Vestas is to shut down its Isle of Wight factory in the face of collapsing demand from a wind-farming industry hobbled by the recession and red tape

The following correction was printed in the Guardian's Corrections and clarifications column, Monday 11 May 2009.

Below we referred to the Isle of Wight factory owned by Vestas. The British Wind Energy Association, which provided the information, has acknowledged that in fact there is a second small plant, in Scotland. It makes the towers for wind turbines and has just been sold by Vestas to Skykon.

The UK's only wind turbine manufact­uring plant is to close, dealing a humili­ating blow to the government's promise to support low-carbon industries.

Vestas, the world's biggest wind energy group, said today that it would close its Isle of Wight facility, which employs about 700 people and makes blades for wind farms in the US.

The group had planned to convert the factory in Newport so it could make blades for the British market, but said this morning that the paralysis gripping the industry meant that orders had ground to a halt. Such low demand could not justify the investment, Ditlev Engel, the chief executive, told the Guardian.

He said the group would consult with the workers for the next two to three months, adding that there was a glimmer of hope investment in the plant could still go ahead if orders picked up soon.

Engel said last week's budget, which increased subsidies available for offshore wind farms, as well as recent moves to free up the sluggish planning process, could boost the industry but it was too early to say whether orders would pick enough to rescue the plant.

"The government has tried to improve the situation," he said. "Whether it's enough I don't know."

In early March, Gordon Brown convened a low-carbon industrial summit aimed at finding ways to help low-carbon manufacturers lead the UK out of recession. Vestas representatives attended the meeting.

Engel said the group was in "constant dialogue" with the government and had informed it of today's move. He admitted that no aid or assistance had been offered by Whitehall to try to save the plant. But he reserved his fiercest criticism for local politicians who he said were holding up projects, particularly onshore, giving the UK one of the lengthiest planning processes for developers wanting to build wind farms anywhere in the world.

"Since last summer, the order intake in the UK market has dropped significantly. Therefore it would be very difficult to substantiate the investment as we had already planned.

"The UK has large wind resources and it's a priority for the government but the orders didn't move. That's why we're telling employees that we're not reinvesting there.

"We are waiting to see in the coming period if the government initiative announced last week will get the market to move again. At least it gives some hope but it's too early to tell."

Engel said the weakness of the pound had also had an effect, making it more expensive to build wind farms in the UK, but the major problem lay in planning application.

"It is extremely time consuming and extremely complicated. Some of our developers, customers, will tell you it is so difficult. In the UK nimbyism is a huge challenge. This is outside of Whitehall territory.

"People talk about big offshore parks. Why not put in onshore parks? The cost of installation is half compared to offshore."

The Isle of Wight facility will stop making blades in June. The R&D department, which employs about 150 people, will remain open.

Engel admitted that if Vestas makes its skilled workers redundant but sees a pick-up in orders later in the year, it would be harder to reopen the plant because it would have to find a new skilled workforce.