SCORES of North-East jobs are being axed as bosses at the biggest commercial banknote factory in the world go on a cost-cutting drive, The Northern Echo can reveal.

About 10 per cent of the 600 people employed at De La Rue in Gateshead are being made redundant as the 201-year-old company battles what it called "significant commercial challenges."

The Team Valley site produces passports and postage stamps, as well as about ten million foreign notes a day. Despite cutting back at other factories De La Rue has invested about £5.5m in Gateshead over the last three years. But the company is now in consultation with staff and unions in a bid to minimise the number of compulsory job losses.

Earlier this month it emerged that De La Rue was making about 40 people redundant at its paper mill in Overton, Hampshire to help reduce costs.

The moves follow a warning in January that company profits were expected to be about £20m less than last year.

De La Rue's annual results will be published on May 27. They will include a £13.5m charge as part of a long running wrangle with one of its major clients, believed to be the Bank of India.

The issue happened at Overton and does not involve its North-East operations.

Nevertheless, it adds to cost pressures on the business which this month started a 10-year contract to make sterling notes for the Bank of England.

The firm said the £13.5m pay-out has arisen from its customer invoking a performance bond; an agreement used in a wide range of industries as a guarantee against the failure of one party to meet obligations specified in a contract.

In its last set of accounts De La Rue drew attention to an investigation by external lawyers, commissioned by the board, which looked into issues at Overton dating from 2010. The investigation was said to have found “nothing of substance”, although it was established that certain paper specification test certificates had been deliberately falsified.

De La Rue then reported what it had learned from the investigation to authorities.

According to the annual report, De La Rue implemented a number of measures arising from the findings of the investigation.

A note to shareholders this week said De La Rue would account for the charge as an exceptional item in its next annual accounts.

The statement said: “The Board considers this is a material step towards resolution of this issue and discussions continue with this important customer.”

It also said the sale of surplus land at Overton would boost its coffers by £9m.

The challenges that face De La Rue are industry-wide. Its German rival Giesecke & Devrient is closing its printing factory in Munich.