A Norwich-based factory that employs workers with disabilities will close with the loss of 38 jobs – including 26 disabled employees – after a last-ditch attempt to secure its future failed.

The Remploy packaging factory in Raynham Street was yesterday named as one of nine in the country to face the axe after no buyer came forward to take over the business, which lost £460,000 last year.

Unions have warned that many of the disabled employees may never work again without the social and economic 'lifeline' of their posts at Remploy.

The decision comes after months of uncertainty over government plans to close non-viable Remploy factories, set up to offer disabled people work opportunities, as part of a review of its £320m disability employment budget.

Harvey Cann, a Remploy employee and GMB shop steward, who has learning difficulties, said he feared for the future of disabled employees at the factory.

'I think that a lot of us may never work again, because I don't know if there are businesses out there that would give us a chance to prove ourselves. A lot of employees are devastated and can't understand how it's come to this,' said Mr Cann, who has worked at the factory for 23 years.

He added that disabled employees now had to put their faith in the transition support offered by government to help them into new jobs.

'But Remploy is not just a job. It's a lifeline – you make new friends, you get money to go out and do the things you want to do,' he said.

'Without a job and money your life becomes a lot less meaningful. A job gives you goals, ambitions and things to work towards.'

Norwich MP Chloe Smith said she was disappointed with the news of the closure, which could happen by the end of the summer, and had encouraged several businesses to proceed with proposals.

But she added: 'I have always said I don't think it is fair to segregate people into factories that actually are loss-making. The Norwich factory was indeed loss-making. It doesn't mean I am any less disappointed for my constituents.'

Ian Carr, shop steward for the Unite union at Remploy, said staff had been expecting the closure and that the government now had a duty to ensure it helped them into new jobs.

He added: 'If disabled employees have to compete against able-bodied people for jobs, they will not be able to do that. We feel there should be a place like Remploy where they can do meaningful work. I don't think they will get that opportunity in mainstream private business.'

A DWP spokesman said a wage subsidy of £6,400 per disabled employee had been offered, but no viable final bids were made.

He added that the disability employment budget had been protected during the parliament and that an independent review had recommended funding should be focused on helping disabled people into mainstream jobs 'instead of subsidising loss-making factories'.