Businesses in the South Otago town of Milton say the laying off of 28 workers at a yarn factory will hurt the local economy.
Qualityarns is making its workers redundant on Thursday but is in talks to save some parts of the factory.
The company has been making specialist weaving yarns since it restarted the old wool mill 11 years ago.
The original mill had employed up to 400 people at its peak.
Managing director Mike Barra says the business has become uneconomic.
Mr Barra says it has become impossible to compete with imported yarns from China because of the high cost of the emissions trading scheme, resource management conditions and ACC.
"They don't really care about small people like us, 28 people in Milton, and they'd rather have these so-called free trade agreements with low cost countries," he says.
Milton antiques dealer Kevin Whiteman says he is very disappointed by the closure.
"When you lose a business it affects everyone because they all spend money everywhere. So we mightn't lose money directly but it will affect everyone in the town," he said.
Mr Barra says he is still meeting with his main customers to see if some sections of the factory can be saved.
He says a number of workers could be re-employed on a casual basis until the future becomes clearer.