2,500 knitters unstitched by mimimum wage

For 20 years, her ability to produce perfect Aran sweaters also brought her a little pin money.

Along with 2,500 knitters across the UK, she would produce garments for Inverallan Knitwear in Alva, Clackmannanshire, a family firm which then exported the jumpers around the world.

She took pride in the thought she was keeping a dying art alive, and the extra cash - 20 a garment - was useful for extras such as holiday spending money.

Now, however, Lamont, 59, from Glasgow, and the other knitters have been told they can no longer work for Inverallan.

Last year, the Inland Revenue told the company it was trading illegally because it was not paying its home-workers the national minimum wage, although no one had ever complained about being exploited.

Inverallan - which made garments for Japan, the US, Europe and British design houses - was forced to lay off its staff and go into liquidation. Today, it is trading again, but with a difference: its home-knitters are now based in Ireland and New Delhi.

Despite the fact that dozens of its former workers have written letters of support - some of them offering to knit for nothing - Inverallan says it has no choice but to source workers elsewhere.

It is a situation Lamont, 59, simply cannot understand. "I think it’s a disgrace," she says. "I didn’t think of the knitting as a source of income, I just liked doing it.

"It was something I could fit round my full-time job, something I could do while I was watching television.

"I wasn’t making vast amounts of money, but I had no complaints at all. Now, like everything else, the work is going elsewhere, and a traditional craft is becoming extinct.

"You don’t see people knitting any more, you don’t even see wool shops."

Inverallan’s director, Paddy Goodman, is equally bemused. He and his wife Rosemary set up the company in the garage of their house in 1980.

Back then, they employed 18 knitters, supplied a handful of firms and had a turnover of just 18,000 a year.

But the company’s reputation for producing Aran sweaters and cardigans gradually grew, until by 2001 it had a turnover of 750,000 a year, employed 2,500 knitters on an ad hoc basis, and was exporting all over the world.

"In Japan, Inverallan is as well-known a name as Dunhill," says Goodman proudly.

"Our garments are in demand abroad and from the UK design houses. If Ralph Lauren wants a polo shirt in 16 colours knitted in two-ply, we can supply it."

At its height, the company paid salaries of 20,000 each to Goodman and his wife, and employed seven people, of whom four were part-time.

Goodman says the profits were never high - 50,000 a year at most - all of which was ploughed back into the company, but describes Inverallan’s finances as robust.

Things started to go wrong, however, when the company rejected one woman’s application to become a home-knitter on quality grounds.

"I had sent out a list of rates, and when she was turned down, she wrote to the Inland Revenue questioning whether or not we were complying with the law," says Goodman.

The firm was then visited by a team from the Minimum Wage Unit who told them they were trading illegally.

"Not only were we required to pay all our ladies on the basis of the minimum wage (4.60 per hour), but any complaint from anyone who knitted that she had not been paid this rate would be retrospective to April 1999, when the legislation was introduced and would apply to all who had knitted over that time. Our estimate was a potential liability of around 2.5 million."

Goodman claims that, as a result, the couple placed the company in voluntary liquidation, and made all the office staff redundant, before writing to the 1,000 knitters who were then completing orders.

"They were incredulous," says Goodman. "Not one of them complained they should have been paid 4.60 per hour.

"They always considered themselves to be self-employed, and if the offered payment was inadequate, they did not need to knit.

"But many of them were a little lonely and many in sheltered housing.

"They loved the knitting, they enjoyed the company Newsletter, the contact with the Securicor delivery man, and they rejoiced in being the world’s best at what they did."

Soon the Goodmans were inundated with letters of support from their former knitters .

"I am extremely sorry to hear of the closure due to the higher payments laid down by law," wrote Mary Matheson of Invergordon.

"There is no way home-knitters could be paid [these rates] and it is very sad to think that such an art is being phased out."

Monica Bearn, from Rustington, West Sussex, added: "I am sure there are many of your knitters, like myself, who wanted the occupation, and the money was a bonus. I miss it so much I am now knitting for the charity shops."

There are currently more than 700,000 home-workers in the UK. Under current regulations they must receive the national minimum wage for all hours worked or be paid under a "fair estimate" agreement, where the employer must estimate the time an average worker will take to complete the work.

"We have 10 different sizes and 150 different styles, and we also do custom-made garments," Goodman says. "To work out hours for all those options would have been incredibly difficult."

But even if it were possible, Goodman claims, the cost of paying the minimum wage for such time-consuming work (some jumpers take between 70 and 80 hours to knit) would have been prohibitive.

"You are talking about paying the home-knitters 450 a garment. This would mean a retail price of 2,000 - which is completely impractical."

As a result of the women’s letters, Goodman went back to the Inland Revenue to ask if the knitters could work for nothing or sign themselves out of the National Minimum Wage agreement .

He also mooted an alternative scheme whereby Inverallan invoiced the knitters for the wool and the knitters invoiced Inverallan for the garments. He was told each of those options would be illegal.

Now Inverallan Ltd is operating again, with home knitwear companies in Ireland and India supplying the expertise. But the company no longer employs any permanent or part-time staff members and Goodman reckons he lost 500,000 of orders while he sorted out the company’s problems.

The plight of Inverallan has enraged some observers who see it as another blow to Scotland’s traditional industries.

Iain McMillan of CBI Scotland said the transfer of work to other countries was an inevitable by-product of the introduction of a national minimum wage.

"This is exactly the kind of scenario we foresaw when we opposed it," he said. "We warned it would destroy jobs in certain industries like this one where the pay was agreed between the employer and the employee, but the government did not listen to our case.

"I think it considered such job losses as a necessary part of its wider economic and social plans."

John Downie, of the Scottish Federation for Small Businesses, says he believes the National Minimum Wage legislation was not drawn up with companies like Inverallan in mind.

"There will always be pressure from small businesses who are complying to make sure their competitors are too," he said. "But this company appears to operate in very particular circumstances.

"Of course, everyone must comply, but it is incumbent on the Inland Revenue to talk the directors through all the options in an attempt to keep the company going and its workers employed."

The Scottish Tories were also vehement in their criticism.

"This is another case where the government is destroying people’s way of life," a spokesman said. "These people voluntarily entered an agreement that suited them, and the actions of the government have removed from them valuable income.

"Scotland is right to be proud of its knitwear industry, which has already been decimated, and the prospect of losing the skills of these women as a result of government meddling is ludicrous."

Back at Inverallan, Goodman struggles to find a positive outcome of his experience. "Of course, the wage I pay the Indian workers is a great deal more than pin money to them, so that’s a good thing," he says.

"But the UK, and Scotland in particular, has a tradition of knitting going back to the 9th century, and the Aran and the Gansay [Gaelic for an outdoor garment] have become classics. It’s so sad British knitters aren’t being allowed to help that tradition survive."