The company said it is looking to sell or downsize its optical components plant in Torbay, Devon by the end of September.

It is a huge blow for staff, whose future has become increasingly uncertain as a result of the downturn in the hi-tech sector.

Thousands of jobs have been lost in the area in the past 18 months - most of them at Nortel which makes components for the internet sector.

I think the government itself ought to be looking at emergency packages of aid for this area

Torbay MP Adrian Sanders

Last year the Canada-based firm, which is the second-biggest maker of telecoms equipment in North America, globally cut about 50,000 jobs, or half its workforce.

On Wednesday the company announced a further 3,500 job losses worldwide.

Torbay's MP Adrian Sanders said: "I think the government itself ought to be looking at emergency packages of aid for this area because of the loss of income.

"While unemployment is falling nationally, month by month it's been going up in some parts of the country one of which is Torbay and they should be focusing attention on those areas which are not getting their share of the national prosperity."

At the height of the hi-tech boom, Nortel conducted a nationwide search for staff to relocate to Paignton.

The plant went on to employ more than 5,000 people - but during 2001, some 4,000 posts were axed.

In a statement Frank Dunn, president and chief executive officer of Nortel Networks, said: "We are aligning our optical business model to where we see the industry going to ensure we are well positioned when spending resumes."