Fifty-three people are to lose their jobs at a Birmingham City Council sheltered employment scheme for disabled workers nine months after being promised they would not be made redundant.

The local authority’s new Labour leadership has decided that a deteriorating financial position at Shelforce, a unit producing double glazed window frames, cannot be allowed to continue.

The unit’s losses total £4.5 million over the past five years after the recession hit the construction industry and orders for windows dried up. Attempts to diversify into other areas failed.

Although Shelforce has an order book worth £2 million a year, its costs are £4.6 million a year.

Cabinet member for development, jobs and skills, Tahir Ali, said slashing the size of the Shelforce workforce from 81 to just 13 was one of the toughest decisions he ever had to make.

Fifteen employees have already taken voluntary redundancy and the council hopes to find alternative employment for most of the remaining 53 whose jobs will disappear.

Shelforce staff were assured by the city’s former Conservative-Liberal Democrat coalition in February this year that there would be no compulsory redundancies for disabled employees. That promise was described as “flawed” by Coun Ali, who said it would be unlawful under European legislation to favour disabled workers in a redundancy process.

Coun Ali said all disabled Shelforce staff would be kept on for six months while the council looked for alternative employment, either with the local authority or elsewhere. But he could not rule out compulsory redundancies.

He added that sheltered employment models were seen now as “outdated”. It would be better to “integrate” people with disabilities into mainstream employment.

Coun Ali continued: “It is important to stress that we are not winding up Shelforce. The unit will continue with 13 staff and we hope that as the economy recovers then the workforce can grow.

“Shelforce operates in a highly competitive and unpredictable market and has found it increasingly difficult to secure profitable sales.

“We are doing all we can to support staff with the aim of redeploying as many as possible within the city council or supporting them into mainstream employment outside the council and we are actively exploring options with external employers.”