Town producing needles, fishing tackle and coloured water (8)
I believe the answer is:
redditch
'town' is the definition.
(I've seen this before)
'coloured water' is the wordplay.
'coloured' becomes 'red' (similar in meaning).
'water' becomes 'ditch' (ditch is a kind of water).
'red'+'ditch'='REDDITCH'
'producing needles fishing tackle and' acts as a link.
I am not very happy about this link. Some or all of it may be part of another bit of the clue.
Can you help me to learn more?
(Other definitions for redditch that I've seen before include "Worcestershire new town" , "Midlands settlement" , "English town" , "Town S. of Birmingham; CD dither (anag.)" .)