More than 40 people have been made redundant at electronics manufacturer Loblite after the North-East company lost a £1.5m contract.
The Gateshead business has always prided itself on maintaining a manufacturing base in the region rather than following its competitors by shifting production to the Far East.
But now managing director Peter Jolliffe has been forced to accept the need for change after a Malaysian company won the £1.5m contract that Loblite lost on a cost basis.
He has reluctantly sub-contracted moulding work to another North-East business and is buying tooling from China.
Total staff numbers are now down from 55 to just 12 and the company has moved to new premises on Third Avenue on Team Valley. Less than two years ago the firm was hoping to expand. Loblite had to go into administration last year but Mr Jolliffe restructured the business to keep trading and keep the Loblite name alive.
From today (Thurs) Loblite products will be traded through Bedfordshire company Deta Electrical, but the brand will continue to function and products will be sold under the Loblite name.
Mr Jolliffe said: "Loblite has moved premises and restructured. We have also passed our marketing to an international company called Deta.
"We have closed the tool room and shut down the moulding department. It's in line with modern trends in manufacturing.
"For the cost base, we had absolutely no choice but to go to sub-contracting manufacturing, though we still have an assembly line. We now have only 12 staff - the redundancies have been made over the last six months."
Deta will now market Loblite products right across the UK and "British Standard" territories - those countries which use electrical products which conform to British Standards such as in the Middle East, Cyprus, Malta, Gibraltar.
Loblite was founded in Germany in 1898. It moved to the UK in 1939 and is the longest surviving business in Team Valley.
Three years ago Mr Jolliffe showed his determination to make manufacturing work in the North-East by snatching a £3m contract from under the noses of Far East competition - then opened a new office in Essen in Germany. He said then: "If you decide you are going to stay in manufacturing, I think you can do it. I have a positive attitude to life. This company is 65 years old - we were very much an OAP company 10 years ago, but I think we are a bit `younger' now."