Once hailed as the best in the world, workers at yet another North-East factory are now looking for new jobs.

Nick Morrison asks: Where have all the foreign investors gone?

"YOUR attitude and quality standards are very high. We can all learn from you." Those who heard those words will now be reflecting on what must have been a steep learning curve. Only three years on, but already it seems Black & Decker has absorbed all it needs to know from its County Durham workforce.

When Nolan Archibald, chairman of the US power tool giant, toured the Spennymoor plant in September 1999, he had only praise for those who worked there. They were the best workforce in the world, he said, who continued to "show the way forward" for the company's thousands of employees around the world.

And these were not mere honeyed words - Mr Archibald had good reason to be proud of his North-East employees. Just before his visit, the factory revealed it had increased productivity by 40 per cent through adopting new working methods. A month later, the plant was runner-up in the search for Britain's best factory, missing out on winning because its staff were too busy installing a new production line.

How times have changed. Now the "best workforce in the world" is preparing to collect its collective P45, as almost 1,000 permanent and temporary employees are told their services are no longer required, with production switched instead to the Czech Republic.

It is all a far cry from the heady days of the 1980s, when foreign companies were falling over themselves to invest in Britain, and the North-East in particular. Low wages compared with the rest of Europe, an abundant labour pool, thanks to high unemployment, and industrial harmony, thanks to anti-union laws, as well as numerous grants and sweeteners, made the UK an attractive place to set up shop.

Now, these foreign investors are like tabloid journalists in a brothel - desperate to make their excuses and leave. Among those fleeing these shores have been Sanyo, which closed its microwave plant in Newton Aycliffe last year, the same town losing the Fujitsu microchip plant four years ago, and Siemens, shutting its microchip factory, also in 1998.

Those virtues which made the North-East so alluring to anyone with a factory to build, are no longer enough, it seems.

"If you look at what has happened over the last ten to 15 years, capitalism has become much more global," says Professor Stephen Procter, Alcan chairman of management at the University of Newcastle Business School.

"Rather than being based in one place, companies see the whole world as the area in which they operate. It is a more agile capitalism, able to move very quickly between different areas."

Advances in IT have made it easier to relocate, and take advantage of the lower costs to be found in Eastern Europe and the Indian sub-continent, particularly when a strong pound is making UK produced-goods less competitive, and when low unemployment is making the labour market less flexible.

Uncertainty over Britain joining the euro may even have been a factor in Black & Decker's decision, although the Czech Republic is outside the eurozone. The fact that Prague is queuing up to join may still be a safer bet than a referendum in favour over here.

But, given that it will only get easier for global companies to relocate their factories, and that there is no immediate prospect of Britain competing with Eastern Europe on labour costs, is there any point in the North-East looking to mass production plants for salvation?

"There is an argument that manufacturing is in terminal decline in this country," says Dr Joyce Liddle, of Durham University's Business School. "These companies need somewhere close to the European market, with low labour costs and costs of production.

"No matter how productive our factories are, or how they change their systems or how much they cut their costs, they will still not be able to compare with the Czech Republic."

Simply pouring more money into attracting investors, through incentives and grants, is no longer good enough, she says. Indeed, according to Prof Procter, the traditional tool of regional policy of encouraging large companies to invest has left the region vulnerable to the whims of a handful of executives.

Instead, there should be a shift away from semi-skilled and relatively low-paid jobs, and towards trying to nurture networks of specialised industries, says Professor Ian Stone, director of the Northern Economic Research Unit at Northumbria University.

"We want to be in more value-added activities, where our particular skills profile and resource mix give us a niche, a competitive advantage," he says.

The role for government and development agencies will then be less in the way of dangling cash-filled briefcases, and more about providing a highly-skilled workforce, as well as encouraging firms to move towards more upmarket lines.

"Companies need to be encouraged to up their skill requirement, improve the quality of their labour, and develop products which are more sophisticated. That gets you into a virtuous circle of producing high quality products and services, and that is important for the future of a region like this. We don't want to be competing on wages," Prof Stone says.

The drawback to this approach, of course, is that it may take some time for the benefits to be felt, and, in the meantime, it takes up a lot of investment both in money and energy. But, says Prof Procter, there may really be no alternative if the region is going to find itself a viable role.

"It is quite clear that Black & Decker is not a one-off - it is part of a broader trend. It is futile to keep pursuing those same kind of companies, but the alternative of trying to create the conditions for indigenous growth is very difficult," he says.

It may not come as much comfort to those 1,000 erstwhile members of the best workforce in the world now facing life without a job, but maybe the time has come for this North-East dog to learn some new tricks.