Scottish & Newcastle, maker of the iconic Newcastle Brown Ale, was yesterday taken over by rivals Carlsberg and Heineken.

Business Editor Julia Breen looks at the future of brewing on Tyneside and the history of the UK's largest brewer

GEORDIES may never forgive the decision by FTSElisted Scottish & Newcastle to move production of their favourite ale three years ago.

Only a brand with such deeply-entrenched roots could cause such a furore by moving across the river.

But in May 2005, S&N ended production of Newcastle Brown at the famous Tyne brewery - in Newcastle - and moved to its newly-acquired Federation Brewery - in Gateshead.

At the time, psychologists at Newcastle University claimed the switch had moved one of the cultural building blocks that makes a Geordie.

But S&N's argument was that the move across the river would barely register with customers in Australia, China, or a growing market in the US for the beer known as "dog" on Tyneside - so called because men told their wives they were "nipping out to walk the dog" - a euphemism for going to the pub.

What was important, the company argued, was that the taste would not change because the new factory would use the same water.

Yesterday's takeover deal for Scottish & Newcastle means rival Heineken will assume control of the Gateshead brewery as it takes charge of S&N's domestic business.

Fears are already widespread about the future of the site under Heineken - and the water argument might not wash with it.

However, Dr Gioia Pescetto, associate dean and senior lecturer in finance at Durham's Business School, said the site may have a more secure future under Heineken.

"The brewing industry is facing difficult market conditions worldwide and a global move towards industry consolidation," she said.

"Against this backdrop, S&N has done very well to push the Carlsberg-Heineken consortium to increase the offer four times and deliver better value to its shareholders.

"The combined strength of the brands and considerable savings opportunities could also be good news for the future of brewing in the UK and job security."

Dr Pescetto said brewers were following the global trend of shifting manufacturing operations to low-cost economies, and the future of British breweries was uncertain under any owner.

But she said the cost savings by bringing the Gateshead brewery and other S&N businesses under the Heineken banner could even protect the short-term future of the site.

Beer consumption is falling in the West, so many brewers are tapping into markets such as Russia and China to address falling sales and looking for cost savings.

S&N traces its roots back to 1749, when the William Younger brewery was established in Leith, Edinburgh.

Younger merged with fellow Edinburgh brewer William McEwan, to form Scottish Brewers, in 1913.

The Newcastle arm of the company dates back to the foundation of the John Barras brewery, in 1770. Barras bought the Tyne Brewery in 1884 and launched Newcastle Breweries in 1890.

Following a merger of the two businesses, Scottish and Newcastle was formed in 1960.

The Newcastle Brown Ale blue star emblem was worn on the chests of Newcastle United players between 1982 and 1998.

The company was the UK's fifth largest brewer in 1985 - focusing on its main Scottish and North-East markets - but expansion saw it become the UK number one by 1995.

That year, it doubled the size of its beer business by buying Courage, bringing in brands including Fosters, Kronenbourg and John Smith's.

S&N's desire for more rapidlygrowing markets saw it push on with a clutch of acquisitions in countries ranging from Finland to India, then into China in 2004.

But at home, the group upset traditionalists in the same year by deciding to close the 150- year-old Fountain brewery, in Edinburgh.

Before S&N bought the ailing Federation Brewery in Newcastle, in 2004, it was operating at only 40 per cent of capacity and had racked up £3m of losses in two years.

In the end, 253 of the 303 workingmen's clubs that owned a stake in the brewery voted in favour of the sale, many seeing the resultant windfall as a lifeline for their venues.

A year later, the Tyne Brewery closed and production was switched to Gateshead.

S&N employs 30,000 people across the rest of Europe and 7,000 in its Asian joint ventures.