AS you drive into Shotley Bridge down the country road from the A68, the village looks unchanged from its Victorian heyday.

It is a picture postcard view, glimpses of old sandstone buildings peeking through the trees, Gothic spires towering over the Victorian villas which cling to the steep slopes of the Derwent Valley.

But if, from a distance, Shotley looks like time has stood still, a closer inspection reveals a village undergoing monumental change, with hundreds of homes being built on the riverbanks.

But Shotley Bridge, for all its quaint charm, is a village used to change.

The first recorded mention of a bridge at Shotley comes in the 14th Century, spanning the River Derwent, which marks the boundary of Northumberland and Durham.

But the village first achieved fame in the late 17th Century, when it was at the forefront of Britain's swordmaking industry.

In 1687, a group of master German swordmakers left their homes in Solingen and set up in the secluded valley, bringing with them the well-kept secrets of making hollowed blades.

Their arrival made this sleepy backwater the only place in England where the blades were made, giving Shotley Bridge a brief fame and air of mystery.

The fortunes of the swordmakers faded - although their crossed swords symbol survives on the Crown and Crossed Swords pub, the former coaching inn which dominates the centre of the village, and in the corporate logo of the company which ultimately absorbed their business, Wilkinson Sword.

By the late 18th Century, the village was home to a thriving paper-making industry, the mills, like the swordmakers' forges, powered by the rushing waters of the Derwent.

But those waters were to have an even more dramatic effect on the village in 1837, when a local businessman attempted to turn the village into a second Harrogate by exploiting the supposedly healing powers of Shotley Spa.

Briefly, the spa flourished, with up to 60,000 visitors a year, including Charles Dickens, flocking to Shotley Bridge to take the waters.

Two grand hotels and even a small private zoo were opened, but the boom was short-lived - the seeds of the spa's destruction laying in the water itself, which derived its distinctive taste from its high iron content.

The discovery of iron ore at Consett and the building of a great ironworks with its belching chimneys on the hilltop spelled the end of hopes for a genteel spa town at Shotley below - although the remnants of the spa can still be found at the village cricket ground.

Instead, the village became a desirable retreat for many of the senior managers at "The Company", industrialists who rubbed shoulders with the local gentry in the Victorian mansions and cottages which line Snows Green Road.

However, Shotley Bridge was also home to ordinary folk.

Pitman poet Tommy Armstrong was born in Wood Street, one of the terraces of working-class housing built along the riverside in the 19th Century, while the village's council estate was added during the 20th Century.

Its affluent history left an indelible mark on Shotley Bridge - the fabulous Crown and Crossed Swords hotel, the Gothic former town hall, now a children's nursery, St Cuthbert's Church, which clings onto the impossibly steep Church Bank and was designed by the renowned architect John Dobson.

After the First World War, Shotley Bridge General Hospital, a mile or so up the bank from the village centre, was developed and emerged as a regional specialist burns centre - fed with a ready supply of patients from the nearby steelworks.

The hospital brought an influx of residents into the village, which was popular with the medical staff.

However, the village suffered something of an economic decline during the 1980s and early 90s, when first the closure of Consett steelworks and then the downgrading of the hospital had a noticeable impact.

But in recent years, the village has undergone a revival led by a remarkable housing boom.

The Oley Meadows development, between the village centre and the cricket field, in the early 1990s was followed more recently by a major housing development which straddles the river.

The remaining mill buildings and the village's workingmen's club, on the Durham bank of the river, and the former transport yard, on the Northumberland bank, are making way for new upmarket houses, mainly home to commuters making the daily journey to Durham or Tyneside.

New housing appears to be springing up everywhere.

The former Summerdale House, once a Victorian mansion, then nurses' home, then nursing home, has been converted into executive flats; builders are at work creating apartments opposite the junior school in Snows Green Road and, in the potentially biggest scheme of all, outline planning permission has been granted for 280 homes in the grounds of the hospital.

Joe Tomer, 57, of Queensway, is an executive member of the Shotley Bridge Trust.

He said: "The village has a thriving community and there is loads of housing development going on and it is enhancing the area.

"The residential development of the area is long overdue. We do have a major parking problem in the village, but we have two excellent restaurants and retained lots of original features.

"It is an ideal place for people who want to commute to Newcastle, Sunderland and Durham.

"The development will not change the character of the village because we have a definitive boundary."

Like many rural and semi-rural communities, there is pressure on more traditional local services.

Although the Post Office remains, Shotley Bridge lost its bank more than a decade ago and, in a sign of the times, the building is now home to an estate agent.

Much of the trade from the rural hinterland of the Derwent Valley now bypasses Shotley Bridge, the farming families more likely to do their shopping at the big supermarkets of Hexham or Consett than pop into the village - and traders are quick to highlight the notorious parking problems in Front Street.

Two retailers in Front Street have ceased trading in the past few months, including one shop which had stood for more than 100 years, but most of the others are keeping their heads above water.

Whether the growth of the village will help or hinder that fight for survival remains to be seen.