CHEAPER imports from China have forced a North-East flag manufacturer to diversify the business to survive.

AA Flags, in Consett, County Durham, has moved into niche markets because it can no longer compete on price.

Mandy Scott, who founded the business in 1992, said: "We retail a 6ft union jack at £47, but I can buy them in from China for about £3.50.

"Workers over there earn in a week what ours earn in an hour. At first, the quality of imports from China was not great, but now they have got so good we have had to diversify." While the run-up to the World Cup will mean a surge in demand for flags, the business focuses more on niche markets, including clothing alterations, tent repairs and seat covers.

Staff at AA Flags also completed a programme of analysis and training development, provided by NA Consultants, under the North-East Productivity Alliance initiative.

The programme was paid for by Business Link. Training was provided at Gateshead College

Miss Scott said: "The results have been striking. Productivity is up by a third and wastage down by almost 15 per cent - improving profitability on a £600,000 annual turnover by up to ten per cent.

"And while this is fantastic, what is even more pleasing is that the team now understands the process clearly, is excited by the improvements already made, and wants to do even better."

AA Flags employs 16 people at a workshop on the Park Road Industrial Estate.

Miss Scott said: "We haven't made any redundancies, but when people have left we haven't been able to replace them because of the downturn in the industry."