A TROUBLED carpet company that counts the Queen as a customer has announced plans to expand after a second management buy-out.

Hugh Mackay Carpets, in Durham, is coming out of a month-long period of administration, after the board secured a new backer.

The deal with venture capitalist Epic Reconstruction not only secures the immediate future for the 130 workforce at its Meadowfield plant, but bosses hope it will pave the way for growth.

Steve Cowie, Hugh Mackay chief executive, said: "We have lots of plans now for collectively growing the business and are looking at merging other businesses into Mackay's.

"The industry is ripe for consolidation. Everyone is fighting on smaller margins for an ever-decreasing share of the pie."

The move follows a doomed buy-out in February, which was backed by The Royal Bank of Scotland.

Back then, Mr Cowie had said the cash injection would help the company claw back some of the market share it had lost in the face of cheap foreign imports and the rise in demand for laminate flooring.

"At that point in time, the investment that came in was basically not enough," he said. "We knew it would cause problems."

The cash crisis deepened when two of its main yarn suppliers went into administration earlier this year. This saw the times between ordering and delivering supplies almost treble, from three weeks to eight weeks.

"The extended lead times caused issues in terms of generating revenue," said Mr Cowie. "If you have an order you need to execute in four weeks and it is going to take you eight, you lose that order."

The company, which went into administration last month and was being run by Newcastle-based Ernst and Young, celebrated its 100th anniversary last year. It holds a Royal Warrant and has an international reputation.

Its client list includes the Houses of Parliament and rock stars Elton John and Liam Gallagher. Other commissions include the Caesar's Palace casino in Las Vegas and a German brothel.

No one at Ernst and Young, or the union that represents most of the workers, the TGWU, was available for comment.