A piper accompanied 500 workers at Scarborough coach building firm Plaxton as they left for the last time yesterday.

The North Yorkshire firm was faced with total closure in May when Transbus International, Plaxton's parent company, said it was switching all its coach and bus building to Falkirk, in Scotland, and all 700 workers would lose their jobs.

But, after talks between former Employment and Trade Secretary Stephen Byers, Scarborough MP Lawrie Quinn, Scarborough Borough Council leaders and Transbus bosses, the company had a rethink and announced it would retain its coach building operation at its Cayton low Road factory.

However, the number of staff was to be cut to 200.

Councillor Michael Pitts the borough authority's cabinet member for economic development, said: "It is a sad day, not just for the individuals and their families but also for Scarborough's economy as a whole.

"We do not have many well-paid jobs in Scarborough and the loss of the jobs will have a major impact.

"We are constantly in the hunt for new investment and jobs for the Yorkshire coast, but we are hampered by poor road communications and an inability to attract new companies through grants."

A Transbus International spokesman said a new company, to be known as New Plaxton, was being set up and was due to be launched when the 200 workers returned from their holidays in two weeks' time.

"It will be a challenging time, but we are confident about the future," he said.

Piper Tom Powell, in full Highland dress, played a lament - A Song for Suzanne - as the men walked through the factory gates.

"It is a sad tune and signifies the workers thinking of their wives or girlfriends after being made redundant," said Mr Powell, who himself formerly worked at the factory.

Plaxton has been building coaches at Scarborough for nearly a century.

It has exported them to holiday and touring companies throughout Europe, but has seen a drop in orders because of increased competition.