THE collapse of Waterford Wedgwood in the New Year may have been the first major casualty of the recession in North Staffordshire.

But the failure may have provided the perfect foundation on which to rebuild the fallen giant as 2010 approaches.

That's the opinion of experts as parts of the business, reborn as Waterford Wedgwood Royal Doulton, prepare to give its production staff a three per cent pay rise.

Patrick Wenger, a former chief executive at Royal Doulton until a car crash in 1999 left him badly injured, said the pay rise and investment sends a positive signal to the workforce that the brands could be resurrected.

Mr Wenger, pictured below, said: "It would appear to be exactly the right thing to do to steady the ship and rebuild the confidence in homegrown production."

Administrators called in in January found a business with debts of £400 million and which had shed more than 2,000 jobs during a failed restructuring.

After a three-month sale and negotiation period, a deal by KPS Partners saw the New York private equity firm pick up "certain assets", including the Royal Doulton and Wedgwood brands and the company's factories at Barlaston and Indonesia.

Crucially, it freed the business from the debts which had increasingly hamstrung efforts to reposition itself from a mass volume juggernaut to a lean maker of luxury goods.

Phil Wood, partner at Newcastle accountancy firm Barringtons, said: "They will have had to pay for the assets and that is likely to be debt, but certainly there will be less borrowing than the company would have had.

"The new owners essentially get a blank piece of paper to change how the business does things and review its manufacturing processes from scratch, rather than trying to rework what's already there."

In May, KPS Partners revealed plans to further cut back staff at Barlaston and move the bulk of its production to Indonesia and benefit from its lower labour costs.

But the news of pay rises and investment further backs up the long-term commitment to keeping manufacturing at Barlaston.

Mr Wenger added: "The whole reason for the Royal Doulton / Wedgwood factory was that producing it in the Far East improved the gross margin.

"But the company has seen it has the ability to drop the margin slightly by making products at Barlaston. It helps stabilise the business going forward."

Meanwhile, WWRD is not yet revealing full details of its strategy.

Its chief finance officer, Anthony Jones, hinted the plans include major advertising and promotional campaigns.

He said: "These are exciting times. We're almost ready to tell you."

Garry Oakes, deputy general secretary of trade union Unity, said: "After all the bad news of recent years it is good to see there is positive news to be talking about. It is early days, but it is a case of a phoenix rising from the flames at Wedgwood."