A Shropshire family business has won a contract to make the official teddy bears for the 2012 Olympic Games.

Merrythought Ltd in Ironbridge is the last surviving teddy bear factory in Britain, where toys are hand made.

The 80-year-old firm will produce a range of traditional limited edition mohair bears for the London 2012 Games.

Sarah Holmes, great grand-daughter of the company's founder, said they were delighted: "It's great the official teddy bear's being produced in the UK."

Merrythought has made jointed teddy bears in the same way since the firm was set up in 1930.

Miss Holmes, marketing manager at Merrythought, said most toys today are produced in the Far East. She said it was important for her firm to be involved in a national event like the London Olympics.

The firm's managing director Oliver Holmes said it was a "significant milestone" in the history of Merrythought.

In 2006 the factory shut down with the loss of 48 jobs when the firm said it could not compete with foreign produced goods.

However in 2007 the business reopened with a smaller team, specialising in collectable, traditionally made toys.

A cult following in Japan has been an important factor in Merrythought's success and according to Sarah Holmes they would be busy without the Olympic contract.

She added however that the licence was "a great string to our bow."