The oldest lace mill in Scotland, and the last of its kind in the world, is to launch its first range of wallpapers.

Morton Young & Borland will launch Paper Lace, based on an original damask lace design woven on its 109-year-old loom, in Russia next week.

The papers are a departure from the company's core lace-weaving business and have been developed in a collaboration with the Glasgow design studio Timorous Beasties.

Margo Graham, head designer at Morton Young & Borland, based in Newmilns, North Ayrshire, is the only specialist Nottingham lace designer in the world.

It has taken her 18 months to realise her dream of diversifying into high-end design-led wall- coverings. Five lace designs were chosen from the company's priceless archive of 60,000, but Lydia', a rose damask with a central urn motif and a complementary ribbon damask design from the 1920s, was chosen because of its potential for enlarging to a scale suitable for wallpaper.

"Lydia has been a bestseller for decades," said Ms Graham. "As a lace fabric it is popular for windows, table cloths and curtains and we hope that as a design-led wallpaper it will appeal to the sophisticated interiors market. We didn't want something too feminine or twee because it has to appeal to the high end of the market."

Alistair McAuley, of Timorous Beasties, the cutting-edge textile and wallpaper design company for whom MYB has made lace for many years, was asked to lend his expertise to help develop the design.

The aim was to create a look that replicated the lace itself rather than create an abstract graphic version of it. So a sample was digitally scanned in a very high resolution so it would retain its integrity as lace when enlarged. McAuley manipulated design elements to create an eye-catching paper.

"The urn is about two inches high, an almost negligible motif in the lace itself, so I made it the focal point," explained Mr McAuley. "If we had kept the scale of the original it would have looked a bit too chintzy for what MYB wanted. Now it has a certain cross-gender appeal."

The design has been developed so there are two wallpapers, one with the repeat urn motif and another with the rose motif so they can be used separately or together. There are two repeats of the ribbon to every one repeat of the urn.

The company's main activity has been in producing theatrical and film backdrop and it supplies hundreds of metres of lace to Pinewood studios each year. It also supplied the lace backdrop for the Harry Potter film Order Of The Phoenix and has been asked to supply more samples for the next, final Harry Potter.

MYB also produced hundreds of metres of black lace in a very different design for the US pop star Pink's stage set for her current European tour, which comes to Glasgow next week.

But diversifying into new markets is vital for its survival. With 72 employees it is the biggest employer in the area.

John Glen, sales director at Morton Young Borland, said Russian reaction to the samples has been enthusiastic. The company's brand awareness in Russia is already high as it has been selling lace to several upmarket design studios, such as Lege Alto and Dana Panorama in Moscow, for a while. Its annual turnover there is £200,000 even before the wallpaper is launched next Wednesday.

"We have had a fantastic reaction to the wallpaper samples, which we have marketed as an exclusive micro collection at a price that will sell," said Mr Glen. "They are excited by it because it looks and feels like lace.

"Russians like majestic, grand, opulent room sets. They have not had money and now that they do they want to show off their wealth. Our clients have the fancy family townhouse in Moscow and an out of town country weekend retreat.

"We hope this will be a new market for our paper lace'. Lace in general is a very traditional looking fabric, and traditional sells for us. We are trying to use that tradition in a contemporary context.

"People like the idea of it being woven in a small village in Scotland. The heritage element of what we make is huge."

The 12-metre cast iron loom on which the original Lydia lace was woven is the last one left in the world, and is a poignant reminder of how industrious the Irvine Valley was in the 19th century. Thanks to the expertise of refugees from Flanders and France, the area established itself as a thriving world-class exporter of lace, muslin and madras.

However, a slow decline began in the 1920s when Mahatma Gandhi encouraged his followers in India to wear "homespun" garments rather than British-made textiles. Protectionist policies almost wiped out the Scottish industry.

A management buy-out of the family-owned mill Morton Young & Borland in 2002, led by long-time employee Scott Davidson, now 40, and four others has seen a transformation of the mill's fortunes.

Threads of tradition Alistair McAuley and Paul Simmons, who met while studying textile design at Glasgow School of Art, founded Timorous Beasties in Glasgow in 1990. Their early collaboration with lace-makers Morton Young & Borland won the company the Elle Decoration award for Best Textiles in 2006. Lace designs exclusively developed for Timorous Beasties include distinctive Thistle and Devil motifs, in both ivory and black. Mr McAuley was invited to apply his wallpaper design expertise to help Morton Young & Borland create their first wallpaper, which will be launched in Moscow - where brand awareness of the lace-makers is already high - on April 1.