The grandfather of Spanish fashion, 81-year-old Elio Berhanyer, has become the latest victim of the country's ailing economy.

The veteran designer, a survivor of Spain's bygone era of haute couture who once dressed Ava Gardner and Cyd Charisse, was forced to close his Madrid atelier this month after a year of sluggish sales. His employees reportedly had not received their wages since September.

Mr Berhanyer's elegant prêt-à-porter line could not survive in these belt-tightening days, especially against competition from large international firms.

Until now, the self-taught octogenarian had managed to churn out a collection for the Madrid catwalk each season while also updating his classic line.

Just last year, Madrid Fashion Week paid tribute to his 50 years in the business with a special show.

"Without the crisis, the business needed an aspirin; with the crisis, it needed morphine," said Pedro Mansilla, a fashion historian who organised a retrospective of the designer's work at the Museum of Costume in Madrid last year, including his space-age mini-skirts, award-winning Iberia airline hostess uniform and a transparent tunic dress for Spain's first on-stage nude scene.

"Nothing was selling and rent in the area was very expensive. He lost €500,000 (NZ$882,628) last year. What Elio does best is haute couture but what he was selling was prêt-à-porter, and those who can afford it prefer to simply shop at Prada."

In his heyday, Mr Berhanyer's futuristic look with metallic trimmings symbolised modernity and freedom for a generation of well-heeled Spanish women emerging from the enforced sobriety of the Franco dictatorship.

He began his career as a magazine illustrator in his native Cordoba and then stumbled into fashion while working as a window dresser for an Elizabeth Arden salon in Madrid.

By the 1970s, he was designing collections for American department stores such as Bergdorf Goodman, Bonwit Teller and Neiman Marcus and dressing the future Spanish queen.

His light, yet highly structured, creations, sometimes compared to the avant-garde work of Andre Courreges, appeared in glossies such as Harper's Baazar.

He once rejected an invitation to work with Cristobal Balenciaga in Paris. A mutual client had shown the master couturier Mr Berhanyer's work. But he preferred to forge his own design personality, believing at the time that Spain would eventually rival France as a fashion centre.

He skirted ruin when Spain's haute couture houses closed, but rose from the ashes with his prêt-à-porter label.

"Elio is living history and a key figure in Spanish haute couture," said Modesto Lomba, president of the Association of Spanish Fashion Designers.

"He has the affection, respect and support of the entire sector."

Mr Lomba blames the atelier's closure on poor management by his financial backer, the clothing firm Artesanos Camiseros.

"This is not a failure of Elio Berhanyer, who has had a brilliant career for 50 years," he said.

Despite the closure and rumours of ill health, Mr Berhanyer is not expected to retire. He will continue to work on spin-off businesses, such as furniture, shoes and accessories, sold at a shop in Cordoba.

He will also oversee the creation of a museum of his works and perhaps indulge in the occasional made-to-order bridal gown.

Mr Mansilla hopes he gets the chance to stage a farewell show at Madrid Fashion Week.

"His financial backers will try to keep him working as much as possible," Mr Mansilla said.

"Elio's flame will remain alive."