A magnificent survivor from the age of steam will greet the new year as a Grade I-listed building, its importance finally recognised as the last working steam powered cotton mill in the world.

The giant Victorian steam engine of Queen Street Mill in Burnley, Lancashire, was originally named Prudence; steam engines of the time were often affectionately christened. The engine, still running after 120 years, was renamed Peace in 1918 in honour of the fallen soldiers of the first world war, who included many former mill workers.

It closed as a factory in 1982, narrowly escaped having all the machinery smashed up for scrap, and was later reopened as a working museum. The 37-metre (120ft) smoking chimney is familiar to many TV and cinema viewers. It has appeared as a symbol variously of Victorian manufacturing might, northern grit or industrial unrest in many dramas, including the BBC adaptation of Mrs Gaskell’s North and South, and in the retro police series Life on Mars.

In the Oscar-winning film The King’s Speech, an attempt to address the mill workers assembled in the Queen Street yard cruelly exposed the stammer of the future King George VI, played by Colin Firth. Firth later signed the visitor’s book, describing the mill as a thing of beauty.

Culture minister Ed Vaizey said: “The Queen Street Mill in Burnley is the epitome of a time when cotton production in Lancashire was Britain’s principal source of industrial wealth. It’s wonderful that it has survived all this time in such splendid condition. Listing it at Grade I will help ensure that it continues to tell the story of that era for many generations to come.”

Grade I is the highest category, only bestowed on 2.5% of roughly 350,000 listed buildings in England, marking the mill as of exceptional importance.

Nick Bridgland, leader of the English Heritage listing team in the north, described it as a unique building of international significance. “Queen Street Mill is a remarkable survival of a working, steam-powered textile mill from the heyday of Lancashire’s cotton production. The textile industry was one of the great drivers of Britain’s industrialisation and so has international importance. The survival of such a complete mill is unparalleled and merits listing at the highest grade.”

The mill has survived so well in part because of its fluctuating fortunes. It was built in 1894 at a cost of £20,000, and opened the following year when the local vicar and Edmund Atkinson, a mill worker and brass band member, climbed to the top of the chimney, where Atkinson played a solo on his cornet.

As the textile industry declined – briefly revived by the demands of the first world war – the company could initially only afford to put in one Lancashire boiler, and could never afford to replace the 500-horsepower tandem compound steam engine. A serious fire in 1918 destroyed part of the building, but the steam engine survived, needing only some repair work. Electricity was only installed in the 1940s. Early in the 20th century the firm bought some motor lorries to replace the horse-drawn delivery carts, only to see them requisitioned for the war effort. The mill horses kept working well into the 1920s, and their stables survive until this day.

The collection includes a Hattersley Jacquard loom, used to weave complex tapestry patterns, which was put through its paces at the 1908 Franco-British exhibition at White City, where it was used to create a copy of Landseer’s painting Scene in the Olden Time at Bolton Abbey – leaving the audience awestruck at the innovations in weaving technology.