Flannigan took the £32,000 winner's cheque, preserving his unbeaten record in the process, and victory in the tournament will have propelled the Mancunian into contention for lightweight titles.
Sykes struggled with Flannigan's southpaw style in the opener as he shipped straight lefts, but the former British champion stepped up a gear in the second, scoring with body shots.
Flannigan was dragged into close-quarters battle in the final round, but he bravely stood and traded with Sykes, earning a 29-28 verdict from two of the judges.
Sykes had booked his place in the final with a split decision win over Anthony Crolla following a three-round dogfight.
Crolla appeared to edge the opener, but a head clash left him with a bad cut and Sykes came on strong from the second, getting the nod with two scores of 29-28.
Flannigan had earlier progressed with a one-sided points win over a badly cut Derry Mathews in their semi-final.
The Liverpudlian entered the semi with nasty gashes above both eyes and was clearly hindered by the injuries as Flannigan forced a count in the second before taking the win with three scores of 29-27.
Flannigan's crisper work gave him the edge against Patrick Walsh in the last quarter-final and Crolla was always in control in his dominant points win over hometown fighter Stephen Jennings.
Tommy Coyle had troubled Sykes in their scrappy opener as the Dewsbury fighter dug deep for a points win, while Mathews overcome his nasty cuts to get the verdict against Jamie Spence.