Downturn hits manufacturers hard

By Steven Duke
BBC News, Derbyshire

Andrew Gilbert has just had his overdraft cut

It's unlikely bank managers expect love and affection in their work.

Which is fortunate, because if the businesses of Derby are a good barometer, bankers are currently about as popular as a flat tyre on a wintry Peak District road.

"We've just had our business overdraft cut," sighs Andrew Gilbert, boss of Node4, a computer services company based just outside the city centre.

Mr Gilbert didn't get to meet the Prime Minister when he visited Derby recently as part of a tour of the regions to see how businesses are coping with the recession - but he knows what he would have liked to tell Gordon Brown.

Lending freeze

"The government has to get banks lending again," he urges.

Standing in a vast air-conditioned room full of computer servers, Mr Gilbert is baffled by the attitude of banks.

"It doesn't seem to matter if you've got strong growth and are making good profits - like we are. The banks just don't want to lend. It doesn't make sense," he says with a shrug.

The firm wants to borrow money to buy more server space to rent to companies, but can't get the funding.

"We've an opportunity to expand quickly and employ more people. But our growth is being stunted by the financial crisis," he adds.

Housing drop-off

Sales at LB Plastics are down because of the housing slump.

A couple of miles away to the north of the city, James Litchfield heads up a very different sort of company - manufacturing plastic window and door frames for the construction industry.

He's not after bank funding to help grow the business, but he is desperate for action from the banks.

"What we need to see is banks spending money. The supply of mortgages needs to be boosted. Until people start buying houses again, I can't see a lot of future for the British building industry at the moment," he warns.

Sales at LB Plastics have been hurt by the housing market downturn, and the firm has already had to lay off 60 staff.

"It really is going to be a very, very hard year. We've made our cutbacks, and now need to see the market reignited," he says.

Car sales skid

Mark Spindley says car sales have plunged in the autumn.

Back in town, the Derby Volkswagen car dealer is glad to see the back of 2008.

Sales manager Mark Spindley likes to compare the year to racing round Silverstone.

"We were going fast, doing really well. Then in autumn we hit an ice patch and skidded off, with no idea of which direction we were going in," he says.

Staff had to go, but he's hopeful 2009 will offer a more sedate trip round the race track.

More people are starting to come through the doors, and he points out that the banking crisis hasn't been all bad for business.

"We've noticed more people coming to us to finance their car purchases because they can't get loans through their banks," he says.

Record low rates

One bank that has been trying to pump money into the economy in recent months is the Bank of England - slashing interest rates to historic lows.

But firms say the unprecedented cuts are having a muted effect on them.

"A rate cut may decrease our running costs a little, but that's not the real problem," stresses Andrew Gilbert. "Getting the finance is what's hurting us!"

"I have no borrowing costs, so rate cuts don't affect me that way," points out Mr Litchfield, "but if banks start offering lower mortgage rates, that could help kick-start the housing market."

As for Mark Spindley at the car dealership, he's a little more upbeat about the cuts.

"They allow us to offer cheaper finance deals," he says, before pointing out that low interest rates mean low savings rates, and that nudges people towards thinking about spending their money - on a car perhaps.

Which suggests a least one banker has a friend in Derby - Mervyn King, the Governor of the Bank of England.