A lender to small businesses has underlined the "rapidly deteriorating" economic climate facing firms as it warned on profits and slashed jobs.
Davenham, which lends to small businesses which cannot get favourable terms from mainstream banks, has cut 20% of its workforce - 43 jobs - and said it "does not expect to be profitable" this year.
The Manchester-based firm's warning comes as Conservative leader David Cameron holds a summit with small business leaders on Monday to discuss ways of helping them through the economic turmoil.
Davenham usually lends between £5,000 and £3 million to businesses to help finance working capital and investment in plant and machinery. Its typical customer has a turnover below £25 million and fewer than 20 staff.
The group also funds smaller property developers to refurbish or build homes, but arrears in this part of the business have soared as the housing market grinds to a halt.
Davenham, which expects the tough conditions to last for at least a year, has halted lending in its property arm in response to the stricken market.
"The markets in which the company operates have been exposed to a rapidly deteriorating economic climate and, more recently, to unprecedented turmoil in the financial markets," the firm said.
The profit warning saw Davenham's shares tumble nearly 75% as it axed plans for a final dividend payout to shareholders. It has also begun talks with its own lenders over renegotiating its banking covenants.
Chief executive David Coates said loan impairments had "moved up considerably" in the last two months due to the property downturn, although other areas of the firm were trading satisfactorily.
He said he hoped that the recent bail-outs of the UK banking sector would kick-start the flow of lending between banks and to small businesses.
Source: http://ukpress.google.com/article/
