George Osborne's family business makes a loss as the weak economy takes its toll

Osborne & Little, the fine furnishing fabrics and wallpaper business majority-owned by the Chancellor’s family fell into the red this year as rising raw material prices took their toll, its latest accounts show.

The £32.8m turnover company, which has glamorous showrooms on the Kings Road in London and in Paris, Munich and Milan, paid one director £736,000 in salary and pension contributions.

But no dividend was distributed to its shareholders, led by Sir Peter Osborne, who founded the firm with his brother-in-law Antony Little in 1968. George Osborne retains a 15pc stake via a trust.

Sir Peter, the 17th holder of a hereditary baronetcy, said the rise in raw material prices had reduced its gross margins to 53pc and that had directly led to the loss.

Market conditions continued to be “challenging”, the directors added, and that there was “little sign of this changing in the near future.”

The international business, which employed 201 people and makes 25pc of its turnover in Continental Europe, plans to focus “on cost controls and investment in new collections” in the coming year. It delisted from the London Stock Exchange in 2003.

Osborne & Little made use of its banking facilities with HSBC, drawing more heavily on its invoice financing and its overdraft during the year. The overdraft is up for renewal in January and the directors said they were confident the bank would renew the facilities.

The company reduced its average payment terms to suppliers to 51 days in the year to March, down from 63 the year before, and did not make any political donations.

The Chancellor referenced the family business when addressing the audience of this year’s Telegraph Festival of Business in Manchester: “I know the pressure you are under to compete, to stay ahead, to make a profit. From that pressure great ideas can emerge,” he said.