Sofa makers Tetrad said it was in discussions with staff about its plans to axe around 35 workers.

The company, which is based in Swan Street, Ribbleton, Preston, has also laid off a number of temporary staff.

Martin Griffin, managing director, said the decision had been taken "with a heavy heart" but said the company had been hit by a downturn in people buying "luxury" items.

He said: "No-one is immune from the current economic conditions.

"The cost of everything is going up and people do not have spare cash to spend on things for the home.

"It is not something any company ever wants to do and this is certainly not a major blood-letting exercise."

One worker, who asked not to be named, said that staff had been told their futures were safe last year when Tetrad unveiled plans to transform part of its site into a housing development.

Mr Griffin said: "Sadly, I cannot safeguard anyone from the kind of economic changes we have seen lately, all I can do is safeguard the future of the business.

"It is a problem which started in the US and has come over here in the form of the Northern Rock crisis and other problems we have seen lately."

He said he expected the luxury goods industry to be hit by the credit crunch over the next two years, but said he believed the job losses would assist the company to ride out the storm.

Barry Montgomery, of the GMB trade union's Preston branch, said that 19 other workers had gone last month as part of similar cuts.

He was due to meet with bosses at Tetrad on Thursday to thrash out the details of the latest redundancy packages.

The union boss said: "I am hopeful that this will be the end of it."

An outline planning application for the development of 90 houses and 80 apartments on the company's base was given the green light by Preston Council planners last week.

It will see an ageing part of the Tetrad site demolished along with Manchester Mill, which currently houses textile firm Somic.

A further detailed planning application is expected to be submitted in the near future.