"Whatever you want, just Yell,” shouts the television campaign for the Yellow Pages operator.

It was more of a scream from shareholders yesterday as the company halved its dividend and said that the slowing British economy was hurting its business.

The pain for investors was a 26 per cent fall in the share price, which is down more than 60 per cent this year.

It closed yesterday at 154p, compared with the 285p at which it was spun off from BT in 2003.

Like many companies, Yell predicted that its business would be pretty robust in an economic downturn.

That was why it could justify taking on so much debt when it bought its Spanish counterpart for £2.3 billion in 2006.

The reality has proved rather different for Yell, as it will for many other companies before long.

Yellow Pages ads are so important for many small businesses that the presumption was that these would be the last thing they cut.

In the prospectus for its flotation in 2003, the company talked about how the classified directories business would be “more resilient to economic downturns than other forms of advertising”.

This has been the case in previous downturns, but unhappy economic times are unhappy in different ways.

This time, small companies that are worried about whether banks will be in a position to lend them money if they need it are hoarding cash.

Yell is finding many of its customers taking a quarter-page instead of the half-page they took before and yesterday it gave warning about “considerable downward pressure” on the business next year.

The impact on the business has been modest, so far. UK revenues increased by 1.7 per cent to £732 million last year, only slightly below original expectations.

Meanwhile, Yell dismisses suggestions that Google is starting to eat its lunch, pointing to very strong growth in its own internet revenues.

But it is easy to see why investors are nervous. It does not take much of a squall to leave a highly leveraged company taking on water.

Only last week, Johnston Press announced a £212 million fundraising amid concerns that the regional newspaper group might breach its banking covenants.

The company has a highly regarded management, but, like Yell, left itself with heavy debts after some big purchases.

Yell insists that it is not in the same position and has no need of a rights issue.

Cashflow remains strong and net debt of £3.76 billion in March, up £100 million on a year earlier, was only five times operating profits.

It is operating well within its banking covenants and does not need to refinance until 2011.

The slashing of the dividend, which saves about £70 million, shows that the company recognises the risks.

The reduced dividend would provide “greater financial flexibility” the company said.

As analysts at Kaupthing said yesterday, events could still tip it over the edge. So some observers argue that it should have a rights issue now while the going is still, relatively, good.

Yesterday Imperial Tobacco joined the ranks of companies passing around the hat, asking for a cool £4.9 billion.

Bankers say that the supply of money is not limitless, and yesterday's equity market wobble is a reminder that the recent strong run could reverse rapidly.

Whether or not Yell needs a rights issue now, there are plenty of others that will before the year is out.

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