Struggling Manchester-based children's show producer Cosgrove Hall is contemplating a move into Granada Studios from its existing base in Chorlton cum Hardy.

The new premises would house a reduced staff of six, down from 70 this time last year, as a further six employees leave the company this week. The move could happen by the end of the year

Cosgrove Hall, which famously made children's animation such as CITV's Dangermouse in the 1980s, has seen a gradual reduction in employees, either through redundancies or the non-renewal of contracts throughout 2008 and 2007. One senior children's TV source said: “It's lost its soul.”

Cosgrove Hall is wholly owned by ITV and has made key children's shows under licence from Entertainment Rights such as Rupert Bear and Postman Pat.

But since the broadcaster slashed its investment in children's production at the end of 2006, Cosgrove Hall has attempted to shift focus from production to creating its own intellectual property such as Eddie Retractorhead, which runs on Nickelodeon.

Anthony Utley, who resigned from the company last month and has not yet been replaced, said: “[Cosgrove Hall is] struggling to make the transformation from work for hire to an intellectual property-owning entity. This is largely to do with lack of investment from ITV in my view.”

An ITV statement said: “Cosgrove Hall has gone through significant restructuring over the past couple of years to get it to a point where we feel it has an appropriate level of creative staff to produce ongoing work and win new business.”

ITV countered claims that Cosgrove Hall has no new work in the pipeline. “It is on the verge of a commission that will lead to the next recruitment drive.”

An ex-employee of the company argued that new animation companies in Manchester are booming as key talent has been released by Cosgrove Hall.

“Around 10 senior creative staff have left Cosgrove Hall over the past three months. This means many smaller animation companies in the region have expanded significantly.”

Executive producer Chris Bowden, who joined Manchester-based puppet makers Mackinnon and Saunders from Cosgrove in January this year, said: “There is a huge talent base in Manchester and Cosgrove Hall is the root of that.”

In addition, Chapman Entertainment set up its Altrincham-based studios in January where a number of key stop-frame animators who left Cosgrove Hall are now working on shows such as Roary the Racing Car.