I can't recall if the whole of Westmid was making a Gross Margin & therefore a contribution towards fixed costs. Manufacturig should be looking at what they do there for a start.

The cost of gaining a new client is truely much higher than most think & I wouldn't dump Westmid unless I had explored all the possibilities of turning it around for Egan (see others above). I'd work with Egan on what is costing the relationship money - this should also be in Egan's interests & save them money too.
They are local, so extra transport costs for short time orders shouldn't be too onerous. However, what about call-off stock on Egan's site for products which have a regular enough sales pattern?
I think in the long term Egan will only stay in business if it can play to it's strength of being faster than going to China or other Eastern cheaper mass producing market because it is local. It therefore needs a very slick and vfm operation of taking bespoke designs & turning them into product for which it will surely need manufacturing processes such as Kan Ban, Just in Time & 6-Sigma. This should also be implemented in the function in the drawing office and order acceptance departments.
Finally, a business which promotes non-profitability by the way it encentiveises it sales staff gets what it deserves (& has). I think Jane will be waking up to smell a new brand of coffee shortly & it should be Egan which brews it!