IS IT the crumbling of the Wall Street towers of Lehman Brothers or the near collapse and bail-out of Royal Bank of Scotland? Perhaps it is the unfolding scandal of Bernard Madoff's $50 billion (£34bn) "Ponzi" scam or the bitterly divisive battle for HBOS and the controversial merger with Lloyds TSB? What is it that business in Scotland will remember most clearly about 2008?

Possibly none of the above. For so many businesses, these headlines were no more than a lurid backdrop to their own daily concerns as they struggled to stay alive. For them 2008 was a year to be survived. It would be nice to say that 2009 will be different. Nice, but unrealistic.

If a single individual can encapsulate the new age of survival, Raymond MacHugh is as strong a candidate as any. His Glasgow design company's tale of boom to near bust in 2008 well encapsulates how Scotland has been scorched by the flamethrowers of the credit crunch. So badly has MacHugh's relationship with his bank, HBOS, broken down that he now compares it to a "Drumchapel loan shark".

So starkly does his case illustrate the cataclysmic shifts in banking-business relations that the chancellor of the Exchequer himself has been forced to take note of Keywest's condition and what caused it.

Keywest Design and Advertising was set up in 1992 by MacHugh, an entrepreneur with a dynamic dissatisfaction with the status quo and a drive to make a good business better. Peddling a strong line in property marketing, it has been one of the many indirect beneficiaries of the long housing boom, the professionalism of its image-making materials having helped its clients to outsurf others on the housebuilding and housing wave. The incredible thing for Keywest was how quickly the situation changed.

MacHugh says: "At the beginning of 2008, we had just taken on our 30th member of staff - our ambition was to have 50 in the next five years and 100 over the next decade. But we've been battered by the financial storm and I've had to make people redundant for the first time in our business life. That's been so very sad and painful."

In total, MacHugh has had to show over two-thirds of his staff the door. The domino effect of the housing collapse had worked its way through from the developers, the architects, the builders, the contractors, the sub-contractors, the lawyers, the conveyancing specialists, the estate agents, to the designers who make those dreamily aspirational brochures depicting new homes, coyly pillow-fighting young couples, happy children and fresh-cut flowers. Simply put, Keywest had too many of its eggs in the property basket.

His busy office in the refurbished Trinity House, beside Kelvingrove Park, had been a stylish place to work, huddled with other creative companies and small consultancies. It reflected the buzz of modern, go-getting Glasgow.

In January 2008, MacHugh's business was "galloping" along. Since 2000, around 27,000 new homes had been started and completed in Scotland each year, and this looked no different at the start of 2008 because of the still-acute housing shortage in Scotland. Yet this year that figure has dropped dramatically.

"We needed to bring in £150,000 a month to cover our costs and pay our wages and bills. We were doing this with ease at the beginning of the year. In some ways, we weren't vigorous enough in chasing clients because there was plenty of work," he says.

Things began to look queasy as it became apparent in the spring that the housing market had not regained its poise from the initial squeeze in credit that brought down Northern Rock the previous year.

On June 1, Jonathan Fair, chief executive of Homes for Scotland, the body which represents the private housebuilders, had expressed his own deep concern. He said: "I'm not prone to overstatement but if this continues unabashed, it will have significant long-term economic repercussions here."

Then came the blackest day of MacHugh's 17 years in business, a day he recalls with a visible shiver.

On the morning of June 11, one of Keywest's biggest clients called to give him the bad news. Gladedale Homes, a UK housebuilder with strong ties and major backing from HBOS, wanted to suspend its marketing spend.

"They told me they would be putting their marketing on hold for three months. But it's really dried up," he says.

Over the next few days, the phone would ring time and again as clients such as Persimmon, the UK's leading homebuilder, Manor Kingdom, Thomas Mitchell Homes and Royal Park Homes cancelled and pulled out of proposed plans. Keywest even found it hard to extract payments from clients for completed work as they sank into the mire of their own cash-flow problems. An economic chain was breaking - and each link was snapping with increased ferocity.

He kept believing that things would improve. Instead of one almighty cull, the agony was prolonged over three rounds of redundancies, reducing his workforce from 30 people to eight while scrupulously following the adage that you must always keep your bank informed.

The pain was intensified by hearing the elaborate and desperate plans that the competent and enthusiastic people around him came up with in order to keep their jobs. He took the radical step of moving to a smaller office in Glasgow's Lighthouse building in the town centre to house his diminishing staff and save £1000 a month. But MacHugh still had a bank loan on the previous Lynedoch Street property of £139,796, which had seven years to run.

"I personally own the office in Lynedoch Street in Glasgow and leased it to the businesses. I wanted to renegotiate the loan to keep my company going until we could find someone to lease the premises.

"We consulted estate agent Knight Frank and they said it would be nine to 12 months before they could see it being let. So I requested our bank, HBOS, convert the loan to an interest-only one for a period of 12 months in order to lessen our overheads by £2000 a month."

But by now HBOS was in deep trouble itself, since it relied on the money markets for its funding more heavily than its rivals, was increasingly viewed as a bad risk and was therefore expected to pay top dollar for what it borrowed. The bank had a major share of Scotland's small-to-medium enterprises and began to turn the screw on dozens of companies, forcing them to pay more for credit. If they did not want to take the new terms, their only option was to leave.

Keywest now received a letter from its HBOS manager that added five points to the company's old interest rate. "It worked out at 9.75%," says MacHugh. "This was quite extraordinary since I had been only paying 4.75%. I think I would have been better going to a loan shark in Drumchapel.

"It's not my fault that the banks screwed up so badly. That's the help and thanks I got from our bankers after 17 years of impeccable relations and lots of money in their coffers," he rails. "The Bank of England has been doing its bit to reduce interest rates but this isn't enough for many businesses - because basically the banks, in my case HBOS, aren't willing or able to pass it on despite what the chancellor wants."

He was so angered by the way that HBOS has treated him that he asked for help from Lesley Sawers, chief executive of the public-private business forum the Scottish Council for Development and Industry. Sawers raised the company's case, along with numerous others, with Alistair Darling.

The chancellor has been putting pressure on the banks to do more for small businesses, together with business secretary Peter Mandelson, who is chairing a Small Business Finance Forum of representatives from the banks and industry to improve relations between them. While the banks protest that they have increased lending this year and they can't simultaneously sort out their balance sheets and prop up business, there have been one or two chinks of light such as RBS's offer last month to guarantee the interest rates on loans to small businesses for a year.

Back at the coal face, MacHugh rejected the HBOS offer and now has a meeting with his bank manager in the New Year. He is still hoping that he can turn things around and re-employ many of the colleagues that he has had to let go.

Many others like him have been understandably reluctant to go public, and are still hoping that the banks will find a way to salvage their reputation through helping the nation's businesses in the weeks and months ahead. The most positive thing that many will be able to say about the year just passed is that it might not be as bad as the one about to begin.