Joe,
We had a similar situation in Southampton where the Adword advertisers were all at the cheap end of the market and the only way to compete with them was on price, which we did for a bit. We got a lot of calls but ended up with people fussing over a fiver. We then stopped adwords, took the prices off our sites and put them up to normal and relied on our websites and the call count went down a bit but business went up.
The illusion is that people want cheap and that the only way to compete with a competitor is to beat him on price - both are totally and utterly wrong.
Don't get transfixed by what your competitors are charging, if they want to work for nothing, let'em. There are plenty of people in Norwich that will very happy pay the going rate for a top quality job, all you need to do is point your advertising towards them. These type of people won't buy from the cheapest, they've tried them in the past and learned their lesson.
I'm not suggesting you charge top end prices but you should let the price you charge be dictated to by your competitors.
Simon