Executive Director’s Report

                                                April 2009

Banking problems for Midlands businesses were highlighted to a new committee of MPs. The clothing textiles sector was highlighted as a possible winner from the recession. Demands for direct air links between Birmingham and the Punjab were stepped up. Government planning inspectors were warned not to allow a massive house building programme without improving the transport network. The planned roll out of next generation broadband at the heart of the Midlands moved closer to implementation.

Recession

a) Budget

The Budget statement of the Chancellor of the Exchequer was greeted with disappointment by the Business Voice WM.

Business Voice WM Chairman Barrie Williams, said:

"The Budget should have focused on avoiding mass redundancies. Instead, the most obvious solution to helping to avoid mass redundancies - wage subsidies - has been missed".

"Governments in the 70s, 80s and 90s introduced wage subsidies as they knew that not only do wage subsidies help to avoid mass job losses during recessions but it is cheaper to pay wage subsidies than to pay unemployed people and their families".

"Businesses also need to retain skilled workers - we all know how losing skilled staff can badly affect businesses when the economic upturn comes".

"Even at this late stage, we urge the Government to do the right thing and introduce wage subsidies for strategic sectors".

"At long last, Ministers are taking action on credit insurance. As every business knows, credit insurance is critical for normal business activity - from running the corner shop to exporting goods and services. The Government, after a long campaign by Midlands businesses, have accepted the need for some kind of underwriting for credit insurance. We will be looking closely at the details".

"We welcome the decision of the Chancellor to help the construction industry. Construction firms were the first sector that entered the recession - and their decline has hit everyone else in the business community. So, putting money upfront for major building works is a good first step".

The Business Voice WM representative on the Birmingham, Coventry and Black Country City Region Board, Glyn Pitchford, expressed disappointment that the Budget did not give the go ahead for new borrowing powers that the City Region Board had been seeking.

Mr Pitchford said:

"This snub of the West Midlands looks like it will put back onto the drawing board the major transport schemes that the West Midlands so sorely needs".

"The borrowing powers that the City Region was asking for could have released cash to tackle the transport bottlenecks that blights the heart of the country".

"This is yet another blow to the Midlands at a time when we needed some good news from the Budget".

"Business will discuss with City Region partners what the next steps from today's decision should be".

b) Banking

The struggling banking system is still failing West Midlands businesses, it has been claimed.

And the Government could do more to nurse the region through the recession, according to Business Voice WM.

The BVWM hit out in a submission to the new House of Commons West Midlands Select Committee, which is holding an inquiry into the downturn and its effects.

“Concerns regarding the behaviour of the banks have continued to be expressed by businesses,” the lobby organisation maintained.

The Institute of Chartered Accountants in England and Wales had cited the example of how one firm borrowing £3 million had an arrangement fee of £1,500 raised to £30,000. Another seeking £15 million now had a £2.5 million arrangement fee renewable in six months.

And the ICAEW had also highlighted reports of exporters facing greater difficulties in gaining indemnity insurance – a business with export interests to Portugal had failed to get cover, exports to the United States were not immune, while some construction companies were being shunned.

The Federation of Small Businesses too had raised issues regarding High Street banks with increases in exit penalty charges.

The submission hails the success of the Advantage Transition Fund – established by regional development agency Advantage West Midlands, it specifically aims to help businesses whose normal bridge funding has been affected, building on the lessons learnt from the collapse of MG Rover and its aftermath.

“While inevitably much of the data relating to access to finance from the banks is anecdotal as commercial confidentiality is required to avoid a collapse in market confidence in some firms, the popularity of the Advantage Transition Fund is a clear indication that these problems are continuing.

“We are concerned that despite the statements from the banks and Government, normal bank lending from all high street banks has not resumed and this is a drag on regaining confidence in the regional economy,” states the BVWM.

It warns that the West Midlands, with its reliance on manufacturing, property and retail, had been hardest hit of all the regions of Britain. Engineering job losses had been particularly marked. And poor broadband connections in parts of the region had exacerbated the problems that rural businesses were facing.

“As a consequence, the need for a joined up approach to economic regeneration is sorely needed but aspects of national policy is holding back on effective delivery.”

The BVWM voices disappointment at the Government’s failure to allow an extension of time for European funds allocated to the West Midlands region to be spent – the EIB had offered an extra six months.

And it bemoans the delay in the announcement of details of the package of measures to assist the automotive sector. The uncertainty had “affected market confidence in this strategically important sector”.

The BVWM has called for some underwriting of the credit insurance market in a bid to boost exports, and it continues to urge the Government to introduce a short time working assistance or wage subsidy scheme.

And it wants a short term reprieve for Learning and Skills Councils – due to be abolished by April 2010 with their responsibilities being split three ways between two new Government quangos and local authorities.

BVWM states: “LSCs are important to address the skills issues arising out of the recession. This is the worst possible time for these changes to take place when all the focus should be on helping people stay in work and get back into work. We would urge that these changes are put on hold until the worst of the impacts of the recession is over, at the very least.”

And it adds: “Positive steps have been taken – such as the Advantage Transition Fund.
“However, full engagement with the business community is necessary to help local communities and the West Midlands region overcome the economic crisis.”

c)         Textiles

Textiles could help the West Midlands out of recession, a new report claims.

The Business Voice WM study – for the Government’s Council of Regional Economic Advisers – says the sector is holding its own and, with backing, could in the future be capable of significant growth.

It points out that textiles is a major employer in the region and estimates it has an annual turnover of more than £500 million.

The report states: “According to some analysts, the number of employees is around 20,000.

“Some are home workers and therefore their visibility in the market place is lower as a consequence. Many are from deprived communities.

“According to the Midlands Fashion Showcase (MFS), which is supported by Advantage West Midlands, 75 per cent of the businesses engaged in this sector are owned by members of the Asian community.

“Therefore, it is important in terms of the number of employees and keeping deprived areas from slipping further into economic decline. It is also an important sector in terms of community cohesion.”

Pundits claim there is a future for the textiles industry – but only if support is given to help it to diversify.

There is a conservative estimate that the clothing manufacturing sector contains 700 firms and 10,000 employees. If, however, home workers are included then the number of people employed in the sector increases to 20,000 or maybe even 30,000 people.

MFS cites its own membership of 543 clothing and textile manufacturers, 137 designer and designer makers and 11 component suppliers.
The sector takes in work wear and corporate wear clothing; promotional wear; country wear and outerwear to include tweed related and highly technical garments; leather clothing and accessories; technical textiles; interiors as a component supplier; fashion garments supplying High Street retailers; and own brand fashion labels in the high value end of the market.

Most textile businesses are concentrated around Birmingham, Wolverhampton and Coventry. There are also a number of businesses operating out of Staffordshire, Worcestershire and Warwickshire.

Birmingham City University has some 500 students annually qualifying in fashion related courses. Matthew Boulton College and City College, in Birmingham, have active fashion departments. Coventry University has close links to the industry in Warwickshire. Wolverhampton University offers fashion related courses. However, technical skills are said to be in short supply.

The report notes: “MFS has stated its optimism for the sector and sees exports as a key player for the industry particularly given the advantageous exchange rate for overseas buyers.

“There has been a resurgence in demand for UK production as buyers look to work with lean manufacturing units and seek smaller volumes and frequent drops.

“The sector seems to be in a better position in terms of holding its own.”

And it added: “Clothing is an example of an industry where clustering would secure the regional economic base and could lead to sectors becoming, in time, high GVA performers.

“The help the sector needs is not just access to finance but also focused on improving capacity.

“This is critical for several reasons. First, employees can be from the most deprived areas and therefore support for the sector leads to help for these areas. Secondly, it assists with community cohesion.

“As textiles is weathering the recession better than other manufacturing sectors, support for the industry could lead to helping the region move out of recession.”

d)         Europe and the Recession

The European Union needs to speed up implementation of schemes intended to help small businesses battered by the recession, Labour MEP for the West Midlands, Neena Gill, has warned.

She told Business Voice WM there were a number of initiatives available – but there was a need to ensure local firms knew about them and could access the money on offer.

Speaking at a breakfast event held at Birmingham Business School, Ms Gill said: “We are urging the European Commission to find mechanisms to get schemes implemented quickly on the ground so that businesses can get some kind of recovery from this recession.”

She said the future for many Midlands firms was in green industries.

“Those who innovate the most, with green issues, like Hadley Industries in the Black Country, will see the recovery coming through much quicker and in a crucial way.”

Ms Gill said that was why the Centre Left parties in the European Parliament had called for a “fiscal stimulus linked to smart green growth” combined with “more stringent rules and monitoring of the financial markets” to ensure that another collapse of the global financial system could be averted.

She warned against euro-scepticism – arguing that only by fighting for British interests at the heart of Europe could action be achieved for Midlands firms. “The UK needs to be part of Europe’s mainstream – not its slipstream. The UK is leading now in Europe on how we will get out of this recession.”

BVWM executive director James Watkins said the Business Council had been actively involved in discussions with Minister for the West Midlands, Ian Austin, to get action for the construction sector.

He added: “Construction is the bedrock of the West Midlands economy and we neglect it at our peril. That is why we will not stand by while the decline in construction continues. Only by taking concrete steps – such as bringing major infrastructure projects forward – can we hope to get people back into construction jobs.

e)         Local Government

Business Voice WM used the plenary session of the West Midlands Regional Assembly – meeting in Stafford – to urge local authorities to open up their procurement procedures to help local businesses survive the recession.

Business Voice WM Executive Director, James Watkins, in remarks to councillors, said:

“By opening up preferred supplier lists, local authorities can open up local supply chains for local firms to create local jobs so providing a local fiscal stimulus to help the local economy survive the recession”.

Transport

a)  Transport and House Building

Government plans for a huge increase in house building would have to go hand in hand with massive transport improvements, Business Voice WM has warned.

It stated: “Road congestion is clearly a major issue for business – leading to negative cost implications.

“There is a vital need to improve road capacity on the road network at some key junctions and along some link roads such as with the M40 Junction 15 (Longbridge), M1 Junction 19 (the junction of the M1, M6 and A14), A46/A45 (Tollbar) and M6 Junction 1 to Junction 4.

“Now that the Government has backed the option of M6 widening through Staffordshire this work needs to be progressed as soon as possible.

“There is also a need to improve the pace of work to enable the transport of freight by upgrading the routes between Birmingham to Felixstowe and Southampton, especially as a potential rise in business growth may be a consequence of an expanded house building programme.”

On bus, it states: “Services across the region, in the main, are failing to be an effective and reliable transport mode. The system of bus deregulation may have aggravated these difficulties.

“Even in the internationally recognised city of Birmingham bus services are not effective or regular throughout the night despite the growth of business tourism and commercial activity in the city. The problems with bus travel are a hindrance to the effectiveness of the hospitality sector.”

And on rail, it maintains: “One significant improvement to help rail traffic flows would be the introduction of the Rail Traffic Management System (ERTMS). While this would not necessarily mean that the long term need for four tracking to improve capacity at Birmingham New Street Station is not required, ERTMS could go a long way to improve the reliability and performance of rail services.”

The BVWM comments came in its response to a Planning Inspector’s plea for evidence.

The inspector is holding sessions at Wolverhampton Wanderers’ Molineux stadium to consider if more than 400,000 homes should be built across the West Midlands over the next 20 years.

“One of the questions, the Inspector has asked is whether transport policy should change to take account of the housing numbers,” said BVWM Executive Director
James Watkins. “We believe it should change.”

In the submission, BVWM welcomes the decision to consider the wider ramifications of the Regional Spatial Strategy (RSS) in the light of the significance and scale of the proposed developments.

It goes on: “The business community has been frustrated that despite the inevitable impact such large housing developments will have on the transport infrastructure, it has not been possible, until now, to comment in any depth on this matter due to the limiting nature of the scale of the RSS Phase Two review in respect of transport.

“It is concerned that without addressing the additional transport needs that will arise from the scale of the housing developments, the impact of transport difficulties for the regional economy would only deteriorate.”

Mr Watkins points out how the British Chambers of Commerce has already claimed that transport problems are costing every business an average of £27,000 per year.

And the Federation of Small Businesses found eight per cent of members had lost more than £5,000 in revenue as a consequence of traffic congestion.

The report goes on: “For firms in the West Midlands region – at the heart of the country – the transport congestion and poor infrastructure is being felt every day. This is despite the fact that being located in the Midlands should provide geographical advantages – from just in time deliveries to developing the logistics and professional services sectors.

“We need to factor in transport improvements to cope with this increase in house building.

“Current transport integration is ineffective.”

It demanded “a fundamental review of transport requirements in the region”.
A failure to do so would aggravate the difficulties.

And the BVWM has long argued that the projected expansion of Milton Keynes could also adversely impact on Midlands transport.

The planning inquiry starts on April 28 and ends on June 26 after which the inspector will produce a report for the Communities and Local Government Secretary, Hazel Blears.

Pundits reckon it could be spring 2010 before anything is decided.

The BVWM report is highly critical of the lack of commitment to park and ride across the region.

Such sites, it points out, are often cited as an effective way to ease traffic congestion by enabling people to park their cars convenient to a local rail station, which provides fast access to their place of work.

It goes on: “In theory, park and ride should provide a valuable contribution to alleviating road congestion.

“In reality, this policy is, in the main, not fulfilling its potential. This is often down to very fundamental reasons. For example in many of the shire counties park and ride sites are not considered safe after 6pm. This is clearly a peak period for travel and this problem immediately negates the point of establishing them in the first place.

“There is also the problem of a number of park and ride sites in the West Midlands conurbation – and elsewhere – that are not secure.

“This leads to cars being vandalised. Without adequate security, people can not feel confident in using these sites and, again, their establishment therefore has a negligible effect.

“Also, within the West Midlands conurbation, signing to park and ride is inadequate and this needs to be improved for these sites to be used effectively.

“In North Staffordshire the problem is even worse – no sites exist at all despite various local studies coming up with the same conclusion that these are good for the environment, good for transport integration and good for business, enabling a boost to local retail activity.

“Sites are not adequately provided at other key urban centres, such as at Worcester while the establishment of a park and ride at Brinsford on the Wolverhampton to Stafford line near to the M54 is still uncertain.

“Without the proper supply of sites, a valuable method in alleviating road congestion would be lost.”

b)         Direct air routes to Punjab

Business Voice WM has joined the fight to restore direct air links between Birmingham and India.

It has written to Shiv Shankar Mukherjee, High Commissioner for India, to protest about the situation.

Last month (MAR) national carrier Air India said it would not be renewing its popular Birmingham-Amritsar route – suspended in October as the airline tried to protect its Heathrow operations.

In his letter to the High Commissioner, BVWM executive director James Watkins said the West Midlands business community warmly welcomed closer business links with India.

He stated: “Since 2006, more than 1,500 jobs have been created by 16 Indian companies. There are now over 30 Indian owned businesses in the West Midlands region, such as Tata Motors, State Bank of India, ICICI Bank, Tata Steel, Mahindra & Mahindra and Aditya Birla.

“In addition, the Punjabi community here provides greater economic prosperity for both the Midlands and the Indian economy.

“Despite these clear economic advantages between our two countries, there is now no direct service between Birmingham International Airport and the Punjab. Using those from a congested Terminal Three at Heathrow Airport leads to additional costs and delays.

“We understand Birmingham International Airport would warmly welcome discussions with carriers that would enable direct services to take place once more.

“Direct line services help tie India and the West Midlands business community closer together as well as serving the requirements of the Punjabi community in the Midlands. We appreciate that this is a matter for commercial interests and also for Indian regulatory considerations.”

And the letter asks how best the deadlock could be broken, with the BVWM saying it would be happy to meet the High Commissioner to discuss matters further.

Andeep Mangal, president of the Birmingham and West Midlands Society of Chartered Accountants, added: "Links between our region and India continue to grow – a regular, reliable service is essential so that business can flourish. It is particularly important at a time when the global economic downturn makes international co-operation even more vital."

Air India withdrew the Birmingham route for fear of losing slots at Heathrow, even though it admitted the flights were actually more profitable than those from London.

There are two indirect routes from Birmingham to Amritsar at the moment, passing through Ashgabat and Bratislava. These will be joined by a new route in April, run by Akal Air, which stops in Vienna.

Broadband

The West Midlands’ bid to launch next generation broadband has taken a leap forward.

The City Region board has called for an action plan to be presented to it by September – a Task and Finish Group is working on the possible roll out.

The move is considered vital for business competitiveness, inward investment and jobs.

The ICT hub at the proposed £400 million Walsall Gigaport development would play a key role, acting as a data storage centre. Birmingham City Council, Coventry City Council, Telford and Wrekin Council and Walsall Metropolitan Borough Council are at the forefront of the project and various funding options are under discussion.

The strategy gained a public airing at the NextGen Roadshow in Birmingham on April 22. Organised by the Community Broadband Network, the one-day event took place at the Maple House Conference Centre in Birmingham.

Glyn Pitchford, elected Business Voice WM business representative on the City Region board, who has been helping to drive the initiative, said: “The advantages of such a project are not only that next generation broadband would be provided to as many businesses as possible in the region, making the City Region a more competitive centre of business activity, but by linking this to a significant data processing capacity in Walsall, this could improve the business activities of a range of potential users.

“These could be Primary Care Trusts, police, education, back office functions of financial institutions, TV and media companies, international businesses, telecommunications and electronics.”

Mr Pitchford said faster communications speeds were necessary to meet customer demands.

A failure to progress would damage the region’s competitiveness.

“It could also affect how potential investors reach their final decisions on locations of choice for business growth”.

The hope is that “back office” functions in the financial services sector, such as with audit and legal services, could be moved from the London area to lower cost centres within the City Region in response to the recent downturn.

“However, such objectives could only be fully achieved if an advanced ICT structure was in place in the City Region,” noted Mr Pitchford. It would also boost Birmingham City Council’s efforts to attract financial services investment into the City Region, particularly given the area’s expertise in Islamic finance.

A report from the Task and Finish Group stated: “It was recognised that other areas of the country were also considering advanced ICT connections and, as a consequence, it would be a vital pre-requisite for the City Region that it should not be left behind and lose its competitive edge because of a lack of action in this area.”

Highlighting ICT enablement programmes undertaken by Birmingham City Council, ICT cabling installed via Coventry City Council and broadband being available across the City Region thanks to the work of BT Openreach and Advantage West Midlands, it went on: “However, the key characteristic of particular benefit is the Gigaport in Walsall.

This ICT hub can act as a national storage centre for data and can provide valuable spin off commercial activities such as in media and further education.”

Late last year the Gigaport development was given final planning approval by Walsall Council. It is set to create 3,000 jobs.

The report went on: “The immediate commercial advantage of next generation broadband would be particularly relevant for inward investors and large businesses with sophisticated data managing requirements.

“However, small and medium sized firms could also gain commercial opportunities from this roll out.”