Executive Director's Report

                                    January/February 2010

Power cuts are afflicting some businesses on a regular basis. In response, Business Voice WM called for action to address this growing problem. Business Voice WM came out in support for some kind of regional economic structure – and began detailed discussions with senior Conservative MPs as a direct consequence. The National Business Crime Forum was formed – with the intention to crack business crime across the UK. Business Voice WM was successful in getting changes to improve the training provision that businesses can access for their employees.

Power Cuts

Power cuts are sparking growing protest from angry businesses.

Now Business Voice WM has written to energy regulator Ofgem asking what is going on.

There has been concern for some time that breakdowns are happening more frequently.

And a series of surveys co-ordinated by BVWM has again highlighted the issue.

West Midlands Chambers of Commerce found that 63.7 per cent of firms responding had experienced power cuts during the last two years, many several times over, causing considerable disruption.

Most claimed they were never told what the problem was, had never been advised how best to prepare for a power cut, and did not have a back-up generator.

All 28 companies in an online survey for BVWM and the Institute of Chartered Accountants in England and Wales reported having suffered a power cut in the past two years. A quarter had suffered up to ten power cuts; over a third even more.

The effects had been damaging and included disrupted production and trading, subsequent equipment problems, loss of productivity, increased operational costs and a negative impact on customers.

Similarly, the British Ceramic Confederation cited examples of badly affected businesses:

• A Cannock company which had suffered up to five power cuts in the last two years which knocked production and affected productivity.
• A factory in Newcastle under Lyme had suffered up to five power cuts over the last two years.
• A Coventry concern which reported that a loss of power would typically result in a one hour stoppage.

In his letter to Ofgem chief executive Alistair Buchanan, BVWM Executive Director James Watkins said:

"Power cuts in parts of the West Midlands region are becoming a feature that is being felt more and more by businesses.

"These power cuts are affecting everyday operations, are increasing costs and impairing competitiveness."

Highlighting apparent contradictions between the surveys and official statistics, he went on:

"We appreciate that the details do not seem to relate to the figures produced by Ofgem in respect of power cuts in the West Midlands region.

"We would be grateful, therefore, if Ofgem could provide us with data for power outages for the East and West Midlands and how these are broken down."

In particular BVWM has asked for details of planned outages, interference, environmental conditions or other explanations.

Skills

Business Voice WM Chairman, Barrie Williams, alongside Tim Campbell of BBC TV’s The Apprentice and the Minister for the West Midlands, Ian Austin MP, urged businesses to back the many schemes that are in place to help young people into work.

With the economic downturn, 1 in 5 young people in the West Midlands region are now out of work. This event, held in Birmingham, urged businesses to take advantage of the many schemes, where they get money in return for helping get young people to experience work.

A Business Voice WM booklet was launched at the event and this has been distributed to the member organisations of Business Voice WM.

We are grateful to Birmingham Chamber of Commerce and Industry for facilitating this work.

The House of Commons West Midlands Select Committee backed calls from Business Voice WM for the system of further education funding to be simplified.

The decision of the Committee of MPs came after evidence was presented to Business Voice WM that demonstrated a very complex structure that was being introduced for further education funding – including a range of new public bodies and the involvement of individual local authorities.

Business Voice WM was invited to be a member of the Regional Planning Group. This group oversees the work of local authorities in their new responsibility for further education funding.

As a consequence, Business Voice WM requested that guidance that was due to go out to the local authorities be amended to include reference to the need for funding specialist courses to meet skills gaps. This request has been agreed to.

Conservative Party Policy on Regional Economic Development

Business Voice WM came out in support of some kind of regional economic development structure so that economic development work can continue to take place.

In a policy paper being distributed to the political parties, BVWM says:

"The potential for AWM to be business-led is still to be built upon. For example, delivery of business support via Business Link has been extremely difficult and the service is not yet stabilised.

"The interference in the RDA from central government has been a real barrier to the organisation being truly business led.

"The RDA, for example, cannot even appoint its own board or chairman. An RDA needs budgets that are long-term and protected; we have seen too many examples of RDA budgets being raided by central government."

The comments come despite pledges by both the Conservatives and Liberal Democrats to abolish the organisations.

BVWM says the development of economic strategy needs to happen at a level that crosses local authority boundaries. "We require a business-led regional economic body (RDA) to achieve this."

But delivery should be via urban development corporations, city regions and local partnerships like the Black Country Consortium.

The document warns that, with so much power still concentrated in Whitehall, regional strategies are largely decided by civil servants and Ministers in London.

"At best, these strategies are influenced by the strength of local representation. At worst, the region has to accept services designed for it as part of a national strategy which might be totally unfit for purpose locally."

Only a tiny percentage of the billions spent in the region was subject to local control.

BVWM states: "Until and unless central government re-visits regional boundaries, the West Midlands must be treated as an economic entity. By chance, travel to work and supply chain patterns demonstrate a region that is often well integrated.

"In practice, however, there are areas of natural economic geography that place a strain on the concept of the 'West Midlands'. Stoke probably has more natural economic ties to Derby or Crewe or indeed Greater Manchester than it does to Birmingham."

There was also a sub-regional economic issue to be considered – for example, the possibility of a Greater Birmingham and Black Country area and a Coventry/Warwickshire area.

RDAs, says the report, should focus on skills, planning, transport and infrastructure, science and technology, business support, inward investment, and co-ordinating responses to exceptional economic events and crises.

The report highlights how little money AWM has – a budget of around £300 million a year.

"It must be recognised that the RDA resources are tiny compared to the size of the regional economy it is supposed to move – an oil tanker with an outboard motor. An RDA is only significant to the extent that it can influence the much larger volumes of private sector and central/quango activity."

The report questions whether local authorities would do as good a job.

It states: "Local authorities have combined to make choices about the £100 million spent annually via the Regional Funding Advice mechanism. Authorities also combined in deciding not to implement road-pricing.

"On the other hand, would New Street Station have been achieved without the £100 million contribution of the RDA? It is also a matter of debate as to whether other transformational projects such as Stoke's University Quarter and the redevelopment of Fort Dunlop would have happened without the RDA.

"It is the view of some of the region's largest manufacturing businesses that the West Midlands science agenda would never have advanced as well had the RDA not been involved – the Science City project and the redevelopment of the site at Ansty being two good examples.

"From the perspective of the private sector, the capability of local authorities in the region varies hugely and is generally worse in those places where the region is underperforming the most. It leads us to conclude that regeneration progress would have been slower without the input of the RDA."

BVWM says there is a need for the private sector to have greater influence on RDAs through contributing to the creation of strategy, and driving implementation via chairing delivery bodies and scrutinising performance.

Board places should be made available to representatives of business bodies such as the chair of BVWM and the president of the West Midlands Chambers of Commerce.

The report goes on: "It is recognised that an RDA is a more efficient vehicle for articulating the voice of the region's businesses into Whitehall than is the alternative, which is to develop multiple links via local authorities.

"However, we must reflect on initiatives which, collectively, the public and private sectors have struggled to maximise. For example, the slow pace of progress around the City Region initiative.

"We need to find ways of inspiring our most senior business people to prioritise civic leadership and we must grab the opportunity to exploit the voice of business via membership of the Joint Strategy and Investment Board.

"We need to hold onto the best, settle on the improvement opportunities and then resist any interference in our regional, sub-regional and local agendas."

Jerry Blackett, chief executive of Birmingham and Solihull Chamber of Commerce and Industry and Business Voice WM Board Member said: "It is important to have a business-led body to agree our economic priorities. The RDA has shown it can pull together and deliver complex projects. The capability to do this via other public sector bodies is simply too variable in quality."

During January and February, Business Voice WM raised this matter in private discussions with a series of senior  politicians including Liberal Democrat Shadow Business Minister, Lorely Burt MP, Shadow Business Minister, Mark Prisk MP, Shadow International Development Secretary, Andrew Mitchell MP and Shadow Local Government Secretary, Caroline Spelman MP.

Crime

a) UK wide work

A National Business Crime Forum has been launched amid rising concern at the growing number of violent incidents resulting in serious injuries and deaths.

Government needs to act more decisively, it is claimed.

And it is also being urged to give increased priority to wider issues such as e-crime and lorry hijackings.

The new lobby group brings together national business representative organisations, such as the British Chambers of Commerce and the Federation of Small Businesses, with regional business crime forums across the UK including those in Wales, the West Midlands and the South East.

The aim is to highlight worrying trends such as the number of armed hold-ups of local shops, but also to come together to tackle crimes that cross boundaries.

Ministers in Whitehall, Cardiff Bay, Holyrood and Stormont will be lobbied for change.

Birmingham newsagent and National Federation of Retail Newsagents national vice president Parminder Singh has been elected chairman. Burton-on-Trent manufacturer and Federation of Small Businesses National Policy Vice Chairman Mike Cherry is vice chair.

Mr Singh said: "Crime against business has for too long in this country been regarded as not something of real importance.

"Tell that to the grieving families of those shopkeepers who have lost their lives after being caught up in brutal robberies.

"Tell it to hard-working employees thrown out of a job because an arsonist has burned their factory to the ground.

"Tell it to a terrified lorry driver held up by masked raiders with a sawn-off shotgun pointed at his head.

"Crime against business is so serious that all of society should be saying that enough is enough. We have been seeking to highlight this with government and the police for some time, and we have got it up the agenda. But much more needs to be done."

Mr Cherry said: "NBCF aims to improve communications, promote best practice, and encourage government, law enforcement agencies and the business community to work efficiently in partnership to reduce levels of crime against business.

"We need to identify and remove the barriers to cutting the levels and types of crime against business and identify and generate the cash needed for crime reduction initiatives."

Business Voice WM is providing the administrative back-up.

b) Retail Crime

Business Voice WM is to distribute free copies of its updated guide, Beating Crime In Your Business Is Your Business, to all 1,300 newsagents in the region. In addition to support from Business Voice WM, the book has been generously sponsored by Westfield, AWM, West Bromwich Building Society, Coventry Trading Standards and Buzz Electrics to ensure as many small business can receive this valuable advice.

The booklet's author, Fay Goodman said: "Businesses that handle cash or valuables should ensure that their employees are trained so that they know how to best react in the event of a robbery.

"They should be instructed to avoid any 'heroics' – the best way to steer clear of personal injury is to co-operate fully with the robber.

"Do not make any sudden moves. Keep your hands in full view of the offender."

And she advises: "Be alert and try to remember as much detail as possible. Consider using safety screens, personal panic buttons and CCTV. Conceal duplicate keys in appropriate areas so that staff can escape if raiders have locked them in the building."

National Federation of Retail Newsagents' Parminder Singh highlighted Home Office statistics that show shop attacks on the rise in the wake of the recession, drug use and changes in society.

He said: "Sometimes people believe they can fight back and succeed. But sometimes you can fight back and lose your life. But I would say that it is not worth fighting back. Rather than risk losing your life it is better to lose money."

Ms Goodman warned that the effects of crime on small businesses could be far reaching.
She cautioned: "For a small business with a turnover of £20,000 or £30,000 a year operating within very tight profit margins it could spell bankruptcy."

Credit card fraud could result in a business suffering permanent damage to its credit status; identity fraud was the fastest growing white-collar crime, increasing at nearly 500 per cent a year; cybercrime was rocketing, with 300 online crimes committed every hour.

And she also highlighted how arson could have devastating consequences for both human lives and property. There were many reasons for it – people deliberately setting fire to a factory just for 'fun'; burglars trying to destroy evidence of their presence; a rival trying to destroy 'the competition'; or a resentful ex-employee acting out revenge.

The guide goes into a host of other areas – from how to spot a suspect parcel bomb to money laundering.

Endorsing its contents, Lord Jones of Birmingham said: "Not surprisingly many smaller businesses concentrate on the pressing day-to-day factors affecting the success of their business such as quality customer service, new sales and existing customer relationship development, credit and cash flow control.

"While insurance is a vital tool to help get you back to the same trading position you enjoyed before a loss, it can never compensate for the emotional effects and traumas which may arise as a result of a crime. With inevitably limited resources to devote to issues such as the effects of new legislation and loss prevention, small businesses need to take advantage of all the help and advice available.

"The burden of the cost of crime on the business community is rising year on year, so it pays to be aware of how to tackle it, especially bearing in mind that the small business sector now accounts for no less than 95 per cent of all business ventures in the UK."

Housing

Homes and jobs must be linked if we are not to create new sink estates, MPs have been told.

Business Voice WM stressed that "the needs of new housing and the needs of economic development must go together hand in hand".

The warning came in BVWM's submission to the House of Commons West Midlands Select Committee on Planning for the Future: Housing and Economic Development in the West Midlands.

The lobby group cautioned:

"The lessons of the past – when land for housing seemed to take very little cognisance of the need for land for local jobs – meant these new housing areas became economically unsustainable in the medium to long term.

"This led to negative life chances for people living on these estates and – economically speaking – was a drag on the whole regional economy, holding back greater prosperity for all families in the West Midlands region.

"These mistakes of the past should not be allowed to be repeated in the future.

"The silo approach to addressing housing and economic development must end."

Business growth was also held back by the lack of affordable homes.

The report continued:

"This principle needs to be firmly taken into account as there is now a large affordability gap for housing in rural areas and this does not seem to receive the consistent attention that this urgent issue requires. Regional and local planners need to focus on the steps they can positively take to close this gap if the rural economy – and its need for key workers – is to be addressed.

"However, it can not end there. Local authorities – working with the business sector – must develop a clear framework for what allocation of proposed new housing needs to be classed as affordable."

BVWM said it was pleased that the Government had opted for a single regional strategy rather than the competing visions of Advantage West Midlands and the West Midlands Regional Assembly – the latter is being scrapped.

It stated:

"The business community warmly welcomes the decision to dispense with two regional strategies and two sets of public agencies dealing with separate economic development plans.

"This duplication of activity did not make economic sense and led – on occasions – to conflict.

"The long term planning for economic development was undermined by this confusion.

"Business Voice WM has continually advocated the stance that regional planning exists to provide added value to the work of local authorities – and regional planning should not be a top down approach that ignores the needs and sensitivities of local communities.

"However, we do consider that there is still a role for regional planning – particularly in the West Midlands region. Developments in one locality will have an impact on other localities in the West Midlands region – even though they may be many miles apart – because of the close economic synergies across the West Midlands region."

Royal Institution of Chartered Surveyors' Head of Regional Policy and Communications, Debbie Walsh – who is also a Business Voice WM Board Member – later appeared before the committee in support of the Business Voice WM stance at a special evidence session held in Worcester.

Floods and Business Support

With the flood threat rising as winter tightens its grip, Business Voice WM is warning companies of the need to safeguard IT equipment.

And, with the help of member organisation, the UK IT Association, it has produced a Ten Tips guide to how they should go about it.

Bill Duncan, managing director of Secure Virtual Office, who compiled the guide, said: "The Midlands knows well the devastation that floods can cause, and already this year we have seen the suffering in Cumbria.

"With climate change developing apace it is doubly important that businesses have strategies in place to combat the threat.

"IT equipment is particularly vulnerable and its loss can cause huge problems, even threaten a firm's very existence. Businesses need to take sensible precautions and be aware that if the worst happens all may not be lost."

The guide suggests computers and other expensive items should be located as high up as possible. It would be better putting a server or workstation on a table or on top of a cupboard, rather than on the floor.

Make sure fire alarms are fitted and working, and take advice on what physical protection can be taken to mitigate flood damage

Another sensible precaution is to back up your data files off site.

"Nowadays the cost of data communications has reduced so dramatically that in many cases it is cheaper to install a piece of software on servers and workstations that will compress and encrypt data files as they are created and back them up continuously to servers owned by a specialist back-up services company.

"These companies will very often also take an image of the operating systems and applications, so in the event of your computer being irretrievably damaged, restoring operating systems, applications and data will take only a few hours."

One important tip is to prepare a business continuity plan.

The guide states: "Government figures show that a company that has a written business plan that it has tested and practised is 90 per cent likely to survive and in all cases will be up and running again in less time and with less disruption and loss of profits compared with a company without a written plan. The same survey show that a company that suffers a disruption to their IT service of a week or more is 80 per cent likely to fail within the next 18 months."

Get a flexible telephone system with portable numbers is another piece of sound advice.

"A telephone is the pulse beat of a modern business. If a customer cannot get through on your normal number then that is a 'sure fire' signal that all is not well. If a supplier cannot get through it is bound to start him wondering if he is ever going to get paid.

Large corporations spend hundreds of thousand of pounds protecting their 'phone systems and their reputation.

"Until recently this was beyond the grasp of small and medium-size businesses. Now, with the advent of Carrier Class VoIP, the introduction of portable numbers and flexible access – just plug the handset into any internet connection and 'click' you are back in business again."

If, despite all this your IT equipment is caught up in a flood, BVWM stresses "don't panic".

It goes on: "Just because a computer has been under water, crushed or exposed to heat, it does not mean that data is irrevocably lost.

"If you have any DVDs, CDs or backup tapes that have been immersed in water, then these are also capable of being cleaned up and the data recovered.

"Do not attempt to power-up water damaged equipment. Do not attempt to clean the equipment with brushes, vacuum cleaners blow dryers or detergents. When you have extracted the hard disk or other media, keep it moist by placing it in a sealed bag – such as a freezer bag."

And then seek specialised help.

The guide states: "Contact your insurance provider and give them details of your circumstances. They will help with registering claims and will send a survey team to give advice on salvage activities. Most insurance companies will offer a cash settlement that includes losses arising from business interruption and the costs of providing temporary accommodation and services, as well as replacing or repairing damaged equipment.

"If you do not have insurance, Business Link may be able to give you access to emergency funds that will help you get your business restarted."

Various agencies exist where you may be able to obtain temporary business accommodation.
But, to avoid all this heartache, you could opt for cloud-based computing – hosted services over the internet

The guide notes: "Although it sounds very technical and expensive, the relatively low cost of hardware and the affordability of broadband connectivity now makes this a realistic option for even the smallest business.

"It is true that it was the large global corporations who paid billions to have the technology developed and it is their vision and foresight that has led to unparalleled levels of security, availability and access to their employees, selected customers and suppliers.

This can now all be achieved with a 40 per cent reduction in total cost of ownership, where IT just becomes another utility – just like water, electricity or gas.

"All you need locally is a low cost PC or laptop and a connection to the internet. Everything else is stored in the cloud and for an affordable monthly subscription you can rent as much or as little resource as you need.

When disaster strikes locally – you know you will be safe and secure – in the cloud."

In response to this work by Business Voice WM, Business Links agreed to ensure that its advisers were briefed on the guide to help businesses who are based in flood plains. The Government Office for the West Midlands also agreed to ask local authorities to advise their local businesses, who are at risk of flooding, of this advice.

Economic Downturn

a) Annual Report

It is make or break time for many companies, Business Voice WM has warned.

And, in its annual report, it promises it won't let the region's vital interests be ignored.

The organisation claims a series of successes in 2009 despite what chairman Barrie Williams describes as "one of the most severe recessions to impact on the region".

Mr Williams cautioned: "2010 is likely to be a year where economic difficulties continue to beset the West Midlands – we will help ensure business is not left in the lurch by decision makers at this critical time."

James Watkins, executive director, added:

"The focus on helping businesses weather the economic downturn has been unrelenting.

"2010 will be a make or break year for a number of businesses. This is the time we move on and out of recession into prosperity across the Midlands."

b) Manufacturing Conference

The credit crunch must not be allowed to become an economic rout, a Midland business leader has warned.

Business Voice WM chairman Barrie Williams urged the region to look after number one, insisting that standing back and waiting for action from the Government was not an option.

As a start, councils should seek to give contracts to local firms wherever possible.

Mr Williams made these comments in a speech to BVWM's Manufacturing Success conference organised with Forrest Research and supported by the Economic and Social Research Council, Aston Business School, Coventry University, Fair Finance Consortium and Emerald.

Held at the Coventry Hilton Hotel, other speakers included Minister for the West Midlands Ian Austin, Shadow Economic Secretary to the Treasury Greg Hands, Guardian business editor Larry Elliott and Jaguar Land Rover director of quality Tim Davis.

Mr Williams said: "We are facing a very difficult time in our businesses. But standing back and waiting for action in London is not an option. As well as lobbying Ministers, we really can do so much in our own firms to make a difference.

"None of us is immune from the crisis, but together we can turn things around for the sake of the livelihoods of local families."

People should not feel "at the whim of politicians".

He went on: "We are not bystanders while the global financial markets swing backwards and forwards. I do believe that we can make the difference in our own areas so that the credit crunch does not become an economic rout."

Companies struggling to obtain finance should help themselves by taking advantage of the various publicly funded aid schemes available. And similarly they should access financial help to improve the skills of their workforce.

Meanwhile councils should do their bit to support local manufacturing jobs.

"This is the moment to get procurement contracts to local firms," said Mr Williams. "This can be done fairly as local firms may be better on quality and delivery while they may differ on price. Councils can also work with other agencies so procurement plans have a big and positive impact on the economy."

The Government had produced detailed guidance to help councils and others deliver greater bang for the public sector buck.

Mr Williams noted: "Manufacturing is going through a very difficult time in the West Midlands. The end of LDV and the decision of Ericsson to pull out of Coventry are just two recent examples of the knock-backs we have faced.

"I know how desperate things have become for some businesses. Some manufacturing firms are having cash flow problems and in obtaining credit insurance. Normal loans – which keep business and jobs going – are no more for some companies.

"I do not want to see the only business sector benefiting from this downturn being the insolvency practitioners."

But, despite the setbacks, manufacturing had a bright future in the Midlands.

He added: "This may seem a strange comment to make in the current economic slowdown. But 20 per cent of West Midlands gross value added is down to manufacturing and 20 per cent of the regional workforce is in manufacturing.

"And when it comes to innovation, it is still the West Midlands leading the way.

"Some may recall, for instance, seeing in the newspapers a photo of President Obama standing by an electric van promoting the green credentials of the US Government. But that van was designed in Coventry by Modec – showing how, when it comes to ideas and innovation, we are still world leaders."

c) Labour MP and Manufacturing

Britain needs to recognise that manufacturing is the glue which holds the economy together, a Midlands Labour MP has warned.

Richard Burden, chairman of the House of Commons West Midlands Select Committee, said it was time to learn the lessons from the recession and admitted that the Government had on occasion been too slow to act.

Speaking to Business Voice WM at an event supported by Birmingham Business School and Forrest Research, Mr Burden, who represents Birmingham Northfield, said: "If ever we needed confirming the importance of manufacturing, the experience of the last year shows that it is part of the glue that holds our economy together.

"Business decisions and Government decisions need alignment. The speed of Government schemes to help businesses were, at times, too slow and business does not work like that. Government, like business, must also understand the process of risk.

"We need to rethink the long term relationship between industry and finance. We need to look at Germany at the links there between finance and its manufacturing base.

"But in the short term there are lessons from this downturn compared to the downturns in the 80s and 90s.

"It has highlighted the need for active intervention. Keeping people in work is really important and it was not always seen that way in previous downturns. The use of things like Train to Gain – one of the best programmes in the country – so you still invest in people during the downturn is also vital. Too many people have low skills. We are getting better in addressing this but we must do more."

Mr Burden said he was cautiously optimistic about the state of the economy.

"We need to keep our feet on the ground but there are some positive signs. Unemployment has gone down – the West Midlands no longer have the worst unemployment rate in England. The Purchasing Managers Index shows new orders are up.

"Over the last few months, there has been action to stimulate construction while the vehicle scrappage scheme has cushioned the impact of the serious downturn on the automotive sector.

"The prospects for the shape of recovery will have an international dimension as the US, China and India will be a key determinate to what happens here in the UK. I do worry about Conservative demands for quicker and deeper cuts as this seems to be very dangerous indeed for continuing the economic recovery. It is often the same Conservatives calling for cuts who are also calling for new investment."

Turning to the purchase of Cadbury by Kraft, Mr Burden said it showed we needed to re-think takeover legislation in the UK. This, he suggested, could involve the introduction of a "minimum time an entity or person has been a shareholder when takeovers are being considered".

Paul Forrest, of Aldridge-based Forrest Research, was critical of the regulators' role in the lead-up to the economic crisis. "Central banks should have noticed that the UK balance sheet had tripled since 1997."