ExecuExecutive Director's Report

July JJuly 2009

The Government was urged to take urgent action so that the credit insurance market can get back on track. A House of Commons committee backed the Business Voice WM's proposals foe short term steps to mitigate the impact of the recession upon businesses. The Minister for the West Midlands was urged to back proposals from MPs to improve transport links into Wales. BT plc responded to the Business Council with a multi million pound investment in the Midlands. Businesses are being urged to take advantage of commercial opportunities from the burgeoning nuclear power industry.

Credit Insurance

The Government's newly launched export credit insurance proposals don't go far enough, Business Voice WM has warned.

And it has told the Export Credits Guarantees Department that it must do more if there is to be an export-led recovery.

James Watkins, BVWM executive director, said his organisation backed plans as far as they went, but noted: "Export orientated businesses in the West Midlands region – critical to driving the UK economy out of this recession – have been severely hit by restrictions in export credit insurance.

"At a time when exporters should be benefiting from a weaker pound as compared to our major international competitors, these restrictions are a restraining factor in getting the UK out of the economic downturn.

"In the current climate this proposal does not go far enough."

The letter of credit guarantee scheme follows on from a recently introduced top-up system for domestic trade.

But BVWM is not happy with the idea that it should be targeted primarily at emerging markets and developing countries.

Mr Watkins said: "For many Midlands businesses, this focus will be seen as another blow during this difficult economic climate as export credit insurance is not just being restricted for emerging markets and developing countries, serious though this is, but also to key EU member states and other major nations."

Highlighting problems in trading with Portugal and the United States, he went on: "We propose that exceptional times require exceptional measure and that guarantees should cover developed markets as well as developing markets.

"Businesses in the West Midlands would also urge faster consideration and implementation not just because of the severe economic pressures hard pressed firms are facing but also the delay in such a scheme means that
UK firms are losing out to companies from our major competitors."

And BVWM says it should not slavishly follow its domestic counterpart.

Mr Watkins went on: "As the scheme does not include reinstating limits that have been pulled completely, instead applying only to companies where cover has been reduced, for example from £100,000 to £70,000, the number likely to benefit will be relatively low."

Indeed it has concerns about the domestic scheme with the two per cent charge to top up being above typical market rates and, combined with insurance premium tax at five per cent, "may prove to be a disincentive for some firms to gain sensible insurance cover".

The submission continues: "We would urge the ECGD to cover developed markets as well as emerging markets with its guarantee proposal.

It needs to move quickly on an export credit insurance scheme that recognises the failures which have occurred in the credit insurance market and the barriers that have regrettably emerged with the domestic top up credit insurance scheme."

But the BVWM has backed a further suggestion in the consultation paper that additional measures may be needed such as an Export Credit Reinsurance Scheme.

The consultation was launched by Dudley South MP and Treasury Minister, Ian Pearson.

MPs Back Short Term Plans to Tackle Recession

The findings of a House of Commons report on the short term steps needed to mitigate the impact of the recession was welcomed by business.

Business Voice WM said it was delighted by the recommendations in the House of Commons West Midlands Select Committee report entitled 'The impact of the current economic and financial situation on businesses in the West Midlands region".

Business Voice WM Executive Director James Watkins said:

"Every single one of our recommendations to the Select Committee have been supported by the MPs.

"Both in writing and at the hearing held at Leamington Spa we called for wage subsidies for short time working, emergency action by the Government to underpin the export credit insurance market, a continuation of the successful Advantage Transition Fund soft loans scheme and action to take the pressure off those having to cope with the impact of rates on empty properties""

"In response, the Committee has called on Ministers to state why they have turned their backs on wage subsidies; has asked them to do more on credit insurance; suggested a review of the empty property rates policy because it is holding back development and therefore jobs; and given full support to the Advantage Transition Fund".

"We believe this report may mark a critical turning point for the West Midlands. These recommendations could make an important short term impact to help the region through this serious crisis".

"The Government should accept this report and take urgent action as a direct result."

Multi Million Pound Investment by BT plc

Business Voice WM has warmly welcomed a BT announcement to speed up plans for super-fast broadband after its representations led to a multi million pound investment in the Midlands.

Glyn Pitchford, chairman of the task and finish group on next generation broadband for the City Region, said the move would boost the local economy.

"It is a good start but we want to see it extended further."

BT said more than 110,000 homes and businesses in the West Midlands would benefit.
Eight BT exchanges in the region – Fallings Park, Great Barr, Leamore, Northern (Soho, Birmingham), Nuneaton, Tettenhall, Walsall and Wednesbury – are among the latest UK locations due to be upgraded next year.

It takes in an arc over the north Black Country which reaches down through Bloxwich and Walsall and touches the northern end of the Jewellery Quarter in Birmingham.

The acceleration of BT's plans will see 1.5 million UK homes have access to super-fast broadband by early summer 2010. A million of those homes will have access by March, which is a doubling of the original pace of deployment.

The plan is the first chapter in BT's longer-term programme to make super-fast broadband available to 40 per cent of the UK – or some 10 million homes – by 2012. The company has pledged to spend £1.5 billion on the project.

John Dovey, BT's West Midlands regional director, said: "This is excellent news for the West Midlands and continues our tradition of being a leader in the provision and adoption of broadband technologies. The West Midlands is an enterprising and innovative region, which will obtain maximum benefit from this latest major investment.

"We are working closely with regional authorities, agencies and partners across the region to ensure that we remain at the leading edge of the communications revolution.

"Broadband has played a vital part in the success story of the region. Businesses are using it to boost their competitiveness and find new customers, whilst households are benefiting from new entertainment and educational opportunities."

Pilot projects are already up and running in Muswell Hill, London and Whitchurch, Cardiff.

Mr Pitchford said: We badly need to keep pace on technology. Without this the West Midlands would struggle even more than we currently do to pull in inward investment.

"We are talking about a revolution which will get us up to 100 megabits a second from the current 2-8."

And he pledged that BVWM would continue to spread the message among businesses of the advantages available.

Steve Robertson, chief executive of
Openreach, the division of BT responsible for the national roll-out, said: "Fibre is the future and so we're speeding up the pace of our plans. We had aimed to get fibre to half a million homes by next March but we're now being far more ambitious. We've received a tremendous response to date and so we're keen to get on with the job.

"BT has invested billions in creating Broadband Britain yet it has done so while offering others equal access to its network – demonstrating once again that competition doesn't have to be a barrier to investment."

Sixty nine locations across England, Scotland, Northern Ireland and Wales will benefit from this latest phase of BT's investment programme. Sixteen service providers are participating in the pilots.

Transport

The Welsh Border region desperately needs improved transport links, Business Voice WM has warned.

And it says that, following years of inaction, the Government must heed the message.

The BVWM hit out following scathing criticism of the state of affairs by MPs on the Commons Welsh Affairs Select Committee.

Rural Economy Group chairman and National Farmers Union West Midlands regional director David Collier said:

"The damning report by the Committee gives no hiding place for Ministers – after years of failing to deal with the poor transport links across the Welsh border.

"That is why I have written to the Minister for the West Midlands, Ian Austin, to ask him to use his good offices to ensure the Government fully accepts the recommendations of this Labour dominated committee so that action finally takes place."

BVWM, in its submission to the Committee, called for closer co-operation between the Government and the Welsh Assembly.

It urged more bridge crossings between Herefordshire and Wales; better connections between Cardiff and Herefordshire, south Worcestershire and Shropshire; and improved rail services.

In a sharply worded report, the Welsh Affairs Select Committee called for an end to overcrowding on trains that travel across the border, improved rail rolling stock for services crossing into mid-Wales, and extra spending on roads.

Mr Collier added:

"The findings reflect the frustration that rural businesses and communities in the Welsh border areas feel day in and day out.

"We now await the Government response to this report with great interest – and the West Midlands regional business community will campaign so that it is seen as a turning point for change."

Repossessions

More imaginative methods are needed to address repossessions – not just in the interests of social cohesion but also to get the housing market back on track.

That is the warning from Business Voice WM in a submission to the House of Commons Regional Select Committee.

"Home repossessions are not only a personal tragedy for the families who are affected, they undermine the housing market and therefore delay the recovery of the regional economy – with its negative impact on consumer spending," BVWM executive director James Watkins said.

"We need to consider what urgent steps could be taken to address the inadequate supply of social housing now that repossessions have increased and which, if the right steps were taken, would also help to revive the housing market."

Noting that Ministers are currently drawing up a list of regional strategic projects, the submission recommends that social housing is included because new homes would provide a quick boost to the wider economy and stimulate consumer spending on home contents; development of social housing would help the construction sector and the underlying housing market, thereby bolstering the wider economy too; and skilled people could be kept in work in preparation for the upturn when "they will be sorely needed to ensure sustainable recovery from the recession".

It is claimed that building 100,000 social rented homes over the next two years would save 30,000 jobs in the industry, as well as thousands in associated sectors such as building materials, furniture and white goods

Such a move "would improve cash flow and reduce risk for developers and suppliers currently experiencing severe financial pressure".

The submission states: "Worsening affordability and lack of affordable and social housing make it more difficult for households to move to take up new jobs and contribute to recruitment and retention difficulties, especially in the public sector."

Mr Watkins suggested the new Homes and Communities Agency could also adopt procedures that would make it easier for housing associations to initiate new build projects.

"For instance, when grants are being made to housing associations, more can be paid up front therefore enabling the more extensive use of funding facilities already in place," he said.

"In addition, the HCA can itself invest in projects by meeting land and infrastructure costs. Finally, the HCA needs to recognise that, with the stalling market, the days when cross subsidy of developments by housing associations – selling homes to subsidise rented housing – is over for the time being.
This needs to be recognised, therefore, in the grant levels awarded.

"We appreciate there has been some movement by the HCA in these areas but we propose that such procedures are part of its mainstream work to keep communities together at this difficult time."

BVWM has also proposed a number of innovative funding mechanisms to help support the development of social housing.

These include:

• Accelerated Development Zones – enabling local authorities to borrow against land values that would be boosted by regeneration projects leading to increased business rates.

• Bond Financing – Local authorities in Europe, Japan and North America can issue bonds, under central Government supervision, to ensure much needed local infrastructure developments take place.

•Prudential Borrowing – Allowing regional development agencies and other public regeneration bodies to use prudential borrowing – investing in capital works and assets so long as the cost is affordable. At the moment only councils can use the facility.

"We need a greater provision of social housing in response to the rising trend of repossessions," said Mr Watkins.

"This will help the West Midlands weather the economic downturn and come out stronger when the upturn arrives."

Nuclear Power

The engineering sector needs to gear up to take advantage of the Government's nuclear power expansion.

Business Voice WM says it could mean thousands of new jobs for the region.

Executive director James Watkins said: "This provides a unique opportunity. With the region at the heart of UK manufacturing, it can become a centre for construction, serving and development for nuclear new build facilities.

"Firms have until 2011 and 2012 to break into the supply chain to support the new nuclear reactors. Power companies want businesses in the UK to service their needs for the basic reason that the safe maintenance and development of the reactors should happen,
ideally, as near as possible to their site rather than considering importing parts and expertise on an ad hoc basis into the UK."

But Mr Watkins warned there were indications that British engineering firms, in the main, had not yet geared up for the work.

He went on: "This was shown by the number of British firms involved in the development of the reactor at Olkiluoto in Finland. Of the 2,183 companies involved in the supply chain only 21 are based in the UK.

"West Midlands regional engineering companies should be in the prime position to bid to be part of the nuclear industry supply chain. But this is not the case."

Businesses, he cautioned, faced systems of accreditation if they wished to gain work.

"There are two international systems of nuclear safety accreditation. These are the ASME system from the United States and the RCCM system from France.

"France's Areva and German company, Siemens, are working together in the hope they can build four new reactors in Britain over the next ten years. Each would cost in the region of five billion euros. This would be under the EPR design. British companies wanting to work on EPR type plants first will need to meet the RCCM standard and qualify as official suppliers to Areva.

"Areva has publicly stated that it is willing to work with British companies for them to reach the right standards so that businesses are ready to bid for this work in order to be part of the supply chain in 2012.

"But that means business getting its act together."

Business Voice WM now plans to run workshops to help engineering companies gain accreditation.

In addition, it will seek support from the Learning and Skills Councils and their successor bodies – operational from April 2010 – so that suitable training programmes can be delivered.

BVWM says, in particular, businesses must be encouraged to work with the Government-initiated National Skills Academy for the Nuclear Sector.

Mr Watkins noted: "All this could open up new opportunities for UK firms to help maintain and supply parts for the continual running of nuclear power stations. With the West Midlands being the heart of the UK engineering base, these new commercial opportunities are particularly relevant for the region and its firms."

Both the Government and the Conservative Party support the development of nuclear power.

Currently, 16 per cent of the UK's energy needs are provided by nuclear power.

The planning process is due to begin next year with licences to build and operate a specific type of reactor on a particular site awarded in 2011. Work should begin for the first new reactors between 2012 and 2013.

The first of the new nuclear power stations is scheduled to start generating electricity in 2017-18.

"Super City" Development

The simmering border dispute between the West Midlands and Milton Keynes has flared up again.

This time it concerns the merits of development in Northamptonshire and Warwickshire, and what that means for jobs.

Now Business Voice WM has called for joint working in a bid to plot a way forward capable of meeting everyone's aspirations.

In a submission to Northamptonshire Enterprise Ltd, responding to the Northamptonshire Strategic Employment Land Assessment, BVWM warns that the document fails to consider how housing and employment land projections near to areas such as Daventry will affect Warwickshire.

Neither does it fully get to grips with "logistics sites and tourism".

BVWM says, however, that it would be happy to work with Northamptonshire Enterprise and Milton Keynes South Midlands "to achieve our joint aim of sustainable growth".

Its long standing concern is the potential population explosion of the MKSM area – in the region of two million, twice the size of Birmingham – and its implications on the economy of the West Midlands.

It highlights transport developments and "their inter-relationship to logistic sites in the West Midlands".

And it goes on: "Skilled people may be attracted to MKSM because of the projected lower cost of housing and this could have an impact on the West Midlands economy."

It urges "that the employment land potential of Northamptonshire complements the growth requirements of the county, MKSM and the West Midlands region.

"Northamptonshire is probably the most important component of the MKSM growth area as far as the West Midlands is concerned because of its geographical proximity to Warwickshire."

Recession Workshops

The workshops on the recession continued in partnership with Birmingham Business School and Forrestt Research. Speakers in July were the Shadow International Development Secretary and Shadow Birmingham Minister, Andrew Mitchell MP and the Economics Editor of the Guardian newspaper, Larry Elliott.