Executive Director’s Report

                                                May – June 2009

Recession fears blighted the business community as the Business Voice WM stepped up its campaign for urgent action to relieve the pressures on regional businesses. Business reacted with anger when the Government blocked plans for new borrowing powers for councils in the West Midlands conurbation. Business called at a public inquiry for clear red lines to be agreed before Government plans for a massive house building programme in the Midlands was allowed to go ahead. Islamic finance was promoted as a growth opportunity for professional services.

Recession

a)         House of Commons Committee

The Government’s credit insurance top-up scheme does not go far enough because it offers no help to exporters, Barrie Williams, chairman of Business Voice WM, has warned.

With the struggling banking system still failing many businesses, he claims it is a “glaring omission”.

Mr Williams outlined his concerns when he is questioned by the new House of Commons West Midlands Select Committee at a meeting in Leamington Spa on May 11. It is holding an inquiry into the downturn and its effects.

“The initiative is not unappreciated but only applies to eligible businesses trading in the UK,” he said.

“The West Midlands is a key centre for exporters and they have been calling for help.

The failure to extend the top up scheme for exporters is a major blow.”

The BVWM has previously highlighted examples of where the system is falling down – a business with export interests to Portugal had failed to get cover and exporters to the United States were also not immune.

“It has been one of the failings of the credit crunch that exporters have had problems accessing credit insurance. The Chancellor announced in April that there will be a consultation as to how the Exports Credit Guarantee Department could help exporters. But, as of now, there is no help on offer to rectify this market failure”.

“Trading abroad is tough enough without trying to do it with one hand tied behind your back,” said Mr Williams.

And the BVWM continues to urge the Government to embrace the concept of wage subsidies.

It is writing to all MPs in the region asking for their support and urging them to sign a Commons Early Day Motion proposed by Lindsay Hoyle, Labour MP for Chorley in Lancashire.

Around 80 MPs have already given it their backing.

“Business and the unions agree that wage subsidies can work to prevent redundancies – and help the wider economy,” Mr Williams said.

The BVWM maintains that keeping people in a job is cheaper than paying benefits to the unemployed and their families.

The Early Day Motion says “such a measure is a quick and effective way to target support to struggling employers and providing financial support to employees during these difficult times”.

It “notes that similar subsidy packages have already been introduced in Wales, as well as in Germany, France, Spain, the Netherlands and Italy”.

And it calls on the Government “to work with business representatives and trades unions to introduce a targeted subsidy package to support the sectors of the economy, such as manufacturing, that are in greatest need”.
Wage subsidies – or short-time working assistance – are not new and featured in the recessions of the 1970s and 1980s.

Short-time working assistance pays a proportion of the wage to the employer so employees can stay in work rather than face redundancy.

The BVWM says concerns regarding the behaviour of the banks continue to be expressed by business.

“Despite statements from the banks and the Government, normal lending is yet to resume fully and this is a drag on regaining confidence in the regional economy,” said Mr Williams.

b)        Banks are “spooked” – MP

The loan problems facing Midland companies are the result of “spooked” banks stunned by their own losses, a senior Labour MP has claimed.

David Kidney, MP for Stafford, was speaking to Business Voice WM at an event jointly run by Birmingham Business School and Forrestt Research. Mr Kidney made the remarks just days before the Prime Minister promoted the MP to become the new Energy Minister.  

Mr Kidney, who is also a member of the House of Commons’ West Midlands Select Committee, said: “Banks have been slow off the mark as they were spooked by the enormity of their losses because of their failures and the need to build up their own balance sheet.

“Foreign banks withdrew to their core business and stopped lending in this country – so half of all bank lending still needs to be built up.”

Mr Kidney said other countries had followed the lead of the UK in re-capitalising their banks and this had safeguarded the global financial system.

In addition, the Government was bringing forward construction projects to help firms tackle the economic downturn.

Mr Kidney said the possibility of the Ministry of Defence placing a super army garrison in the Midlands could benefit Stafford, Lichfield and jobs around RAF Cosford in Shropshire.

The MP praised the role of the Business Voice WM and added: “Bodies like BVWM should, with Government, be part of solving, together, the burdens that businesses can face.”

Prof Robert Cressy, of Birmingham Business School, declared the warning from Standard and Poor’s that the UK’s credit rating could be adversely affected by the level of Government borrowing should not be overstated as “a few years’ economic growth will raise tax revenues to deal with this problem”.

BVWM executive director James Watkins expressed disappointment that both Labour and the Conservatives were not supportive of wage subsidies to help people stay in their jobs if they are put on short-time working.

He said: “This policy is helping economies in Germany, Italy, the Netherlands – and Wales. It’s time we had it here.”

c)         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. The MEP made the comments just weeks before losing her seat in the European Parliamentary elections.

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.

Government “Snub”

Business Voice WM has called for a Government re-think of its decision not to give the Greater Birmingham area official City Region status.

Glyn Pitchford, elected BVWM business representative on the City Region board, said he had written to the Minister for the West Midlands Ian Austin MP asking what he proposes to do about it.

The announcement that Manchester and Leeds would pioneer the concept came in last week’s Budget.

It means that Birmingham, Solihull, Coventry and the Black Country will miss out on millions of pounds of investment and thousands of new jobs.

Speculation is rife in the business community as to why this decsion was made.

Mr Pitchford said he did not want to get into the “blame game” but did believe the West Midlands had put up a very strong case and was due a proper explanation.

“We took this very seriously, put in a very detailed submission, and are deeply disappointed at the result,” said Mr Pitchford.

“There is growing anger in the business community, the decision offers no confidence in what we are trying to achieve, so let them give us a clear message about what we should be doing.

“Come on, Mr Austin, let’s hear from you. It is time to stand up and be counted.”

Mr Pitchford said Metro and other transport schemes could have been resurrected had the City Region been given financial powers.

“We wanted to alleviate congestion and get the traffic moving – now that won’t happen.

“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 desperately needed some good news.”

A go-ahead would have allowed for the establishment of accelerated development zones – defined areas in towns and cities where councils are allowed to keep business rates for a period of up to 25 years.

Mr Pitchford added: ”We will not let go of Accelerated Development Zones and we call on the Minister to help us win approval for ADZs by the time of the autumn’s Pre Budget Report”.

Birmingham Chamber of Commerce chief executive Jerry Blackett has also vowed to continue the fight to set up a City Region in the West Midlands and claimed the region has suffered for thinking more progressively than counterparts in Whitehall.

He too has called for an urgent meeting with West Midlands MPs Liam Byrne and Ian Austin. And Birmingham City Council leader Mike Whitby has revealed how he pleaded with the then Local Government Secretary Hazel Blears to approve proposals for a powerful West Midlands City Region. He claims Ms Blears has agreed to continue to look at the plans. Ms Blears has since resigned from the Government and the new Communities and Local Government Secretary, John Denham MP, will be considering this matter.

Electric Vans

The Government has been urged to do more to encourage electric vans, and boost Birmingham-based LDV in the process.

Business Voice WM wants vans to be given equal status with electric cars in the green agenda.

And it has written to Business Secretary Lord Mandelson requesting a meeting to take the initiative forward.

David Caro, BVWM board member and Federation of Small Businesses’ West Midlands Regional Policy Unit chairman, welcomed the establishment of a low carbon transport strategy and hoped it would boost the region’s automotive sector.

But there were ways in which it could be more effective, create new green jobs and “lead to a step change in meeting the Government’s environmental objectives”.

Mr Caro stressed that van production was a key area for the West Midlands.

Praising the Government’s help in the last ditch rescue of LDV by Malaysian company Weststar, he went on: “Thanks to this intervention, we are hopeful that LDV can remain in business.

“LDV is one of a number of van manufacturers in the West Midlands who are helping to sustain the regional and national economy. Implementation of the green motoring transformation process for vans as well as cars would be timely and of direct benefit in the maintenance and creation of jobs.

Since this plea was made, LDV has gone into administration – but the call to encourage electric vans could help other regional businesses such as Zytec.

Mr Caro added:

“We believe that the process of ensuring more vans become electrically powered is more straightforward than for electric powered cars since the production process for vans is less complex in terms of assembly. Furthermore it may well be easier to create facilities for charging/fuelling within an industrial environment and conurbation and be more commercially viable for companies than for the domestic user or commuter.

“As a consequence the uptake of the technology may well be more rapid.”

And, pointing to the Government’s recently announced support for electric cars, he told Lord Mandelson: “The extension of the funding scheme to include electrically powered vans has the potential to be implemented more quickly and efficiently as compared to car production and can therefore lead to the potential of faster and more efficient progress in meeting the Government’s objectives in a green motoring transformation.

“We would be happy to meet you and your colleagues to discuss in more detail how this amendment in policy with the encouragement of electric powered vans can be implemented.”

The original announcement, promoting ultra low carbon transport over the next five years, was aimed at helping put electric cars into the reach of ordinary motorists. Support worth £2,000 to £5,000 will be on offer towards buying the first electric and plug in hybrid cars when they hit the showrooms – from 2011 onwards.

Around 200 motorists across the country will have the opportunity to drive a cutting-edge car and feedback the information needed to make greener motoring an everyday reality.

The strategy also includes plans to provide £20 million for charging points and related infrastructure to help develop a network of 'electric car cities' and an expansion of an electric and ultra-low carbon car demonstration project on UK roads.

The moves are intended to promote infrastructure, support technology development, encourage manufacture in the UK and incentivise consumers. The funding is part of a wider £250 million green motoring push.

Planning

Business Voice WM made strong representations to a Government public inquiry so that thousands of new homes can only be built if it helps the economy:

a)         Eco Towns

Business leaders have stepped up their opposition to badly planned eco towns.

It comes in a new paper which went before the Regional Spatial Strategy public inquiry that took place in Wolverhampton.

It was examining future housing needs, but Business Voice WM insists the eco town concept must be at the heart of the probe if it is to properly address the wider issues.

Executive Director, James Watkins said: “Eco towns require roads, drainage and the full set of amenities. Someone has to pay for all this.

“They must not be considered in isolation.”

His plea sparked the inspectors to request a written report on the BVWM’s eco town stance.

The submission to the Government inspectors on eco towns, which refers to the eco town proposal at Middle Quinton near Stratford upon Avon, warns that eco towns could quickly turn into ghettos of ‘green build’ housing estates”.

The Business Council state: “Developing eco towns away from other settlements essentially leaves them isolated requiring a range of transport links which are not readily available on all of the sites proposed and access to services, facilities and employment that are most likely to be ‘off site’.”

It reckons eco towns could work – but not in the manner currently suggested.

“We firmly believe that the future of eco towns should be the incorporation and development of the concept as an essential and mainstream part of local redevelopment and regeneration.”

And in that context it highlights redevelopment plans for Longbridge in Birmingham.

“Here, all elements of a sustainable community are being addressed in order to make the phoenix rise from the ashes.”
It has condemned the current eco town blueprint as “a missed opportunity”.

And it crucially adds: “The fact that these proposals are outside the normal process in terms of regional planning means that they can, and in the West Midlands do, run counter to regional spatial planning policies promoting major growth through urban renaissance.

“The eco towns as so far proposed may be large and unsuitable for the localities identified but, in sheer numbers of dwellings, they will also do little to contribute towards meeting Government housing targets.”

b)        Small Shops

Small shops need to be nurtured if plans for thousands of more houses across the region are to go ahead, Business Voice WM has warned.

And it has urged planners to take a strong line against unfair competition from supermarkets.

Executive director, James Watkins put down a marker when he gave evidence before the Regional Spatial Strategy public inquiry currently taking place in Wolverhampton.

It is set to lay down guidelines on how much new housing should be allowed.

Mr Watkins will state: “For a long time there has been widespread concern that small locally owned shops are being pushed out of town centres by the large multiples.

“This must be strongly resisted

“Town centres are all too often full of bland and boring stores such as you could be virtually anywhere in the country.

“We believe the small shop keeper still offers a vital service if given the chance – and if ludicrously high rents don’t price them out. Their presence offers a distinctive identity from the chain outlets giving a variety that ultimately benefits all.

“And often they are sourcing locally made products and produce which spreads money around the community.

“In addition, with Government pushing the agenda so hard, there is a concern that business premises could go to meet housing demand – and that local job opportunities would be lost as a result.

“Thanks to the work of the Business Voice WM, it has already been established that local authorities will be obliged to build on the ‘local distinctiveness’ of town centres. This can only help locally owned shops who know their areas inside out.

“So, before business premises are lost for housing purposes, local authorities should, when necessary, intervene to ensure there is an adequate choice to meet the needs of business – including SMEs – within their areas.
“And this needs to be set in stone rather than perceived to be some airy-fairy dream to be ignored by all.”

The BVWM believes such an approach could particularly help town centres in Cannock, Lichfield, Newcastle under Lyme, Nuneaton, Rugby, Stafford, Sutton Coldfield, Tamworth, Telford, Walsall and West Bromwich.

And Mr Watkins will argued that new housing must be tied in with new jobs.

He said: “Business has demanded that two clear red lines be met before thousands of extra new homes are built.

“First, that the infrastructure should be in place – from transport to schools. We are determined that we should not be party to repeating the mistakes of the 1950s, 60s and 70s, creating a new legacy of sink estates.

“Our second clear red line was that new housing land must be linked to new employment land so that, again, the potential legacy of new sink estates is avoided by creating land for jobs near to land for homes.

“This is critical and goes to the heart of the inquiry. Get it right and there will be sustainable communities at peace with themselves and an asset to the area. Get it wrong and joblessness, deprivation, crime and drugs will quickly result in misery for all who live there.”

c)         Transport

The transport network could come close to collapse if thousands more houses are built across the region, Business Voice WM has warned.

Big spending on road and rail improvements will be necessary if gridlock is to be avoided, it argues.

Executive director, James Watkins put the case when he gave evidence before the Regional Spatial Strategy public inquiry currently taking place in Wolverhampton.

It is considering whether more than 400,000 homes should be built across the West Midlands over the next 20 years.

Mr Watkins said: “Road congestion is a major concern for business.”

Highlighting British Chambers of Commerce claims that transport problems are costing every business an average of £27,000 a year, he said: “For firms in the West Midlands – at the heart of the country – transport congestion and poor infrastructure is being felt every day. This is despite the fact that being located in the region should provide geographical advantages – from just in time deliveries to developing the logistics and professional services sectors.

“Current transport integration is ineffective and unless something is done to address this the projected increase in housing will make things significantly worse.”

The BVWM has praised aspects of Government policy – the extension of Active Traffic Management on motorways and the planned widening of the M6.

But, for example, it sees a vital need to improve road capacity at 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.

And it wants Park and Ride sites to be extended across the region.

“This is a basic requirement if we are to improve traffic flow, increase the reliability of journey times and relieve the pressures on our roads,” says Mr Watkins.

But, he believes it is happening nowhere near fast enough.

And he told the inspectors that the lack of commitment to park and ride – enabling people to park their cars convenient to a local rail station which provides fast access to their place of work – is deeply damaging.

“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 of alleviating road congestion will be lost.”

d)        Textiles

Prelimary agreement has been reached between the Business Voice WM, Government Office for the West Midlands and Advantage West Midlands for a regional action plan to help the clothing textiles sector. More details will be issued shortly.

Crime

Business Voice WM Executive Director James Watkins renewed his organisation’s pledge never to let up on business crime.

His comments were delivered to 300 newsagents at the national conference of the National Federation of Retail Newsagents in Torquay.

Mr Watkins supported Birmingham newsagent Parminder Singh, who represents the NFRN on the business council, on plans to develop a National Business Crime Forum – the West Midlands has been the location for the first regional forum.

The pleas follow mounting violence against small shopkeepers culminating in a number of deaths.

The BVWM has been working with various police forces urging tougher action against retail crime.

Mr Watkins told the conference that business people are twice as likely to be a victim of crime, with 56 per cent already hit.

Statistics show business crime is at least 25 per cent of all crime. The regional cost to business is £14,000 every hour, a total of £123 million a year.

“Business crime costs jobs,” said Mr Watkins. “It harms economic prosperity and brings misery and pain to all those affected by it.”

It was vital that business and particularly newsagents were both aware and alert, and he was determined to ensure the police stayed engaged.

“We must ensure that crime against business has a high profile within the police. We need co-operation and action on all crime issues, including business crime, across the UK. There can never be any letting up.”

Mr Singh said business crime hurt both urban and rural areas and it was important to ensure it featured as a priority in regional strategies.

That meant working with key agencies and organisations including the Association of Chief Police Officers to bring issues to the fore.

“It means pushing for action across the UK – such as our work with the Scottish Business Crime Centre. We believe we must take that forward into a National Business Crime Forum.”

Mr Singh said business crime prevention guides and rural business crime prevention leaflets were available to NFRN members. They could also get money for crime prevention from regional development agencies – but it had to be a collective bid from deprived areas.

And he added: “We now have a Business Crime Action Plan thanks to the Minister for the West Midlands Ian Austin.

“We are also taking action to break the link between drugs and shop crime.”

BVWM has issued crime prevention advice to shopkeepers across the area.

Highlighting truck crime, Mr Watkins said it was not just attacks on shopkeepers but the hijacking of lorries bringing in their goods.

That too, said Mr Watkins, was a major worry for them.

BVWM has been pushing a long running campaign against truck crime.

Midland Truck Watch, launched last June, sends out alerts by e-mail, fax, text messages or telephone to drivers and haulage owners so they can be on the look-out for stolen trucks and loads – and then let the police know if they see anything.

It involves West Midlands Police, West Mercia Constabulary, Staffordshire Police, and is run by Warwickshire Police.

And recently the Scottish Business Crime Centre, a proactive crime prevention and reduction organisation part funded by the Government, police and business in Scotland, agreed to forward vital information about stolen trucks and loads from north of the border in case they were moved through the Midlands.

Islamic Finance

Firms across the region are being offered a blueprint detailing how best to access the Islamic finance market.

The opportunity came as Business Voice WM in association with West Midlands Minority Ethnic Business Forum put on another in a series of workshops, this time at the offices of law firm Needham & James at One Colmore Row, Birmingham, on May 13..

BVWM Executive Director James Watkins said: “We will be offering businesses the opportunity to be part of free breakout sessions so they can get tailored advice on how in a specific sector, such as accountancy for example, they can take advantage of the Islamic finance chain.”

The sector specific sessions will take place at dates yet to be announced later this year.
Islamic finance has been bucking the credit crunch, and Birmingham is at the heart of the expansion.

BVWM believes it is a niche area which can only go from strength to strength.

With Muslims forbidden by their religion to engage in the charging or receiving of interest, Islamic finance is essentially based on profit sharing.

Mr Watkins said: “Many organisations, particularly in the professional sectors, now realise that Islamic finance is an area they should be in.

“Some are engaged in a big way.

“But not all understand how best to go about it.

What we are trying to do is make it easier for them to become involved.

“The two leading cities for the speciality are London and Birmingham.

“It is the one financial services sector which is still growing and it holds out the possibility of winning new business at a time firms hard hit by the recession are hunting high and low for work.”

Some projections have put annual growth over the next few years at 15 per cent per annum.

Pundits say Islamic finance's role in the global market is becoming increasingly important.

Last year Locate in Birmingham, the city council’s inward investment arm, together with the Birmingham-headquartered Islamic Bank of Britain and Aston Science Park-based consultancy Islamic Finance, Advisory and Assurance Services, promoted the city’s strength as a financial services location when they took part in the World Islamic Banking conference in Bahrain.

And the Muslim Council of Britain – representing more than 500 local, regional and national Muslim associations and institutions across the country – and the BVWM signed a memorandum of understanding committing the two bodies to work together to further develop Islamic finance.

In 2007 West Midlands car maker Aston Martin was sold for £479 million to a Dubai-based consortium using an Islamic financing technique known as Murabaha.Murabaha is a mark-up arrangement.

There are several different Islamic financing techniques available and the other most commonly used ones are: Mudarabah, an investment arrangement, Musharaka, a partnership/joint venture, Ijara, a leasing arrangement, Sukuk, for bonds, and Wakala, for deposit products.

There are said to be more than 550 Islamic financial institutions and Islamic mutual funds worldwide, with estimated combined assets of £360 billion. Another £130 billion in assets lie in Islamic “windows” at conventional banks and financial institutions.

Mr Watkins said: “A number of Midlands legal and financial firms say their Islamic finance work is growing fast.

“The message is that this is a sector you need to be engaged with.

“This is a major campaign for us and it seems to be working.”

North Staffordshire

A Business Voice WM delegation met with senior officials of the Northern Way to advance the interests of north Staffordshire.

The Northern Way is made up of three northern England Regional Development Agencies and it has been successful in pushing forward on economic development and transport links.

The meeting, which took place in Warrington, and further co-operation – particularly on improving rail links between Stoke and Manchester – will take place.

Skills

Business Voice WM challenged the Business and Skills Secretary, Lord Mandelson, to ensure the further education changes that will take place in April does not lead to chaos. The comments were made to the Secretary of State during his visit to Birmingham.

Business fears that with up to three quangos taking over from one quangos on further education funding – as well as local councils also getting in on the act – this will lead to confusion and chaos once the new changes are introduced in April.

The Secretary of State promised to investigate the matter.

Transport

Business Voice WM held an open forum with Network Rail, Cross Country Trains and London Midlands Trains. Business again called for tougher action to tackle signalling problems as well as action to reduce high car parking fees at station car parks – amongst other issues.