Executive Director’s Report

                                    October – December 2009

Business Voice WM is represented on the Joint Strategy and Investment Board. The Construction Action Plan was launched by the Minister for the West Midlands. In response to a keynote speech at the Business Voice WM launch reception, the Financial Services Authority responded to calls to take action on invoice financing. Plans are in place for a Clothing Textiles Action Plan to be launched shortly. Justice Secretary, Jack Straw MP was the keynote speaker at the Business Voice WM Conference. MPs were urged to take action so that workplace training can be broadened for all business sectors.

Joint Strategy and Investment Board

Business Voice WM Chairman, Barrie Williams, now represents the business community on the Shadow Joint Strategy and Investment Board (JS&IB). The Board also brings together the Regional Development Agency, Advantage West Midlands, and local government via the West Midlands Leaders Board. The JS&IB will make the key economic development and planning decisions for the West Midlands region.

Barrie Williams has already been asked to lead on several issues – including the key issues that need to be addressed to ensure there will be economic recovery and the role of local authorities in economic development.

Recession

a)         Invoice Financing

Business Voice WM Chairman, Barrie Williams, speaking at the formal launch of Business Voice WM declared that the authorities should investigate the scale of invoice financing to SMEs by banks in the West Midlands region and across the UK. In response, the Financial Services Authority contacted Business Voice WM to state that it had now contacted the Bank of England in urging them to monitor the trend of invoice financing. However, the Bank of England stated to Business Voice WM it had no intention to monitor this issue. Further contact is being made with the Bank of England as a direct consequence.

b)        Construction Action Plan

Minister for the West Midlands, Ian Austin MP, launched the West Midlands Regional Construction Action Plan. Business Voice WM had been instrumental in calling for such an action at the start of 2009 and was at the heart of a steering group that led to its launch.

The action plan includes:

·         Financial help for firms to ensure construction projects are not stalled;

·         New drive to improve skills levels in the construction sector;

·         Simplifying procurement procedures so it is easier for small and medium sized firms to win public sector work.

c)                                 Clothing Textiles

A seminar focusing on the region’s textile industry brought together leading manufacturers, Advantage West Midlands business experts and members of the West Midlands Taskforce to debate the issues facing the industry as companies look to survive and capitalise on new opportunities post-recession.

The seminar was hosted by leading leather retailer Ashwood at its Birmingham City Centre offices.

Organised by Advantage West Midlands with Business Voice WM on behalf of the West Midlands Taskforce, the seminar attracted over 40 high profile delegates from across the region.

The debate was informed by a special report into the West Midlands textile industry.

The report was commissioned by Advantage West Midlands and suggests that around 7,000 people are employed in textiles manufacturing (2007 figure), which amounts to around 2% of all manufacturing employment in the West Midlands.

However, if consideration is given to related employment in wholesale related activities then it is estimated that some 16,346 people were employed in manufacturing and sales related activities, roughly 3.8% of the total manufacturing workforce in the region.

Debra Blisson, Director of Enterprise at Advantage West Midlands, said:

“The textile industry in the West Midlands faces similar challenges to those faced by all businesses in the region. As a sector it has weathered the recession relatively well compared to the rest of region’s manufacturers.

“This debate has been useful for policy makers, manufacturers and business representatives to discuss the measures we can work on together to help the industry invest in innovation and skills to make the most of the future market opportunities.

James Watkins, Executive Director of Business Voice WM said:

“It’s vital that business sectors cooperate to improve the overall performance of their sectors. This debate today was very positive but there were still some areas of concern to the textile industry mainly around skills, investment and recognition of the industry’s contribution to the regional economy.

“The over riding message was that we mustn’t underestimate the challenges that face the sector as the economy emerges form this recession, however, we would be foolish to underplay the opportunities presented as the economy recovers.”

Sarabjeet Soar, Business Voice WM Alternate Council Member and speaking on behalf of the West Midlands Minority Ethnic Business Forum, welcomed the commitment from the meeting for an action plan:

“It is important to improve the profile of textiles. There is no future for “Cut, Make and Trim” but we must concentrate on high value added and niche markets where we can compete with the best in the world.

“For too long textiles has been seen as the ‘Cinderella’ sector and too easily dismissed as the Asian rag trade when it has so much more potential."

d)         Economy Conference

Justice Secretary Jack Straw was the keynote speaker at a major conference in Birmingham.

The Financing recovery... funding innovation and investment conference was an opportunity for the West Midlands to step up its bid to entice the Ministry of Justice from London.

Other cities are also in the race which could mean several thousand jobs moving out of the capital, albeit it is now thought unlikely to happen this side of the General Election.

Barrie Williams, chairman of Business Voice WM, who also spoke at the event, said: “This will be a chance to showcase the West Midlands to Mr Straw and emphasise what an excellent location it would be for the Ministry of Justice.

“The West Midlands is a major legal centre and Birmingham Law Society has been pushing hard for a positive decision from the Ministry.”

Other speakers included the Conservatives’ Shadow Trade Minister, Geoffrey Clifton-Brown, and senior Lib Dem MP John Hemming.

The conference was organised by Business Voice WM, Forrest Research, Aston Business School, Birmingham Business School and the Fair Finance Consortium. Held at Aston Business School, it also featured senior academics, commercial banks, venture capitalists and leading economists. The all-day event was free to attend.

The Government was urged to do more to help the West Midlands climb out of recession

Barrie Williams cautioned: “The West Midlands region has been the worst affected region in the UK from this recession. One in five young people is out of work, repossessions have seen a steep rise and firms are still having problems accessing the finance they need.

“Business Voice WM has been working to get action to mitigate the impact of the recession upon Midlands’ businesses. But, much, much more needs to happen.”

Mr Williams outlined five key steps the organisation has been pressing the Government to act on.

• Short time working assistance – it is keeping people in jobs in Wales and parts of mainland Europe, but so far has not been picked up by Westminster.
• Credit Insurance – the Government has failed to go far enough, introducing a top up domestic credit insurance scheme the terms of which exclude most small and medium sized businesses, and providing nothing at all for exporters.
• Energy Prices – Utilities are demanding money up front putting intolerable pressures on businesses.
• Staggering of tax payments – the arrangements in place remain vital and the Government should resist pressure from HM Revenue and Customs to end the arrangements.
• Liquidity – the banks need to bring back loans and overdrafts and not push firms towards invoice financing, making business planning difficult.

Mr Williams stated:

“It is these five steps which, if addressed, would have a disproportionate impact on helping the West Midlands region – and the country – move out of recession.

“There are wider systemic issues that need to be addressed. For instance, what can we do to diversify so that we can meet the global challenges of the future? Taking these short time actions now would mean a stronger business base to build on for the economic opportunities of years to come.

“After all, despite the problems we are facing, the West Midlands is still the UK capital for manufacturing. Our rural economy is robust and this provides opportunities for future growth. And we have the largest professional services sector outside of London.

“Let’s get the short term action right so we are in good shape for the recovery.”

d)        Export Opportunities

Midland businesses could be winning valuable contracts as the world aims to invest its way out of recession, according to an international trade expert.

Paul Corcut, of export support body UK Trade and Investment (UKTI) highlighted how countries across the world were looking to spend their way out of trouble.

Speaking at a Business Voice WM seminar, held in conjunction with Birmingham Business School and Forrest Research, Mr Corcut said the G20 – the world’s 20 wealthiest nations – had committed to $1.64 trillion (£1.03 trillion) to drive the world economy from recession into recovery. The London G20 summit of earlier this year had pledged an additional $1.1 trillion (£692 billion) for developing countries.

UK Trade and Investment listed the top countries introducing fiscal stimulus measures – that can lead to new orders for Midland businesses – as the United States, Canada, Brazil, China, Spain, France, Germany, Saudi Arabia, United Arab Emirates, India, Russia, Hong Kong, Japan and Australia. The US leads the pack with an $841 billion (£529 billion) spend.

These stimulus packages were producing new opportunities in the supply chain and UK Trade and Investment offered its help to Midlands businesses to get a piece of the action. In most countries, major infrastructure and support work was under way as result of this new money – giving firms from all sectors the chance to win some of it.

e)         Late Payment to SMEs

The level of late payment by major companies has led to concerns for the health of SMEs.

Business Voice WM agreed to persuade big business and public bodies to sign up to the Government’s Prompt Payment Code.

David Caro, the Federation of Small Businesses’ West Midlands policy unit chairman and Business Voice WM board member, wants to see more offenders named and shamed.

The FSB has highlighted a number of examples of ‘poor practice’ including:

• Delivery firm TNT, food producer Bernard Matthews and catering company Compass Group have all told small firms to wait 60 days for invoices to be paid.
• Builder supplies firm Jewson has done the same and is also charging a ten per cent settlement fee as a discount for paying within the 60-day period.
• Shopping website Amazon has extended its payment terms to 90 days with a two per cent settlement fee if paid in that time or 120 days without one.
• Courier company DHL is charging three per cent for paying invoices on time.
• Brewer Carlsberg has changed its payment terms to 95 days from the end of the month of invoice, which could leave a small business owner waiting a total of 135 days for a bill to be paid.

Mr Caro said: “These are outrageous and unacceptable demands, which are doing great harm to suppliers.

“Companies like these, however large they are, need to be exposed so the public have a clear choice – would they prefer dealing with reputable firms or those whose behaviour is deeply flawed?

“The obvious solution is for all companies and organisations to pay their invoices promptly and in accordance with their stated payment terms and for the practice of using small suppliers as a cheap source of credit to be outlawed.

“Companies House needs to be given more powers to name, shame and fine those companies who do not conform.”

BVWM plans to contact the West Midlands’ biggest companies asking them to sign the Prompt Payment Code, participate in associated media and publicity activity surrounding it, and set an example to others.

The Department for Business, Innovation and Skills has been pushing for public and private sector organisations to follow suit.

BVWM also intends to lobby regional economic forums so that prompt payment remains a priority; pressure all NHS, regional agencies and local authorities to fall into line; and challenge public bodies to ensure their key suppliers are signed up to the code and that they in turn are meeting their contractual terms to pay their sub-contractors on time.

But there is concern at duplication – regional development agency Advantage West Midlands also has a code. The ‘10 day pledge’ currently has 73 public sector bodies committed.

“The two schemes may be causing confusion and the value of having both should be considered,” cautioned Mr Caro.

According to the Banker’s Automated Clearing Services (BACs) outstanding payments to Britain’s SMEs tops £30 billion, up £18.6 billion on 2008. The average amount owed to an SME at any one time is £28,000. One million SMEs are experiencing payment delays compared with 684,000 last year.

SMEs in the Midlands are seeing the largest late payment bill – £12.6 billion, an increase of 29 per cent. Midland companies are owed an average of £41,000.

f)          Liberal Democrat Concerns

Liberal Democrat Shadow Business Minister Lorely Burt has dubbed Gordon Brown the Jean Luc Picard of British politics and called on Ministers not to end many of the schemes that have been helping businesses get through the recession.

Speaking to Business Voice WM – at an event jointly organised by Forrest Research and Birmingham Business School – the Solihull MP was scathing.

She declared: “Gordon Brown is acting like Jean Luc Picard in Star Trek where he says ‘Make it so’.”

And, in reference to Government plans for an Act of Parliament that would seek to cut the national deficit in half, she added: “It is barking mad to think you can legislate out of your problems.”

Ms Burt called for a series of Government schemes – that are aimed to help businesses get through the recession – to continue.

She said: “The Government has refused to change the timing of its VAT increase. The Federation of Small Businesses says the change should occur from February 1 to help the January sales. I agree.

“The top up credit insurance scheme is due to end on December 31. The car scrappage scheme is due to end at the end of February. The first year capital allowances scheme is due to end at the end of April. I have asked the Government for certainty about these schemes.

“I have urged the Government to continue the Enterprise Finance Guarantee scheme. The automotive assistance programme has not worked. Jaguar Land Rover was messed about by officials and it realised this was not worth the candle and got funding from elsewhere.”

Prof Robert Cressy, of Birmingham Business School, speaking at the same event, slammed the Financial Services Authority (FSA) for not properly overseeing the growth of self certified mortgages, which, he claimed was leading to “the UK’s sub prime crisis”.

He added: “The FSA must shoulder much of the blame. Self certified mortgages (SCMs) are inherently risky as marginal borrowers could not get loans on the basis of standard income assessments. The FSA either didn’t know the extent of SCMs or, more likely, was under the illusion that the property bubble would never burst.”

Regional Development Agencies

Regional development agencies must stay, Business Voice WM has insisted.

But it wants the private sector to have a greater influence on how Advantage West Midlands is run.

In a policy paper that has been 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.”

Crime

Business Voice WM has been asked to be the Secretariat for the new National Business Crime Forum.

The National Business Crime Forum brings together representatives of regional business crime fora from across the UK as well as national business crime policy leads from the national business representative organisations.

This responsibility is the result of Business Voice WM having formed the UK’s first regional business crime forum with the West Midlands Regional Business Crime Forum.

The aim of the National Business Crime Forum is to exchange best practice and see how regional groups can work together to get united action to reduce business crime across the UK.

Skills

Business Voice WM has called for a skills revolution to transform the future of small and medium sized enterprises.

It says SMEs need a more flexible system with training tailored to individual companies’ needs.

BVWM Executive Director James Watkins spelled out the need for change when giving evidence to the House of Commons West Midlands Select Committee meeting in West Bromwich.

The MPs are considering the impact of the recession on individuals.

BVWM wants to see the widespread adoption of a ‘passport’ – portable if an employee switches jobs – whereby individuals can build towards NVQ qualifications.

It says reform is needed because the Government’s current ‘packaged’ approach puts off too many companies.

Mr Watkins said: “One of our members, the EEF, has been at the forefront of this.
“Traditionally, if you are an employer and you approached public agencies and training providers they would offer a package of training.

“But you would have to have the whole package – take it or leave it – when perhaps all you needed was just one aspect of it. We think that is bonkers.

“For example, it might be that the company concerned needed employees to be trained in operating a lathe, but was told they must take on board other training elements as well which aren’t actually needed.

“A number of SMEs said it was simply not suitable and so they wouldn’t bother.

“We have been calling for workplace training assessed by the employer and checked by an outside body. This would be subsidised and would help SMEs in particular. There would be a system where each task learnt would be marked on a passport-style document and units would be gained by the employee that would go towards an NVQ qualification.

“So the business wins as they can train staff on the shop floor and get funding for it, while the employee gains as they can get training that will take them towards a recognised qualification.

“Instead of a business having to jump over all these red tape hurdles, forced into things not suitable for it or its workers, they get the money at the right time, the skills training at the right time, and it is tailor made for them when they want it. We believe this will make a very real practical difference to SMEs.”

BVWM has recommended to the Select Committee that the whole country should adopt the approach.

Mr Watkins said: “We believe this would address employers who are termed as ‘hard to reach’ as they will have confidence in ensuring the training process addresses the immediate needs of the business while employees who may have been cut out of the recognised qualifications and training system for whatever reason will have a chance to gain a national recognised qualification.”

Transport

Birmingham and the Black Country City Region Chairman, Cllr Mike Whitby, has formally asked for help from Business Voice WM to ensure there is an extension to the runway at Birmingham International Airport.

Cllr Whitby, who is also the leader of Birmingham City Council, asked Business Voice WM if it could investigate to see whether the private sector would be willing to invest £5 million into this project.

Business Voice WM has already begun to investigate this matter and will report back to the City Region Board.

Business Voice WM with two of its members – North Staffordshire Chamber of Commerce and the Civil Engineering Contractors Association – met with Network Rail in Manchester to see if rail links could be improved from north Staffordshire to the North West from 2014 – the earliest date when practical action could occur because of Government constraints. It was agreed to follow up these discussions with further dialogue in February.

European Parliament

The West Midlands should gain an extra European Parliament representative, Business Voice WM has urged.

Now it has written to the Electoral Commission making the case for a further MEP.

If successful, as a result of the June election results, Anthea McIntyre, a Conservative and a Federation of Small Businesses member, would appear to be the prime candidate.

Following the European Council of Ministers summit in November and the ratification of the Lisbon Treaty, the UK has been allocated an additional European Parliament place.

And BVWM believes the West Midlands has the best case over other electoral regions.

In a letter to Electoral Commission chief executive Peter Wardle, BVWM executive director James Watkins points out that the West Midlands has a population of 5.3 million.

He goes on: “The West Midlands business community would urge you to decide that the region, in the interests of fairness and transparency, should gain this additional MEP place.

“Despite the West Midlands representing approximately 10 per cent of the UK population, it currently only has six MEPs. This does not seem to be in the interests of equity when, for instance, Scotland, has six MEPs despite an electorate of around 3.8 million while London has eight MEPs with an electorate of 5.2 million people.

“There is no doubt in our judgment that the West Midlands – in terms of the ratio between the number of MEPs and population size – is under represented. This is an aggravating factor for the businesses and people of the West Midlands at a time when the region needs to be adequately represented by elected representatives at the European Parliament while this difficult economic downturn continues.”

Ms McIntyre is a partner in MCP Systems Consultants, an independent consultancy specialising in management information systems.