Examination of Witness (Questions 289-299)
MR MARK
HUGHES
21 MAY 2009
Q289 Chairman: Thank you very much indeed.
Can I begin by asking you to introduce yourself and explain your
role in the Agency.
Mr Hughes: My name is Mark Hughes.
I am the Executive Director for Economic Development at the Agency.
In this context I have got responsibility for the business support
activities of the Northwest Development Agency.
Q290 Mr Hoyle: Obviously the Northwest
is a big area for automotive, whether it is JLR, Vauxhall, Bentley,
but more importantly amongst that is the commercial vehicle sector
and Leyland Trucks which is a big employer in this area. Can you
foresee any other sector replacing the automotive sector in this
local economy or in the economy of the Northwest?
Mr Hughes: I would probably put
the question round a different way. I do not think we need to
foresee a future where the auto sector is not part of the Northwest
economy. Currently it employs about 40,000 people in the Northwest
and has approximately 500 businesses here. It has got very high
productivity, a good competitive base and it follows through on
a number of the R&D innovation programmes that each of the
manufacturers is following. There is no reason to foresee in the
future why we cannot continue to have a strong manufacturing sector
within the Northwest. To give another component to my answer,
the Northwest is very fortunate in the current economic conditions
in that we have a very diversified economy. We have significant
growth taking place in other sectors, in defence, aerospace, nuclear,
digital and creative environmental technologies and, as I said,
we are fortunate to have that diverse base and there are crossovers
between some of the activities taking place in auto and those
in other sectors. We are diversified and have good growth, so
I do not think it is about finding something to replace auto but
continuing to support auto to grow again in the future.
Q291 Mr Hoyle: Do you see growth
of the auto industry or do you see that this is the level it is
going to remain at, or will it decline?
Mr Hughes: If you look to the
future there is nothing to say that vehicles are not going to
be part of our daily lives, as it were. There are massive legislative
and environmental drivers for innovation within the auto sector,
therefore there is a huge opportunity for the auto sector to grow
again in the Northwest. Whether it will continue to maintain the
levels of employment is a different question. It is very high
value. If you look at the average GVA contribution within the
auto sector it is double what the average is for the whole economy,
so in that respect although it might be small—
Q292 Mr Hoyle: What is the percentage
of the Northwest economy roughly?
Mr Hughes: Roughly it is about
3 billion. In GVA terms it is 3 billion in a 115 billion economy.
If you look at the added value nature of that it is double the
average for the whole of the economy. Small higher value would
be the synopsis for it.
Q293 Mr Hoyle: Obviously you know
the region very well and you know we have got leading skills within
aerospace, there is no doubt about it, we lead the world in aerospace
technology, but is there anything you feel you can do to bring
those technologies together from a Fighter Attack Aircraft to
a civil application into the automotive industry? Is there a way
of knitting that together that does not take place now?
Mr Hughes: There are examples
where we are doing that. The example of the Northwest Composite
Centre has already been touched on by the previous witnesses and
that is something the Agency funded obviously with central Government
money. The structures are there or can be put in there. The businesses
in which the technologies can reside, where is the near-term incentive
for them because the transfer and commercialisation process is
quite long and they need short-term return on profits, that is
the issue. To maybe address that you have to look at the incentives
that exist around technology development and R&D to then pull
profit through that system. There are opportunities, but currently
they are not as quick or as pervasive as we would want. In terms
of auto you have talked a lot about low carbon growth and supply
chains and there are opportunities in there around light vehicles,
there is electrical and chemical development within auto in the
future that relates to other sectors in the Northwest. There is
a strong chemical sector in the Northwest and a strong electrical
engineering background in the Northwest and the other benefit
of returning and growing the auto sector in the Northwest is it
actually connects with a lot of other sectors within the region
in which we do have certain concentrations of expertise within
our higher education institutions. We have talked about linkages,
as you have, between aerospace and business and I think there
is also a focus around linkages between higher education institutions
and businesses and how that work can more effectively in the future.
Q294 Chairman: Can I just ask you
one question of some importance. Our last witnesses talked very
plausibly about the need to develop composite technology in the
automotive sector, but the Southwest also has centres of excellence
in composite technology. Are the Northwest and Southwest talking
together about rival or comparable programmes?
Mr Hughes: This question has come
up a number of times and existed previously. We work as an RDA
family, particularly when it comes to sectoral interventions.
We have a working group between the Southwest, SEEDA, Northeast
and the West Midlands around the automotive sector. What you might
find is initiatives called similar things in different regions
but when you pull up the skin between those initiatives they are
concentrating on different aspects of the problem and working
complementarily underneath. I would have to provide details on
where they link but I am pretty confident they are not competing.
If I go to a different sector, the biomedical sector, we have
biomedical research centres in the Northwest and similar centres
in the Northeast which the RDAs are supporting and we spent a
huge amount of time working with the Northeast RDA to make sure
they were complementary rather than competitive.
Chairman: Rather unusually I am going
to have to call the senior member, Mr Hoyle, to the chair briefly.
I have an urgent matter I have got to deal with outside.
In the absence of the Chairman, Mr Hoyle was
called to the Chair
Q295 Mr Wright: As regards your role
as the RDA, what have you done to help sustain the industry during
the present crisis?
Mr Hughes: I think when we look
at that we need to look at two things really. One is what we do
in terms of general business support and then what we are doing
in terms of specific support for the auto sector. The auto sector
does have opportunities for assistance beyond things like the
Automotive Assistance Programme. If I just touch upon a few of
the mainstream things for the moment. With the Business Link service,
which is a key conduit for business support, we introduced an
access to finance service in November last year and that has provided
assistance to 800 companies in that period, of which a number
are automotive.
Q296 Mr Wright: Is that just financial
advice or financial help?
Mr Hughes: That is help and advice.
There is a financial health check first of all and then actual
assistance with accessing finance. Business Link itself does not
give finance, the Agency is the granting body. The other thing
that service has done, and I am sure we will come on to the banks,
has been to work with the banks and reposition businesses with
the banks so the banks will actually lend to them. Another component
of that is with a number of the banks what they have offered is
a review opportunity, so if they have turned down a loan facility
or loan request from one company Business Link has been able to
review that and go back to the bank and present another proposition
and secure funding for them. That is core frontline, as it were,
that is available to all businesses. Most of our grant offerings
are available to all businesses, including the automotive sector.
Government and RDAs have spent probably the last 18 months trying
to tidy up business support and simplify it and make it more eligible
for more businesses. We have a grant for business investment that
is available for auto companies and grants for innovation that
are available to auto companies. Again, I can provide detailed
material on the take-up of those within the automotive sector.
If we move specifically to auto assistance, we have put in place
a number of initiatives. The training one is the one that gets
discussed which is also being used by Bentley, and Leyland are
obviously part of it, and one other manufacturer utilises that.
That was a million and a half funding going into particular training.
We also have a supply chain programme which is about a three million
programme working with auto companies on their supply chain initiatives.
We support something called the Northwest Automotive Alliance
which works with the auto companies in terms of developing market
opportunities. There are some dedicated auto assistance programmes,
some of which have been in existence for some time and some of
which have come into place as a direct response to the situation
we are in at the moment. The other thing for us is to utilise
any of the national schemes that are available and try to raise
awareness. There were some comments earlier on about awareness
and understanding of the national schemes and that is something
we have been trying to work on with businesses within the region
because it is still a bit opaque and unclear.
Q297 Mr Wright: You did mention the
banking issues and how you are trying to help the industry with
that. Quite clearly there is a specific problem with the truck
manufacturers on the basis that it is the people who purchase
them who cannot get to the banks. Have you made representations
to the banks in respect of that difficulty? If you could release
finance through that route then it resolves the problem at the
other end.
Mr Hughes: Absolutely. No, we
have not on that particular problem but we will have to after
today. We meet the commercial banks on a regular basis. We had
a meeting with eight of the commercial banks from the region last
night on the access to finance question. It is one of those wicked,
wicked problems. At a macro level, fundamentally what is happening
is the amount of money in the system has been drastically reduced
and the cost of that money is going up. Those are two fundamentals
you just cannot get away from. We are in a readjustment process
at the moment, we are not going to go back to where we were 18/24
months ago. Unfortunately, businesses have to change their business
models to adjust to a new reality and that is what is happening
at the moment. The banks will tell a somewhat convincing story
about the amount of lending that they are making, but at the same
time you have lots of examples of individual businesses who have
been turned down or had their provisions renegotiated at the same
time. Trying to get a very clear take on which one of those is
the real world is actually quite difficult because they co-exist
at the same time.
Q298 Mr Wright: What else is it that
you think you could do if you had greater resources? Is there
much more? There must be something where you think, "I really
want to do this".
Mr Hughes: I do not think it is
necessarily in some respects greater resources for the total effort,
it is the channelling and effective deployment of those resources.
Previous people have talked a lot about skills and innovation
and I think those are the two key things over the medium and long-term.
There is a wealth of resources, a wealth of money available across
Government in those areas, it is just not coordinated enough and
delivered at the right level enough. You can look at billions
that are spent and made available for skills development and similar
numbers available for innovation, but they are not channelled
through an industry window and in a particular way. I guess one
hope I have is that the New Industry, New Jobs approach will actually
lead to a greater industry focus for the channelling of the delivery
of resources to businesses. That is the one big change that I
would make.
Q299 Mr Wright: Within your organisation
do you have someone specific to the automotive industry to take
care of that?
Mr Hughes: Yes, I do. We also
sponsor the Northwest Automotive Alliance as well, which is a
dedicated industry body which gets that industry voice around
one table to clearly explain to us the kinds of issues it has
got and what it would like us to do and then we also use that
as a kind of conduit to engage with national and European auto
groups. I do have an auto person, for want of a better word. Within
most of our other business support activities one thing that we
have been able to do is we have now sectorised them as well, so
with UKTI and trade, the trade people in the region, we have got
auto people and in Business Link we have got auto people. We have
replicated that across our programmes and those teams get together
on a regular basis to share intelligence and information. It is
not perfect and it does not do everything that people would probably
want it to do, but it is a significant advance on where we were
three years ago.
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