Memorandum submitted by the British Marine
Federation
1.1 The British Marine Federation is the
trade association for the leisure boating industry, representing
around 1,500 member companies. Our members provide the boats,
equipment, facilities and services that enable nearly four million
people to enjoy their recreation afloat on the coast and inland
waterways of our country. The BMF also operates the London and
Southampton International Boat Shows via its subsidiary National
Boat Shows.
1.2 Our industry is wholly comprised of
small and medium-sized enterprises with over 95% of companies
within our membership employing less than 50 people (based
on BMF membership statistics). In total the UK leisure marine
sector directly employs over 35,000 people and generates
annual revenues of nearly £3 billion, of which 35.1%
represents export sales. Over recent years the leisure marine
sector has been recognised by Government as a manufacturing success
story and a growing and valuable contributor to the UK economy.
1.3 The BMF welcomes the opportunity to
submit evidence to the select committee hearing at a time when
many member companies are facing financial difficulties, including
access to credit from lenders and other financial institutions.
1.4 A number of firms in the leisure marine
industry have entered administration in the last six months and
hundreds of highly skilled workers have lost their jobs, often
in areas of the country with few other high-skill employment options.
2. THRESHOLD
OF AN
ANNUAL TURNOVER
OF £25 MILLION
FOR APPLICANTS
2.1 The vast majority of marine businesses
are small and medium sized enterprises. As the BMF alluded to
in its recent submission to the committee in its inquiry, Financial
Support for Small and Medium Sized Enterprises, access to
credit can be close to impossible, interest rates for overdrafts
and loans are at unprecedented premium over base-rate, while the
inflexible attitude toward loan covenants are driving otherwise
valid businesses into administration.
2.2 While the vast majority of SME's within
our sector qualify for help under the Enterprise Finance Guarantee
Scheme, the £25 million threshold for turnover
can also affect them indirectly.
While only 16 of our 1,600 members
have turnovers in excess of £25 million, their
cumulative worth is well in excess of £1.1 billion.
This constitutes over 35% of the total worth of the UK marine
industry, however the majority of small manufacturers also rely
upon these 16 companies as their key customers. Despite this,
larger marine businesses remain unable to secure affordable credit
from the private sector or the Government (quantitative evidence
of this can be furnished to the committee in confidence, on request).
2.3 Many companies have reported difficulties
in receiving payment from the larger businesses within the sector
which, as larger concerns, have greater exposure to a depressed
credit market. Payment terms, on many occasions, have been extended
from 30 to 90 days and many smaller businesses have
little choice but to accept part payments for work and materials
that have already been delivered. As a consequence many SME's
who act as suppliers to the larger manufacturers are struggling
to maintain sufficient operating capital. This increases their
need for credit beyond what would be required in a more stable
economic climate, consequently driving an increase in applications
to the Enterprise Finance Guarantee Scheme and putting additional
pressure on the tax payer as a result.
2.4 One of the larger yacht manufacturers
deals with over 300 separate suppliers who rely on their
business in order to remain financially viable but, despite possessing
a healthy order book, the business has often been unable to pay
them in a timely manner, exclusively due to the depressed credit
market.
2.5 With this in mind, the BMF would strongly
advocate that the threshold for turnover within the Enterprise
Finance Guarantee Scheme be relaxed and a level of support made
available to larger organisations, appropriate to their the number
of suppliers and employees they support, as well as turnover.
2.6 This would not only serve to aid a comparatively
buoyant, British owned industry but would also have the effect
of reducing the burden on the tax payer by allowing companies
to cascade Government support through the supply chain. The net
effect would be reduced administration to both the Government
and applicants and an overall reduction in the exposure of the
tax payer to corporate debt. It would also ensure businesses throughout
the supply chain could operate with a healthier capital reserve,
significantly reduce their exposure to bankruptcy proceedings
and improve their credit profile in the eyes of traditional lending
institutions.
3. EFFECTIVE
PROMOTION OF
THE SCHEME
TO THE
PRIVATE SECTOR
3.1 The BMF has worked extremely hard over
the last year to promote Government initiatives aimed at supporting
industry to its members. It has come to our attention, however,
that a vast number of our members are wholly unaware of the Enterprise
Finance Guarantee Scheme and we would strongly urge the committee
to recommend to Government that they invest in order to promote
it. This is particularly true of very small and sole trader companies
where knowledge of the scheme appears to be virtually non-existent.
3.2 The BMF itself, as a qualifying medium
sized enterprise (all be it not-for-profit), has received no information
in regard to the scheme, only becoming aware of it through its
public affairs activity on behalf of its members.
4. ADMINISTRATIVE
BURDEN OF
THE APPLICATION
PROCESS
4.1 The BMF understands the need for Government
to attain accurate and appropriate information in order to ascertain
the validity of claims made against the Enterprise Finance guarantee
Scheme. With an unprecedented amount of credit being offered to
private enterprises, it is only prudent that Government attain
sufficient evidence that the credit will have a beneficial effect
on the national economy. However, the experience of our members
would appear to indicate that the correct balance has yet to be
struck for small and sole trader businesses.
4.2 Many of the smaller BMF members have
reported significant difficulties in securing these funds due
to a lack of understanding of the Enterprise Finance Guarantee
Scheme at local branches. While the scheme can be administered
through 26 lending institutions, the reality appears that
availability depends on the knowledge of the individual bank manager
in question. Having made a telephone enquiry to a major High Street
lending institution, recently supported by Government funding,
the BMF spoke to several phone bankers none of whom professed
to know what the proposed scheme was, nor, after consulting with
their supervisors, were they able to improve the situation. Contact
through telephone is perhaps the first point of call for small
businesses and sole traders with their bank. When facing difficulties,
it is crucial that bank staff are aware of this Government initiative
otherwise the funding will be all but inaccessible to SME's.
5. CONCLUSIONS
5.1 In conclusion, while the BMF is broadly
supportive of the Government's plans to provide guaranteed credit
to SME's, we believe that the tax payer's money should be used
carefully and with holistic view of the economy. The leisure marine
industry, being a wholly discretionary business, relies heavily
on credit to service a comparatively buoyant market and guaranteed
funding can help ensure the longevity of the industry. However,
we remain concerned that the current proposals may not leave this
British industry on the best footing once it emerges from recession
and we would urge the committee to consider our suggestions in
the light of this, in its ongoing discussions.
6. NEXT STEPS
6.1 The BMF would be delighted to provide
any further evidence to committee, should you require it, and
is also available for oral evidence. We look forward to further
involvement in your inquiry.
16 April 2009
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