Memorandum submitted by the British Marine Federation
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 4 million people
to enjoy their recreation afloat on the coast and inland waterways of our
country. The BMF also operates the
Our industry is wholly comprised of small & medium-sized enterprises with over
95% of companies within our membership employing less than 50 people (based on
BMF membership statistics). In total the
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 significant 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 employment options.
2. The current economic situation
The current economic situation is having a profoundly negative effect on the
leisure marine industry in the
2.2 The BMF has seen the resignation of 151 member companies since July of this year and we have recently had to terminate the membership of 46 companies for non-payment of subscriptions.
2.3 50 BMF members have ceased trading this year. Of these, 17 firms have gone into liquidation, with a total value of £34 million turnover.
Larger firms have also suffered from the downturn. Two major boat builders
located in the East of England and
Over the past eight years the revenue generated by the
3. Access to credit
3.1 The current economic downturn has been compounded by the problems facing member companies in accessing credit streams.
3.2 Experience from member companies suggests that:
- Business relationship managers from banks are under increasing pressure to maximise profitability and are being overruled by senior management where previously they would use discretion to authorise credit
- Interest rates for business overdrafts are being increased by as much as three and a half times their current rate
- Banks are heavily punishing the breaching of loan covenants where previously they would have sought compromise to ensure the debtor remained solvent for the life of the loan
- New loans being offered to small businesses are being offered at interest rates of up to 20%, increased from an average of 9-11% earlier in 2008. Such lending rates have made credit totally unaffordable.
4. Measures which could help
4.1 The leisure marine sector is feeling the impact of the
financial crisis as business demand is falling sharply. The change of interest
rates down to 2% will help our exporters but as it is a global crisis and many
of countries that our sector exports to are in similar difficulties there is a
real need to stimulate business in
Furthermore many of our companies are small to medium businesses and they need to secure access to affordable credit in order to honour current commitments and embark on new projects.
4.2 The BMF welcomes the Government's commitments in the Pre-Budget Report to temporarily reduce the rate of corporation tax, but believes this should be made permanent, welcomes the commitment to help exporters and welcomes moves to increase the availability of loans from Regional Development Agencies (RDAs).
4.3 The BMF calls on Regional Development Agencies to develop specific plans to reach out to and help leisure marine businesses, especially in areas of the country such as the South East, where the sector is a major local employer for coastal towns and cities.
4.3 The BMF particularly welcomes the establishment of the Small
Business Finance Scheme which could enable many member companies to access
affordable credit. However, the BMF believes that greater clarity is needed on
aspects such as the lending criteria that will be used under the scheme. The
benefit of the scheme for SMEs in the
4.4 In its policy making the Government needs to make a distinction between small sized businesses and medium sized businesses. There is a vast difference in the credit needs and financial challenges facing a specialist firm of three individuals when compared with a medium sized manufacturer employing two hundred people.
4.5. Banks must be discouraged from prohibitively increasing interest rates on existing overdrafts and new loans for small and medium sized businesses or there will be an increase in insolvencies and redundancies in the leisure marine sector. The Government must use its new influence over the financial sector to restrict such practices.
4.6. The BMF would welcome the opportunity to enter a dialogue with the Government to establish how it could further assist the leisure marine sector in accessing affordable credit and in how it can ensure banks continue to assist industry in its recovery from the current economic situation.
5. Next Steps
5.1 The BMF would be happy to provide further evidence to the committee, or indeed take part in an oral evidence session should the committee wish. We look forward to further involvement as your scrutiny continues.