Memorandum submitted by the British Marine Federation

 

1. Introduction

 

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 4 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 & 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 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

 

2.1 The current economic situation is having a profoundly negative effect on the leisure marine industry in the UK, and has resulted in companies taking hard commercial decisions in order to survive. We have seen a dramatic increase in companies entering administration and a severe downturn in sales.

 

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.

 

2.4 Larger firms have also suffered from the downturn. Two major boat builders located in the East of England and Midlands regions have recently made almost 400 redundancies and closed two of their four factories. Other manufacturers have gone to short time working

 

2.5 Over the past eight years the revenue generated by the UK leisure marine industry has consistently grown over recent years by 7%-8% per annum. The current economic downturn is the first time in many years that the leisure marine industry has faced a comparable decline in sales and consumer confidence and such a decline in employment numbers.

 

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 UK as well.

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 UK remains unknown; such is the sheer number of businesses in the sector and the problems affecting all industries in accessing affordable finance.

 

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.

 

December 2008