Memorandum submitted by EEF (EE 08)
Summary
· Despite government efforts to increase flow of credit businesses continue to report difficulties when dealing with the banks e.g. tighter lending and financial review processes, and problems with credit insurers. · Government
initiatives have been announced well before the infrastructure was in place to
deliver them. eg. The · We believe that the East of England Development Agency (EEDA), as the principal front line agency has an important role to provide leadership in developing and coordinating policies and to promote regional economic development. Those who propose abolishing RDAs completely have yet to present a credible alternative. · EEDA has suffered, along with all RDAs, from a lack of clear aims and objectives; hence efforts to measure their effectiveness have been flawed. · The work of EEDA is hampered by a funding formulae that awards the East of England the smallest Budget of any RDA, and its effectiveness is undermined by further cuts to its budget. · Active engagement with the business community within the post Sub-National Review (SNR) infrastructure, rather than just consulting business as originally proposed, is essential. · EEF value the close working relationship that has been developed with EEDA, East of England Regional Assembly (EERA), Business Link EAST (BLE), Learning and Skills Council (LSC), Manufacturing Advisory Service (MAS), amongst others. This has provided an opportunity to represent the voice of the wealth creating manufacturing sector. We look forward to developing similar links with the Regional Select Committee. About EEF
1. EEF, the manufacturers' organisation is a
trusted partner to thousands of employers around
The nature and extent
of government programmes in the East of
2. The downturn has led to very difficult trading conditions for large parts of manufacturing in the East of England. The global nature of the recession and significant contraction in world trade flows over the past six months has led to a particularly sharp contraction in new orders for export-focused companies in the region.
3. .While few sectors have been unaffected by the economic situation, some sectors, such as electronics and medical equipment have been faring better, given their greater reliance on government spending. However, there is a degree of uncertainty about the medium term for these sectors.
4. The most recent EEF survey[1] showed that manufacturing output in the East of England continued to decline in the first quarter of 2009, and a balance of companies were expecting both output and orders to contract further in the next three months.
5. Companies also reported further deterioration in profit margins and the squeeze on cash flow had also intensified.
6. Despite government efforts to increase flow of credit and improve behaviour of banks, businesses continue to report difficulties when dealing with the banks e.g. tighter lending and financial review processes, and problems with credit insurers.
7. Unfortunately government initiatives such as the Enterprise Finance Guarantee Scheme were announced well before the infrastructure was in place to deliver them. In general the business support announced during the downturn amounted to little more than what was already in place.
8. Our next quarterly trends survey will be published on 1 June and give an overview of the current state of the sector and forecasts. We shall share this with the Committee.
9. As a provider of business services, as well as regular communication with members, EEF is also able to track enquiries to our helpdesks as a way of assessing issues affecting the sector. Since the Autumn of 2008 we have continued to notice an increasing in requests for assistance making redundancies or moving employees to short-time working.
10. The lack of any Government support for short-time working, wage top-up or compensation scheme, as is run in Wales and some other EU Member States, makes it more difficult for businesses to hold on to skilled workers.
11. Many firms are utilising the reduction in production to train and upskill their staff. The new, more flexible, Train to Gain programme was well received, but having raised expectations, is now running out of funding. We look for certainty of funding for train to gain and apprenticeships funding in 2009-10 and beyond. This is essential to ensure the manufacturing workforce is appropriately skilled for a speedy recovery from the recession.
The role of the front line agencies
12. The Regional Development Agencies divide opinion. Many people argue that they are unaccountable and unnecessary quangos. EEF has a number of concerns about the RDAs, but we believe that they provide business-led critical mass for promoting regional economic development. Put more simply, they are better able to address what are often region-wide economic issues than central government who is viewed as distant or local authorities who are too parochial. Those who propose abolishing RDAs completely have yet to present a credible alternative.
13. Nonetheless, EEF believes that RDAs need clearer objectives, a greater focus on outcomes rather than outputs and often need to work more closely together to overcome artificial geographical boundaries. Some evidence of EEDAs cross region working between SEEDA, LDA and EMDA is available but more can be achieved. In most cases RDAs should be commissioning bodies, rather than delivery agents.
14. In terms of their performance, EEF published a
report in 20072which found little
direct evidence of RDAs having made a major difference to regional economic
development. However, RDAs have made a major contribution to urban renewal and EEDA
came to the fore in coordinating responses to regional crises, such as the GM
Vauxhall closure in Luton and the Buncefield disaster in
15. In this current economic downturn EEDA took the lead roll in communicating the extra support available through BLE, Job Centre Plus Advisory, Conciliation and Arbitration Service (ACAS) and LSC.
16. EEF in the East of England has a strong strategic and operational working relationship with EEDA and the other front line agencies and believes that they are working well within changing priorities and, more recently, challenging times.
17. We are impressed with
EEDAs approach to stakeholder relationships. EEF is represented on a variety of
EEDA-led regional consultative groups, such as the Regional Manufacturing
Forum, Regional Advisory Group for
How the various agencies are working together to deal with the current climate and also to prepare citizens and communities for the future upturn
18. In general the various agencies are working well together but we are concerned as to the relationship changes that will result from the implementation of the SNR.
19. EEF welcomed many
aspects of the recent Sub-National Review, in particular the
proposals for new Single Regional Strategies (SRS) to bring together the
Regional Spatial Strategies and Regional Economic Strategy. 20. With the failure of the Regional Government agenda there was a clear need to address the question of local accountability for, and scrutiny of, the economic strategies. We recognise that the new arrangements agreed in the Local Democracy, Economic Development and Construction Bill, with RDAs and newly-formed Local Authority Leaders' Boards taking joint responsibility for a SRS, try to address this issue.
21. However, we are concerned that a SRS could become subject to costly delay either because of disagreements between RDAs and the Leaders' Boards, or indeed division within the Boards themselves. There is a safeguard to avoid this, through the ability of Ministers to force the process, but it remains to been seen how effective this will be.
22. Stakeholders have a critical role in informing the SRS process. Where previous arrangements of stakeholder engagement have worked well, they should be maintained as far as possible and used as examples of best practice elsewhere.
23. In the East of England, EEF has been represented at Regional Assembly level for some years via the Community Stakeholders Group which continues to lobby for real engagement within the new SNR infrastructure rather than merely a consultee as originally proposed. It remains to be seen how the Local Authority Leaders Board will take advantage of the existing experience and knowledge of the CSG, particularly those members from the business community with their knowledge of what needs to be done in support of economic development.
24. Whichever future arrangements are agreed it is important that the existing strong liaison between EEDA and the business community is maintained and developed. We therefore hope that EEDA will continue to see the East of England Business Group (EEBG), which comprises most of the business organisations as a valuable link for business engagement.
The impact of economic aid in the region
25. EEDA has an important role in regeneration, a great challenge for it in parts of the region where deprivation and unemployment are a significant problems. EEDA who already had the lowest budget of any region, had it reduced still further (in common with all RDAs) in order that government could offer support to first time buyers. It is feared that this action will reduce the strength of EEDAs response to the regeneration issues that it is confronting..
26. EEDA needs to do more to address these challenges but is hampered by an archaic, RDA funding formulae, which denies it the resources necessary and which needs to be changed.
27. In general Government initiatives such as the Enterprise Finance Guarantee Scheme are slow to roll out and create frustration amongst potential clients and providers.
28. More companies are taking financial advice from BLE now they have set up a confidential Business Link help line. Hopefully this will result in more businesses receiving advice before they reach the point when closure is inevitable.
29. We have seen significant productivity improvements resulting from MAS interventions.
30. We welcome the recently announced £10M Regional Loan Fund to support innovative businesses finance their development and the Understanding Finance workshops.
The measures that could be taken to promote sustainable economic growth
31. Finding agreement for Regional Economic Strategies is too lengthy a process rendering them quickly out of date and this is further highlighted due to the current challenging economic climate. This is particularly the case now because targets, for example to increase GVA, were set prior to the recession and funds had been diverted for other purposes e.g. previously for the housing recovery and latterly recession support.
32. It would be appropriate to revisit this strategy and to give increased support to measures that would better prepare the region for the upturn, such as measures to support people in work thereby retaining the skills base that the region will need, especially in the manufacturing sector which could spearhead an export led recovery.
33. This could be done in conjunction with the major stakeholders to retain a sense of joint ownership but should not go through the full consultation process which although very thorough, was too extensive taking too long to be agreed.
34. Employers need confirmation of the future of Train to Gain and apprenticeship funding to ensure there is continued training and upskilling of the workforce.
20 May 2009
[1] EEF Quarterly Business Trends Survey Q1 2009
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