4 Response
to current economic climate
50. In its written evidence, emda described
the effects of the current economic climate in the region:
The financial and economic downturn has affected
all businesses in the East Midlands region, particularly in the
manufacturing and construction sectors, but with knock on effects
on retail and service sectors, as consumer expenditure in the
region remains flat. Major job losses have been experienced in
the region leading to increased unemployment.[62]
The Federation of Small Businesses East Midlands
detailed the experience of small businesses:
33% of the respondents to our quarterly survey in
January 2009 rated the decline in their confidence as 'substantial'
since October 2008. The continuous decline in business confidence
is coupled with decreased turnover for the majority of small businesses
over the same period of time. In January 2009, 51% of our members
reported a drop in sales and turnover, of which a staggering 31%
reported significant falls of over 3%. Our most recent survey
data for April 2009 shows only a slight improvement, with 48%
of our members still reporting a decrease in trade.[63]
51. Witnesses spoke of the difficulty they had
in convincing emda and the government of the seriousness
of the situation businesses faced. John Hardwick, Chair, Area
Policy Unit, Federation of Small Businesses East Midlands, stated:
We started to flag up that there were significant
problems from January 2008. We raised that through the East Midlands
Business Forum and in direct meetings with the regional Minister.
That was reinforced by our findings in April 2008 and it then
culminated in quite heated discussions in July and August 2008
when the responses had shown a gradual decline.[64]
Stephen Woolfe, former Chair of East Midlands Chamber
of Commerce, agreed that the gravity of the situation had not
been fully appreciated, "I am not sure about how much the
delays at emda reflected a lack of appreciation at […]
central Government level about the recession that we were entering.[65]
52. Once the extent of the decline was realised,
witnesses commented positively on the speed of emda's response.
John Hardwick commented that emda was "one of the
first RDAs to make a response and we cannot fault it."[66]
Stephen Woolfe also noted that, "in terms of what they are
doing now, I certainly feet that there is very great concern within
emda […] to try and help, wherever they can."[67]
Quadrelene, a company manufacturing detergents and disinfectants,
commented that, "There have been good initiatives launched
quickly and effectively in response to the global recession, which
different members of our team have attended and gained helpful
advice."[68]
53. In announcing the publication of the PwC
independent evaluation of RDAs, Lord Mandelson's speech to Parliament
included the following statements on his expectations of the RDAs
in the current economic conditions:
I am asking the RDAs to focus, working with and through
others; as an immediate priority, on providing assistance to business;
for the medium-term, on stimulating the recovery and growth; and
for the longer term, on restructuring and developing each region's
strengths, supporting its growth and competitiveness in the future.[69]
54. emda acknowledged that their role
had changed and that "overall we have been focusing our attention
on support. We clearly have had to re-focus in the current climate."[70]
The East Midlands Regional Assembly also commented that, "emda
have revised their delivery of services to businesses to reflect
current economic conditions."[71]
However, the University of Nottingham warned that "The RDA's
response to this situation should not be to the detriment of long
term investment in skills, capacity and infrastructure needed
to sustain and grow the knowledge economy."[72]
55. The East Midlands Regional Assembly expressed
concern that the economic strategy "that was developed in
times of growth" remains in place, and asked for it to be
looked at again.[73]
On 18th July 2008, EMRA passed a motion that called on emda
to "undertake an urgent review of elements of the Regional
Economic Strategy in order to take account of the new economic
challenges facing our region."[74]
emda stated that there were two reasons why a review of
the RES was not felt to be in the best interests of the region:
Firstly, the RES is a long-term strategy, which seeks
to address and negate long-term barriers to our economic competitiveness.
As a result, the broad themes and priorities of the RES remain
valid. Secondly, instead of undertaking a time consuming review
of a long-term strategy, emda has proactively put in place
a range of measures to help support businesses through the economic
downturn, whilst undertaking initiatives and investments that
will prepare the region for recovery and future growth. This approach
was endorsed by Government and the Regional Minister and we remain
convinced that this was the most appropriate course of action.[75]
56. emda described the support they were
providing to businesses through the current economic downturn.
They ran a series of 'Survive and Thrive' events across the region
in December 2008, which provided master classes for businesses
and were attended by over 2,000 businesses. Jeff Moore, Chief
Executive, emda, commented that, "It is fascinating
to hear "survive and thrive" used all over in Government
and industry speeches. It has been a very positive soundbite for
us."[76]
57. emda commented that "the primary
channel for awareness raising and marketing of its business support
products is through Business Link."[77]
During 2008/09 over 67,000 businesses used the Business Link service
in the East Midlands; 70% of which had 10 or fewer employees.
Michael Carr, Executive Director of Business Services, emda,
stated:
… we have been working extremely closely with
businesses, making them aware that the support is there, and we
have seen a significant inflow of established businesses coming
to talk to us. In many ways, this recession has brought Business
Link to the fore, and it has been seen to respond very strongly
in the eyes of businesses … [78]
58. John Hardwick, Chair, Area Policy Unit, Federation
of Small Businesses East Midlands, commented that the "good
thing is that Business Link has changed its emphasis to survival
from growth."[79]
However he noted:
Making business people aware of what they can access
through Business Link still leaves a little bit to be desired.
There has been a bit of TV advertising, which is good. Any advertising
is good advertising, and makes people aware of what is available
to them, but it is generally not perceived as the first port of
call.[80]
59. emda has taken
positive and effective steps to provide support to business. We
are concerned to hear from witnesses that awareness of Business
Link and its services is not as good as it should be. We urge
the Government, working with emda, to improve its marketing
and advertising in the region, to ensure that businesses are aware
of the services they can access.
Data Collection
60. Jeff Moore commented that a key part of emda's
role is "about a gathering of intelligence and influencing
Government in what they need to do to respond to the credit crunch.
That is a major part of our work, which is that strategic research-type
work, as well as delivering."[81]
61. However, the Federation of East Midlands
commented:
One particular tool which could have helped emda
[…] is more timely and accurate data on which to base decisions.
emda's statistics are significantly out of date, and decisions
are being based on data that is at best eighteen months old and
at worst five years old … during the recession we have found
that emda had been reliant on the data gathered by business
representative organisations. As a business-led body with a considerable
budget, the collection, analysis and dissemination of up-to-date
economic data should be better.[82]
Access to Finance
62. Access to finance was recognised as a key
concern for businesses. Michael Carr, Executive Director of Business
Services, emda, described how the banks stopped lending
"around Christmas-time and we recognised there was a need
quickly."[83] emda
established a Transition Loan Fund of £6 million that made
loans of up to £250,000 to businesses that had been affected
by reduction in the availability of banks' finance. In addition,
emda sought to support micro businesses in some of the
region's more disadvantaged areas through Enterprise Loans East
Midlands. This £5 million loan fund provides loans of up
to £20,000 to viable small businesses that traditionally
struggled to raise bank finance.
63. Michael Carr commented that emda had
now developed good relationships with the banks:
… what is coming out of this is a clarification
to the relationship managers of banks as to exactly what support
is available, so that they are clearer about being able to direct
their clients to business support.[84]
64. Despite emda's assurances about their
good relationship with the banks, we remain concerned about the
ability of businesses, in difficulties with their banks, to access
information about the support available to them.
Regeneration Projects
65. In its written evidence, emda highlighted
its focus on regeneration schemes, and had worked with the Government
Office for the East Midlands to identify schemes whose delivery
could be brought forward. These schemes would have "major
regeneration impact and will create and safeguard jobs, through
bringing forward mixed-use developments in support of sustainable
communities."[85]
Schemes identified by emda include:
- The redevelopment of Derby's
Cathedral Quarter;
- Development of a new Business Quarter for Leicester
adjacent to the city's railway station; and
- The re-development of Nottingham Railway station
to create a new transport hub supporting regeneration of the surrounding
area.[86]
66. Jeff Moore highlighted the effects of the
current economic climate on regeneration projects:
By far the biggest, obvious area where the credit
crunch is impacting on us is the amount of private sector resource
there is to fund regeneration schemes […] as the private
sector cash dries up, you see lots of schemes stopping or not
being taken forward. That is certainly the biggest impact that
we have.[87]
67. We welcome emda's
focus on regeneration schemes in order to create and safeguard
jobs during the current economic climate.
European Regional Development
Fund
68. The European Regional Development Fund (ERDF)
helps stimulate economic development and regeneration in the
least prosperous regions of the European Union (EU). These programmes
are designed to meet current needs by targeting employment, small
and medium-sized enterprises (SMEs), innovation, and high-tech
business investment, among other key priorities identified by
each region.
69. In its written evidence, the EMUA notes:
… that the implementation of the ERDF [European
Regional Development Fund] competitiveness programme by emda
in this region is bureaucratic and difficult. Universities here,
unlike in some other regions, have been unable to apply for ERDF
match funding for recession-related initiatives such as the HEFEC
ECIF Challenge fund, because the short timescales cannot be achieved
in the ERDF scheme.[88]
In oral evidence to the Committee, Professor John
Coyne, Chair of East Midlands Universities Association, commented
that other RDAs had been "a little speedier and more flexible
in their interpretation than has been the case in the East Midlands."[89]
70. Jeff Moore accepted that there had been problems
with the previous programme which ran from 2001 to 2006, although
not in the East Midlands. He stated that emda "had
the right processes in place"[90]
to prevent any potential clawback and penalties from the European
Commission, which he said was a current problem for three English
regions.
71. emda has responded
quickly and positively to the current economic situation. They
have worked hard to support business in the region, and we urge
them to continue to work with banks in order to make them aware
of what support is available and to urge banks to assist companies
as appropriate. We note the concerns surrounding the European
Regional Development Fund and encourage emda to examine
the process to make it easier to access.
72. emda needs
to work with timely and accurate data on which to base decisions
in the current economic climate and we urge them to improve the
collection and analysis of data and to work with regional partners.
62 Ibid. Back
63
Ev 90 Back
64
Q 39 Back
65
Q 40 Back
66
Q 39 Back
67
Q 40 Back
68
Ev 152 Back
69
HL Deb, 31 March 2009, WS 81 Back
70
Q 15 Back
71
Ev 93 Back
72
Ev 131 Back
73
Ev 93 Back
74
Ibid. Back
75
Ev 163 Back
76
Opening statement, oral evidence on 27 April 2009 Back
77
Ev 164 Back
78
Q 20 Back
79
Q 42 Back
80
Ibid. Back
81
Q 242 Back
82
Ev 90 Back
83
Q 15 Back
84
Q 20 Back
85
Ev 102 Back
86
Ibid. Back
87
Q 242 Back
88
Ev 147 Back
89
Q 105 Back
90
Q 252 Back
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