House of Commons - North West Regional Committee

The impact of the current economic situation on the North West and the Government's response - North West Regional Committee Contents

Memorandum from Keep Our Future Afloat Campaign (KOFAC) (NW 19)

1. INTRODUCTION TO KOFAC—THE KEEP OUR FUTURE AFLOAT CAMPAIGN

1.1 The Keep Our Future Afloat Campaign (KOFAC), led by UNITE (Amicus), GMB, CSEU with support from Furness Enterprise and NWDA welcomes the Committee's inquiry.

1.2 KOFAC has three aims, to:

— Sustain and grow jobs in naval shipbuilding in NW England.

— Secure full use of the naval shipbuilding industrial base assets and supply chain in the region.

— Sustain the large naval ship and submarine design capability located within NW England and at Barrow in particular, which has around 60% of UK naval design capability.

KOFAC has pursued these aims since March 2004 through its dialogue seeking to include leaders in Government, industry, the civil service and across all political persuasions.

2. SUMMARY

2.1 We deal first with the need in this economic downturn to ensure that areas like Furness and West Cumbria which are remote from engines of growth in NW England remain as a key focus for public and private sector investment. A shift solely to investing in city regions would be harmful. We highlight the impact of the recession on Furness and South Cumbria and the important role NWDA and other bodies are playing in helping to address it. We draw attention to the need to help all types of businesses highlighting the importance of the Working Neighbourhoods Fund, manufacturing, innovation, energy and the defence industries as means of offsetting recessionary effects, and paving the way for stimulating economic recovery.

3. A NEED TO FOCUS ON TOWNS AS WELL AS CITIES

3.1 We welcome the Regional Minister's initiative in establishing the Joint Economic Commission (JEC) to "stave off the worst effects of the economic downturn".[32] NWDA's NW Regional Economic Strategy[33] describes Barrow as the "the one district with high concentrations of worklessness remote from areas of major growth". Professor Michael Parkinson in "The Credit Crunch and Regeneration: Impact and Implications",[34] clearly states "Small and medium towns which are dependent on single economic sectors will be badly hit".[35] It is important that JEC's decisions on resource allocations continue to ensure resources are funneled into towns like Ulverston and Barrow in the UK Assisted Areas as well as city regions—to address the concern identified by Professor Parkinson.

3.2 JEC's focus on the energy west coast in Cumbria[36] and the renewable sector as key projects "to expedite to benefit people, businesses and the economy of the region" is welcomed.

4. JOB CREATION IN 2008-09

4.1 Defence systems integration is helping offset the effects of the recession in Barrow Travel to Work Area. In 2008 BAE SYSTEMS Submarine Solutions created 1,000 jobs taking their employment to 5,078. The Company anticipates needing to fill 300-400 more, mainly design, test and commissioning engineers vacancies in 2009-10.

4.2 Furness Enterprise Partnership helped companies create and safeguard 597 jobs in 2008.[37] There was 32% growth in jobs arising in new start businesses over 2007,150 jobs being created. The 209.5 jobs created through organic growth represented a 59% increase on 2007.

5. SCALE OF REDUNDANCIES IN 2008 AND 2009

5.1 Job losses in Furness are occurring in increasing numbers during the recession. In the last seventeen months 816 jobs have gone.

5.2 In 2008, companies shed 368 jobs, 58% being in manufacturing with the remainder in retail and construction.

5.3 So far 2009 has seen announcements that 448 jobs are going (70% were in manufacturing).

5.4 In Ulverston GlaxoSmithKline are progressing a three year 60% (330) reduction in its 2008 workforce of 550 (100 of these ended in 2008 and 100 more will occur in 2009).

6. WORKLESSNESS IS A HUGE CHALLENGE

6.1 In Barrow Travel to Work Area on the one hand there is very strong demand by certain employers for managerial, professional, technical skills while on the other there continues to be a high level of worklessness.

6.2 Barrow has the third highest percentage of working age population claiming IB benefits in England (13.4%, 5,650 people—almost half have been out of work for more than 10 years). It is also ranked the 29th most deprived district in England[38] and has one of the highest levels of worklessness in England.

6.3 5,650 Incapacity Benefit and 1,696 Job Seekers Allowance claimants meant that Barrow Travel to Work Area in April 2009 has 7,346 workless people. Job Seekers Allowance claimants increased by 531 (45%) over the past year and the number now seeking Job Seekers Allowance totals 1,696. Of these, 625 (36.9%) are aged under 24, an increase of 165 in a year. There are only 463 vacancies (not including BAE SYSTEMS) an increase of 278 on 12 months ago.

6.4 Working Neighbourhoods Funding (WNF) is being used in a holistic way to address worklessness but it currently only has a 3 year budget. Currently the focus is on offering job access in inner Barrow wards where unemployment is highest,[39] on effective engagement with employers, building the capacity of workless people to get them back into work using a suite of, measures that include:

— attracting companies to the area;

— helping existing firms to grow;

— support for start up businesses;

— job access to help workless people back into work;

— ILM schemes; and

— sustained action to help firms access money and markets.

We emphasise the importance of extending WNF to a five year programme as recommended by Stephen Houghton in his report on worklessness to DCLG[40] and of ensuring that those who have been out of work some time are not being overlooked as emphasis switches to helping individuals recently made unemployed back into work.

7. THE NEXT 12 MONTHS

7.1 Recent (survey) evidence[41] from main companies suggests that the Furness economy is performing better that the UK national economy. Many of the leading firms suggest that business and order books are holding up well.

7.2 64% of firms considered the UK economy to be in gradual decline, 28% said it was depressed. In contrast 30% claimed the Furness economy was doing quite well or better, 38% stated it is stable and only 26% described it as in gradual decline with 1% saying it was depressed.

7.3 Over the year ahead 54% of Furness firms believe the UK economy will stay the same or worsen a little, a further 28% say it will worsen a lot. By contrast 64% say the Furness economy will improve or stay the same, only 26% say it will worsen a little and 2% say it will worsen a lot.

7.4 28% of businesses see their sector as growing with 40% describing sectors as stable and 14% as falling. 42% suggest their current level of business is good or very good, 32% say it is stable and only 24% report a decline. The overall picture remains one of cautious optimism with more firms exploring or expecting positive outcomes than negative outcomes.

7.5 Manufacturing currently providing some 22% of Barrow's employment. It offers an opportunity to "make" a route out of recession in Furness. Manufacturing currently offers an opportunity for new high value job creation within south west Cumbria.

8. The response of the Joint Economic Commission to the economic downturn

8.1 The Joint Economic Commission's (JEC) decision to identify "a number of major projects in the region that it wants to see go ahead to help it stave off the worst effects of the economic downturn",[42] and " to identify other projects which may be stuck to move forward"[43] includes a focus on the energy west coast and renewable energy key projects that should benefit the whole of Furness and W Cumbria UK Assisted Area[44]

8.2 This approach supports NESTA's view that "drawing on local expertise.rooting innovation in a locality to nurture growth" offers a basis for addressing the recession[45] and realising opportunities in civil and defence nuclear, oil/gas and renewables can be fully exploited. Barrow is being promoted as a gateway to the energy coast.

9. The effectiveness of NWDA in assisting businesses in the current economic downturn

9.1 NWDA is using a wide range of resources to improve assistance for businesses in the current economic downturn, including flexible use of Assisted Area grants and the interactive website www.nwdabusinessforfinance.co.uk to publicise funding schemes, and facilitate online submission of applications for discretionary grants, loans and equity finance. Other good examples are the new Visitor Attraction Fund to support tourism and the enhanced range of activity delivered by Business Link NW and the Manufacturing Advisory Service offering health checks and access to lean manufacturing.

9.2 KOFAC supports the recent NWDA initiative to set up a Barrow Vision Board using the resources of West Lakes Renaissance Urban Regeneration Company to deliver "place based regeneration" of Barrow's town centre and disused docklands to create new retail opportunities, housing areas, a business park, marina and marina village which will assist in retaining and attracting key skills required by industry. These actions complement the "people and business based regeneration" delivered by Furness Enterprise and Barrow Borough Council using resources such as Working Neighbourhoods Fund to address worklessness in a clearly targeted way

9.3 NWDA should support direct development of new business park offices, workshops and factories at The Waterfront Barrow in Furness Business Park as an essential part of stimulating potential for construction employment and permanent employment.

10. The usefulness of Government Initiatives such as Real Help Now, in providing support and enabling access to finance for businesses in the North West

10.1 "Real Help Now" is a welcome focus for highlighting the range of support available and enabling information on how to access finance to be made easier. We note that Furness Enterprise have adopted the "Real Help Now" theme to highlight what financial support is available locally producing a "Looking for Finance Guide" listing all the main sources of UK regional and local discretionary grant and loan schemes.

10.2 The Working Neighbourhoods Fund's (WNF) flexibility enables it to be used in Barrow in an holistic, coordinated way specifically to tackle worklessness across a broad front by:

— Overcoming individuals' obstacles in moving towards employment by offering intensive job access support.

— Attracting employers to the area and matching their vacancies with workless people's skills.

— Encouraging enterprise and retention of young people.

— Helping workless people set up new businesses.

— Skills enhancement.

— Investment in new work spaces.

10.3 The planned introduction of the Future Jobs Fund (FJF) offers potential to assist individuals aged under 24 and older people who have been out of work for some time. As conceived, the scheme may exclude people who do not claim Job Seekers Allowance. FJF would offer greater flexibility if it supports deliver of Intermediate Labour Market schemes with the private sector acting as employer. Present DCLG/DWP guidance seems to restrict this scheme to the public sector acting as the employer. This will restrict the type of work experience and training that workless participants may receive.

11. The approach of Regional Government and its agencies during the current economic situation should strike the right balance between short term need and planning for the future

11.1 From its outset the Joint Economic Commission for the NW (JEC) has sought to focus on short term, practical measures deliverable through bodies and on significant longer term delivery of strategic projects such as "Energy West Coast".[46]

11.2 The Energy West Coast Project could ultimately result in thousands of construction and operational jobs in civil nuclear power generation. Barrow shipyard could design, manufacture, test and assemble civil nuclear power plant modules—a source of diversification for the shipyard and its supply chain.

11.3 We are less convinced about the employment potential of renewable energy in the short/medium term because it is likely that much of the activity could be sourced overseas or outwith NW England. In the future, tidal energy schemes may offer more potential to sue skills in Furness.

12. DEFENCE SPENDING

12.1 Defence spending and defence employment growth is providing the potential for the Furness economy to be more resilient in the recession enabling the area to largely rely on indigenous strengths. Government should where practicable use defence spending to provide an economic stimulus.

12.2 We are disappointed that defence spending has not so far been identified as a priority measure in the short term for addressing the UK downturn. It is important that existing commitments to investment in naval shipbuilding (see Table 1) are not weakened, otherwise areas like Furness could experience adverse effects which compound the effects of the recession. The view that, "there are no diversification options available to the Barrow shipyard that will realistically have anywhere near the positive impact on employment that an Astute class submarine has. It requires 2-3,000 jobs and is therefore critical to Barrow that further Astutes are ordered",[47] remains as valid as ever. KOFAC maintains there is a need for long term investment in up to eight Astutes.

12.3 It is important that Government, continues to fund implementation of the Defence Industrial Strategy 2005 shipbuilding programme (see Table 1 below)

Table 1

PLANNED NAVAL SHIPBUILDING PROGRAMMES[48]

Platform	Vessels Required

Astute Submarines	8, subject to affordability
Type 45 Destroyers	6-8
Future Surface Combatant	20
MARS Replenishment Ships	Three classes Logistics ships
Type 23 Frigate upgrades	Life extension programme
Vanguard Successor	3-4

12.4 Maintaining defence spending has a regional and nationwide effect on the industrial base supply chain. In the region RAF Typhoon aircraft production, submarine and other production are important roles in alleviating recessionary effects.

12.5 BERR's September 2008 "Manufacturing New Challenges, New Opportunities" stated that manufacturing is "critical to the success of the UK economy". Whilst several manufacturing companies in Furness are reviewing their recruitment plans, naval shipbuilding is undergoing a resurgence, making a large contribution to improving the region's GVA and creating demand for highly skilled people offering average salaries of £27,600.[49] Skills gaps currently experienced at BAESYSTEMS who need the following skills:

— Mechanical/Electrical Engineers;

— Naval Architect;

— Welding Engineers;

— Metallurgy/Materials Scientist;

— Nuclear Safety/Product Safety Engineers;

— Components Engineers;

— Acoustics/Noise and Vibration Engineers;

— Shock and Signature Engineers;

— Structural Engineers;

— Operability/Systems Engineers; and

— Electrical/Mechanical/Hull/Hull Components/Production Engineering designers.

We note that in the NW's adjoining region, Scottish Enterprise have funded "The Future is Shipshape: Engineering Skills for Life" (www.futureshipshape.com) as a major initiative to attract people into the shipbuilding industry. We would like to see the north west emulate their action.

12.6 We endorse NESTA's view[50] of the need to "unlock the potential of regions by looking at real local strengths", using "shipbuilding" as a "phoenix industry" with skills, expertise forming a basis for "building blocks" to open up new activity in offshore engineering, civil nuclear module integration and in devlopment of 21st century naval vessels.

13. CONCLUSIONS

13.1 To assist areas like Furness and West Cumbria, it is important that the Government continues to fully resource and support:

— Regeneration in small and medium sized towns in UK Assisted Areas and Britain's Energy Coast (Section 3).

— Investment in capital equipment, processes, skills, research and development and new start up companies (Section 9).

— Use of the Special Investment Fund to help manufacturers exploit technology to create innovative high value products.

— WNF expansion into a five year programme (Section 6).

— Adoption of best practice lean manufacturing (Section 9).

— Development of oil, gas and low carbon industries as a potential source of jobs by fostering establishment and growth of indigenous supply chains for civil nuclear, offshore tidal and wind energy (Section 11).

2005 Defence Industrial Strategy

— Attraction and retention of talented minds, especially young graduates and apprentices into industries such as naval shipbuilding, electronics, systems integration, aerospace and the energy industries (Section 12).

— Direct development of business premises in areas where the private sector are reluctant to invest (Section 9).