Memorandum from the private Sector Partners
NW Limited (NW 20)
1. INTRODUCTION
1.1 The Private Sector Partners (PSP) is
not replicated anywhere else in the UK. It is unique to the North
West. The primary purpose is to pursue the common interests of
members and distribute information that is important for effective
decisions and guidance. There is no attempt whatsoever to interfere
with independence.
PSP was formed in 2002, "represents"
in excess of 110,000 businesses that employ 1.2 million
people in the Region. Len Collinson was the founder and first
chairman. It is a company limited by guarantee. The current members
and numbers in the North West are:
| Association of the British Pharmaceutical Industry
| 60* |
| Association of Chartered Certified Accountants
| 5,000 |
| British Office Supplies and Services Federation
| 80* |
| British Printing Industries' Federation |
350* |
| Chartered Institute of Building | 4,500
|
| Chartered Institute of Management Accountants
| 6,608 |
| Chartered Institute of Marketing | 3,100
|
| Chartered Management Institute | 7,500
|
| Confederation of British Industry | 2,000*
|
| Downtown Liverpool and Preston in Business |
300* |
| Electrical Contractors' Association | 950*
|
| EEF North West | 2000* |
| Federation of Small Businesses | 18,000*
|
| Forum of Private Business | 2,600*
|
| Home Builders' Federation | 90*
|
| Institute of Business Consulting | 568
|
| Institute of Chartered Accountants in England and Wales
| 10,500 |
| Institute of Directors | 2,700
|
| Institute of Environmental Management and Assessment
| 800 |
| Institute of Financial Accountants | 460
|
| Institute of Materials, Minerals and Mining
| 600 |
| Law Society | 10,743 |
| National Farmers' Union | 4,000*
|
| Road Haulage Association | 1,400*
|
| Royal Institute of British Architects1,800 |
|
| Royal Institution of Chartered Surveyors |
9,000 |
| Note: *alongside a number means they are all businesses. Members of professional bodies are qualified individuals—many are principals and/or directors of firms.
|
| |
2. SUMMARY
2.1 The Region's economy weakened sharply through 2008.
Growth was around 0.5% last year and the signs suggest a reduction
at 4.5% in 2009.
2.2 The Northwest Development Agency (NWDA) and its subsidiary,
Business Link North West, have responded quickly and effectively
to the recession. PSP does not know the trends in total costs
and expenditure per unit of output.
2.3 The Joint Economic Commission has not had a noticeable
impact in the private sector on the understanding of inevitable
changes and assuring speedy attention to specified issues.
2.4 It is a constant part of conversations between, and
about, businesses that the last twelve months have seen additional,
and often unnecessary, announcements of policies and schemes.
2.5 Some of the initiatives and schemes devised by Government
have had the characteristics of an instruction for rapid-fire
with a scattergun. Until recently, the targets were unclear and
delivery variable. Often, communications have been poor.
2.6 Emphasis on the short-term was a wise decision. Stimulating
confidence and demand for services/products is now essential.
A move towards a tentative mapping the future warrants careful
attention.
3. The effect of the economic situation on the region;
including the consequences for different sectors and sub-regions
3.1 There have been sharp declines in manufacturing (-13%)
and construction (-10%). It is reasonable to predict that the
downturn will be deeper in the North West than in the UK as a
whole. The recession has spread well beyond the financial sector.
For structural reasons, financial and business services (-2.5%)
are doing better than those in London and the South East. Distribution,
hotels and catering (-5.5%) are likely to perform worse than the
sector nationally—possibly into 2012. Transport and communications
was expected to fall by 2.5%.
3.2 A majority of firms in most sectors report lower
domestic and export orders. Confidence in manufacturing for this
year is lowest since serious records began
3.3 Destocking has been a new way of life. There are
some signs of slow and limited corrective action. The cancellation,
postponement and reduction of investment will reduce, but continue
into 2011. Unemployment will not reach a plateau until mid-2010.
3.4 The impact varies across the sub-regions. Ironically,
the smallest statistical reduction is in deprived areas. Reliance
on particular activities is a factor also. For example, the serious
decline of sales/prices in commercial and residential property
has not hit Cumbria as seriously as parts of Greater Manchester.
It goes without saying that towns with plants producing motor
vehicles, and their suppliers, have encountered major economic
problems.
4. The effectiveness of the Northwest Development Agency
in assisting business in the present economic downturn
4.1 We have been impressed by the NWDA's fast realignment
of its people and other resources in offering support to private
businesses. It has not been helped by the confusion and inertia
of central departments of Government when translating statements
into action.
4.2 The Agency acted swiftly in the delivery of the Venture
Capital Loan Fund. There was a promise of the project's start
in April 2009. We understand that delays by HM Treasury mean June
2009 is the earliest possible commencement of this programme.
We are sure that valuable companies have ceased to trade because
of this slowness.
4.3 The NWDA has gone out of its way to consult the private
sector and seek advice in recent months. It is important that
bodies such as the NWDA are seen to be giving practical leadership
to the Region. The Agency has recognised problems and proposed
interventions. There has been optimism for the future, too.
4.4 Business Link North West has been quick, decisive
and cheerful when wishing to offer solutions to firms' genuine
anxieties. This has been especially appreciated in finding liquidity/cashflow.
4.5 The work and success of BLNW have highlighted the
need to be regional and strategic. This allows greater benefit
for businesses across the North West.
5. The response of the Joint Economic Commission, established
by the Regional Minister in November 2008, to economic downturn
5.1 The formation of the JEC in 2008 was a generally
applauded move during worsening economic conditions. The private
sector welcomed its arrival and objectives. These are:
— review information and intelligence on the economic
and social impacts of changing circumstances;
— agree a regional response to them; and
— look at opportunities to push forward both existing
and planned infrastructure projects that would benefit the North
West Economy.
5.2 The JEC has performed the job of reviewing information
and intelligence. It is a useful forum for agencies and departments
from the public sector to meet and talk with each other.
5.3 The JEC has been functional in translating announcements
of national government into an outline for actions by the public
sector within the Region. The completion of these obligations
is not apparent to many observers.
5.4 The third objective does not appear to have yielded
desirable outputs. The JEC's meeting in November agreed that the
"Minister for the North West to write to all public sector
organisations in the Region to encourage prompt payments".
A recent survey revealed that 80% of Councils were not hitting
the 10-day target set by the Prime Minister.
5.5 The JEC started with a pivotal part in focussing
attention on the worsening recession and to be a central point
for the development of action. The JEC has fulfilled the first
item and has been supported by the private sector's representatives.
5.6 However, senior directors and managers in the private
sector have begun to question the purpose of JEC. A paper submitted
to the meeting of the JEC in May entitled "JEC achievements"
contained topics largely of interest to the public sector. For
example, "All Government Departments, local authorities and
other public sector agencies in the Region have been asked to
honour the prompt payment commitment to settle invoices within
ten days and many are so doing." Two of PSP's large members
have surveys showing that 80% of Local Authorities are failing
to meet this target.
5.7 The JEC is a "cheerleader" for the Government's
behaviour and policies and a messenger to other groups/committees.
This is an important, but limited, task.
6. The capacity of Government Office for the North West,
Government's agencies such as Business Link, Learning and Skills
Council, and Jobcentre Plus, and other partnerships between the
Government's agencies, local government and the private sector,
to respond effectively to the economic downturn
6.1 We have commented at section 4 on the Northwest
Development Agency and Business Link Northwest. We have been impressed
by both organisations.
6.2 The apparent lack of co-ordination by departments
of central Government has been a burden for the additional agencies
mentioned in the briefing. Also, the almost daily announcements
of policies and initiatives by separate departments almost certainly
led to local confusion and dismay.
6.3 The structures and processes of these agencies demand
reactions in implementing decisions made elsewhere. There seems
to have been more concern with tomorrow's headlines, rather than
tackling agreed problems. These approaches have been unhelpful
to regionally-based agencies of Government. They have been busy,
but not always either efficient or consistent.
6.4 We are unaware of partnerships in this context. There
are consultations. The gap between these two structures is a defect.
7.0 The usefulness of Government initiatives such as Real
Help Now, in providing support and enabling access to finance,
for businesses in the North West
7.1 Urgency on solving the crisis in provision of commercial
credit by the UK's recapitalised banks has been a crucial priority.
We have the impression that managers of banks in the Region have
been slow to install the understandings made in London.
7.2 Lack of liquidity will remain a constraint for some
time. The value of assets/collateral has fallen. The offerings
under Real Help Now are largely a re-marketing of existing products.
This is well known to business advisers. The booklet relating
to Real Help Now points to funding through the Venture Capital
Loan Fund. This facility is not in place. A significant proportion
of employers in the private sector have concluded that Train to
Gain has had positive results for their businesses. 74% have described
the brokerage service as "mixed" or "poor".
However, it is good that the presentation of Real Help Now has
brought information about assistance into one place. The scheme
does not permit extra "solutions".
8. Whether the approach of regional Government and its
agencies during the current economic situation strike the right
balance between the short term need and planning for the future
8.1 There is now a need to consider ways of encouraging
an upturn and making the extant support work properly. Some changes
will be permanent. The cost of Government must come down and be
seen to concentrate on "new" and productive priorities.
8.2 The truth is the basic conditions are still not in
place for a recovery. Huge imbalances of debt have yet to be unwound.
The financial sector is still fragile and banks are showing little
enthusiasm for resuming lending. The rebuilding of personal savings,
especially if the prices of housing and other assets fall further
(Capital Economics). And if the price of oil escalates, the pressure
on household budgets will mount. This "mix" will take
a long time to play out.
8.3 Figures for the first month of the 2009-10 financial
year suggest that cash tax receipts have fallen compared to the
same month last year. Spending, particularly on social benefits,
has grown strongly. These are bad signals. The costs of rescuing
Lloyds Banking Group and the Royal Bank of Scotland have not yet
been fully incorporated into the public finances.
The inevitable cuts in public expenditure will affect the
North West. We hope the Chancellor will bear in mind the importance
of minimising costs and regulation on the private sector, especially
SME's. They employ 50%(+) of all people in the sector. 98% of
registered businesses in this country employ fewer than twenty
people.
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