Examination of Witnesses (Questions 89-99)
STEVE BROOMHEAD,
MARK HUGHES
AND VANDA
MURRAY
8 JULY 2009
Chairman: We though that we might make
an early start because we half expect that a vote will put a bit
of a hole in our timetable. I thank the witnesses for coming and
welcome them to the Committee. Please feel free to remove your
jackets if you wish. It would probably be best if you introduced
yourselves before I start with the questions.
Steve Broomhead:
Thank you, Mr Chairman. I am the Chief Executive of the Northwest
Regional Development Agency.
Vanda Murray: I am the Deputy
Chair of the NWDA and I chair Business Link in the North-West.
Mark Hughes: I am an executive
director at the NWDA.
Q89 Chairman: Can you speak up
please, because this is not a great room, although we have tried
to turn the sound up? I was saying earlier that I am trained from
trade union meetings at shouting at people from big pieces of
machinery or from crane tracks, so maybe I am practised at it,
but we would appreciate it if you could speak up so that we can
all hear you. I will start the questions to the NWDA. In your
revised corporate plan for 2009-10, you said that you had lost
a total of £71.9 million from your budget, up to and including
2010-11, so can you explain what that loss of funding has meant
for your work and, most importantly, what you are prioritising?
Steve Broomhead: We have lost
that amount of money partly through efficiency savings and, in
particular, to support the HomeBuy Direct scheme, which is managed
by the Department for Communities and Local Government and delivered
by the Homes and Communities Agency. There were vigorous discussions
about the loss of that money last year, and the effect of the
loss of the cash will be felt through the NWDA's budget, probably
from 2011 onwards. It presents us with a number of challenges.
As a result of the recession, we felt that we needed to re-present
our corporate plan back to the Government through our sponsor
Department, the Department for Business, Innovation and Skills.
It was not a re-presentation of the corporate plan because we
had lost £71 million. We have gone through a rigorous exercise
of talking to our partners in the public and private sector about
the nature of our priority of moving forward. We have also been
retasked by our sponsor Department, particularly around supporting
businesses during the period of planning for economic recovery,
and that is the main reason why we have presented that corporate
plan.
Clearly, there will be areas of activity that
the agency will not be able to support in the way we have done
before. Actually, I wrote only this week to all the partners in
the region—all the local authorities and the key people
in the private sector and in other parts of the region—to
indicate from a strategic point of view how we intend to move
forward. We have not said that we will not do X,Y and Z, but that
the role of the agency—this is what Lord Mandelson want
us to do in particular—is to focus on planning for economic
recovery. That means that we will have to be much more careful
and rigorous about the way in which we assess our projects, looking
for a very strong relationship with the HCA, particularly on physical
regeneration, and with the Skills Funding Agency when it is created
next year on supporting adult skills and the move from some of
the college capital schemes, which have, rather disappointingly,
been terminated. That is the way we should move forward. There
has been full engagement with the region and, as I have said,
I have written to regional partners this week to explain how we
will go forward.
Q90 Chairman: Can you tell us
something about the process you go through when deciding your
priorities?
Steve Broomhead: The process starts
with the regional economic strategy. The development agency's
role is to deliver the socio-economic—I use that term loosely—part
of the RES. There is very strong partner engagement with local
authorities through 4NW, which replaced the regional assembly,
and with the private sector to ensure that we have evidence-based
priorities that will make a difference to our regional economy
through the RES. The agency then sits down with partners, again
through 4NW, and with local authorities, private sector partners,
the chambers of commerce and the Institute of Directors to ensure
that we are focusing on the priorities they want. We also now
have a structure of sub-regional partnerships for each of the
sub-regions, and we ask those sub-regional partners each year
to present us with a series of proposals and priorities that they
think would have an effect more locally. We knit all those things
together, discuss the issues, initially with the Government, and
then produce a draft of the corporate plan that goes out for consultation.
The Government advice this year, because we are revising it as
a result of the recession, has been not to conduct a full consultation
across the entire region, so we chose about 20 partners to take
advice from. It then goes to the board, which approves it. It
is down here for comment at the moment, and we have heard informal
feedback that it has been approved.
Q91 Tony Lloyd: Steve, our region
is still very dependent on manufacturing and its associated industries.
One of the comments that the CBI made in our open session a few
weeks ago was that it is still felt that not enough was being
done for manufacturing. Can you outline what the overall strategy
for manufacturing is at the regional level? As a supplementary
question, do you believe, across the different strands that you
are representing here today, that the response to sectoral problems,
for example in the automotive industry, have to be dealt with
nationally, or is there anything more that we can do at the regional
level?
Steve Broomhead: Manufacturing
still accounts for 23% of the total GVA of the North-West economy,
which is £120 billion a year. Manufacturing is clearly under
some pressure at the moment because of the issues of last year,
and it is still an important sector. In terms of the agency supporting
engagement, we support manufacturing through the Manufacturing
Institute and have strong engagement with the Manufacturing Advisory
Service. There is a cluster of organisations for the aerospace
and automotive industries, and two separate areas where the industry
works with us on some of the issues about improving competitiveness
and productivity. The CBI was probably right to say that we have
to give more emphasis to manufacturing. We will be moving forward
over the next 20 years towards a knowledge-led, low-carbon economy,
but I think that manufacturing is still very important in parts
of our region. I believe that we have given it exactly the right
sort of attention that it has deserved. In terms of the automotive
industry, we have had a strong relationship with BIS—BERR
as was, until very recently. Of the challenges that have been
presented to us, the major events have been with Jaguar Land Rover,
with Vauxhall at Ellesmere Port, in particular, and of course
with the supply chain. I think that we have the right sort of
regional engagement. We have supported Vauxhall, and we had to
fight a state aid case on that, which was for a large—£8
million—training grant. We have also given support to both
Bentley and Jaguar Land Rover for training support, and we are
supporting the supply chain through rather difficult times. Rosie
has a car parts manufacturer in her constituency to which we have
given some support. It is a challenge, but I think that the dialogue
between the centre and the development agency is working very
well.
Q92 Tony Lloyd: You are making
an important point about the supply chain, because there are probably
more jobs in the supply chain than there are upfront with the
car and vehicle constructors. How does that work out in practice?
The supply chain that we are part of might be supplying the automotive
industry in the west midlands, and the supply chain on which the
North-West depends might itself be from the west midlands or elsewhere.
Is that brought together at a central Government level? Are you
happy with your ability to interface with the Department here
to make sure that we are getting the equation right across all
the regions to protect the supply chain?
Steve Broomhead: Yes. I think
that more could be done. We formed a coalition with Advantage
West Midlands following the Land Rover issue to make sure that
we worked more strongly together across the regions with the supply
chain. I think the area could be looked at for the future, but
I am comfortable that we are moving in the right direction.
Chairman: Eric Martlew will ask some
questions about Business Link.
Q93 Mr Martlew: We have heard
differing reports about Business Link, which surprised me to be
honest, because we have known Business Link for a long time. I
think the CBI was particularly complimentary about it. Is it your
view that it is working very well with industry at this time?
Steve Broomhead: I will make a
quick comment and then I will pass over to Vanda. Certainly the
Business Link brand, which has been around for a number of years,
is somewhat tarnished, as we have said. However, we have refreshed
the organisation and put it on a regional footing. We do a strategic
review with our sponsor department every year, and they recently
gave us the welcome news that they thought, from the contacts
that they have in BIS, that things had improved quite considerably.
However, there is an issue about the brand, and perhaps I should
pass to Vanda.
Vanda Murray: I think that the
region's Business Link has improved enormously, and there is a
real understanding that, while improving, we still have some way
to go. We measure that independently. However, in terms of all
the evidence and measures, we are making real progress. Calls
to the universal service are 60% up year on year; our intensive
assists are achieving our targets; and our GVA targets are all
being hit, so we are making real progress. More importantly, the
service has responded very quickly to adapt to the needs of business,
particularly over the past 12 months. When it became clear that
businesses were having real problems accessing finance, we reshaped
and refocused the organisation so that all the brokers were fully
briefed on the issues that businesses were facing and on the products
as they were coming out. We set up a dedicated access to finance
team with professional people who could work very closely with,
and intensively assist, businesses. We have intensively assisted
6,000 businesses over the past year. We have been running Thrive
and Survive road shows around the region with partners such as
the Institute of Chartered Accountants and the Manufacturing Institute,
which, as you know, offers the manufacturing advisory service.
We have therefore been working really closely with businesses
to address the issues that they face now. The evidence so far
is that that is starting to have an effect. We have helped businesses
secure finance, and we are working closely with partners, such
as local authorities and others.
Q94 Mr Martlew: You have answered
all of the questions that I asked. However, we have information
that 50% of businesses go to the bank before they approach Business
Link. Why is that?
Vanda Murray: They do, and we
have started to work very closely with the banks over the past
year, both at NWDA level, with Steve and Mark, and in Business
Link. Businesses have close relationships with their banks, and
they have often been their first port of call. We have worked
very hard with the banks to try to educate them about what Business
Link can do. Interestingly, 10% of referrals to Business Link
now come from the banks, which shows that we are making progress,
but there is still more to be done. Often, when we have case studies
that support that, when the banks can't help and businesses come
to us, we can often help them, if they have a good business plan
of course.
Q95 Mr Martlew: You mentioned
local authorities. Are you working well with them, or are they
duplicating what you are doing? I wonder how you can work well
with local authorities in Cumbria, for example. It is a very difficult
situation.
Steve Broomhead: Perhaps I should
ask Mark to answer that.
Mark Hughes: Within the Business
Link service, each of the five sub-regions has a particular relationship
manager. We have about 70 office drop-in locations across the
region where Business Link brokers can use local partner offices,
such as local authorities. We have spent the last 18 months working
with local authorities to integrate the Business Link service.
So, for example, Blackpool council's business support website
information is supplied by Business Link. It was going to spend
£500,000 on its website, but Business Link now supplies it
free of charge, so it has been able to redirect that money elsewhere.
In the Pennine Lancashire area we have Business Link brokers based
in a number of the local authorities on the ground. We have regular
review meetings with each of the local authorities. The landscape
has moved enormously in the last 18 months, and in terms of the
third party review of that, we recently had the 4NW scrutiny of
the Business Link service in the region. Again, in terms of relationships
with local authorities, it gave us seven out of 10, recognising
the improvement that had been made, but that there is still some
way to go. Wirral now finances some Business Link brokers in its
area as well, so we have a different model in different local
areas, but things have massively improved over the last 18 months.
Q96 Mr Martlew: I am very conscious
that Cumbria never passed your lips with regard to good practice.
Is that right?
Steve Broomhead: That was my mistake,
Eric. If I may continue, with Cumbria, we have struck up a relationship
on business and business support with the Chamber of Commerce,
which is based in Carlisle, and through the Vision Board of Barrow
and the Vision Board that has now been established for Copeland
and Allerdale. While it is a regionally managed service—we
put together the five Business Links three years ago—I am
convinced that we have local delivery on the ground. We dealt
with a lot of businesses who were very disappointed, particularly
before Christmas, about the conversations they had had with banks
when the pressure was on. Business Link was a safety net, particularly
for those businesses that found they had to present different
types of business plans back to the banks, especially with regard
to some of the loans, overdrafts and facilities fees that they
were experiencing. It is not surprising that businesses have a
relationship with the banks, and the relationship with Business
Link is, indeed, adding value.
Mark Hughes: On Cumbria, the Thrive
and Survive events that Vanda mentioned have also taken place
with the Cumbria chamber of commerce and CREA. I was cantering
across the region, as it were.
Steve Broomhead: Don't forget
Cumbria.
Chairman: Rosie Cooper.
Q97 Rosie Cooper: Thank you. I
nearly said good morning, which shows you where I am in the day—God
help us. As MPs we often get people coming to see us about trying
to borrow money. There are success stories, but most of the smaller
businesses or individuals talking about expanding businesses,
or trying just to stand still, are not so successful. If they
do have a success, it costs a lot of money, and the amount they
have to pay becomes really extortionate. As a development agency,
what kind of feedback are you getting across those different levels?
Do you think that the banks are getting back to normal? Are there
any barriers, and what can you do—or what can we do—to
start to break through and help people get on the road to recovery?
Steve Broomhead: Can I deal with
the banks question and whether they are getting back to normal,
and then I'll pass to Mark and then Vanda.
We have an extensive dialogue now with the banks,
and that started just before Christmas. It is fair to say that
it has taken some time for the banks, particularly those that
have had Government intervention, to come to terms with their
new role. So in terms of discussions around fair lending, which
is what we want to see, we are seeing—perish the thought
that I should say "green shoots"—fragile seeds
with where they are now. They are much more supportive of SMEs
than they were perhaps even three months ago. That is a product
of the fact that they are coming to terms with their new role.
Clearly it was a difficult time before Christmas. Banks had been
reckless. This has been looked at by other parliamentarians and
the regulators have had questions to answer as well. We set about
working with the banks in a very positive way rather than joining
in the furore about beating up all the banking system, which was
going to get us absolutely nowhere. That was part and parcel of
the Agency trying to take a more positive economic leadership
role when everybody seemed to be losing their heads amid economic
doomsterism. So, I think that we have seen, to be fair, an improvement
in relationships with the banks, in terms of fairer lending and
getting money into the system from a cash-flow point of view.
Vanda Murray: Things are improving,
but they are not back at previous levels. You made a point about
interest rates; they are higher than they were and we believe
they will stay that way for some time. Things are not going to
go back to the levels they were at, and that will make it more
difficult for companies to access finance. Their business plans
have to be better, and we at Business Link have been working with
many companies to try to make sure that their business plans are
well prepared. But it is difficult. Things are improving—they
are better than they were—but there is still more to be
done, and the more we can work with small businesses to help them
in their interactions with banks, the better. Interestingly, RBS
customers who are refused finance are automatically referred to
Business Link now, and we will work with them to try to secure
finance from alternative sources. There is a lot of work going
on behind the scenes and, as Steve says, Business Link is very
much a safety net in the region.
Mark Hughes: The harsh reality
is that money is more expensive and there is less of it. The enterprise
guarantee scheme has started to kick in. There is variable use
of it across the banks, but it is beginning to have an effect
on the ground. The RDA has also made loans available to businesses.
Along with other RDAs, we have created a transitional loan scheme
of £10 million, and have spent about £5.5 million of
that to date. That can sit alongside the enterprise loan guarantee
scheme that the Government initiated. As Vanda said, I think that
the situation is improving. We will never get back to where we
were, and businesses will, in a sense, have to adjust their models
to reflect that the financial situation has moved on. That really
takes us into the other arena of the agency's support, which is
to make sure that business as a whole has a way forward, and that
finance is addressed in that sense. So, the situation is improving,
but we will never go back to what we had, and there will be businesses
that were able to get finance 18 months ago but will not get finance
in the future.
Q98 Rosie Cooper: In the evidence,
you said that you held joint events with Lloyds TSB and HBOS.
Can you describe what happens at those events? How are they received?
How do you publicise them? How do people know that they are happening?
Who gets invited? How do you measure their success?
Mark Hughes: Just on the practicalities
of that, it is very much a team effort. Business Link engages
with roughly 120,000 people a year. It has its own database—an
ongoing client base. All those events are held with other organisations.
It could be a chamber of commerce, a bank or a local authority.
It has its own access to businesses as well. Basically, we are
all using our client relationship systems. We are making local
publicity. We have upped our investment in promotion through newspapers
and radio in different localities. There is a big push to draw
people in. A typical event might be an afternoon or a morning,
generally with a short series of speakers. What we are really
focused on is trying to get individual businesses there to have
one-to-one conversations with Business Link advisers and bank
representatives who might be in that room, so that they can get
practical assistance at the event, rather than just be talked
to. The feedback that we get on those events probably reflects
our highest level of satisfaction. We get our highest level of
customer satisfaction with those events. It is an ongoing series
of events, and we will probably have another series in the autumn,
dealing with how businesses now grow out of recession—slightly
changing the message.
Q99 Rosie Cooper: I was just wondering
whether you will let MPs know when you are starting that series
again, because that might be another avenue that would be of use
to us when businesses are talking to us.
Steve Broomhead: Obviously, that
is a good idea, and we will take it up.
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