Memorandum from the British Ceramic Confederation
(WM 04)
1. EXECUTIVE
SUMMARY
1.1 As a direct consequence of the current
economic and financial situation
— a number of ceramics manufacturing companies
in the West Midlands region have gone into administration; and
— many others have been forced into temporary
shut-downs or have introduced short time working.
1.2 Key roles for the Government now are:
— to restore confidence in the economy
so that businesses remain solvent, employment is safeguarded and
consumers feel confident enough to start spending again. There
has been some practical networking support offered by a number
of agencies eg AWM and NSRP, and the Business Link Portal has
been helpful. There may be limited scope to what agencies can
deliver, as they may be constrained by their remit.
2. BRIEF INTRODUCTION
2.1 The British Ceramic Confederation is
the trade association, the lead body for the UK ceramic manufacturing
industry, representing the common and collective interests of
all sectors of the industry. Its 100 member companies cover
the full spectrum of ceramic manufacture, including the supply
of materials, plant and machinery, and comprise over 90% of the
UK industry's manufacturing capacity. Many members of the Confederation
are based in the West Midlands. Membership of the Confederation
embraces manufacturers from the following industry sectors:
|
| — Gift and Tableware | — Floor and Wall Tiles
| — Sanitaryware |
| — Bricks | — Clay Roof Tiles
| — Clay Pipes |
| — Refractories | — Industrial Ceramics
| — Material Suppliers |
| — Plant and Machinery |
| |
| |
|
3. FACTUAL INFORMATION:
EFFECT ON
BUSINESSES IN
THE CERAMIC
INDUSTRY
3.1 In the traditional pottery sector, the most high
profile casualty is the Waterford-Wedgwood group. The main manufacturing
facility at Barlaston in North Staffordshire employed 600 persons
in December 2008. Fewer jobs will be left when the anticipated
restructuring of the business is completed.
3.2 Similar comments can be applied to the administration
of Spode/Royal Worcester in November 2008, with many extra job
losses in Stoke-on-Trent. A third, recent administration involved
another tableware manufacturer, Hudson & Middleton and Jesse
Shirley, a supplier to Wedgwood, with employment losses.
3.3 Other companies in the industry have placed staff
on short-time working for extended periods. For example, the hotelware
producer Steelite International plc, which in February 2009 announced
90 jobs at risk of redundancy whilst factory staff at the
company have been on short time working (a four day week) since
December 2008.
3.4 The numbers employed in the brick industry are at
an historic low but companies are keen to avoid further redundancies,
hoping to retain skilled staff in anticipation of eventual recovery.
In the meantime, the basic rates only are paid, to keep valuable
employees attached to the workforce. At the start of 2009, 90%
of UK brick factories were temporarily closed, or on short time
working: a few of these have stepped up production now slightly.
It is anticipated that brick sales in 2009 will be only 60%
of those in 2008. One major brick making company, with an approximate
20% share of the UK market, is currently paying to retained employees
50% of average earnings. This obviously impacts at a local level
on other businesses as consumer spending and confidence is severely
restricted, with discretionary spending being curtailed.
3.5 The suppliers of support services to the ceramics
industry in the West Midlands have also been seriously affected
by the downturn, notably the Stoke-on-Trent based kiln—maker
Drayton Beaumont, which ceased trading in February 2009.
3.6 Withdrawal of credit insurance or reduced credit
rating for existing companies and those emerging from administration
has partly prompted demands for prepayment by energy suppliers,
typically asking for payment equivalent to three to seven months
energy costs in advance. This burden on cash-flow is further threatening
the viability of surviving companies. Energy costs can be up to
35% of total manufacturing cost. Access to finance for these amounts
of money, typically several hundred thousand pounds, is often
not possible in the current climate.
4. BCC'S RECOMMENDATIONS
FOR GOVERNMENT
ACTION
Markets—supporting and monitoring the availability of
funding
4.1 Financial markets—ensure adequate credit and
cash-flow to companies. Many viable businesses are failing because
of withdrawn credit lines and lack of overdraft facilities.
4.2 Credit insurance and export credit insurance—ensure
that credit insurance is available. Without it, exporters with
orders can't benefit from favourable exchange rates.
4.3 Mortgage and housing market—ensure government
lending to banks is matched by delivery of commitments, by the
banks themselves, to lend the money.
Employment and Consumer Confidence
4.4 Ensure that skills are retained by businesses, employees
retain their jobs and therefore their income which in turn will
instil confidence and increase the willingness to spend and reduce
the likelihood of home repossession.
4.5 A temporary short time working compensation scheme,
or similar, would allow employers to receive a percentage of affected
workers' salaries, retain staff and therefore respond the future
economic upturn. A reduction in employers' National Insurance
charges would improve the ability to retain staff. The funding
made available for retraining of existing employees has been welcomed.
Invest in infrastructure—Notably projects that can be
delivered within the next two years
4.6 Physical infrastructure—accelerate the implementation
of publicly-funded projects, where planning permission has already
been granted—especially social housing, because this can
be more easily brought forward and meets a compelling need to
compensate for a shortfall in private housing. Provide the necessary
funding for an additional 75,000 affordable, social houses
by the end of the Current Spending Round.
4.7 Knowledge infrastructure—skills and R&D,
particularly in the low carbon economy with, for example, help
to enable the energy intensive industries to adapt.
Exploit Exchange Rate Advantages
4.8 Promote exports and tourism where markets are still
active. Also encourage international companies to see the UK as
a place for lower-cost skilled manufacturing to supply other parts
of Europe.
4.9 In addition, offering capital allowances as soon
as recovery becomes in sight will also favour investment.
Reduce the Regulatory Burden—avoid new or extended regulatory
burdens which would detract from the above objectives
4.10 Suspend Empty Property Rates for all companies and
guarantee rating relief for temporarily closed plant.
4.11 Ensure that capital grants are widely available
to develop and implement improvements in energy efficient technology,
particularly the energy intensive industry, to help meet the UK's
commitments in carbon dioxide reduction.
4.12 Retain industrial building allowances for investments
prior to 31st December 2007; the withdrawal has invalidated long
term investment decisions and dramatically reduced assumed cash
flows at a critical time.
| 
