Memorandum from Shropshire Council (WM
19)
1. Introduction
1.1 Shropshire Council thanks the Regional
Select Committee for the opportunity to submit evidence on the
impact of the recession on the county's businesses.
1.2 The Council's response, below, addresses
the issues that the Committee is particularly interested in receiving
evidence on, as detailed in Trudi Elliot's letter to Sheila Healy
of 23 March 2009.
2. Summary
— Shropshire has a higher proportion of
businesses in the sectors hardest hit by the recession than both
regionally and nationally.
— A recent survey of Chamber members reported
a significant downturn in business confidence and a decrease in
customer spend, ranging from 10% to 40%.
— Estimates suggest that the county has
suffered a net loss of over 1,300 jobs between August 2008 and
March 2009.
— The number of people claiming Jobseekers
Allowance in Shropshire has risen by over 100% since June 2008,
compared to 68% regionally and 74% nationally.
— The proportion of Shropshire's working
age population claiming JSA still remains relatively low at 2.9%
(compared to 5.0% in the West Midlands and 4.0% for the UK).
— County organisations have a close working
relationship with Business Link in addressing the support needs
of businesses.
— Shropshire businesses regularly engage
with the Council and other partners through the private sector-led
Business Board to ensure policies are business-focused.
— The Business Board have opened a dialogue
with banks to explore their lending policies and assistance to
businesses.
— The Council and other partners coordinate
support for those facing redundancy through the Recruitment and
Redundancy Support Group and the Government Rapid Response Team.
— Shropshire Council's Recession Committee
is advised by the Shropshire Business Board on the priority areas
for the Council in mitigating the impact of the recession on the
county's businesses.
3. The effect of the financial and economic
situation on businesses in the region including the effect on
different sectors such as manufacturing, service industries etc
3.1 As global economic hardship has advanced
to full-blown recession, its effect on the Shropshire economy
is becoming increasingly evident, with job losses rising, the
number of job vacancies reducing and the numbers claiming benefits
on the up.
3.2 During 2008, GDP fell in the UK for
the first time in 16 years. This fall in output was primarily
driven by a few key sectors, including construction, manufacturing,
distribution (especially land transport and post and telecommunications),
hotels and restaurants, and business services (mainly "other
business services"). Shropshire's economy relies heavily
on some of these sectors. For example, Shropshire supports a higher
proportion of employees in the manufacturing sector than is the
case nationally (11.5% of employees in Shropshire compared 10.6%
in Great Britain). More people in Shropshire are employed in the
construction sector (6.3%) than is the case in the West Midlands
(5.1%) or Great Britain (4.9%). The hotel and restaurant trade
is also more important for Shropshire than for either the West
Midlands or Great Britain, accounting for 7.4% of employees compared
with 6.3% in the West Midlands and 6.7% in Great Britain.
3.3 The BETA Model provides statistics on
business numbers on a quarterly and annual basis. The latest quarter
(October 2008 to January 2009) shows that the decline in
businesses in operation in Shropshire has been much more rapid
than at the regional or national level. Over the last quarter,
the number of businesses operating in Shropshire fell by 2.6%,
with the overall number of businesses operating at the end of
January 2009 1.5% lower than at the same time in 2008. Regionally,
the number of businesses operating at the end of January 2009 was
1% higher than in 2008, although the last quarter saw the number
of West Midlands businesses reduce by a marginal 0.1%. Nationally,
the number of businesses operating expanded by 1.3% in the year
to January 2009, with a very slight increase of 0.3% being recorded
over the last quarter.
3.4 The British Chambers of Commerce undertake
a quarterly survey of their members, with Quarter 3 results
in 2008 showing that confidence levels appear to be at a
lower level now than they were in the early 1990s. The results
of a small survey undertaken by the Shropshire Chamber of Commerce
suggest that business confidence in the county is equally low.
Half of all businesses responding to the survey reported a decrease
in spend from business customers, with the scale of this decline
typically standing at between 5% and 20%. Around half of businesses
responding reported a downturn in customer spend, with most reporting
this decline at between 10% and 40%. A downturn in the construction
sector was one of the principal factors contributing to lower
levels of business to business spend. Lower disposable income
was impacting on consumer spending patterns, with spend on luxury
goods in particular feeling the squeeze.
3.5 Reports in the local media suggest that
a minimum of 2,425 jobs have been lost in Shropshire since
the summer (between August 2008 and March 2009). It should
be noted that this total excludes any redundancies which have
not generated media interest or automatically triggered a response
from Jobcentre Plus due to the scale of the issue. Over the same
period, approximately 1,100 jobs have been created in the
county (again, this figure includes only those reported in the
media) resulting in the net loss of 1,325 jobs (based on
figures reported in the media). 41% of all reported redundancies
have been in the manufacturing sector (12% of the total within
automotive manufacturing), 21% in construction, 14% in retail
and 7% in the hotel and leisure sector.
3.6 Some Shropshire firms within professional
service industries and environmental technologies sectors are
indicating that expansion plans requiring additional staff are
on hold for the time being.
3.7 The retail sector is being severely
impacted with independent operators in market towns reporting
reductions in trade (Tourism West Midlands Visitor Economy Trading
Conditions Feb 09). Numbers of empty shop units are rising with
Oswestry reporting more than a dozen shop closures within the
main high street trading areas between November and January.
3.8 Business tourism across the county and
wider region has fallen sharply, with secondary spend down significantly
in areas where consumer and trade events are taking place. Although
accommodation sector bookings are significantly down, visitor
numbers to key attractions remain positive (Tourism West Midlands,
February 2009) in line with the national trend towards domestic,
local tourism rather than overseas travel.
3.9 Industries associated with domestic
tourism, such as sales of motor homes and caravans, are also reporting
increased sales (25% plus) in the county.
3.10 Given the reduction in Shropshire businesses
and reports of redundancies amongst many other companies it is
not surprising that the numbers claiming benefits in the county
is on the rise.
3.11 The number of clients seeking business
start up advice has risen. Due to a time lag in the availability
of official data, this is yet to translate into rise in the Office
for National Statistics business start up rate reported for the
county. Anecdotal evidence suggests that a significant increase
in the number of business start ups has been fuelled by individuals
being made redundant and opting for self-employment.
3.12 Jobseekers Allowance claimant count
data shows that the number of Shropshire residents claiming JSA
has been increasing since June 2008. Overall, between June and
February 2009 the number claiming JSA in Shropshire more
than doubled to reach 4,880. The claimant count has risen by at
least 10% in each of the last four months. The rise in the number
of JSA claimants has been much more rapid in Shropshire than in
either the West Midlands or the UK (+103.1% since June compared
with 67.7% in the West Midlands and 74.3% in the UK). However,
the proportion of the Shropshire resident working age population
claiming JSA, remains comparatively low, at 2.9%, against claimant
rates of 5.0% for the West Midlands and 4.0% for the UK. Within
the West Midlands, Shropshire (alongside Herefordshire) still
enjoys the lowest JSA claimant rate, with the number of claimants
significantly higher in urban locations, especially Birmingham
and Wolverhampton.
3.13 Since June 2008, claimants across all
eight main occupation groups have risen (managers and senior officials;
professional occupations; associate, professional and technical
occupations; skilled trades occupations; personal service occupations;
sales and customer service occupations; process, plant and machine
operatives; elementary occupations) suggesting that job losses
have been sustained across all areas. Claimant rises have, however,
been particularly acute amongst associate professional and technical
occupations and process, plant and machine operatives. The rise
in claimants has also been above average for professional occupations
and skilled trades occupations.
3.14 Likewise, the number of job vacancies
fell across each of the main occupation groups, with the exception
of personal service occupations, in the year to December 2008.
3.15 Overall, the number of job vacancies
is subject to considerable fluctuation, some of which relates
to the seasonal effects of summer and Christmas employment. However,
when analysing the number of unfilled Jobcentre vacancies each
month compared with the same month of the previous year, the underlying
trend is undoubtedly downwards. By January 2009, there were just
664 unfilled job centre vacancies in Shropshire, almost half
as many as in January 2008 (1,216 vacancies). Some improvement
occurred in February, with the number of vacancies rising by 35%
to 897. However, this remains 41% lower than the number of unfilled
job vacancies in February 2008.
4. How effective Advantage West Midlands and
initiatives such as Business Link are being in assisting businesses
in the current climate, including helping them to gain access
to funding both the Government funding streams and the banking
system
4.1 Shropshire Council's Learning Employment
and Training Service (LETS) has a close working relationship with
Business Link West Midlands (BLWM) on employer engagement, particularly
linked to skills training.
4.2 The quality of referrals is variable
due to issues with the current Organisational Skills Analysis
used and the interpretation of results by Business Link advisors.
Officers from LETS are part of a working group to assist BLWM
in developing a more appropriate method of engagement, however
no details are currently available on the agreed working model,
but it is positive that BLWM are seeking the input from partners
in finding a solution.
4.3 Feedback from LETS suggests that the
general perception of the employers that they work with find Business
Link's offer too limited to assist them with immediate issues
facing their business. It is acknowledged that Business Link are
working hard to change these perceptions but it is felt that,
through their current structure and funding, the organisation
is not altogether suited to providing the solutions to business
in the current economic climate. A greater link could be made
with other organisations so that Business Link could promote a
wider remit of business solutions.
4.4 A Memorandum of Understanding (MoU)
has been drawn up between Business Link West Midlands and Shropshire
Council to clarify the role and responsibilities of each organisation
in delivering business support in the county. Individual MoUs
are also now being developed as a matter of course for all Shropshire
Council business support schemes to outline the role of each partner
in delivering the service to ensure clarity to businesses and
avoid duplication of schemes in the future.
4.5 There is little information available
as to the extent to which local businesses have been able to access
available initiatives, although it is known that three Shropshire
firms have been able to access Advantage West Midlands' Advantage
Transition Bridge Fund, designed to help businesses having difficulties
seeking credit. Better publicity highlighting local successes
in accessing solutions to problems is needed in order to encourage
businesses to come forward for help. However, it is acknowledged
that in some instances there would be little desire for publicity
from businesses involved and that there are data protection issues
which need to be considered.
5. The response of banks and other financial
institutions to government and other initiatives to stimulate
bank lending and the access of businesses in the region to credit
5.1 Representatives of the major banks met
with leaders of Shropshire's key businesses through a meeting
brokered by the Shropshire Business Board in January 2009. The
private-sector led Board explored the banks' current lending policies
and impact of government schemes to assist businesses in the county.
5.2 The meeting was positive and resulted
in agreement on the following:
— Continued support for fledgling business,
as well as for existing enterprises, is essential.
— Shropshire is a high growth area in respect
of new enterprises and banks need to seek out that growth.
— Representation from the banking sector
on the Business Board would be beneficial to ensure closer working
and better dissemination of information on available support (this
has now been implemented).
5.3 Feedback from the banks emphasised the
importance of businesses making them aware of issues when they
first anticipate or experience difficulties, rather than waiting
for problems to reach a critical level. Banks noted that businesses
were not coming forward to seek help/finance, possibly as a result
of media-generated perceptions that banks were not lending. The
Government and the banks' own initiatives were therefore experiencing
slow take up in Shropshire and across the region.
6. The role of the West Midlands Task Force
established by the Regional Minister in helping businesses cope
with the economic downturn
6.1 The reports, summaries and analysis
of economic conditions and existing business support and schemes
received from the Task Force have proved useful in assessing the
regional picture and analysing trends during the recession.
6.2 The direct additional impact on businesses
of the Task Force's work to date is unclear. The usefulness of
the Task Force appears to be in bringing together relevant partners,
each of whom have their own programme of support to deliver, but
can do so in a better coordinated way through working in partnership.
7. The role of other Government agencies such
as the GOWM, and of partnerships between Government agencies,
local government and the private sector, in providing support
for businesses.
7.1 Operating on a countywide basis, Shropshire
Council's Economic Development Team has worked closely with Jobcentre
Plus, which has taken on a lead co-ordination role in supporting
employees when they are notified of redundancies. The Council
works in partnership with Jobcentre Plus, County Training and
Telford and Wrekin Council to arrange meetings and deliver workshops
for employees as part of the Jobcentre Plus-led Government Rapid
Response Team. Practical support for job seeking is offered, plus
advice on accessing housing and other benefits, council tax support
and relevant Council services.
7.2 The Economic Development Team is also
a partner on the Recruitment and Redundancy Support Group. The
group is administered by Transforming Telford and was originated
with Advantage West Midlands funding to provide a service for
Telford companies. Although the funding from AWM ceased, a number
of partners decided to continue with the function. The group consists
of Transforming Telford, Shropshire Council (Economic Development
and County Training), Job Centre Plus, Unity, Next Move, Telford
& Wrekin Council, Learning & Skills Council, Unite, Telford
College of Arts and Technology and Business Enterprise Support
(who are contracted to deliver BLWM's business start up service).
7.3 When the group was established two years
ago, its members originally met every six months. The frequency
of meetings soon increased to every three months but, since October
2008, meetings have been every six weeks in response to the impact
of the recession. The role of Transforming Telford and Shropshire
Council is one of co-ordination and to broker the initial meeting
with companies to assess the numbers of employees affected, type
of support they would like and to advise on what is available.
Other agencies from the group are then deployed to provide the
specific support the company requires. This partnership approach
has made it easier for businesses to access a joined up package
of advice and support through a single, initial point of contact,
rather than receiving uncoordinated approaches from a number of
agencies.
7.4 In addition, there have been a number
of Learning and Skills Council co-financed bids which support
unemployed people into work and, very recently, for people who
are under threat of redundancy. The Integrated Employment and
Skills packages encourage employers to recruit unemployed people
who have received some skills training before they go into the
workplace and then receive Train2Gain support once employed. This
complements the wide range of initiatives provided by Jobcentre
Plus for both the long term and newly unemployed.
7.5 Shropshire Council Members have established
a Standing Committee on the Economic Recession and have held a
joint meeting with the private sector-led Shropshire Business
Board to ensure that the Council's response to the recession takes
on board the views of the business community.
7.6 In parallel to the group of Members,
Shropshire Council is also establishing an officers group from
across all directorates to ensure that the support the Council
is able to offer individuals and businesses across the county
is coordinated and promoted appropriately. An action plan detailing
ways in which the Council can mitigate the impact of the recession
is under development, with many initiatives already underway in
areas such as supporting individuals to access benefits and advice
on homelessness through to stimulating the economy through the
Council's programme of capital investment and signposting businesses
to appropriate advice and support.
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