Memorandum from Sub Regional Economic
Development Offices Group (SREDOG) (WM 20)
The Sub Regional Economic Development Offices
Group meet on a regular basis to discuss areas of common interest.
They represent the Coventry, Solihull and Warwickshire area. At
its last meeting this common response was agreed, although on
this occasion Solihull will be submitting its comments by another
channel.
To help with the formulation of this response
discussions have taken place with the Chamber of Commerce, the
FSB and JCP.
1. EFFECTS ON
BUSINESS
1.1 The impact of the present economic situation
has seen a wide selection of differing experiences.
1.2.1 JSA claimants in the sub-region are higher
than they have been for some long time. Job losses in the Coventry
and Warwickshire travel to work area (mainly in automotive engineering
and manufacturing) will have an effect on residents through out
the sub-region which is currently unquantifiable.
1.2.2 However, vacancies registered at JCP have
been fairly steady and something like 25% of these vacancies are
for middle to senior staff positions.
1.3 Areas of employment such as retail,
leisure and the logistics sector that feeds them have seen shrinkage,
together with the motor industry supply chain who are hit by declining
sales and extended payment terms.
1.4 There is also evidence of projects being
put on hold or cancelled as businesses are unsure about their
own and their specific market sector
1.5 One of the biggest areas of concern
expressed by the businesses consulted is the extension of payment
terms by their customers, which seriously effects cash flow and
has lead to business closure. Anecdotally, there is evidence to
suggest that businesses in the sub-region are struggling with
cash flow—particularly with respect to late-non-payment
of invoices and bills, and difficulty in securing reasonable overdraft
facilities from banks. The latest Quarterly Economic Survey seems
to support this view, with a worse negative balance on cash flow
for both manufacturing (-30.4%) and services (-40.1%) than the
national picture (-28% and -32% respectively).
2. EFFECTS OF
AMW/BUSINESS LINK
2.1 Advantage West Midlands have been proactive
in looking for ways to help with the present crisis and indeed
have come in for some positive comments from the businesses that
have been in contact with them. However their focus does seem
to have been on the major conurbations and their Regeneration
Zones. AWM is looking to increase the resource to BLWM to help
them implement a business doctor service which will be targeted
at both SMEs and large companies. There are also a number of additional
measures have been introduced by AWM in response to the current
economic downturn these include a commitment to a £9 million
Transition Loan Fund that is helping to address the problems businesses
are facing in obtaining credit through banks and other traditional
routes.
2.2 Business Link on the other hand have
come in for some criticism. It is possible that this reflects
their position pre the crisis and as such businesses have not
had the confidence to contact them. here contact has been made
through the Credit Crunch Hotline, experience is mixed, with some
businesses being positive about the help and others less so. None
commented that there had been any help in accessing financial
help.
2.3 We continue to struggle with getting
useful data with which to monitor the scale and effectiveness
of support offered by Business Link. Data that we have been given
on calls to the Credit Crunch Hotline appear to be very low compared
to the level of need that we know exists within the area. The
latest data we have been given by Business Link say that just
320 businesses across the whole region contacted the hotline,
with 18% (58 businesses) from the Coventry and Warwickshire
area. We are told that these numbers may understated due to calls
to the main Business Link number (but it appears that these calls
cannot be disaggregated to identify whether this is indeed the
case!).
3. BANKING RESPONSE
3.1 The banks have come in for more or less
universal criticism. No help with increased short term overdraft
facilities, short term notice of reduced overdraft facilities
together with the removal of facilities, pressure applied to pay
off loans early and the cancellation of credit cards are all sited
as recent experiences. Together with increased over draft interest
rate, despite the reductions in base rate. In fact no evidence
that Government intervention had any effect.
3.2 There is an instance locally where a
successful local company has been turned down an overdraft because
they are in the automotive industry despite the fact that they
were seeking to diversify.
3.3 Factoring, which has been a major source
of finance seems to have hardened with movements in rates, putting
even more pressure on cash flows.
4. OTHER AGENCIES
4.1 The creation of the Coventry and Warwickshire
Economic Recovery Partnership (CWERP) has seen the development
of a local help network. The partnership includes the Chamber
of Commerce and the FSB, which have been helpful in getting the
messages out to businesses. Area based grants have been allocated
to Local Authorities through CWERP to enable the Chamber of Commerce
to advise and assist businesses in the current climate. This initiative
is in its infancy. Coventry is exploring ways of offering help
to businesses occupying Council owned properties and is incorporating
recession issues into to its wider Enterprising Coventry (LEGI)
service delivery offer.
4.2 An established local financial instrument
is the Coventry and Warwickshire Reinvestment Trust which has
seen a huge increase in the number of enquiries for its services.
As a lender of last resort the number of businesses seeking their
help, having been turned down by the banks has led to the Trust
having to take on extra staff.
4.3 One area that has been positive to the
plight of business is the Inland Revenue who have been understanding
about spreading payments for businesses in difficulty.
4.4 Likewise the LSC and JCP have been proactive
about redundancy help and training opportunities.
4.5 An area of concern is the time taken
for the NHS and Primary Care Trusts who do seem to have a reputation
for taking up to 90 days to settle invoices.
4.6 The West Midlands Taskforce—AWM
is leading on the organisation and facilitation of the group.
Work stream groups have been set up to look at different issues.
Data and intelligence gathering work will help to ensure that
taskforce members have an up-to-date picture of geographical areas
and business sectors that are being particularly affected in the
sub-region.
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