Examination of Witnesses (Questions 87-99)
DR LAURA
COHEN, MIKE
SHIRLEY AND
BRIAN STANDBRIDGE
8 JUNE 2009
Q87 Chairman: May I welcome you
all here today? This is the third formal evidence session of the
new West Midlands Regional Select Committee. Let me introduce
myself and other members of the Committee who are here. I am Richard
Burden, MP for Birmingham, Northfield, and I chair the Committee.
On my right are Adrian Bailey MP and Joan Walley MP, and on my
left is David Kidney MP. David Lloyd is the Clerk to the Committee.
Just so that you know, it is a new initiative for Parliament to
set up Committees such as this. Until now, in the main, Select
Committees have shadowed particular Government Departments, whether
it be Health, Foreign Affairs or other Departments. What we have
not always had is scrutiny mechanisms that look across Departments
at some of the big strategic issues that affect particular regions
of England. The very definite view is that, when so many initiatives
and activities are co-ordinated at regional level, there has been
an accountability gap. Although we would not claim to be the whole
answer to that, we hope that we can be part of the process that
starts to tackle some of those issues. This inquiry is about the
serious economic situation facing our region. Our first evidence
session was involved representatives of some of the major clearing
banks. Last time, we met in Warwickshire to meet representatives
of business. In a few weeks' time, we shall meet representatives
of Advantage West Midlands and take evidence from the regional
Minister. We will produce a report, to which the Government are
obliged to respond. Today, we are taking further evidence from
regional business. In a little while, we shall be hearing from
Unite to get a union perspective, and we shall also be hearing
from local government and regeneration partnerships. I put it
on the record that when we talk about wanting to hear voices from
the region, we mean the entire region. That is why our first meeting
was in Birmingham, why for its second meeting the Committee went
on to Warwickshire, and why we felt that it was very important
to meet in Staffordshire, in particular the north of Staffordshire,
today. Our determination to hold meetings outside Westminster
is part of that commitment. We are all West Midlands MPs, from
different parts of the region. Because we are West Midlands MPs,
we hope that, as well as improving scrutiny and accountability
in regional governance and finding ways forward on key regional
issues, our activities as a Select Committee will help the region
as a whole to punch its weight more effectively on the national
stage. As we are in Staffordshire today, I particularly welcome
the fact that both David Kidney and Joan Walley, as Staffordshire
MPs, are here with us. In a moment, I shall ask you to introduce
yourselves and we will move on to the evidence. There is a great
deal to get through this morning, with three panels of witnesses,
and, sadly, we all have to get down to London this afternoon to
do our day job. We have a lot to get through and we want to hear
anything you have to tell us, but do not all feel obliged to answer
every question. We have your written evidence, which has the same
status as your oral evidence, and all of that will go to make
up our report. I do not want anyone to feel inhibited from saying
what they want to, but I ask for your co-operation and ours in
getting through the business. With that, perhaps you could introduce
yourselves.
Dr Cohen: I am Laura Cohen, Chief
Executive of the British Ceramic Confederation, which is a trade
association representing the ceramic industry in the UK. We cover
industries as diverse as those producing tableware and giftware,
bricks, roof tiles, floor and wall tiles, sanitary-ware, refractories,
clay drainage pipes and high-tech ceramics, as well as some materials
suppliers to the industry.
Mike Shirley: I am Mike Shirley,
Managing Director of Jesse Shirley and Son Ltd, which is a ceramic
raw materials supplier that currently employs 35 people. I am
also the chairman of Hudson's Fine Bone China Limited, a bone
china manufacturer that employs 25 people. We have recently come
out of administration after being a month in administration during
January and February.
Brian Standbridge: I am Brian
Standbridge, Regional Manufacturing Director for Ideal Standard
International, which is a large player in the UK. We employ 1,400
people in the UK in total with plants in Rugeley, South Staffordshire
and in Middlewich, Cheshire. Our head office is in Hull and our
European headquarters is in Brussels. I am here to represent the
bigger players in the ceramic industry.
Q88 Chairman: Thank you. We are
aware that Staffordshire as a whole, but particularly north Staffordshire,
has fared quite badly, not only in the current downturn but in
terms of its gross value added per head in the West Midlands region
as a whole. I think it is down to about 75% of the UK average.
No doubt much of that predates the current economic difficulties,
and we might ask you something about that in a little while. First,
however, will you give us your assessment of where you see the
West Midlands economy being at the moment, both in relation to
your industry and more broadly?
Dr Cohen: I think the West Midlands
economy has in some ways been affected worse than many other parts
of the UK, as there is very heavy dependence on manufacturing
industry. In particular, the drying up of finance and the challenges
of obtaining finance in all its forms has startled the industry
here. Problems include a lack of access to funding through financial
markets, problems obtaining credit and with cash flow for companies,
and problems with credit insurance—particularly export credit
insurance for exporters—because the three main credit insurers
largely stopped supplying credit insurance back in November. Last
summer and autumn, we started seeing the collapse of the mortgage
and housing market, which has had a massive leverage on many of
our products, and more widely in the UK. All that has had a marked
impact on UK industry, so industry is being heavily affected at
the moment.
Q89 Chairman: To what extent do
you believe that the present difficulties in ceramics in particular
are due to the current situation? We will talk about the general
issues that you have highlighted, such as access to credit, but
how many of the difficulties that the ceramics industry has been
going through do you attribute to the current downturn, and how
much do you think it has exposed problems that were being experienced
anyway?
Dr Cohen: Many of the problems
have been exacerbated by the current downturn, particularly in
the housing market, because many of our products go into the housing
market or are used in homes. I know from my visits to some of
our members that there has been very heavy investment over the
past few years in new technology relating to energy efficiency.
The ceramics industry uses a lot of energy as a raw material,
and through the discipline of the climate change agreement that
our members have signed up to, members have worked very hard to
reduce their energy consumption, and we have some excellent examples
of that work. There has been good investment in the industry—Brian
would like to talk a bit more about that.
Brian Standbridge: Typically,
we have seen our UK sales grow year on year for the past 10 years.
We have the Ideal Standard and Armitage Shanks brands, which are
household names that you have heard of. On the back of good performance
in the UK and our commitment to UK manufacturing, we invested
£10 million in the Rugeley site to make it probably the most
productive sanitary ware site in the world, which is all good
for the local region. However, we have seen part of that technology
idle for this year. So, to go back to your question, we have seen
growth year on year, but this year we have seen significant volumes
of new technology in which we have invested—high state-of-the-art
technology, novel technology, the types of technology seen in
the automotive industry, high robotic investment—standing
idle, which is primarily down to cashflow from reduced sales
Mike Shirley: I can only speak
primarily for the tableware industry. Our situation is rather
like Brian's. We have had a very static order book over the past
six years. I think that it is fair to say that we have managed
the outsourcing run. It used to be that 100% of our market was
in Stoke-on-Trent and that is now down to 20%. On the other hand,
we have managed that and have got through it, but in the past
six months we have seen a 30% to 40% drop-off in orders.
Q90 Chairman: Thank you. We will
return to a number of those issues in later questions. Before
passing on to one of my colleagues, perhaps I could ask you a
question, Dr Cohen. We will be looking at the effectiveness of
some of the Government bodies and advice agencies and so on, but
perhaps you could tell us something about the help the confederation
and other such organisations are able to provide to members during
economic circumstances such as these. To what sorts of bodies,
networks and advice agencies do you try to signpost members for
advice and support?
Dr Cohen: We spent a lot of time
in quarter 4 and quarter 1 listening to our members and to other
organisations, such as the chambers of commerce, the Confederation
of British Industry and the West Midlands Business Council, with
which we work in partnership. We listened to problems that our
members are having and to those that people in other businesses
are having. It is important to find common ground in order to
influence policy. We came up with a list of five main areas, which
we have detailed in the written evidence, in which we felt that
some specific Government help would be needed. Those areas are:
(a) funding/finance; (b) employment and consumer confidence; (c)
it is about the Government investing in infrastructure, particularly
housing; (d) exploiting exchange rate advantages and (e) reducing
the regulatory burden. We are finding that we have a lot of these
issues in common with other stakeholders.[1]
We also thought that it would be quite important to send out economic
briefings as information became available, such as the announcements
on 14 January about the funding that was available to businesses.
We continue to update our members as new issues emerge. For example,
one of the top issues at the moment affecting 10% of our members
is the credit demanded by some energy companies.
Chairman: If I could interrupt you, I
think that we will be coming on to that. Energy came out as a
big issue in the submissions.
Dr Cohen: But on that sort of
issue, what our members have appreciated is that one company alone
does not know whether the problem being faced is significant or
part of a trend. They cannot always get the representation that
they need unless by working through a trade association. We work
in partnership with other representative bodies too, because we
are quite a small organisation. We can punch above our weight
and support our members through these challenging times.
Q91 Chairman: I have one final
question. At our last session we met people from the Federation
of Small Businesses and the West Midlands Business Council. We
have heard evidence from a range of trade organisations and you
are with us today. In the sense of linking up business and the
voice of business with government—be it Advantage West Midlands,
regional taskforces or whatever—do you feel that the business
voice and its co-ordination is sufficient here? Government want
to say, "Where do we turn to for a business representative
on this body?" What is clear is that, sectorally and geographically
within the West Midlands, there are the mechanisms to provide
that business voice across sectors and different sub-regions.
Dr Cohen: I know that you have
taken evidence from the West Midlands Business Council, and there
are other representative bodies. It is important, particularly
at times like this, for organisations work together and find common
ground where necessary. We found it helpful to work with the CBI
and British Chambers of Commerce. We are not affiliated to the
Federation of Small Businesses, but we exchange information with
it and find that we have a number of issues in common.
Q92 Joan Walley: Laura, I want
to move on to Advantage West Midlands and the regional taskforce.
How have your members benefited? Some things have been very clear
to us when taking evidence—we have had information, for
example, about the practical advice that the West Midlands Taskforce
has given so far. I wonder whether there is a perception that
that has concentrated on those who are already geared up to get
an advantage or benefit from it following the Rover situation.
How much work is that body doing to reach out to places such as
North Staffordshire?
Dr Cohen: My gut feeling—you
have summed up the problem—is that not a lot is getting
up to North Staffordshire. I do not know whether my colleagues
would like to comment.
Mike Shirley: In December we benefited
from the transition fund, as Advantage West Midlands gave us a
grant—very quickly, because we had a cash flow problem.
Unfortunately, within 10 days Wedgwood went into administration
owing us a lot of money, which did not help us in the long term.
We went into administration ourselves. But I have to say that
Advantage West Midlands gave us money from the transition fund
very quickly and very professionally.
Q93 Joan Walley: What I am looking
at is the fact that there is this www.supportwm.co.uk website,
which is meant to be signposting businesses to the regional and
national support available. At the local level—the British
Ceramics Confederation, the North Staffordshire Chamber of Commerce
and other bodies—how much of what is being set up in the
West Midlands is really accessible in a joined-up way to businesses?
Dr Cohen: One of the issues that
we have is that we are a national trade association; we cannot
just send out information available in the West Midlands. Some
of the signposts in the West Midlands have been very good. It
is very important that similar national signposts are available—for
example, the Business Link one that appeared in January with the
portal for finance and other support.
Q94 Joan Walley: May I follow
up Mike Shirley's comments about the support from AWM? Presumably
the money referred to came out of the £9 million Advantage
transition loan fund. Are there any messages that need to go back
to Government about how that loan fund could become more effective,
given what you have just said? What positive contributions could
the Government make in the light of your experience?
Mike Shirley: It was certainly
delivered very quickly. That is important. When you go them with
a cash flow problem, you need a very quick response, and we got
that. Yes, it was of benefit. I have to say that I do not think
that there was a lot of knowledge about it, but I believe that
at this stage it is totally over-subscribed. That was the comment
that I heard recently.
Q95 Joan Walley: But there is
a message, is there not? There is an issue if it gives with one
hand but—because of the Wedgwood situation, for example,
and the supply chain—it is not being connected up. Perhaps
we might come to this later in our evidence, but presumably there
is a role for the North Staffordshire Regeneration Partnership,
because it is about how regeneration goes hand in hand with business
recovery and help to get us through the recession.
Mike Shirley: I agree that it
is pointless to give to one and then not to another or to someone
else failing in the chain, but I would not like to comment on
the Wedgwood situation.
Q96 Joan Walley: Okay, can we
move on, then? Do you know of companies that have tried to access
the Advantage transition loan fund and not managed to do so for
one reason or another, such as the geographical coverage of the
fund or the business types and sizes that it covers? Laura, you
just mentioned that you are a national organisation.
Dr Cohen: Members have not fed
back about whether they have wanted to access it and not been
able to. I know that the total—£9 million—is
a relatively small amount for the cash flow issues that companies
are facing, so there will never be enough to go around.
Q97 Joan Walley: In your experiences,
are small businesses in the area required to rely on the community
development finance institutions for financial support and are
there any competitive advantages or disadvantages to that source
of credit?
Dr Cohen: I'm sorry, I don't have
that information.
Q98 Joan Walley: So that is not
something that your small companies have accessed. How much knowledge
do you have about what support Advantage West Midlands has given
not only to Wedgwood, which you mentioned, but to other organisations
or ceramics companies in the area?
Brian Standbridge: I am certainly
aware of a training initiative that a lot of companies like ours
have taken up in these slack times. We are using two different
training providers in Cheshire and South Staffordshire. Both are
based in the West Midlands. We are training, typically, 300 people
this year by NVQ 1 and NVQ 2 training, which is 100% funded from
the Government.
Q99 Joan Walley: Is that effective
training that meets your needs?
Brian Standbridge: We have made
sure it is tailored to our needs. It is not just training for
training's sake. We are taking it to NVQ and making sure it complies
with Business Improvement Techniques, so obviously in a manufacturing
environment it is fairly relevant. You talked about us being a
large company. We have not got the same access compared to the
small businesses, but we are equally affected by such things as
the short-time working programmes. It is probably the same for
large and small companies. Our company has taken a 10% initiative
across the whole organisation. Directors and managers—all
employees—have taken a 10% pay cut this year. People have
been given time off and we have had temporary plant closures.
I have European factories in France, which get chômage partiel
subsidies from Government and the Italian plants get the benefits
also of heavily subsidised support during these periods. Again
we find that we are not on a level playing field with some of
our competitors. As I said, we have invested heavily in the UK
and our biggest competitors are either our own particular plants
or competitors who are primarily Far Eastern or Eastern European.
1 What was meant was: We are finding that we have
a lot of these issues in common with other stakeholders. Back
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