Memorandum submitted by The West Midlands
Chambers of Commerce
BACKGROUND
The West Midlands Chambers of Commerce was launched
in January 2002. It was the first dedicated business support organisation
for the whole of the West Midlands.
Our aim is to enhance the collaborative working
of the seven chambers of commerce in the West Midlands and to
provide a comprehensive, powerful and influential voice for businesses
in the region.
The West Midlands Chambers brings together the
following chambers of commerce: Birmingham and Solihull, the Black
Country, Coventry and Warwickshire, Herefordshire and Worcestershire,
North Staffordshire, Shropshire, and Southern Staffordshire. Our
collective strength is based on grass roots links to businesses
in towns, cities and rural areas across the region. We are business
owned and business led.
In the West Midlands, the Chambers of Commerce
are UKTI's delivery partner for International Trade Services across
the Region.
CONSULTATION
1. What export problems have your members
faced since the economic downturn began?
Those companies that are well-established exporters
and which operate in a number of countries feel that there are
limited opportunities for them to benefit from export support
and consequently they have not changed their strategy or approach
to international trade as a result of the recession. Given the
global nature of the recession, both traditional and emerging
markets are encountering similar constraints—a lack of available
money in the marketplace. Customers are delaying placing orders
and are reluctant to commit, which is having a direct impact on
the export order books and sales of UK companies.
The downward spiral of falling prices and the
prospect of prolonged deflation are inhibiting spending amongst
businesses and consumers and for the UK, this is being exacerbated
by the weak pound. Volumes, particularly in the US are down and
there are currently more international trade opportunities in
Europe as a result of the exchange rate.
While manufacturing sales in the UK have been
slowing for some considerable time, a number of businesses in
the West Midlands have maintained output and found considerable
success by selling their products in international markets. The
strength of the Region's manufacturing base puts us in a strong
position to benefit from the manufacturing downturn in foreign
markets such as China.
It is now becoming more competitive in terms
of cost, lead times and transportation to manufacture products
in the UK, especially as exchange rates are making it more expensive
to buy from "low cost countries". Black Country manufacturers
can now compete in terms of higher quality goods and due to the
value of the pound against the Euro.
Exporters have undoubtedly been helped by the
weak pound and the expansion of European and Middle Eastern markets,
as well as the recent downward trend in oil and commodity prices,
but businesses need to be supported to benefit from the opportunities
that these external factors present.
As well as a lack of export credit, credit insurance
remains a significant problem for businesses' domestic transactions
as well as exports and this is likely to become an even greater
problem next year, as the rates will be based on the atypical
2008 performance. This is likely to compel even more small
companies to rely on invoice discounting for working capital,
but as sales slow, the levels of finance through invoice discounting
also fall, often at a faster rate than small businesses can cope
with. As a result of the lack of credit insurance available businesses
have to decide whether to take on the risk themselves, thereby
increasing the cost of borrowing.
We support the Government's announcement in
the Pre-Budget Report that the Export Credits Guarantee Department,
in conjunction with the banks, would introduce a temporary guarantee
scheme to support a £1 billion facility providing smaller
exporters with better access to short-term working capital. However,
export credit insurance is still not working, as there is evidence
that insurers are taking a country-wide approach to assessing
risk, as opposed to looking at the particular business needs.
Romania has been highlighted as one of the countries for which
credit insurance is no longer available. It has also been suggested
that is a problem most pertinent to the UK and that as credit
insurance in foreign countries is more accessible, UK exporters
are further disadvantaged.
Local manufacturing supply chains are also being
damaged by late payments from large foreign-owned companies. In
some cases, local businesses are not being paid for 60 or
90 days.
Local businesses have also highlighted problems
with using Letters of Credit (L/Cs), as foreign banks are not
accepting L/Cs from UK banks. Given that L/Cs should eliminate
the seller's risk, it is particularly concerning that UK businesses
are being placed at a competitive disadvantage as a result of
this.
Supporting and encouraging exporters will help
to bolster the UK economy.
2. Have your members received any help from
the government or government bodies?
Experience of receiving support directly from
Government, or Government Agencies is mixed. UKTI, Chambers of
Commerce and Advantage West Midlands were highlighted as providing
good support, particularly providing grants for overseas visits
and exhibitions, as well as market surveys and assistance in identifying
new agents.
Local businesses have also been helped by the
recent HMRC support scheme and flexibility on payments.
For those firms that meet the eligibility criteria,
the support appears to have been effective. However, there are
numbers of businesses who have requested funds for foreign visits,
but have not received anything.
Some businesses criticised the lack of assistance
through ECGD and the fact that when they had sought help, they
were simply referred to the website, or to Business Link.
The West Midlands operates a region-wide structure
to deliver UKTI support to business, through Chambers of Commerce
as well as RDA/EU projects and initiatives in developing international
market opportunities. This structure facilitates close working
with other regional agencies in ensuring a coherent approach to
providing support and guidance to businesses.
3. Could the government do more to help businesses
exporting in a recession? If so, please provide suggestions as
to what.
Whilst exporting should be a long-term commitment
and any knee-jerk reaction to the recession would not be advocated,
there are a number of things that could be done to help get the
international economy moving again.
The Government should consider underwriting
all existing credit insurance debts for the short term to support
those businesses whose credit facilities have been withdrawn.
We not believe that the Government's proposal to underwrite 50%
of credit insurance payouts goes far enough, given the scale of
the problem and the considerable impact throughout the supply
chain, particularly manufacturing. The plans, administered by
the credit insurers, are likely to cost more than ordinary policies,
which will only increase the overall cost to business in the longer
term. We are also concerned about the suggestion that the scheme
will be offered to medium-risk companies, as at present, credit
insurers are branding most small manufacturing companies a high
risk.
Government support for exporters must be flexible
enough to take advantage of the opportunities provided by changing
global economic circumstances. The Government could support the
redistribution of resources by UKTI to facilitate access opportunities
according to where local businesses may have a competitive advantage.
Relaxing the eligibility criteria for export
assistance would also be welcomed. Businesses require ongoing
financial support to continue to export/return to markets, as
well as support for first-time exporters. There is a perception
that active exporters are penalised.
There is concern that in the current climate,
protectionism will increase. The Government should continue to
resist protectionism, whilst influencing overseas governments
to reduce import duties.
The Government should encourage foreign Governments
to put pressure on their local businesses to adopt payment policies
of at least 30 days or less.
Companies need working capital to pay duty and
VAT so transparency agreements with other countries would also
help.
More needs to be done to increase confidence
and stimulate demand in the UK economy. The car scrapping scheme
in Germany for example, has been a considerable success, with
sales increasing by nearly a quarter in February and Volkswagen
reached its highest sales figures ever for February of 120,000 vehicles
and UK based components and automotive manufacturers constitute
a significant proportion of the global manufacturing supply chain.
There is also a perception that SMEs do not
have the same access to Government funds as the internationally-recognised
brands, such as Jaguar Land Rover. Many smaller companies also
invest considerably in R&D and are equally critical within
the supply chain.
In the longer term, more should be done nationally
to promote British designed and manufactured products overseas.
4. Do your members know of and understand
all the help available from the government?
The West Midlands enjoys a joined-up communication
strategy as it is Chambers of Commerce that deliver UKTI services.
This strategy encompasses stakeholders such as Business Link,
the LSC, Manufacturing Advisory Service as well as other regional
trade and commerce multipliers. While the business community is
largely well informed of international trade advice and assistance
we cannot be complacent and so seek mechanisms of continuous communication—relaying
and emphasising the message.
Although many companies are aware that there
is much assistance for exporting in place, those that are most
knowledgeable are those that are already engaged in Chambers of
Commerce and/or UKTI. There is concern that small businesses with
little prior knowledge find the numerous schemes complex and struggle
to understand quickly exactly what support is available to them
individually.
There is concern that for businesses that are
not actively involved through their local Chamber of Commerce,
or similar body, the information from central Government does
not always filter down through the various agencies.
It seems that there are many excellent support
schemes available, more could be done to raise awareness amongst
more "hard to reach" businesses and to clarify to novice
exporters what exactly is available to them. Additional resources
to provide a more tailored and segmented package to individual
businesses would work well.
5. Do your members who have just begun exporting
or wish to start exporting feel they are getting the help from
the government they need?
For those companies that have recently starting
looking into exporting opportunities, some are discouraged by
the perceived minefield of legislation, so greater encouragement
to begin this process and to navigate the complexities of exporting
would be welcomed. An initiative not unlike UKTI's Export Explorer
Programme—a project that encouraged new and novice exporters
into "starter" markets—with considerable guidance
and support would achieve this.
Many local businesses have received substantial
help, mainly from UKTI. However, there are still companies that
are not aware of any available support and who have funded their
own overseas visits and materials to market their company overseas.
A number of companies would welcome financial
assistance for marketing, particularly given that marketing can
be one of the first areas to cut back on during difficult economic
times.
Like many government programmes the perennial
problem of outputs being structured by so many schemes is a considerable
barrier when the output target is reached. We would prefer to
see a budget allocated to each area for them to deliver the assistance
that firms actually need, rather than having to disappoint clients
once the allocation is reached.
6. Would your members like more help from
the government to access new markets? If so, what kind of help?
Overall, businesses would like to see more help
from the Government to access new markets, although a number of
businesses have raised other concerns, such as the need to provide
a long term strategy and framework for the manufacturing sector
and the need to reduce the regulatory burden in the UK so that
businesses are not at a competitive disadvantage.
UKTI offers substantial support, but reductions
in the UKTI budget would be concerning, particularly given that
exhibitions have seen the largest reduction in funding over recent
years, yet this is one area that has been highlighted to help
businesses access new markets.
Marketing and company promotion are particularly
high on the list of priorities, particularly within Europe. Support
for website development and creating a company presence overseas
would be particularly beneficial. The costs of overseas promotion
and winning business are often prohibitive without Government
support.
There could be greater engagement with business,
to provide clarity on what help is available and guidance on potential
market opportunities. Increased trade missions and market surveys
would also be welcomed.
There is however, some concern about the focus
on "new markets" and that there should be increased
support for the markets that companies are already concentrating
on. A business that already exports a large proportion of their
goods or services has reduced opportunities to find new clients.
7. Do you have any other comments?
Government funding should only be available
to companies who put in the effort—proper planning should
be part of the application process but this must not create too
much increased admin for ITAs.
7 April 2009
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