Andy Coyne introduces our annual audit of the West Midlands and tries to determine which parts of the patch are faring best in difficult circumstances.
The words everyone must be sick of reading are ‘during a recession’ but, unfortunately, when an elephant is in the room it won’t be ignored.
So this year’s look at the West Midlands region must be done in light of a dire economic backdrop, which, while not unique to our region, is having a major impact on it. A glance at some of the tables dotted throughout this feature reveals that the West Midlands is fairly low down the list in many of them. We are higher up when it comes to exports, which reflects the region’s large manufacturing and production base.
It is, of course, this base that makes the area vulnerable in a downturn. The headlines are full of news of closures and redundancies in the West Midlands. Household names such as JCB and Wedgwood have been among those to suffer, and the saga of van-maker LDV has dragged on, leaving hundreds of workers uncertain about their futures.
One of the area’s main voices representing manufacturers has issued a rallying cry to West Midlands companies.
David Wright, the outgoing chief executive of the Manufacturing Advisory Service-West Midlands (MAS-WM), believes that businesses need to invest in people, productivity and new products so that the region can lead the way again.
Speaking in response to the Confederation of British Industry’s Industrial Trends Survey, he cited the need to control costs and urged organisations to come forward and tap into the specialist support available.
He said: “The falling sales indicated in the research are similar to the anecdotal conversations we have been having with companies in the West Midlands so it came as no surprise.
“However, the story it doesn’t tell is the measures many companies are taking to reverse this trend.
The management teams are more committed than ever and doing everything they can to secure new business to replace orders that have been taken from them through no fault of their own.
“Manufacturers simply have to be involved in new and exciting products, either their own or as a supplier to someone else. And by involved, I mean involved in the design, innovation and the technology, not just as a ‘make-to-print’ organisation.
“Companies must get involved with the sources of innovation, the universities and technology organisations, and use the extensive expertise that exists if they are to still be here in 12 months.
“They should also utilise all the support available from whatever source, including, for example, the research and development Tax Credit scheme. We will also be introducing a New Product Development scheme that will help companies as they take their ideas to the market.”
MAS-WM – funded by regional development agency Advantage West Midlands (AWM) – has helped more than 5,000 manufacturing companies to improve manufacturing efficiencies since 2002, adding £150m to the turnover of these businesses in the process.
Away from manufacturing, the West Midlands – like many regions – has set its sights on regeneration, creating jobs and leading to inward investment wins. This can be in response to a particular problem – such as the collapse of Rover at Longbridge in Birmingham – or it can be simply trying to use brownfield land for newer and better purposes. As our Midlands-wide regeneration feature (on p53) shows, while some schemes have come to a halt, others are progressing as planned.
Where projects have stalled it is often because of a reluctance for private developers to get involved in speculative schemes in a climate in which would-be occupiers are reluctant to move. In the wider commercial property world, agents will tell you that things are slow, and some local funders are unable to back projects.
In the professional services market this region has seen its share of lay offs. Dealmakers will tell you that while deal numbers are down and deals are harder to get away, people are still buying and selling. Acquisitors who can fund their own deals are in a particularly strong position.
There is general concern among professional and financial services types, but there is little sign of widespread despondency.
Graham Nicoll, regional centre head for Barclays Wealth in the Midlands, says: “It feels like we are in the eye of the storm right now, but it will pass. The recession has lengthened the unemployment queue but many sectors such as private client, insolvency and litigation are still thriving.
“It is a sour market for selling a business, so business exits are down. This has had a knock-on effect on the professional services firms that focus on this area.
“Professional services firms with a focus on private client work are still thriving. Although it is a sign of the times, insolvency and litigation seem to be prospering.
“And I think companies that benefit from government contracts and expenditure, such as certain areas of the healthcare sector, are performing well.”
Charles Bond, public markets partner at legal firm Cobbetts in Birmingham, says the area could actually benefit from being cheaper than London at a time when corporates are tightening their belts.
“PLCs should be aware that the West Midlands advisory community is one of the strongest outside London,” he says.
“Its lawyers, accountants and corporate finance advisers have a lot of experience of dealing with UK and international matters for a range of blue chip companies, and often on more economical terms than you’d expect from the City. This can present an ideal solution for those companies looking to maintain a lower level cost base without having to sacrifice quality.”
Entrepreneurs, too, are confident of the region’s prospects. Angela Maxwell, a consultant and board member of AWM and the brains behind the Fracino coffee company, says: “It is difficult for businesses, there’s no getting away from that. But there are also highlights. Some companies are doing well – they have set themselves up well and internationalised their businesses.
“Enterprise does come out of difficult times. Research that I have seen indicates that the level of young entrepreneurs in the West Midlands is higher than in other parts of the country. We need to make sure those entrepreneurs keep coming through.”
As far as the role of the public sector in the region is concerned, Maxwell says there needs to be a two-pronged approach: “The strategy has to be maintaining a focus on the future but also giving good businesses all the support they need.
“We also need to keep putting out positive messages,” she says. “We are going to get through this.”
Also in: June 2009
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Editorial
That’s swings and roundabouts, for the non-religious. Either way, it’s been a mixed month for Birmingham with good and bad news from central government.
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A change in the law
A rapidly shifting business environment is testing the resourcefulness of local legal firms. Ian Halstead reports.