Regional focus: glum in brum


‘The core strengths of the West Midlands’ economy should enable us to face up
to the global economic impacts of tighter credit and higher commodity prices,’
says Mike Laverty, chief executive of Advantage West Midlands, the regional
Development Agency.

Yet in the first week of January this year Martin Smith, partner at DAINS
LLP, UK200Group members with six offices in the region, reports: ‘We had twice
as many administration and liquidity cases as in the same period last year.
Banks are still difficult when clients want to renew facilities. Getting credit
is really tough. Without demonstrable proof that a business is running well and
can show first class management, you wouldn’t have a chance.’

Smith adds: ‘We’ve got two motor accessories clients; in one case sales have
dried up in the last month or so. We hope to save at least part of the business.
In the second case we have been in discussions with major customers and helped
with some restructuring.

‘A lot depends on the outcome of the rescue package being worked out by the
US government for GM and Ford in Europe.’

Who’s doing well in Birmingham? Small shops are having a tough time: many are
standing empty. Even supermarkets are struggling. The West Midands has lost
112,000 manufacturing and engineering jobs in the last five years, largely as a
result of competition from China and India. The automotive industry is the main
local worry, with BMW cutting another 70 jobs at its engine making plant in

More motor industry job losses will follow 600 redundancies already announced
by Jaguar Land Rover, plus the loss of 850 casual staff.

Total UK car sales fell to their lowest level for l2 years in 2008. Nissan
has already announced plans to cut a quarter of its workforce from its
Sunderland plant and Vauxhall has offered its workers sabbaticals of up to nine
months on reduced pay.

More promisingly, in June last year Tata Motors bought Jaguar Land Rover from
Ford for about £1.1bn and promised to keep the company’s production plants at
Castle Bromwich, Birmingham, Lode Lane, Solihull and Halewood open for at least
five years.

Tata is believed to be in the process of pumping hundreds of millions of
pounds of new working capital into JLR, but is thought to be having problems
doing so. ‘It would be much more efficient if we could get that funding from the
banks,’ says the company.

It is believed to have recruited Citigroup to advise on talks with the
government on state assistance, and has been in talks with the government since
November about its cash flow problems and a possible multi-billion bridging

In an interview with the Birmingham Post, the Prime Minister confirmed that
the government was in talks with JLR and Tata Motors, but pointed out that
‘first responsibility lay with the Indian conglomerate’.

Meanwhile, the government has promised a £64m boost to help the West Midlands
economy, including £61m infrastructure funds for development, £48m of which is
to encourage commercial property developers into the market and £13m regional
infrastructure funding.

Paul Jones, partner at JW Hinks in Edgbaston, is finding mixed reactions to
the downturn among the firm’s clients. A specialist engineering equipment client
has had one of the best ever end-of-year order books, but another client
specialising in wood products had one of the worst final quarters.

‘Banks are still refusing to increase working capital. Some of our
sub-contractor clients are waiting for road building programmes to get started.
On the other hand, we have a strong healthcare clientele which is largely
government-funded and not too affected by the downturn.’

Lights at the end of the tunnel, according to Smith, are ‘hopes that the
banks can get themselves sorted out soon and start lending again, and that the
weaker pound will spurt the region’s companies to step up exports’.

‘I can see no movement by the banks, despite all the talk in London. The one
bit of good news is that Jaguar Land Rover jobs are safeguarded, following cost
cutting, but we don’t know how many jobs are safe or the extent of cost

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