The committee of West Midlands MPs set up to look into the effect of the recession on the region has said regional development agency Advantage West Midlands has a huge role to play in the economic revival – but needs to accept a new reality of lower budgets.
The first official report from the West Midlands Regional Committee said the economic downturn and ensuing recession had come as a double whammy for a region still suffering from the effects of the closure of MG Rover in 2004.
The after effects of the closure contributed to making the West Midlands the worst-hit area in the country for job losses.
The committee report looked at four aspects of the downturn in the region:
Access to finance
Regional managers at banks need to work more closely with business groups to make sure lending levels stay up and charges do not put businesses off during the downturn – one of the most common complaints.
The Enterprise Finance Guarantee Scheme set up by the government had been a huge success, but many bank employees did not even know it existed when the scheme started. It is due to finish in March 2010, but the committee said this needed to be extended.
AWM’s advantage transition bridge fund had been key in easing the burden on businesses struggling with the recession, and it was crucial the Treasury continued to finance it, the report said.
And decisive action is needed from the government on credit insurance, particularly from sectors like construction and automotive supply.
The popularity of the Train to Gain scheme had been a success for businesses which had to cut their working hours in the recession and risked losing skills, the report said. It recommended the government funding continue for as long as there was demand for the programme.
But it deplored the lack of action on the much-vaunted £2.3 billion automotive assistance programme announced by Lord Mandelson in January. What could be a vital lifeline for the struggling automotive sector had so far been ignored with not a penny handed out in the West Midlands, a dismayed committee said.
Small-scale and rural regeneration projects had been hit hard by the cuts to Regional Development Agency funding – and many would be suffering for a second time as external funders pulled out because of the lack of RDA backing, the report said. While AWM had done the right thing by focusing on the region’s key projects, this made things even harder for those left off the list, the committee said.
It urged the government to reconsider the budget for AWM to avoid stifling regeneration in an area that had historically benefited strongly from it.
Stimulating the upturn
While there was a bright future ahead for the region’s economy in high-tech industry and manufacturing, it would take action from the government and its agencies to bring this about, the report said. A short-term working wage subsidy programme would give companies more freedom to update their operations.
Although the government has so far rejected a wage subsidy scheme, estimates say it could prevent as many as 600,000 redundancies across the UK at a cost of £1.2 billion a year.
The report said Advantage West Midlands was still the key regional player in protecting jobs and stimulating the local economy, but said it needed to accept that budgets would be getting tighter, and look to forge new partnerships by using its money as a seed for outside investment.