The Government is giving West Midlands industry what amounts to a £4million bridging loan but will it be enough to bail the region out of recession? Duncan Tift talks to Business Secretary Lord Mandelson about how the region is to weather the current climate.
Given the size of recent global bail out packages, £4 million is a mere drop in the ocean. However, in the current climate any opportunity for small businesses to access vital funding is like offering a lifebelt to a drowning man.
Such a move is likely to boost the Government’s short term popularity but in the long term will it be enough to provide the region with a safe harbour?
No is the simple answer, and although Business Secretary Lord Mandelson will not say this directly, I’m sure he knows it all the same.
Not that he is being evasive. He is happy to answer questions and admits bluntly that the region will not be able to shelter from the storm that is upon us – but then, neither will anyone else.
The Government acted quickly to try and stabilise the declining economy and its actions have won praise from commentators around the globe and many countries are now using it as a model for their own economies.
Lord Mandelson would like even more to do so because only through global co-operation can a real solution to the crisis be found.
Until then, short term measures such as the Transition Loan Fund will have to suffice.
So what does he believe the prospects are for the West Midlands and its key industries?
“My feeling about the West Midlands is that it has very strong foundations in all sectors but especially in manufacturing and precision engineering where its products are in demand in all the major global markets.
“The West Midlands cannot shelter from the effects of the current climate but it’s strong enough to get through this and emerge on the other side,” he says. “What we (the Government) have to ensure is that the region is strong enough to weather the storm ahead.”
After visiting Goodrich Engine Control Systems in Hall Green on Friday, Lord Mandelson fronted a question and answer session at the ICC attended by business leaders from around the region.
Joining him at the event were West Midlands regional minister Ian Austin, and Jerry Blackett and Mick Laverty, respective chief executives for Birmingham Chamber of Commerce and Industry and Advantage West Midlands.
The quartet heard first hand accounts of companies’ experiences of the credit crunch.
“Business leaders in the West Midlands have been telling me that firms face difficult economic times but many are still viable although they need help.
“They need help to improve cashflow, credit flow and to drive exports but unfortunately they have been rocked by what has happened and have had their confidence shattered,” he said.
The Business Secretary said he hoped that the £4 million Transition Loan Fund would go some way towards helping firms survive recession.
The scheme, which will be administered by Advantage West Midlands, will offer viable small and medium-sized enterprises loans of between £50,000 and £250,000 to help bridge short-term funding problems due to the current financial crisis.
The fund is based on the successful rescue package established in the wake of the MG Rover collapse in 2005. The Advantage Transition Bridge Fund threw a lifeline to MG Rover’s supply chain companies, making loans totalling £5.4 million and helping to safeguard around 1,400 jobs.
“The loans will be offered to businesses that are vibrant and have strong prospects but need transitional funding,” said the Business Secretary.
“Many firms won’t need the earth. They just need bridging finance to get them through a difficult period.”
Lord Mandelson promised that if the funding proved insufficient then the Government would review the scheme although he would not say for certain whether more money would be allocated.
The Business Secretary said the Government would also be doing all it could to restore confidence in the banking sector.
“The way banks deal with their customers over the next six months will define the next five years,” he said. “We now have to do everything we can as a Government to influence banks to help businesses in the West Midlands weather the storm which cannot be avoided. We have to get channels of communication flowing properly between banks and small businesses. It will take time to restore confidence and trust in the banking sector but the banks have to do their share,” he added.
“The government is on the case and we want to help firms in the West Midlands get through the difficult times.
“However, businesses have to keep their nerve. Fear must not be allowed to drive the economy. It’s going to be tough but not impossible.”