John Russell, new chairman of the West Midlands CBI, warns that emerging from recession will not be easy for the region.
There are no quick or easy answers to Britain’s economic malaise, the new chairman of the West Midlands CBI has warned.
John Russell expects the country to be just emerging from the downturn when his two-year term of office ends in December, 2011.
“I think that in two years’ time we will be in a better state but we won’t be sitting there saying ‘isn’t it wonderful, aren’t we doing well?,” he said.
He believes Britain has to build its future prosperity on manufacturing and trade instead of relying on the banking sector and a new surge of property price inflation.
Mr Russell, the chief executive of Manganese Bronze Holdings, the company behind Coventry-based London Taxis International, manufacturer of the traditional “black cab”, this week took over leadership of the West Midlands CBI from Geoff Percy, who heads Solihull skincare company Simple Health & Beauty.
Commenting on the wider economy, Mr Russell said the country’s previous reliance on the banking sector and the property market as sources of growth meant the United Kingdom was destined to recover more slowly than other countries in the G20.
“There are going to be setbacks and it is going to be bumpy along the way to recovery and if we do come out of it, we are going to be six or seven per cent down on where we were before the credit crunch and the recession,” he said.
Mr Russell sympathises with the predicament in which the banks now find themselves.
“It is tough for the banks because they have to be prudent in their lending but are under pressure to lend more,” he said.
While bigger companies have the option of turning to their shareholders to raise money, small and medium-sized enterprises are having to draw up strong business cases in order to persuade their banks to lend money to finance new products or ventures.
Mr Russell said his own industrial sector, automotive, had been hardest hit by the downturn but had benefited from the “positive impact” of the scrappage scheme under which buyers get a £2,000 discount, half of which is financed by the Government, on a new car when they trade in a vehicle ten years or more old.
The extra VAT banked by the Government makes scrappage cost-effective.
“Thirty per cent of my sales are being done under the scrappage scheme,” Mr Russell said.
CBI regional director Chris Clifford said after this week’s regional council meeting that improving links between business and higher education was essential in order to boost the number of students with the science, maths and technology skills needed by high-value manufacturers.
The West Midlands also needs to tackle growing unemployment among young people, Mr Clifford said.
One in four of the region’s young are out of work compared with one in five nationally.
“We are in danger of failing a whole generation,” he added.
CBI members are also pressing for reform of the public sector, even though it might cause strikes and disruption in the short term.
“The CBI has identified £120 billion of efficiency savings which could be looked at,” Mr Clifford said. “But if there is to be change, the next government will have to grasp the nettle early because if it doesn’t, it will go back in the ‘too difficult’ box.”