Business leaders in the West Midlands threw their weight behind the Chancellor’s focus on cuts rather than taxes but admitted that the devil remained in the detail about the consequences of the spending squeeze.
Katie Teasdale, head of policy at Birmingham Chamber of Commerce Group (BCCG), said there was also cause for relief that improvements to Birmingham New Street Station and the city extension to the Midland Metro will be preserved.
She said: “We have to prioritise creating an internationally competitive taxation regime in the UK if business is to flourish here. Today gave us the headline figures. We will be waiting anxiously to see how 7.1 per cent cuts year-on-year in the Department for Business, Innovation and skills, for example, will breakdown and the impact it will have on enterprise.
“Clearly the cuts announced today are severe and will impact across the board. Half a million job losses in the public sector between now and 2015 will have a significant effect on the private sector as will inevitable cutbacks in private sector contracts.
“We must now ensure that we all - business and government - have a laser beam focus on creating the conditions for growth which will help the private sector to pick up the slack and genuinely rebalance the economy.”
Louise Bennett, chief executive of the Coventry and Warwickshire Chamber of Commerce, believes that the CSR could not have waited any longer. She said: “The economy both locally and nationally needed this spending review. People from nearly every walk of life will be able to find elements that affect them in a negative way but, in terms of the bigger picture, the whole economy was on the brink of meltdown because of our rising debt. Something had to be done to tackle the rising deficit but at the same time rebalance our economy.”
Black Country Chamber of Commerce President Mike Dell added: “The focus on growth is essential, particularly where it means maintaining capital investments on crucial infrastructure, which will create private sector employment.
“We were pleased by Mr Osborne’s commitment to de-centralising decision making. The cuts to local authority funding of 7.1 per cent need to be accompanied by a drastic reduction in central government targets and clearly local authorities will be looking at the detail of what these reductions will mean on the ground.”
James Watkins, executive director of Business Voice WM, said it was now up to businesses to fill the void left by the shrinking public sector. He said: “Business will need to be imaginative and innovative if it is to fight the supply chain problems that the spending cuts could herald.
“Cuts in social housing will be a matter of grave concern to the hard-pressed construction industry. The hope is that tax increment funding – allowing councils to keep business rates in return for commercial development – will help the sector.”
Graham Bushby, Birmingham-based partner at Baker Tilly Recovery and Restructuring, felt that everybody should knuckle down for the long haul. “Few Midlands businesses will escape the ripple effect of the announced cuts to public sector spending,” he said.
“Taking billions of pounds of spending out of the UK economy will affect the supply chain, from the top down to the consumer and back up again. Those who anticipate and act quickly to address the implications of the cuts are likely to be the fittest in the battle for survival and longer term prosperity.”
Lucas Markou, a partner in Solihull accountants and business advisers Jerroms, was far more bullish. He said: “I welcome the fact that the direct support for business and innovation has been insulated from the worst.
“The future of our regional and national economy lies in enterprise and wealth creation and I am pleased that the science and innovation budget has been protected. I also welcome the additional finance for the regional development funds.
“But I hope the government can go much further in the future. I want to see a real drive to the enterprise economy because it is only through private sector growth and enterprise that our long term problems will be solved and public services delivered.
“I hope the government will be able to go for a five year project including, when the state of the economy permits, lower business taxes and the simplification and reform of the tax system to boost growing businesses.”
Laurence Moore, chairman of Prime Chartered Accountants in Coventry and Solihull, was sceptical of the Chancellor’s projections. He said: “It is interesting that the Chancellor believes that the private sector will create as many jobs as are cut in the public sector.
He is clearly relying on business to play a key role in the deficit cut both by increasing profitability and therefore paying more tax as well as by generating growth and employee more people.”
John Rider, chairman of the Institute of Directors in the West Midlands, stressed the region needed jobs, being the only place in the country that over the last ten years had seen a net decline in private sector jobs, where unemployment was well above the national average and there were 850,000 people defined as economically inactive.
“We are in favour of these public sector cutbacks but at the same time the Government needs to protect jobs where it can and provide an economic environment for job creation.
“Let’s hope the private sector can come up trumps and fill the gap. But it is a risk and I am concerned by the timing.”
James Martin, a partner in the Birmingham office of business recovery specialists Begbies Traynor, praised the Government’s new emphasis on the regions.
“This is a welcome focus on the regions – the Midlands has found the going tough and needs all the support it can get,” he said.
Johnathan Dudley, Midlands managing partner at Crowe Clark Whitehill, said the regional growth fund would only work if it was well administered.
He charged: “It needs to provide a real incentive for British business to start, re-start and keep manufacturing in this country. But if much of the money ends up in the hands of lawyers, accountants and administrators then it will not achieve what it is being set up to do.”
And he urged a re-emphasis on Britain as a manufacturing economy.
“The growth fund needs to be targeted on manufacturing – making things and adding value – not just running call centres and recruitment consultancies.”
Welcoming the public sector cuts, he said it had been “far too bloated for far too long”.
He hoped the overall package meant the public would rein in spending on “foreign holidays and imported goods”.
Gary Cardin, from Drivers Jonas Deloitte, said the time was now for the city to unite in a bid to move forward. He said: “Overall, the government’s growth agenda is very clearly linked to transport infrastructure investment.
"The West Midlands, Birmingham and the Black Country now has positive reconfirmation of New Street Station’s transformation funding being in place, alongside the added benefit of the Metro extension from Snow Hill to New Street.
"This, coupled with a broadening agenda for transport in the city, has to be a way forward in terms of focussing on the positives for new investment and leverage to create jobs, rather than playing the maligned negative cards that hold the city back.
“More than ever now is the time to pull together as a city. David Cameron said ‘your country needs you’ earlier this month, but after this Spending Review ‘your city needs you’ is perhaps a phrase more appropriate to this new age of austerity.”
Martin Cook, from Ernst & Young, said there would be no easy choices for local authorities when it came to meeting the tough new budgets.
“For the public sector, grappling with this new age of austerity won’t come easy,” he said. “What’s needed is for public servants to seize this opportunity to start afresh. While making their processes and systems as efficient and effective as possible, departments will need to empower their staff to innovate and experiment, as well as supporting them through their own uncertainty about their job security.
“With no administration since 1945 having achieved anything like such a sustained reduction in spending the coalition is targeting, the public, private and voluntary sectors must now come together to ensure that they are able to sustain essential public services with reduced resources.”
Mike McDonagh, head of public sector at KPMG in the Midlands, echoed his views. “The public sector has been preparing for cuts of this magnitude, but the implementation will require them to be brave and challenging in the new economic environment they face.
“This will be a time for revolutionary and collaborative transformation of public sector services rather than tinkering so it is a time for a considered response rather than a knee jerk reaction.”
Midlands companies should benefit from opportunities created by the reform of public services, but will need to ride-out initial cost-cutting measures, according to Jon Roberts, partner at Grant Thornton in Birmingham.
He said: “Councils throughout the region should be planning to make a fundamental shift from being public service providers to enabling bodies. This requires them to be more innovative in their approach, involving greater private and voluntary sector collaboration to deliver improved productivity.
“Even smaller support service companies can benefit from this move to an enabled provision of services, particularly if they are either highly specialised or able to deliver services at lower prices.”
Dr Stephanie Allen, partner and public sector leader at PwC in the Midlands, added: “The Spending Review announcement is confirmation of a well trailed inevitability. Public sector leaders have known for some time what has been coming their way, and have been making plans on how to cope. Those plans have focussed first on deep job cuts. But those cuts, while painful, are the simple bit.
“The real challenge is to redesign front line services, and to reorganise back office support functions, so that decent public services can be delivered with fewer people and less money.”
With all the potential carnage in employment, Mark Hammerton, partner at international law firm Eversheds, warned companies to tread carefully when reducing headcount.
He said: “Clearly the coming months will be a challenging time for affected staff, both those leaving but also those who remain in reduced number. Even before any formal Government announcement of cuts in expenditure through the Comprehensive Spending Review, we are aware that a large number of employers - a survey we conducted suggesting 69 per cent - have already taken steps to reduce staff headcount.
“Whilst redundancies make the headlines, and for obvious reasons, it presents just one means of cost reduction and needs to be carefully thought through in terms of maintaining service delivery.
"Organisations will be, and are, asking fundamental questions about which services will be required, to what degree and by whom they should be provided. Such longer term strategies are likely to pay dividends over short-term responses. Increasingly also, we are finding that public sector employers are prepared to look beyond more ‘traditional’ measures to innovative approaches and wholesale service transformation.”
Steve King, chief executive of Birmingham-based employment experts Pertemps People Development Group, added that it was important that everything was done to help those made redundant from the cuts.
He said: “Whilst the spending cuts are inevitable there is a human cost, with lots of people moving from what they believed was a certain future. The public sector contains a mass of expertise which offers fantastic opportunities to the private sector.
“Although it is inevitable that there will be thousands of redundancies it is vital people who find themselves unemployed are able to access support services.
"During these tough times motivation can easily be lost but I would urge unemployed people to adopt a positive approach in their search for work. This may involve improving qualifications or even a career change but, be assured, there will still be employment opportunities.”
