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01 June 2015
Introduction
Leading financial services professionals in Coventry & Warwickshire came together to discuss and debate the sub-regional economy and the factors affecting its growth.
The Coventry & Warwickshire Economy
The Coventry and Warwickshire economy is seen as a bellwether for the national economy, trends being seen locally before they materialise in the national statistics.
There are many headwinds – problems in the Eurozone, the impact of the sanction on Russia, political uncertainty, etc – but inflation, base rates and unemployment remaining low are strong positive factors. Against this backdrop the sub-regional economy (Coventry and Warwickshire) is seen as relatively optimistic in outlook.
However, there is a perception that the UK is not capitalizing on its current strength, in particular exports are not considered to be as high as they could or should be. There is a clear role for the local advisory community to encourage and help clients grow exports.
In Coventry and Warwickshire mirco (fewer than 10 employees and a turnover under £600,000) and small (fewer than 50 employees and a turnover under £10 million) businesses dominate the landscape. The majority of clients of Coventry & Warwickshire First members are between £3 million and £10 million in turnover.
The Jaguar Land Rover effect
Jaguar Land rover (JLR) is a strong and successful business that has a significant positive effect on the local economy. Hundreds, if not thousands of businesses, have flourished in the supply chain, creating employment and wealth throughout the West Midlands.
The dominant effect of this one company on the sub-regional economy, however, is a potential weakness. It is difficult to strip out the JLR factor and properly assess the underlying strength of the local economy. It could be that fundamental weaknesses are being masked by the JLR effect.
Drivers of growth in Coventry and Warwickshire
Previous investment agencies, in specific Advantage West Midlands, adopted a strategy of building business clusters. These in turn would enhance the skills based and create a virtuous circle.
In contrast to that clear strategy there is a perception that the current investment agencies lack a coherent approach and that there is no clarity as to the type of jobs being attracted to the region. In particular the lack of long term stability in the leadership of the Local Enterprise Partnership is perceived to be a weakness for Coventry and Warwickshire. Against this backdrop Friargate is a very important development but it is noted that there will be little space available to SMEs.
Access to finance
Funding is a recurring issue faced by the small businesses typical to Coventry and Warwickshire.
The need for unsecured lending to businesses with a strong balance sheet is a clear requirement; the perception that banks only provide secured funding remains. This being accepted as true it is to be expected that the continuing decline in commercial property values is negatively affecting access to finance.
There is also a belief that funding for small and micro businesses is particularly difficult to obtain. As this cohort dominates the Coventry and Warwickshire economy this represents a risk.
There is a question mark over the equity of funding deals available in Birmingham versus those available in Coventry and Warwickshire. Some advisers clearly stated the terms they can obtain in Birmingham are better than in Coventry. Again, this presents a risk to the Coventry and Warwickshire sub-regional economy.
Our universities
Coventry University and the University of Warwick are both world class and have a reputation for driving innovation. Combined they are a powerhouse for the sub-regional economy, providing global links as well as a flow of very high quality talent.
The depth, breadth and calibre of advice in the region
Coventry and Warwickshire is home to many excellent professional and financial services advisory firms. Collectively they have the capability required to support the growth of micro-businesses and SMEs, advising on everything from exporting to employment law.
However many micro and small businesses opt for the false economy of getting information from the internet instead of expert advice from qualified professionals. This hampers growth and the case for professional advice need to be put firmly.
The Growth Hub and the Clearing House have both been created to provide micro business and SMEs with the advice they need. However the Growth Hub is only as good as the number and quality of local professionals hot-desking there and it is possible to see the Clearing House as devaluing the advice of the professional services.
There is perceived to be a sales and marketing gap amongst small businesses in the region. The product or service may be excellent but the business lacks the knowledge and ability to market and sell it effectively. If this is the case it needs to be addressed.
Success or failure depends on the strength of management and leadership
Businesses succeed or fail on the strength of their management. The final ‘straw’ may be something very specific but strong management and good leadership will ensure the business minimizes its exposure to risk and is able to adapt to survive.
Family businesses are particularly vulnerable to weak management. The second, third or fourth generation family members may inherit the position of leading the business but not necessarily the skills or outlook to do so.
The sub-region’s leaders need to be able to access good advice and support, with mentors able to guide them and provide a sounding board.
Beating the barriers to growth
Access to the right skills at the right time is crucial but this is difficult and seen as a real barrier to growth. The sub-region needs to attract talented professionals and be confident in its offer to them: a good quality of life and a positive work / life balance.
A lack of skills can also be tackled through innovation and improved efficiency. The challenge presented by poor quality legislation is, however, harder to navigate. The volume of legislation that is perceived to be inappropriate, clumsy or plain daft is seen to be increasing. For political reasons a range of legislation appears to have been brought forward quickly with the attitude that the Judges can fix the details later through case law. There are plenty of good examples of this type of legislation that need to be brought to the attention of the Government as part of campaign for change.
Collaborating to promote Coventry and Warwickshire
There many organisations tasked with driving growth within Coventry and Warwickshire and attracting inward investment. These include Coventry City Council, Warwickshire County Council, the Local Enterprise Partnership, the Chamber of Commerce, the Growth Hub and of course Coventry & Warwickshire First. Working collaboratively these organisations could constitute a powerful lobby.
The regional offer
Growth is also dependent on attracting key individuals to the region. In particular, it needs to be attractive to chief executives. They need to opt to live and work here.
Coventry and Warwickshire has a good offer that includes culture, countryside, and good transport links. However there is little that is truly unique and so it may not sufficiently differentiate the sub-region from other locations. Furthermore the housing stock may not be sufficiently high calibre.
Roadmap to a successful business in Coventry & Warwickshire
There are a number of factors that contribute to the success of a business:
Strong and competent leadership and management
Innovation: in products, service and the approach to doing business
Access to informed, ethical and local professional services providers
The alignment of and collaboration between the bodies tasked with driving inward innovation
Fostering diversity on the board
With the Government on track to achieve its target of women accounting for 25% of board members of FTSE 100 companies, there is more to be done amongst firms within Coventry and Warwickshire. The black and minority ethnic representation is also poor. As a consequence the firms are not fully tapping into the potential talent available.