Region's economic wish-list for a more prosperous 2013
Although the uncertain global economic forces of 2012 are likely to continue into 2013, we should take confidence that the Westcountry is well positioned to benefit from the UK's stuttering economic recovery as it gathers momentum into 2013 and beyond.There is much about which to be positive. 2013 is the year when the Westcountry will start to realise its dream of becoming a digital peninsula. We have the environment and the skilled workforce. All we need is the superfast fibre-optic infrastructure and the transport links. Then hi-tech and environmental businesses can start to form a new wave of regional growth that combines with the continued success of our tourism and agriculture. 2013 will see a major expansion of superfast fibre optic broadband across the Westcountry. This will be crucial to the organic growth of existing businesses and to increasing local start-ups as well as attracting business relocations to the region. Such major regional IT infrastructure investments will help to bring renewed confidence to businesses across the Westcountry and will allow this region to punch above its weight.
If the pattern of this recession follows previous ones, then 2013 is the 'get back on the horse year' and in 2015 we should start to move ahead much more confidently with wounds healing nicely by then. However, liquidity is key – funds must be unlocked and the banks need to be made accountable and responsible and the justified vilification of them must be followed through with political teeth. The banking system has a duty to play a lead part in economic recovery. A lot of South West businesses are doing well but others have held on to skilled staff awaiting the upturn – if the economy does not move ahead in 2013 some will be forced to admit defeat and release those skills to survive. Of course, for some, the recession has drained all their resources and/or their bank has withdrawn working capital facilities – so these will struggle to participate in the upturn. Business failures increase when the economy turns upwards as their banks put them down in order to clean up their books ready for the move ahead and because by then bank balance sheets can absorb the crystallised losses. I had dinner with my good mate the visionary Tony Rowe. He said: "if you want things to happen in your business you must make them happen – they will not happen on their own" – simple, but very sage words.
On the threshold of 2013, it is timely to consider Cornwall's economy 'past, present and future'. Nearly two decades ago, I championed Cornwall's economy in Brussels. Back then, the focus of economic ambition was on the 'basics' including, for example, adding value to agricultural goods. Fast forward to today and we have a plethora of high end, high value businesses thriving in this important sector: from Camel Valley to Trewithen Diary to Cornish Blue; Cornwall now retains the benefits of innovation and adding value to its raw materials. Similarly, in tourism, there is a transformation from a weather dependent 'bucket and spade' summer offer to today's year round cultural destination, with world class all weather attractions, a vibrant cultural and arts scene and superb accommodation, restaurants, shops. Importantly Cornwall today is focused on innovation, knowledge based enterprise and low carbon agendas. Strategic investments include: the CUC, Wave Hub, Aerohub at Newquay Airport, innovation centres and investment in Superfast broadband.So what of the future? Building on current pioneering investments with fresh, ground breaking and future proof ideas is critical. So is both celebrating the influence and maximising the potential of the Cornwall and the Isles of Scilly LEP, which is a real asset to the economy of Cornwall. Vision, leadership, partnership, devolved funding and effective project delivery will ensure we achieve our destiny.
Business investment is a critical component in growth and economic recovery, and the Government recently gave management teams two good reasons to start spending again. As part his Autumn Statement the Chancellor handed out a 1% reduction in corporation tax as well as restoring and enhancing capital allowances for investment in plant and machinery. From January capital allowances will be increased ten-fold to £250,000 and will remain at this level for two years, giving South West businesses a compelling reason to invest in the new year. This means that there has not been a better time to borrow to invest for 25 years. The reality is that money hasn't been as cheap for the average business since 1987 thanks to the Bank of England's low base rate and their Funding for Lending Scheme. Coupled with the restoration and uplift in capital allowances and the reduction in corporation tax it is hoped that businesses will now start upgrading their plant and machinery, which will have a knock-on effect throughout the supply chain, boosting companies' order books. Up until now, many business leaders in the South West were postponing capital investments in all cases except for the most compelling, but they have been few and far between with the majority holding on to their cash given the uncertainty for the short-term economic outlook. This has stifled the local and national economy. We are already in conversations with our clients about refreshing tired plant and machinery or investing to increase capacity and take advantage of market opportunities. Whilst austerity and uncertainty are likely to remain the backdrop to UK business in 2013 we expect to see an increase in borrowing for this purpose from January, when the new allowances come into play, which will have a positive impact the economy for the South West.
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2012 has been a torrid year for many Westcountry businesses resulting from instability in both the economy and the weather. 2013 needs a massive injection of positive infrastructure actions by government as empty promises will no longer suffice. According to the National Infrastructure Plan £400 billion needs to be invested in the UK's infrastructure between now and 2020 if the country wants to remain competitive in a global market. Projects such as the Bloodhound Super Sonic Car, which we actively support, developing the first land-based vehicle on four wheels to break the 1,000 mph barrier, can act as catalysts for innovation in the supply chain and enthuse budding engineers to follow a creative future. If we are to retain their skills in the Westcountry we need to create an environment that encourages local production rather than feeding the imports bandwagon. Exporting products and services, support for the housing market, the construction of good housing and investment in productive infrastructure are all essential building blocks for recovery. Real wealth creation depends on making and selling things. Bott's growth in supplies of industrial equipment in 2012 give me some hope that a UK manufacturing renaissance is under way. The Government now needs to provide an environment for sustained growth.
I have three New Year wishes – investment in infrastructure, the confidence across industry to invest and less red tape and restrictions. This recession has been long, hard and is not yet over. It requires investment to pump prime the recovery and investing in infrastructure brings both short and long term benefits. Short term job creation and stimulus to the supply chain to build the asset, long term as people and businesses are able to use the asset. Confidence is a major factor. During a recession companies batten down the hatches which means they protect what they have got, cut costs, don't reinvest, don't replace and don't train. Once on this cycle it needs a step change which is where investment in infrastructure becomes so important as does less red tape and restrictions. If the investment is ready, the funds and confidence available why does it need to take years in the UK to get approvals, licences and all the permissions UK red tape requires. I emphasise UK not EU because the UK has taken EU rules in the past and gold plated them, often turning four pages of guidance into forty pages of regulation. If you want an example try for seven years to dredge the Port of Falmouth and create wealth and employment for Cornwall.
I hope that as we enter 2013 business leaders across the Westcountry will throw caution to the wind and become more confident about the future. Naturally, I understand that this is a tall order given the current economic climate and uncertainty, but in my opinion a can-do attitude is probably our only option, and potentially could be the key to the survival of many businesses. It occurs to me that people are always looking for a better way to do business. Our clients recognise that they need to continue to invest in design, by marketing and developing their brands in order to win market share – and naturally if their marketing is effective and brings them results, they'll see a tangible return on their investment. However, the businesses that survive the challenges of the coming years will be those that offer wider benefits to their customers – not only in financial terms. Customer satisfaction has to be a priority, so spend time listening to what your customers like and don't like about the services you offer. Confidence is contagious and my hope is that if we remain upbeat against the odds, whilst proactively looking after our clients and employees, we'll weather this economic storm and all be better businesses as a result.
I have four wishes for the Westcountry's business economy in 2013. Each one is eminently achievable, but that achievement is much more difficult now that we have lost the regional agencies, like the regional development agency, South West Tourism, and Government Office South West.
1) We have to get Devon and Cornwall tourism bodies to understand that they must work together to attract visitors, rather than compete against one another. Both counties have their own marketing bodies, now that we've lost the regional tourism agency no-one is promoting the obvious option of a week in Devon and a week in Cornwall.
2) Currently, the Westcountry exports less manufactured goods than the UK average (ie 11% of output compared to 20%). If the region is to achieve its true potential to help Britain's economic recovery that has to change, and there is much help available to deliver a growth into overseas markets.
3) As elsewhere, many Westcountry businesses are sitting on their cash, hoping for a radical change in market conditions. This is not going to happen in the short term, so those businesses would be better advised to invest cash in growing their business.
4) Too much of the Westcountry's future talent escapes to London. This region is great at attracting people when they retire, but not so great at keeping the graduates of its excellent universities: this is a crucial issue for the Westcountry's economic prospects – and should be easily addressed, given the greater lifestyle benefits and the region's global credentials for so many sectors. The thing that could make the biggest change is to get LEPs, councils and MPs working together. That seems common sense, although I accept that it is politically difficult.
What would I do with the limited funds available? Dredge Falmouth Harbour and invest in the Unlocking Cornish Potential programme – the best thing to have come out many initiatives in Cornwall that actually does support local businesses. Working with the UCP team I would amalgamate the Oxford Innovation team with them. Scrap the Cornwall Development Company and use their budget to appoint a small team to evaluate the strengths and weaknesses of the companies in Cornwall and observe who has the potential to realistically grow. Part of this team would be out identifying sales opportunities in the national / international marketplace ie matching our strengths with market demand out of the region.Mirror this task with a team in Devon and co-ordinate between both counties.
I would focus very much on our returns on investment with effort put in to drive our strengths forward to meet targets set to achieve.We have to become a knowledge based economy because manufacturing on any form of large scale has left us all forever in reality. Tourism is our second option to expand for both counties if we can offer value for money. Look at those successful companies we have and help them expand if they so desire. Well that's what I'd do if I wanted to grow the local two county economies, but I'm just a wealth creator so that is against what the public sector will realistically do. They all live in their own bubble which is on a slow downhill path as the rest of us strive to grow our businesses to help them get us out of the mess we all find ourselves in today.
The Westcountry is a beautiful part of the world and everyone who lives here can count themselves extremely lucky – unless, of course, they are unemployed, on reduced benefits or in danger of being made homeless as a result of the multiple dip recession that has become the economic norm in Europe. 2013 will be a year of continued uncertainty and increasing fear among people without job security or job prospects. This stark reality should be a call to arms for all those institutions charged with developing the employability of our young people, the growth of our small and medium sized businesses and the eventual recovery of our economy. When times are hard and money is tight there is a temptation to avoid risk and hang on to what is more certain and less unpredictable. Paradoxically, we know that when everyone else is running for cover, that is precisely the time to be bold, take risks and bet on our collective future as a region. But the pre-requisites for such behaviours to emerge are self-confidence, mutual support and access to capital. So my wish list for 2013 would include deeper and more meaningful collaboration between Local Economic Partnerships, more effective coordination between local authorities, and united business leadership between our leading industrial cities: Bristol and Plymouth. We need clear commitments to grow the sustainable regional enterprises of the future: renewable energy installation, social house building, and local food production. We need apprenticeships and highly entrepreneurial college and university graduates. A regional development bank supported by public pension funds and a pipeline of projects for investment by the Government's Green Investment Bank and Big Society Capital would also make a significant difference to the Westcountry.