ROUND TABLE: Economic sustainability – a route map for the East Midlands

Businesses in the East Midlands continue to outstrip the rest of the UK (outside of the south-east), but what is driving this growth – and how do we ensure that it is sustainable?

Our exclusive round table, sponsored by Freeths, JLT and Barclays discussed the issues facing economic sustainability in the region and outlined what business owners should do to ensure their businesses are fit for the future.

How do we ensure that this period of economic growth is sustainable?

Karen Rutter: There is no magic wand. The recession made business owners re-evaluate how they look at their costs and instilled a sense of discipline which has brought many businesses under good financial control. What this has meant is that now sometimes firms can pick and choose which contracts they take on rather than saying yes to everything. They can be more selective. It’s all about learning to walk before we can run, controlled growth and having the right capital in place.

Karen Rutter and Chris Freeston

Sally Swann: Is finance available for businesses?

Steve Wooler: There seems to be an appetite like never before to lend. A lot of this money is coming from foreign investors, and the market is good.

Matthew Proudlove: Is the appetite there from businesses to take up the funding? Are we approaching the levels we saw ten years ago?

Wooler: I think we are. Ten years ago no-one knew what was around the corner – hopefully a lot of businesses have learned from that experience. I know the banks aren’t willing to fund unsustainable businesses any more.

Chris Freeston: I think the profile of lending has changed. For the vast majority of businesses the bank is still the first port of call for finance, but now there are also avenues such as private equity and crowdfunding and so on. What we don’t know is how the markets will react if lending becomes less frothy.

Craig Craney: We’re pretty self-contained, so we don’t really have to worry about this. We know what we’re capable of and we aim for controlled growth.

Sally Swann

Mike Reader: We were pretty novel in the fact that we actually grew during the recession, but now our focus is on consolidation and helping the business to become stable. We’re looking at more organic growth.

Proudlove: There is lots of funding out there for changes of business ownership. But are there more instances of funding outside the traditional routes?

Rutter: I’m obviously an advocate of traditional funding models, but we work on a number of Enterprise Finance Guarantee deals and with some high-growth entrepreneurial businesses. There are some good opportunities for companies to grow, funding-wise. There is lots of competition out there for banks at the moment; we’re always up against two or three other banks when we’re looking to secure a piece of work.

Ian Baxter: I totally funded the set-up of our business, but over the next 12 months we’ll be looking at putting some funding in place.

Steve Wooler

Rutter: The management team is still critical when it comes to putting a lending deal together.

How can a company best protect its assets in a period of growth?

Swann: It’s rare for businesses to think about their exposure to risk. Because of the recession business owners did all sorts of new activities and diversified to stay in business. It’s rare for businesses to think about exposure to risk when they are making changes and developing their business. Any change can mean a change in risk profile and it is imperative that is considered and amendments made in discussion with the business’ risk advisers.

Baxter: Our biggest risk is our debtor profile. As we’re in an SME we have to be slightly more flexible with payment terms, but certainly can’t afford bad debts. On another note, I think we have to ask: is sustainable growth up to us? the UK will face external factors such as what is happening in Europe and China and those who, if we leave the EU, will think more carefully about their investments

Matthew Proudlove and Matthew Reader

Will the threat of Brexit affect growth?

Wooler: I definitely know of property investors postponing decisions until after 23 June, and those that are writing post-Brexit clauses into contracts.

Freeston: I’m seeing people beginning to process deals – many areas we work in are insulated by the Referendum outcome.

Baxter: I think if the Leave vote wins the day then it could set off a domino effect throughout the Eurozone.

How much of an issue is the skills gap in the East Midlands?

Craney: We’ve found that there are a lot less young people going into engineering, so we’ve had to adapt our own in-house training and strategies to combat that. There are also a lot less people leaving school at 16 – so it’s beneficial for us to look after our own.

Baxter: I don’t understand the skills gap. We’ve taken people and trained them up. I mean, not many young people dream of being a freight forwarder, but we take them on and give the training they need.

Ian Baxter

Wooler: Engineering needs people doing STEM subjects coming out of school with the right background. However, it seems to me that young people aren’t making the right decisions at school.

Rutter: Do businesses need to talk to schools more?

Wooler: I think it’s mainly the responsibility of government. Careers advisers, on the whole, are abysmal. In some cases they’re actively putting people off a career in engineering because they’re telling them it won’t be a rewarding, well-paid career. The opposite is in fact true.

Reader: I think industry is often slow to react, but it’s getting into gear.

Swann: Insurance seems to be attractive to graduates. Some might have done law at university but because firms haven’t been investing in training they’ve looked elsewhere – we also don’t have as many exams! We sometimes have problems recruiting because Nottingham isn’t seen as a centre of insurance in the way that – for example – Birmingham is.

Baxter: Making people pay for university is a good thing because it focuses their mind of what career they want out of it.

Proudlove: If people don’t choose to go to university at 18, do we offer them enough?

Craig Craney

Wooler: I think we’re changing on that issue. Some of our best staff are people we’ve taken from school and they’re potentially more valuable to us than graduates.

Freeston: We have to also understand that there is a national pull towards London… but that people do come back.

Does the Midlands Engine project resonate with business owners?

Wooler: It’s hugely important that there’s a rebalancing of the economy, and the opportunity for the East Midlands is there. However, parochialism is in danger of killing it before it gets going.

Swann: Birmingham, because of its size, stands on its own. It seems that in the East Midlands we don’t get our act together; Derby, Leicester and Nottingham are all like little islands.

Baxter: There’s no stand-out city in the East Midlands, I think that’s part of the problem.

Proudlove: It’s also a very stretched-out region. It extends from just south of Grimsby down to south Northamptonshire. Travel links and transport around the region is also appalling.

Reader: Business owners want to the Midlands Engine to work. If the politics get sorted out then it’s a great catalyst for a successful economy.

Panel:
Sally Swann, JLT
Karen Rutter, Barclays
Chris Freeston, Freeths
Matthew Proudlove, Retail Assist
Steve Wooler, BWB
Craig Craney, A1 Flues
Mike Reader, Pick Everard
Ian Baxter, Baxter Freight