NEC Group chief calls for ‘son of furlough’ to help keep business alive

The chief executive of NEC Group has warned of an “economic disaster” facing the West Midlands and UK economies as he pleaded for Government to extend its support to business.

Paul Thandi wants the Government to repay the favour from the creation of Nightingale Hospitals and provide some economic medicine to keep it out of intensive care.

He specifically called for an extension of the furlough scheme and for the Government to support those industries that cannot turn their revenues back on within days or weeks of reopening.

“I don’t think it will come back in 2021,” said Thandi. “I think 2021 will be a tough, tough year, not just for my business, but for the UK economy.

“But I also think that it’s going to take us two to three years to recover from this.”

Thandi, who was awarded the CBE for services to the economy in the 2020 New Year Honours, is forecasting two cliff edges for businesses – the first at the end of October when the furlough scheme ends, then in January when the deferred VAT and business rates must start to be paid back.

The warning is particularly stark because, unlike some of the region’s other strategically-important companies like Jaguar Land Rover and GKN, the NEC Group had been performing strongly.

It had doubled its operating profits in the three years to 2019, to £64m, while revenues had increased by more than one-quarter to £170m.

The NEC Group is Europe’s busiest venue business and has a huge impact on the region’s visitor economy and profile.

It played a key role in Birmingham’s successful bid to host the 2022 Commonwealth Games and is working with Birmingham City Council on an ambitious, generational masterplan for the NEC campus, linked to the arrival of HS2 at the planned Birmingham Interchange station.

The NEC campus

He said: “We need to protect these significant businesses like ours, that have a strategic value to the country.”

The NEC’s sites include arenas in Birmingham city centre and at Resorts World, and the NEC and ICC conference venues.

It welcomes 7m people to 750 events every year and the £4bn those visitors spend in the regional economy helps support the jobs of 30,000 people.

“That’s the point about keeping our business alive so we can continue to support the indirect jobs that we support in our economy,” he said.

Thandi has engaged with “government at all levels, including Number 10” but has now sounded a public warning about his fears of the scale of the problems facing businesses.

“There’s talk of being 20% down on GDP, I don’t think that touches the sides,” he said. “I don’t think my business will get 50% of revenue and you can do the math on what it does to my head count.”

NEC Group, which includes The Ticket Factory and caterer Amadeus, employs 800 full time and 1200 part time staff and its wage bill normally averages more than £3m a month.

It used to generate £1m revenues every 48 hours before lockdown, when its revenues became effectively zero overnight, causing it to furlough 90% of its full-time staff and all of its part-time and casual staff.

But businesses are required to take on some costs of furloughed employees from August and contributions step up to 20% in October, which is the final month of the Government’s job retention scheme.

Chancellor Rishi Sunak has promised a £1,000 bonus for every furloughed worker who is brought back and still employed in January. But the scheme has been criticised for being wasted on those companies that were going to bring staff back anyway while being too small to make a difference to employers struggling to pay their staff.

“I’m not going to pull any punches,” said Thandi. “I’m sorry, but £1,000 to try and save someone’s job, or a bonus to keep someone’s job, is just not good enough.

“I’m taking on full-time pay for our people from October, November, December. We’ve had zero revenue since March in terms of events and we have got hardly any events, literally a handful, until the end of the year.”

There is clearly a concern that Sunak and the Government might wash its hands of any further direct economic support for businesses.

NEC Group’s Paul Thandi won the Ambassador award at the 2017 Business Masters

But Thandi, who has led the NEC Group since 2007 and is a non-executive director of Metro Bank, is pleading for an extension of the furlough payments to the worst-affected industries.

“What we are asking government for is to look at a son or a daughter of furlough to take us through to March 31,” he said.

The Government has announced the events industry can reopen from October 1, but the NEC Group often delivers concerts, conferences and trade shows with international participants and audiences that cannot be switched back on overnight.

“The issue is for us to fire up events, and exhibitors and visitors to get ready for that date, there needs to be an element of confidence that the event is going to take place,” said Thandi.

“All the events that were in March to June have moved into next year. But the events in Q4 now are looking very anaemic and the reason why they’re looking anaemic is because of the supply chain, visitors’ confidence to attend these events, and also exhibitors saying it’s just too late.”

He is calling for urgent Government intervention to ensure it is not too late for many businesses for whom the next six months are gearing up to be even tougher than the previous six.

Thandi said: “My plea to government is: one, look at furlough or some other intervention. Two, look at the cliffs that all businesses are facing at the end of October and January because, realistically, no one’s had enough time to gather enough revenue to pay those taxes that we all need to pay. And lastly, please get a message of confidence out there.”

The NEC Group is owned by Blackstone, the largest alternative investment firm in the world with more than $500bn of assets.

“Blackstone have been an excellent shareholder in terms of supporting us and they have come to our help,” he acknowledged.

Although Thandi said that what has been discussed is “between us and them”, the group’s owner has already provided significant financial support to the business it paid £800m for less than two years ago.

“Our costs are fairly significant and Blackstone has been able to meet to make sure that we are able to keep the lights on for our business and make sure that we have got a chance of recovery next year,” he said.

Despite the financial resouorces of its American owner, Thandi believes the NEC Group has earned the backing of the UK Government.

In April, at the height of fears about the capacity in the NHS to deal with the pandemic, six halls at the National Exhibition Centre were converted into Nightingale Hospital Birmingham, with a potential 4,000-bed capacity.

Thandi said: “We’ve come to the nation’s call and given our venues over to the NHS for nothing. Now there’s a ton of other people that got paid to supply their services to the Nightingale hospitals across the country. We didn’t.”

He wants the Government to acknowledge this contribution by supporting the conference and events sector through its lengthier transition back to more normal levels of trade.

He added: “All my other brother venues in the UK, the ExCeL venue, Manchester etc, have all come to the country’s call to help fight Covid. I would now ask the Government supports us in our fight to recover the economy.”