Funding recovery in a region of discontent

Economically and geographically at the heart of industry, the Midlands remains dependent on a thriving manufacturing base.

During the anxious days last spring when Rover’s existence hung in the balance, everyone from Tony Blair downwards realised that the closure of Longbridge would be a potent symbol of the decline of UK manufacturing in its traditional heartland.

Thankfully Rover survived as a volume car producer, even though its long-term future is still far from assured. But the episode concentrated plenty of minds on the state of Midlands manufacturing, whatever Rover’s eventual fate.

Manufacturing remains hugely important in both the West and east Midlands, accounting for around 30% of gross domestic product.

The Rover crisis highlighted the dilemma facing regional bodies and the government — how to safeguard as much ‘traditional’ industry as possible while gearing the Midlands up to competingin the high-tech markets that are setting the pace in the global economy.

The Rover Task Force was established to pursue both these ends and as the first anniversary of the crisis at Longbridge approaches, it is still making an important contribution to regional policy.

One of the most urgent problems facing the West Midlands was how to protect the hundreds of suppliers serving Rover if the car manufacturer collapsed.

The response was a £12m government support package administered via Birmingham & Solihull TEC’s Accelerate programme. The scheme offered cash to suppliers with more than 20% exposure to Rover to help them invest in technology and training for their business, allowing them to strengthen their position and diversify into new markets.

Around 150 firms successfully applied for funding, and a recent evaluation of the scheme by Birmingham University suggests its impact was positive. The programme led to a significant improvement in technical skills, 80% of recipients said. Three-quarters claimed to be better placed to collaborate with the rest of the supply chain.

David Hall, programme manager for the Rover supply chain support package, says the sense of foreboding in the region last year cannot be exaggerated. ‘There was real fear for the future. We had companies ringing us up panicking,’ he says.

The wake-up call

Hall believes the threat to Longbridge sounded a much-needed alarm call to the regional supply chain. The project claims to have secured around 1,500 jobs that would have otherwise vanished. But he warns that ‘creeping complacency’ is still a danger to the region’s prosperity, with e-commerce a particular area in which businesses need to keep up with the global game.

‘The mood in the region is more bullish than it was, especially among the motor manufacturers,’ says Hall. ‘But suppliers are still worried, because they can see the effect globalisation could have on their business and want to know how to respond.’

While initiatives such as the Rover support package have been invaluable, the regional development agency, Advantage West Midlands (AWM), knows the area will stand or fall on its ability to attract new investment and encourage start-ups, particularly in high-tech industries.

To encourage the latter, AWM recently launched what it claims is a unique public and private sector finance initiative called the Advantage Technology Fund. This £7m venture capital fund offers assistance to technology companies in, or moving to, EU Objective 2 special assistance areas within the region.

But though the money is there to attract new industries, other factors will affect the ultimate success of the new arrivals.

Many commentators believe the key to successful regional economies lies in clusters — groups of manufacturers, suppliers and services which form a mutually supporting network in particular locations.

Clusters are central to government plans for boosting regional economies across the UK. In a bid to help RDAs promote clusters, the Department of Trade and Industry recently published a major study of those already in existence. The DTI found nine significant clusters in the West Midlands, most connected with the region’s traditional strength in manufacturing.

The Rover Task Force is keen to promote three growth areas it believes could attract high-tech clusters: the A38 corridor from Birmingham past Longbridge and Birmingham University to Malvern; a Telford/Wolverhampton corridor around the M54; and the Coventry/Solihull/Warwickshire triangle.

According to Tony Lowe, joint managing director of Nuneaton-based NPL Technologies — a pattern and tool making company serving the automotive sector — access to a local network of partners and suppliers is a powerful business asset in the West Midlands.

‘We’re often asked to take on jobs as lead supplier and draw up a list of second-tier companies while remaining the main point of contact for the customer,’ says Lowe. ‘Access to a wide range of companies you are familiar with and can just jump in a car and visit is a big plus.’

If clusters really are the future model for regional economies, then the East Midlands may be better placed than many to take full advantage.

Nigel Chubb, director and chief executive of the Engineering Employers’ Federation in the East Midlands, says that ‘possibly more by chance than design’ the region has become home to small groups of specialised companies.

‘Unlike the West Midlands, we have no big regional centre, which some have seen as a problem,’ says Chubb. ‘But I see it as an advantage, because we have distinct pools of success in various areas and have never had all our eggs in one basket.’

The motorsport cluster in Northamptonshire, machine tools around Leicester, suppliers serving Alstom in Lincolnshire and even Raleigh (still an important employer in Nottingham) are among the well-established East Midlands hubs. It is home to plants of world-class companies, such as Rolls-Royce, Toyota and Adtranz. The DTI acknowledges it supports an aerospace cluster of ‘international significance’.

But Chubb says predicting the regional investment plans of companies like these has become almost impossible, given the complex global markets in which they operate.’It is very hard to know what the plans for these sites are, because the people running them at local or even national level may not know,’ he says. ‘All we can do is develop a first-rate infrastructure, regionally and in the UK as a whole.’

New infrastructure

To help create that infrastructure, the Midlands business community is forging strong links with local universities. Along with the RDAs and business community, universities are at the forefront of a three-pronged push to commercialise the Midlands’ engineering and technology innovators.

In the West Midlands, Warwick University is lead partner in the Mercia Institute of Enterprise, a joint venture by several of the region’s universities, including Aston, Birmingham and Keele.

The institute wants to set up at least 10 new firms in fast-growing technology markets each year by encouraging engineering and science students to commercialise innovations. Financial support and business training to the tune of £10m is being provided.

In the east Midlands, Nottingham University’s Institute for Enterprise and Innovation has similar aims. The Rolls-Royce Manufacturing Technology Research Centre, also at Nottingham, aims to help engineering research work hand in hand with the needs of industry.

There are also encouraging signs that individual sectors in the Midlands are now more prepared to blow their own trumpets. One notable example is Motorsport Valley, an initiative led by the Motorsport Industry Association (MIA), which has gained the enthusiastic support of the RDAs.

The more than 4,000 businesses involved in providing engineering, technology and other services to global motorsport are mostly located in a corridor taking in the east and West Midlands along with the south east and East Anglia.

This corridor is unique to the UK, employs 30,000 engineers and turns over around £3bn. But the MIA realised its position in such a global sport is fragile, with North American and Asian competitors all too willing to take advantage of any weakness.

Its response was the Motorsport Valley Pathfinders to Prosperity, an initiative in conjunction with the RDAs to provide the support and investment needed to keep its world-class status. This includes forging better links between motorsport teams and local technology, and includes plans for a UK motorsport academy.

Keeping the critical mass of the motorsport industry in the UK is just one of the many challenges facing the Midlands. If such high-tech jobs can prosper, then the region could see a dramatic turnaround over the next decade.