The struggling banking system is still failing West Midlands businesses, it was claimed today.
And the Government could do more to nurse the region through the recession, according to West Midlands Business Council.

The WMBC hit out in a submission to the new House of Commons West Midlands Select Committee, which is holding an inquiry into the downturn and its effects.

“Concerns regarding the behaviour of the banks have continued to be expressed by businesses,” the lobby organisation maintained.

The Institute of Chartered Accountants in England and Wales – a WMBC member – had cited the example of how one firm borrowing £3 million had an arrangement fee of £1,500 raised to £30,000. Another seeking £15 million now had a £2.5 million arrangement fee renewable in six months.

And the ICAEW had also highlighted reports of exporters facing greater difficulties in gaining indemnity insurance – a business with export interests to Portugal had failed to get cover, exports to the United States were not immune, while some construction companies were being shunned.

The Federation of Small Businesses too had raised issues, mostly with high street banks, concerning increases in exit penalty charges.

The submission hails the success of the Advantage Transition Fund – established by regional development agency Advantage West Midlands, it specifically aims to help businesses whose normal bridge funding has been affected, building on the lessons learnt from the collapse of MG Rover and its aftermath.

“While inevitably much of the data relating to access to finance from the banks is anecdotal as commercial confidentiality is required to avoid a collapse in market confidence in some firms, the popularity of the Advantage Transition Fund is a clear indication that these problems are continuing.

“We are concerned that despite the statements from the banks and Government, normal bank lending from all high street banks has not resumed and this is a drag on regaining confidence in the regional economy,” states the WMBC.

It warns that the West Midlands, with its reliance on manufacturing, property and retail, had been hardest hit of all the regions of Britain. Engineering job losses had been particularly marked. And poor broadband connections in parts of the region had exacerbated the problems that rural businesses were facing.

“As a consequence, the need for a joined up approach to economic regeneration is sorely needed but aspects of national policy is holding back on effective delivery.”

The WMBC voices disappointment at the Government’s failure to allow an extension of time for European funds allocated to the West Midlands region to be spent – the EIB had offered an extra six months.

And it bemoans the delay in the announcement of details of the package of measures to assist the automotive sector. The uncertainty had “affected market confidence in this strategically important sector”.

The WMBC has called for some underwriting of the credit insurance market in a bid to boost exports, and it
continues to urge the Government to introduce a short time working assistance or wage subsidy scheme.

And it wants a short term reprieve for Learning and Skills Councils – due to be abolished by April 2010 with their responsibilities being split three ways between two new Government quangos and local authorities.

WMBC states: “LSCs are important to address the skills issues arising out of the recession. This is the worst possible time for these changes to take place when all the focus should be on helping people stay in work and get back into work. We would urge that these changes are put on hold until the worst of the impacts of the recession is over, at the very least.”

And it adds: “Positive steps have been taken – such as the Advantage Transition Fund.

“However, full engagement with the business community is necessary to help local communities and the West Midlands region overcome the economic crisis.”