Mark Young and a web-based audience learn that banks want to lend, margins must be maintained and Ireland should be used as an entry point for exports.
“We’ve got money to lend to businesses but they have to show us how they can pay it back.”
That was the message from NatWest chairman of small businesses Peter Ibbetson at a live manufacturing webinar debate held today by the bank in association with smarta.com.
This was the latest in NatWest’s Business Knowledge webinar series and Ibbertson was joined on the panel by outspoken Dyson director Sir Richard Needham and EEF chairman Martin Temple.
Despite being challenged by Needham who said three “desperate” businesses he works with are experiencing quite the opposite, Ibbertson maintained that “the banks are very much open for business” – or, at any rate, his is.
However, Ibbertson warned that businesses must have foresight when they come calling for cash. “If you know you are going to want to borrow in three or four month’s time, come see us now,” he urged. “That way we can work out the best way to borrow and the best way to repay.”
He said he could understand the position when businesses came to the bank asking for emergency loans ‘to pay the wages tomorrow’ but said in these cases the right information was rarely available for the bank to be able to confidently lend. And in that circumstance, given the fact that charges of irresponsible lending were levelled at all high street banks and were oft quoted as one of the key causes of recession and the fact that NatWest’s parent company Royal Bank of Scotland is majority owned by the taxpayer
Of the £1bn fund made available for manufacturers by RBS at the start of this year, Ibbertson wouldn’t put a figure on how much has actually been disseminated but after the webinar he told me fixed rate loans, such as any that would come from, this fund, “have not seemed popular” among manufacturers.
Nevertheless that fund is still open and Ibbertson says RBS has a total pot of £50bn worth of liquidity waiting for manufacturers to snap up – providing they can pay it back of course. And, if the Enterprise Finance Guarantee scheme is any measure, RBS is indeed putting its money where its mouth is as so to speak. Ibbertson says around half of the money lent out through the EFG scheme so far – amounting to £400m – has been lent by the bank. It is one of 27 involved in the programme.
The hour long panel discussion also took in exports, skills, innovation and low cost economy manufacturing.
Needham’s advice to manufacturers first and foremost was not to panic with prices during hard times. “The road to ruin during recession is reducing your prices to maintain your volumes,” he said. “You have to maintain your margins to stay profitable.”
Ibbertson concurred and added the following counsel: “Find a way to make sure your debtors pay you on time.”
Needham, a former trade minister who is chairman of the business networking and advice website smarta.com, chose to employ a hint of poetry in his analogy of some companies’ shortcomings. “Businesses are full of muck and diamonds,” he said. “But some spend too much time sifting through the muck and too little sorting out the diamonds. Innovation is the diamonds.”
Temple said innovation must not just apply to products; it has to be introduced within all ways of adding value, including management, services and delivery.
Following a question from the remote audience, Temple told manufacturers to think long and hard about the reasons for seeking to move manufacture to low cost economies. “If it’s just for cash flow, be wary,” he warned. “There are pitfalls.” As well as hidden costs, he said intellectual property is a concern. “Don’t give away thins that are important to you because they’ll steal it – only subcontract out what you can afford to lose.”
From here, the conversation naturally flowed to exports and Needham had an interesting viewpoint. Though he agreed with his fellow panellists over the merits of pinpointing the regions where your product is desired, he suggests Ireland, because of its adoption of the euro and its proximity, is usually a good place to begin exporting. “Start with the Irish, maintain your margins and make sure you have a decent sized marketing budget,” he suggests. “Then move into regions like Benelux. But don’t spend so much time (on exports) that you don’t look after the shop at home.”
As well as warning against a ‘scattergun approach’, Temple said it is paramount that manufacturers understand the cultural significances of the markets they are moving into. He said that while European markets may not be as lucrative in terms of exchange rates and other factors, it may be more beneficial in the long run as “it is easier to understand”.
The panel debated skills and whether the problems lay in the lower production end or the higher skilled end of the industry.
Ibbertson said a certain mindset among graduates that they can immediately demand salaries of £40-50,000 should be challenged. They must instead be urged to enter advanced apprenticeship schemes at the likes of Rolls Royce and BAE and gain vocational experience, he said.
Needham summarised the problem by regaling Dyson’s recent experience. The company recently announced that it wants to employ a further 750 engineers. It has interviewed 90 so far; 11 were found to be capable of doing the job.
The hour long webinar is available to view online by clicking here.