MIDDLESBROUGH COUNCIL
EXECUTIVE REPORT
Middlesbrough’s Response to the Recession – an update
Executive Member for Regeneration and Economic Development: Councillor David Budd
Director of Regeneration – Kevin Parkes
Date 30th March 2010
PURPOSE OF THE REPORT
1. This report provides the Executive with an update on work being undertaken by the Council and its partners to tackle the effects of the recession in Middlesbrough. It identifies a wide range of activities, either currently being undertaken, or planned for the future. It demonstrates that Middlesbrough’s response to the recession is comprehensive and properly set with the national, regional and sub-regional context.
SUMMARY OF RECOMMENDATIONS
2. It is recommended that the Executive:
a) notes the contents of this report and endorses the ongoing work of the Council and its partners to address the impact of the recession in Middlesbrough; and,
b) receives further regular reports by way of an update on these activities and the state of the local economy.
IF THIS IS A KEY DECISION WHICH KEY DECISION TEST APPLIES?
3. / It is over the financial threshold (£75,000)It has a significant impact on 2 or more wards / r
Non Key
DECISION IMPLEMENTATION DEADLINE
4. For the purposes of the scrutiny call in procedure this report is
Non-urgent / rUrgent report
BACKGROUND AND EXTERNAL CONSULTATION
Introduction
5. In terms of the technical definition the UK is now out of recession. Having contracted for 6 consecutive quarters the economy grew by 0.3% in the last 3 months of 2009. Growth was weaker than many commentators expected and is not universally considered to be an indication that the UK has emerged decisively from the longest UK recession on record. However, the fact that the UK economy is currently operating well below both its pre-recession and trend levels of output is beyond dispute.[1]
6. Whilst, recently, there have been more tangible signs of recovery, for example UK unemployment falling for the first time in 18 months, a report by the Chartered Institute of Personnel and Development (CIPD) claims that the impact of the recession is deeper than headline figures suggest.[2] It acknowledges that although the scale of job loss in the recession is much less than originally feared it is evident that the direct experience of redundancy, repeat spells of unemployment and pay penalties has nonetheless been widespread. This, the report claims, is likely to have a much greater impact on perceptions of job security and consumer confidence during the recovery than the simple 'unemployment situation is better than feared' story of the moment would suggest. [3]
7. The quarterly Labour Market Outlook aims to offer an early indication of future changes to the labour market around recruitment, redundancy and pay intentions. The latest report offers no sign that the provisional estimate that the UK economy is now out of recession is leading to better job prospects. In fact, the employment outlook for the first quarter of 2010 has worsened slightly since the November 2009 report. The report suggests that the slight fall, nationally, in net employment intentions in the first quarter of 2010 is due to a dramatic slump in confidence in the public sector. The report claims that any private sector recovery will not be strong enough to offset the public sector losses, nationally.[4] As the North East region currently has the highest proportion of public sector workers in England (32%) its high dependence leaves the region disproportionately vulnerable to a second wave of job losses as spending plans are modified to address the budget deficit. It is suggested that a pay freeze is the likely approach post-election and this may mitigate the impact on jobs[5]
8. The preceding paragraphs emphasise the importance of continuing to implement existing, and developing new responses, as well as the dangers of complacency in the face of an uncertain future. With the General Election pending it remains to be seen exactly how the Government, whatever its political complexion, will tackle the £178bn budget deficit and how this will impact on a frail economy. For obvious reasons, the Government has made no specific decisions for spending beyond 2010/2011. Many commentators argue that excessive and premature spending cuts will prolong the downturn and delay the recovery. Post-election, and Comprehensive Spending Review (CSR) 2011, the Council will almost certainly be entering uncharted territory as the public spending profile changes from the relatively high levels of investment and stability engendered by CSR 2008 and more recent fiscal stimulus measures, to reflect a period of retrenchment and austerity. The pace, extent and scope of change remains uncertain and the Government has made no decisions as yet for spending beyond 2010/2011. In this regard, the Council’s reliance on central government funding for approximately 73% of its gross expenditure is a major cause for concern.
9. This then, is the backdrop, for the most significant single blow the recession has landed on the local economy; the mothballing of Corus’ Teesside Cast Products (TCP) which was confirmed on the 15th February. Previous reports to the Executive expressed relief that Middlesbrough had not yet witnessed the major redundancies experienced elsewhere in the UK and the region. The town is now faced with the harsh reality of 1,700 redundancies at Corus, with some 30-40% of the workforce from Middlesbrough, and at least the same number of jobs lost when supply chain and indirect economic impacts are taken into account. Whilst still to be verified, initial analysis shows that the town centre alone could lose an estimated £12m in retail and leisure spend annually.
10. The Council has been working with Job Centre Plus and Redcar and Cleveland Council since June 2009 to develop a response plan. This includes the establishment of a Resource Centre at Steel House from mid January 2010. Redundancies will commence from February 2010 and will continue for a period of time affecting 1,700 staff and 600 external contract staff. There will be a three stage process to the redundancies and this will include initial discussions, interviews, financial guidance and details of support services available. Numerous partner organisations are contributing.
11. The Government has announced a £60m aid package for workers losing their jobs at TCP. Of this, £30m will be invested in low carbon and advanced manufacturing industries to create more jobs. The Government has suggested the aid package could create up to 3,000 new jobs in the short to medium term and sustain over 10,000 jobs in the long term. Of the remainder, £10m is to be spent on providing apprenticeships and support for Corus workers who start new businesses after losing their jobs and up to £20m will be invested in the Wilton International site. Clearly, it will be important for the Council to work with partners to maximise Government and other support.
12. A further report on the formal response to the Corus issues will be presented to Executive shortly.
THE RESPONSE
Regional[6]
13. Public sector partners in the North East have introduced a number of new measures to offer businesses and individuals immediate help or signposting to help combat the effects of the global recession. A framework is also in place, through the Government Minister for the North East, the North East Regional Committee and the Skills and Employment Response Group to alert Government to specific concerns, co-ordinate activity and share good practice.
14. One North East, Jobcentre Plus, the Learning and Skills Council, Business Link, Government Office and The Association for North East Councils (ANEC) have established the Skills and Employment Response Group (SERG). SERG is leading the joint response to redundancies and unemployment during the recession mapping out the help that is available to both businesses and individuals, identifying where the gaps in provision are and aligning resources to meet these. Under the banner “Real Help for People and Business”, there is a marketing effort to signpost people to the support available in the North East.
15. ANEC has produced a report to provide central Government with an illustration of the range of activities councils are taking in the North East and has also highlighted where Government could support and facilitate regional efforts. ANEC has also undertaken a member-led Task and Finish Group that focused on how collective approaches and joint actions, involving a number of other partners in the public, private and voluntary sectors, can add value to what authorities are already doing.
Tees Valley
16. Tees Valley Unlimited (TVU) has produced a strategic response to the effects of the recession which concentrates on the long-term vision and ambition of Tees Valley which has encompassed the following[7]:
a) playing its part in responding to short term initiatives, led by One North East, to deal with the immediate issues at Corus and in the petrochemicals sector;
b) ensuring that the intelligence available on the recession is up to date and properly disseminated to partners;
c) preparing for the upturn by ensuring strategic initiatives are in place to deliver economic impact - a long term investment plan, new regeneration funding models and the Multi Area Agreement being the mechanisms for delivering the long term investment needed; and,
d) ensuring the integrated regional strategy and regional transport programmes reflect the needs of the Tees Valley, and contributing to regional initiatives such as ANEC’s Task and Finish Group (as described in paragraph 15, above).
17. Like Middlesbrough, the other Tees Valley councils have also stepped up their community leadership role to support people in localities, particularly vulnerable families and individuals, such as those on low incomes, the unemployed, or workers facing the prospect of redundancy. They have also expanded and intensified their support for businesses, with a view to sustaining local and regional economies and placing them in a strong position to move forward when the economic upturn arrives.
18. Councils across the Tees Valley continue to work with a wide range of partners, including the wider public sector, business, and the voluntary and community sector, to share corporate intelligence, explore and develop appropriate responses, targeted interventions and co-ordinated activity to address the impacts of the downturn.
MIDDLESBROUGH – A PARTNERSHIP APPROACH
19. Previous reports to the Executive have emphasised the importance of developing a partnership response. The Council and its partners have undertaken a significant amount of work in tackling the recession locally. A series of service-specific actions have been discussed and endorsed by the Council’s Executive and Middlesbrough Partnership’s multi-agency action groups have each developed plans detailing how the recession will be addressed within their particular theme of the Sustainable Community Strategy. The action group plans, which are a work in progress, are provided at Appendix 1. Progress in this area will be monitored via the Partnership’s six-monthly Accountability Sessions and will be the subject of future reports to the Partnership and the Council’s Executive.
20. The following paragraphs highlight some of the key areas of work being undertaken to support Middlesbrough’s people, communities and businesses through the recession and beyond. Given the scope of activity it is acknowledged that this report is not exhaustive, rather it is an attempt to provide a flavour of the important activity which is under way across the town.
21. More details about the work of the Council and its partners can be found on the Council and Middlesbrough Partnership websites. The Council has set up a dedicated site which offers a wealth of information and advice to individuals and organisations.
Supporting business
22. Middlesbrough is benefiting from a range of Government support through Business Link, including:
a) additional investment funding;
b) increased access to loan finance;
c) events advising on sustaining a business through difficult times;
d) free business health checks; and,
e) targeted support for businesses in vulnerable sectors.
23. In order to provide support to local businesses the Council is working closely with Business Link and, increasingly, with the University of Teesside to help businesses access the support they need. This activity complements the Council’s existing package of support to businesses. The Council is also working with businesses that are experiencing difficulties to help them manage Business Rates and rent arrears, to seek to enable them to maintain tenancies and continue trading where recovery is a realistic option.
24. The Council remains attuned to the needs of local businesses and continues to provide direct assistance, including the following:
a) the Council has signed up to the Government’s Prompt Payment Code – one of a series of structured initiatives devised by the Government with The Institute of Credit Management to tackle the crucial issue of late payment and help small businesses especially;
b) reduction in the time in which the Council aims to pay invoices from 30 to 20 days;
c) the Council has implemented a significant planned maintenance programme of its own buildings and will spend £30m over 10 years on leisure and community centres, administrative and social care buildings - this has the potential to stimulate the local economy through the use of local tradesmen and suppliers, and the Council has sought to package the contracts to best meet local needs; and,
d) National Non Domestic Rate Hardship Relief is publicised widely along with Small Business Relief.
25. The Council continues to work regionally with businesses and local authorities, through the North East Regional Improvement and Efficiency Partnership, to maximise opportunities for contract packaging, which will allow more local companies to bid for work.
26. Specific measures in this area already undertaken by the Council, include the following:
a) a change to standing orders which requires managers seeking below tender level quotes (up to £53,100) to source from 3 local businesses and only if they can't find a local supplier can they widen the search;
b) a database of suppliers to enable managers to identify local businesses - registration is free and details can be accessed via the Council web site under Apply for it / business registration;
c) a series of procurement workshops ( part funded by European Regional Development Fund ) targeted at small to medium enterprises and the voluntary sector explaining the procurement process and preparing them for successful local government tendering - average attendance of 28 companies per workshop for the 5 undertaken so far, with others are planned through to mid May 2010;