Away from the debts, boardroom upheaval and managerial changes Nottingham Forest chief executive Mark Arthur speaks to Jim Pendrill in a rare interview.
Birmingham's Millennium Point was the landmark millennium project for the Midlands. Now, two and a half years after opening, the project is in crisis. Claire Greenshields assesses whether the £3114 million scheme has any future.
In the 1980s no-one knew what science parks could achieve. Twenty years later the University of Warwick Science Park is a beacon of success.
Customer still king
If there was ever such a thing as a Home Counties Insider and it produced its own guide to that region's top 500 companies, I've a fair bet which company would come out on top.
Like our own Top 500 this month (our 20-page report begins on page 27) it would almost certainly be a retailer which headed the field. So while Boots comes top of our survey for a third year running, it can safely be assumed that Hertfordshire-headquartered Tesco would top a Home Counties list.
I make the observation because Tesco's tentacles are being felt ever more strongly in our region. When chief executive Sir Terry Leahy recently said he was pushing ever more strongly into non-food - while unveiling annual pre-tax profits of £31.6bn - his words doubtless struck fear, or at least should have done, into every Midlands retailer.
"Our share of total retail is under 13 per cent - that leaves 87 per cent," quipped Leahy. The remark may have been a little flippant, but we get the point.
I'm sure Richard Baker at Boots got it. The former Asda man will doubtless know Leahy well, and the rise and rise of Tesco is arguably the biggest headache he faces as he embarks on his restructuring plan, a plan that has already come with some painful medicine for Nottingham (see page 32).
Our number three company this year, Leicestershire-based Next, also faces huge challenges from Tesco, while a casual look further down our Top 500 reveals a string of Midlands companies which need to be alive to the threat too - Halfords, Adams Childrenswear, James Beattie, Dillons, Remainders, Claire's Accessories...do you want me to go on?
A good number of these companies have themselves been the focus of corporate activity or refinancing in recent years, which only goes to show that the high street remains an extremely lively arena for corporate finance in our region too. And it's only going to get livelier.
And the above is all proof too that in the consumer sector at least, competition from home is still just as relevant to many of our Top 500 as is competition from overseas. It will probably become even more relevant as the balance of our economy shifts away from manufacturing to a more consumer-oriented base. Further proof too that any UK consumer downturn sparked by a housing market crash or sharp rise in interest rates will have major consequences for everyone, not least in this region.
The more general shift of the region's economy towards the consumer sector is also one that we inevitably pick up on in this year's 500. It is a trend which we all know is happening, but our analysis of the region's biggest companies - judged by our own distinctive formula which bases their ranking on a combination of both their turnover and profitability - is uniquely able to confirm the trend in black and white.
Talking of which, I hope you'll also agree that our Top 500 report - thanks to our research editor Rob Mayfield - is bigger and better than ever this year. As ever, any comments are always most welcome.
Jim Pendrill, editor
Joining the party
No other region in the UK has felt the impact of pending EU enlargement in recent years more than the Midlands.
Although I cannot back up the bold assertion with precise figures, I make the claim because of what I have learnt from speaking to directors of countless Midlands businesses over the last few years. Namely, that attracted by low costs, skilled labour and underdeveloped markets, they have been pouring into Eastern Europe in their droves.
In particular our automotive industry has been investing heavily along the new frontier, underscoring a massive expansion of car manufacturing capacity in Eastern Europe.
As such the momentous accession of ten states on 1 May probably meant little to these shrewd directors who got into Eastern Europe early. They will have doubtless been planning for the day when these countries became fully-fledged members of the European club for several years and have all the financial and legal systems in place to ensure their business move is a profitable one.
These same directors are probably the ones who are already eyeing the next wave of EU entrants - Romania, Bulgaria, Belarus and Ukraine - for the next big deal.
However, for those who are arriving later to the bigger European party, there are serious issues to take on board. Firstly, how quickly the competitive advantage of being there in the first place will be lost as the new states raise their living standards; and secondly, whether legal and financial issues (documented by Andrew Macleod in our report on page 35) surrounding a move east could become too cumbersome.
For the wider health of the new member states - in terms of raising their living standards - it is to be sincerely hoped that Brussels bureaucracy doesn't get in the way of their growth. The early signs are good, with most commentators agreeing that the new states will be reluctant to cede too much sovereignty to Brussels or embrace anything that could impair their growth.
Some have even suggested that the new states could be a dynamo for reform of the EU machine, a move that would surely be applauded by every Midlands director bombarded daily by Brussels diktats.
It might appear a faint hope but let's hang on to it, and here's too to plenty more opportunities for Midlands business to trade with our new partners.
Going for gold
Surprise surprise, London's Olympics bid looks like being floored by its chronic transport system (having attended a global sporting event at the Stade de France last year I believe we might as well give it to Paris now).
However, what caught my eye was the simultaneous proposal by a consortium of leading business figures to help the government address the problem by dipping into their pockets, via a one-off hike in business rates, to help fund the £310bn Crossrail scheme across the capital, a scheme that desperately needs to happen if the Olympic bid is to stand any chance of success.
This all got me thinking whether something similar could ever get off the ground in Birmingham to fund improvements to its chronic rail network and New Street Station. Would directors of leading Midlands companies consider dipping into their pockets in similar fashion? Just a thought.
Jim Pendrill, editor
Does it matter who owns you?
Is the public tide beginning to turn against buyouts and particularly secondary buyouts (SBOs), where one venture capitalist sells a business on to another?
Never mind the general state of the corporate market, which some argue is increasingly hedging against buyouts anyway as corporates begin to spend again. I ask the question in the wake of what appears to be some kind of mounting revolt against the practice of venture capitalists (VCs) playing pass the parcel.
Take the comments of Peter Hindley, chief executive of Midlands-based funerals business Dignity, whom we interview in this month's working lunch on page 20. Recalling the time earlier this year when he could have gone down the road of a SBO, Hindley told us: "Our business relies on stability, particularly from a staff's point of view. One option was to change from one VC to another and refinance the business, but every time you do that the staff think, "oh, not another change of ownership'. They get upset and it's not good."
The morning I wrote this I heard on my radio a very similar view for not selling on to a VC from none other than Jeremy Deedes, managing director of the Telegraph Group. Deedes was speaking after the group had just agreed to a £3665m offer from the Barclay brothers in preference to various VC-backed bids on the table.
As Deedes remarked, the brothers had "a great track record of nurturing, developing and investing in their acquisitions" and they "bought things for life". Besides, he added in so many words, staff wouldn't have favoured the group being sold on to someone who themselves would have just sold the business on a few years later.
I'm quite sure 3i and other private equity players who were hovering over the Telegraph would have been rather taken aback if they had heard Deedes' comments. But it did raise an interesting dimension to the whole debate - do staff really care when a business is sold on? And, for that matter, do they really understand the mechanics of a buyout well enough to offer a sensible opinion in the first place?
Hindley and Deedes clearly think so, and given how intellectual those chaps are at the Telegraph one has no reason to doubt that. But in most businesses I would guess that staff would be very unclear (and certainly not privy) to what was really going on. Talk of workers being somehow informed enough to influence the decisions of senior executives when it comes to a sale process is patently absurd.
When all is said and done, it's the bottom line that counts, and, in the Telegraph's case at least, the Barclays had the deepest pockets. For Dignity, the time and price were right for a public listing.
And are staff always better served when there is no VC involvement? It invariably makes no difference. Just look at another recent Barclays investment - the acquisition of mail order giants Littlewoods and GUS. The result? Already more than a thousand job losses as the new owners make all those nice economies of scale by merging the businesses. Hardly a great deal for staff but exactly what any VC would do too.
Devolution - what's it good for?
I make no apologies for choosing to harp on about transport in my column again this month. Regular readers will probably know it's one of my pet subjects - but then again it's probably yours too. If there is one issue above all that affects us in business (and which costs us a fair bit too) then it's transport.
The government's recent White Paper, "The Future of Transport, a Network for 2030", was a shocker. Full of contradictory messages and vague commitments to projects, it was also particularly shocking for the regions.
On the one hand the government said it was "now confident" that London's £310bn Crossrail project should proceed (even though it cannot be built before the 2012 Olympics and the government has no idea how it will be funded), while on the other hand it pulled the plug on the extension of light rail schemes costing a fraction of the cost across several British cities including Nottingham and Manchester, saying they were getting too expensive. Excuse me?
The regions could hardly have got a worse deal if they tried. At least somewhere like Birmingham hasn't even got its act together to ensure it has a major light rail network in the first place (you cannot even get from Snow Hill to New Street) so here the government is pulling the plug on nothing at all.
But what really gets me is that in the same breath the government talks about ever-greater devolution of decision-making to the regions. That's all very well, but you need money from central government to fund those decisions in the first place.
And where something controversial comes up, such as congestion charging, the government of course passes the buck by saying it is happy to create incentives for local authorities to introduce charging. Politicians in marginal seats at both a local and national level (and there are plenty of those across the Midlands) are hardly going to risk their necks on that one.
Meantime the national motorway network grinds to a halt as the government lacks the courage to push ahead with the blindingly obvious - that the whole network simply has to be tolled. Instead it says it isn't sure if the technology is quite there yet so we'll park that one for a while (while we all park in a jam).
Take another one - rail devolution. What does that mean? Does the government seriously expect Birmingham on its own to come up with the £3350m-plus needed to give New Street station merely a facelift? Please help us.
Sadly there are broader parallels here with the progress of the Lyons review, which called for a major relocation of civil service jobs out of the South East. Progress has so far been painfully slow. Midlands cities better not hold their breath waiting for major relocations as Sir Humphrey really isn't too keen on this devolution nonsense.
Seven years on, I am sick of Labour's spin on devolution. Although the formation of the regional development agencies has undoubtedly been a step in the right direction and gradual increases in their budgets are to be welcomed, the bottom line I'm afraid is that the economic gap between London and the regions just keeps on growing and there is no sign of it slowing.
Jim Pendrill, editor
The power of one
Sometimes I think to myself it's amazing the impact that one person can have on a business, good or bad. For instance the Olympics is a business, and look at the impact that Kostas Kenteris has just had on that.
At the other extreme look at what Richard Archer did for the Parkman business featured on our cover this month. The former head of KPMG in Birmingham saw an opportunity and my word he went for it.
Looking back today, what is probably most impressive about the Parkman story is the way the company has brushed aside many of its rivals in a fiercely competitive sector. The outsourcing bandwagon is one that many firms have jumped on in recent years - but many have fallen straight back off it too.
Today the business, now called Mouchel Parkman following its merger with a rival 12 months ago, is in the very safe hands of Richard Cuthbert and he has some grand designs for the company too. Just take education where the government is throwing money at secondary schools. The opportunities are endless. Managing future growth will arguably be Cuthbert's biggest challenge.
Returning to our theme of influential business figures, how about West Bromwich Albion chairman Jeremy Peace who, as we report on page 7, has steered a very difficult ship through extremely choppy waters. The business acumen - and sheer sense - that Peace has brought to the role (thanks to his former City career) is vindicated if you read through Deloitte's just published annual review of football finance. In particular the club comes right at the top for having a healthy wages-to-turnover ratio, a key indicator of financial performance.
While Cuthbert and Peace have already proved their value, one man we profile this month who has much to live up to is Neil Rami who has just been appointed chief executive of Marketing Birmingham. The business of marketing the city is a crucial one and the hope is that Rami, who is widely credited with transforming Newcastle and Gateshead's image, can do the trick here. Time will tell on that one.
Rami would be helped if plans to redevelop New Street Station ever get going. As we report on page 9, some exciting proposals courtesy of famed architect Will Alsop have reached the drawing board and there appears a genuine momentum now building up on all sides which is to be applauded.
All of which shows too that the power of one man, in this case an architect, can truly transform a city too with leading edge design.
However whether the plans for New Street actually happen remains another matter altogether. Sadly as far as Alsop and landmark schemes are concerned the omens aren't great right now - his plans for the 'Fourth Grace' on Liverpool waterfront have just been scrapped. The very same plans also formed part of Liverpool's Capital of Culture bid which defeated Birmingham, and the subsequent scrapping of the scheme has not surprisingly led to more than a few cries of 'dis-Grace' among Birmingham's chattering classes. I wouldn't go quite that far, but they've certainly got a point
Jim Pendrill, editor
Time to draw the line
Amid the acres of newsprint devoted to the growing crisis engulfing the Midlands automotive industry perhaps the most telling comment on the state of the industry actually came from her Majesty's government.
Concluding its six-month investigation into the state of the UK industry, a Trade & Industry Committee summed up that the problems in the industry weren't so much down to British manufacturing but simply one of "getting the right car to the marketplace at the right time".
Exactly. The motor industry is not one of rocket science. Build the right car to fit the right market at the right time and you're laughing. Look at the new Mini - BMW cannot make them fast enough at its plant in Oxford.
Sadly the same isn't true of the great West Midlands triumvirate of Land Rover, MG Rover and Jaguar. We should be seriously worried about all three. Sales at MG Rover were 37 per cent less in August this year than they were in 2003. Ford has already stopped production at one Jaguar plant - how long before its other plant in the Midlands is deemed surplus to requirements? Land Rover at Solihull may have been given a stay of execution, but is it just that?
There are plenty more qualified than me to answer these questions, but the picture is extraordinary if you compare it with what's actually going on in the wider British industry where we are actually almost making a record number of cars a year.
Look at Toyota in Derby where the Japanese company is expanding further in its production of the Avensis and Corolla models. Hardly an English patient there.
So what now? Well, the DTI report makes some dispiriting conclusions. It says that while individual plant closures have not fundamentally undermined the UK's vehicle production capacity, they can have a "serious economic impact on the regions in which they are located". It says in areas like the West Midlands where vehicle production is long-established the impact of closure can "spread out through the supply chain to have an effect considerably beyond the plant itself".
The report also pointed out that a skills shortage at many smaller firms in the automotive supply chain is a problem of increasing urgency.
The future for the West Midlands surely has to be in the IT and technological areas instead. Another revealing statistic is that GDP per head in Coventry is still £31,000 per head higher than the national average, in large part due to its growing and successful IT base. In other words it can live without Browns Lane.
It is time to draw a line under the past. In generations to come it will surely be shown that the past month was when others drew the line for us.
Jim Pendrill, editor
Women and the workplace
Our cover this month is an extraordinary story. It's not everyday you come across a single mother-of-two barely out of her 30s running a Midlands metal-basher. It's not often either that you then go on to hear a chief executive admitting that staff have seen her cry.
Elsewhere such a revelation would be seen as a weakness in the male-dominated world of business. But for Dani Saveker it appears to have given her a position of strength from which to make sweeping changes to the company. "Staff know I'm human and it's the best I can do to make sure I'm there for them when they have a crisis," she tells us. "None of us is invincible. Things happen and it's part of life."
Dani goes on to offer some revealing views about male managers. "So often (they) don't show respect to people below them. They seem to believe they have a status above and beyond anyone else but everyone is important in their own way."
In many regards Dani's wider observations go to the heart of the complex debate surrounding women in the workplace today. Despite massive cultural shifts in the last 30 years, the sad fact remains that a pitiful three per cent of executive directors and eight per cent of non-executive directors in this country are women.
I see evidence of this all around me. Just take Insider's own property and dealmakers awards - you will hardly see any women in the audience (indeed the property sector is still the worst culprit for being a boys club).
As Perm Saini remarks in our women in business feature on page 22, "the perception in the industry is that females are not as sufficiently capable as their male counterparts".
This is all pretty depressing stuff which is why the government are so keen to do something about it. The excuse all too often given by short-sighted employers is that women invariably take a temporary break between the ages of 30 and 40, the key time to progress, and so there are fewer women vying with their male colleagues for executive positions.
The government's answer is to increase paid maternity leave and even give women the option to transfer some of their paid leave to partners. Although laudable, there are risks as more legislation could easily have a more detrimental effect, particularly in small businesses. As is remarked elsewhere in our feature: "When people are on leave it's not always a money issue, it's a people issue too."
As I said, there are no easy answers here. But if there is one thing that businesses can do to address the issues, it is surely for them to be far more flexible in their approach to helping working mothers return to work. Being prepared to dip in their pockets for nursery and childcare provision would be one giant step (and government could help here), another would be to give working mothers better access to technology to enable them to return in a more flexible fashion. You may not believe it, but there are still millions of workers who don't know the meaning of the words email, internet and broadband.
Better still, just get every one of their bosses to read our article on Dani Saveker.
Jim Pendrill, editor
A missed opportunity
Hats off to Colin Harding, chairman of George and Harding Construction. Why? Well, this is the fellow who did precisely what every self-respecting business person would love to do - he gave Gordon Brown a good run for his money.
The occasion was the CBI's annual conference in Birmingham earlier this month where Mr Harding harangued the Chancellor over his Pensions Bill and particularly the Pensions Protection Fund (PPF), which Harding claimed would "paralyse SMEs, making them impossible to sell, restructure or rescue".
Harding may not have got the answer he wanted (Brown mounted a vigorous defence of the PPF) but that's not the point. The point is that he got the chance to quiz the Chancellor in the first place.
The fact that ministers such as Gordon Brown were happy to take questions from the floor after their speeches (incoming European Trade Commissioner Peter Mandelson gave the impression he could have chatted with the audience all morning) was the biggest single improvement of this year's conference.
Sadly, the vast majority of directors of Midlands businesses were not there to see it, too busy to possibly consider the prospect of a two-day jamboree, even though it was virtually on their doorstep. It's a point that was widely picked up on by the Press after the conference. As one national paper rather poignantly remarked, conference attendees weren't so much the captains of industry but "lance corporals maybe".
The great shame for this region is that this could be the last time the conference is held in Birmingham, which means our directors are even more unlikely to attend future shows. The biggest reason it has been held in this region is of course down to CBI director general Digby Jones who played a major role in securing such prominent speakers this year.
The show is moving to London next year (where it will also be held over just one day) while after that Digby will probably have moved on.
In my view the value of such conferences can never be underestimated. As one adviser always tells me, a director should always spend at least a third of their time "thinking about their business" rather than just running it. The chances are that if they had bothered to attend this year and hear the thoughts of the bosses of BT, the BBC, M15, French finance minister Nicolas Sarkozy or our own Cabinet, they would at least have been given some serious food for thought about areas such as offshoring, risk or European economic reform, which no MBA will ever teach them.
Jim Pendrill, editor
