In Business After the Crunch

Listen to After the Crunch (16/09/2010)

A fleeting visit to Newcastle upon Tyne the other week has left me with a strong impression of yellow paint. It comes about because one of the jobs we think we have to do in In Business is to take the temperature of the economy by simply asking business people what is going on.

So we went to Newcastle where they are waiting to see how heavily the public spending axe will fall on the many government dependent jobs created in the North East of England in the past 10 or more years.

In an area famous for a long heritage of heavy engineering, we wanted to see how manufacturers were holding on as Britain (perhaps) comes out of recession.

It is a time when, traditionally, bankruptcies soar; companies who've hunkered down for survival and held on suddenly expand their working capital needs to take on new orders, and the money doesn't come back in fast enough..

This recovery (if it is one) is different, though. The banks won't lend, increased working capital is hard to come by. So times are still hard.

The other great uncertainty for at least some businesses is what happens to the English Regional Development Agencies which the new coalition government is phasing out.

The powers that be have asked for bids from local organisations to set up so-called Local Enterprise Partnerships that will do some of the work has been done for the past 12 years by the RDAs. Nobody yet knows what geographical areas they will cover or what exactly they will be asked to do.

Land

But everyone knows there will be much less money to spend on the kind of grants and development help and advice that the RDAs used to give.

A new £1billion pot of money called the Regional Growth Fund will put money into regional or local projects. It is also not yet clear how that money will be shared out and what kind of projects will attract the backing of the fund panel chaired by Lord Heseltine and his deputy Sir Ian Wrigglesworth, a prominent Tyneside worthy.

The RDAs also have investments in lots of local things including land. It is not clear how these holdings will be wound up or where the money will go. Business always said it hates uncertainty and there is lot of it around, but so there is in vast swathes of public life at the moment.

Up and down the Tyne I heard from firms who said that RDA grants are a vital component of how they work, taking some of the risk out of long term investments such as clearing land made derelict by the demise of great big industries such as shipbuilding.

Out of this is emerging a flourish of new enterprises supplying offshore wind and oil and gas energy plants and rigs. These new businesses are flourishing in the old shipyards and quays along the river.

One of the things I was struck by in Newcastle was the amount of yellow we encountered on the Tyne.

Great expanses of yellow paint on cranes, machines, rails, inside offices. It introduced to me to a new term for the engineering industry; "yellow goods", to go with white and brown goods as types of manufactured items.

High visibility yellow is a symbol of the huge pieces of equipment needed for offshore projects ... and the industry that supports them. When the earth moves, it moved by yellow trucks and diggers.

Printer

The one striking Newcastle-based company that has nothing to do with manufacturing is Sage, supplier of accounting software and other business services to thousands of smaller businesses in many parts of the world.

It has given its name to the Sage Music Centre, a sliver slug of a building that dominates the city centre from the southern bank of the river.

I had thought that the Sage story might have no bearing at all on the current concerns about public money for private companies, but that turned out not to be quite true.

Sage began life when a Newcastle accountant turned printer, the late David Goldman, decided in the 1980s that he needed some computer software to help him run the business better.

Paul Muller was an American computer consultant involved in a DTI-funded project to get local businesses interested in IT.

The two got together and recruited some Newcastle University students to write a software package for the then popular Amstrad computers that small businesses were beginning to use. The software was too good to use just at the print firm.

That's how Sage began. The story is a reminder that when politicians grumble about public handouts to private enterprise, a little bit of government money/ help can sometimes go a very long way indeed.

Sage now employs nearly 15,000 people in some 24 countries. It's the biggest stock market quoted software company in Britain.

Yellow goods are impressive in the revival of the UK economy ... but so are the invisible products like software with absolutely no colour at all.

Listen to After the Crunch (16/09/2010)

Previous Programmes

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Building BRICS - Peter Day finds out about the BRICS - Brazil, Russia, Indonesia and China

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Reconstructing Capitalism - Peter Day hears all about the challenges to the way capitalism works.

All at Sea - Peter Day hears all about sea transport.

China Dispossessed - Peter Day hears about some of the problems caused by China's rush for prosperity.

Back on the Road - Alan Mulally tells Peter Day how he changed the way Ford works and how it is now back in the business of selling cars.

Asia Bling! - Peter Day ponders how the rise of the Asian comsumer will change business.

Euro on the Rocks - Peter Day asks what is the future for the Euro?

Bitter Pills - Peter Day looks at changing face of drug development.

Operation Robot - would you allow a robot to operate on you? Peter Day looks at robot-assisted surgery.

Growing Pains - Peter Day asks, what is the main component of growth?

After the Crunch - Government funding and regional development: the view from Newcastle.

Chips off the Old Block - Computing in the UK, past, present and future.

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Small Wonder - microfinance.

Unlimited Company - organizational models.

Credit Crunch - cash and credit.

Student Startups - student entrepreneurs.

Media Mayhem - changes in the newspaper industry.

Squeaky Clean - branding.

Battery Power - Bolivia.

Women's Work - women in the city.

Hell For Leather - John Timpson and Timpson's Shoes.

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Let's Start a Bank - banking.

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For more programmes visit the In Business programme archive.

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