RSS feedsOnly three-quarters of the funding made available to former suppliers of failed car giant MG Rover is likely to be spent, according to a National Audit Office report released in March.
Of the £62m of the government’s support package allocated in loans and grants to support former suppliers and dealers to Rover, only £47m is likely to be taken up by them. This is less than half of the £102m the company owed its UK-based trade creditors at the time of its collapse.
Accelerate, part of the Birmingham Chamber of Commerce charged with administering the funding package, attributes the lower than anticipated take-up of the support measures to the impact of earlier efforts to help the local economy to diversify following the sale of Rover by BMW in 2000.
Supplier support
Back then, the support agency found that 161 companies in the UK had been
dependent on Rover for more than 20% of their sales. By 2005, this had dropped
to 74, of which 57 were in the West Midlands. At the end of September 2005,
Advantage West Midlands estimated that fewer than ten former suppliers had gone
into administration or closed plants as a result of the collapse.
David Malpass, senior operations manager at Accelerate, says that between 300 and 400 firms applied for funds under the agency’s wage replacement scheme, but only 170 of them were found to be eligible for support. According to Malpass, “only those companies whose contracts with Rover amounted to 15% or more of their total turnover were automatically entitled to the wage replacement scheme and consultancy and business support services on offer”. An unspecified number though admittedly low were awarded support on appeal, says Malpass.
In addition to Accelerate’s support, HM Revenue & Customs allowed 106 former MG Rover suppliers and dealers to defer payments of VAT and other taxes due.
European subsidies
Under Articles 87, 88 and 89 of the Treaty establishing the European Community,
agencies are only allowed to provide up to e100,000 (around £68,000) per company
in subsidies or relief over a three-year period to support failing or
economically hit businesses, whatever the size of company. Grants in excess of
that constitute “state aid” and may be deemed as protectionist by the European
Commission.
Yet Rover’s former suppliers do not appear bitter that they are not eligible for more funds, despite such large write-offs. “It would be good to get more money, but it was explained from the start that each company would only be entitled to so much,” said one former supplier. “We can’t complain. We were given immediate help and we are still in business and our workers still in employment,” he added.
Steve Hoole, sales manager at JV Murcott & Sons, which lost around £600,000 and 17 employees as a result of Rover’s collapse, says that Accelerate has helped fund “around half” of the company’s £120,000 spend on its latest business development plan to continue to diversify the business. JV Murcott is now a components supplier to Ford and Aston Martin in Germany, but it also supplies parts to leading hand drier manufacturer PHS Group, as well as producing metal studs for rugby boots.
Colin Sarson, managing director at WH Smith & Sons (Tools), says that the
company which wrote off up to £500,000 in debts, lost stock and lost business
from Rover’s collapse received funds from Accelerate that enabled it to pay
around 50 employees for five weeks.
While he declined to say how much emergency money the company received, or was
eligible for, Sarson says that the first round of funding came within two weeks
of meeting Accelerate. “The funds were not a lifeline for the company, but they
certainly were for those workers, some of whom would have faced redundancy if
Accelerate had not assisted,” he says.
