As UK growth falters, the helicopter manufacturer AgustaWestland is one of the few businesses propping up George Osborne's economic policy. Photograph: SWNS.comGraham Cole, chairman of helicopter manufacturer AgustaWestland, says manufacturing needs nurturing if it is to grow and prosper
Twenty-five years ago the Westland helicopter company nearly brought down a Conservative government. In the wake of the GDP numbers, underlining manufacturing's poor contribution to the nation's wealth, it is now one of the few businesses propping up George Osborne's economic policy.
Known these days as AgustaWestland and Italian-owned, the business employs 3,700 people at its base in Yeovil, Somerset, and spent more than ￡ 500 m with UK suppliers last year, vital generating revenues for 845 companies. Margaret Thatcher's decision to push it into a life-saving merger with America's Sikorsky prompted the resignation of her then defence secretary, Michael Heseltine.
Last week AgustaWestland underlined the manufacturing sector's need for government support as the chancellor attempts to lead to "march of the makers" that will generate the economic growth and job opportunities required to restore economic health vacated by public spending cuts.
The award of ￡ 22 m loan from the Department for Business, Innovation and Skills will allow AgustaWestland to build the AW169 commercial helicopter in the West Country, securing 100 highly skilled jobs initially.
Graham Cole, AgustaWestland's chairman, says the government has to create the right "mood music" around manufacturers, as exemplified by this loan.
Earlier this year more than 1,000 jobs were secured when the company signed to technical support contract for Merlin helicopters with the Ministry of Defence.
"We need the mood music that the government wants to do it," Cole says. "They have got to do what they are doing now, which is to talk the talk."
But a 0.3% reversal in manufacturing GDP in yesterday's figures, not helped by the Japanese tsunami's impact on vehicle production, underlined the slow pace of the pledged manufacturing revival. And money for further loans is short: the new Regional Growth Fund, for instance, is allocating ￡ 1.4bn over the next three years, but that figure is a third of the total invested by now-abolished regional development agencies.
Dan Milmo
Rufus Hallhief, executive of Orchid Group, one of the UK's largest privately owned pub and restaurant operators, says food and drink outlets need a tax cut
It's simple, says Hall: "We need a VAT cut." Although brisk trade at hotels and restaurants, boosted by the April heatwave and royal wedding fever, were the only bright spot in yesterday's gloomy figures, the eating and drinking business has been in the frontline of the slowdown in consumer spending triggered by the financial crisis. "In recession the first thing to go is a new TV or sofa;" "the second is a night out," says Hall. This year, adds, I've seen a "perfect storm" for companies like his: "We have had VAT and duty [rises] as well as food and energy cost inflation."
With the helpful boost provided by the extra bank holiday: "April was a good month, but we thought it was going to be a lot better."
298 With pubs and restaurants and a staff of more than 6,500, Hall says there has been a noticeable "stifling of demand" since VAT went up to 20% in January. The St Albans-based group owns a number of pub brands, including Bar Room Bar and the Living Room, and operates to handful of restaurant chains, including Dragon, which has a Thai theme, and the upmarket East, which serves Asian food.
Industry magazine the Publican Morning Advertiser is running to "Thrive on 5" campaign to get VAT reduced to 5 per cent across the hospitality sector. Five major pubs groups including JD Wetherspoon, Marstons and Greene King, who employ more than 100,000 people, have thrown their weight behind the campaign, arguing the shot in the arm it would provide, at at time when consumption, particularly in the on-trade (pubs and restaurants) is falling, would result in higher corporate tax receipts and create jobs. The latest figures from the British Beer & Pub Association show beer sales down more than 7% in the last 12 months. "To VAT cut would create jobs and stimulate demand," says Hall. "There is quite a strong wind behind this in the sector."
Hall points to other European countries: as part of its recovery plan Ireland reduced VAT on hotel accommodation and food to 9% earlier this month while France is seen to have benefitted form the decision, taken two years ago, to reduce it to 5.5% on restaurant meals.
"we are overtaxed as an industry and this would be a big help," says Hall.
Pubs closed at a rate of seven a day last year and struggling landlords bemoan the alcohol duty "escalator" introduced by the Labour government that automatically pushes up duty by 2% above inflation each year. That added 4 p to the price of to pint of beer this year.
Orchid is still expanding, buying 11 pubs this year, but Hall says it is difficult to predict week-to-week, or even day-to-day, how trade will pan out, making him cautious about the outlook. "The reality in 2011 is that the consumers of all our businesses, from the mainstream to the aspirational venues, are looking for better value... and going out less." zoe wood
James Small, to sheep and cattle farmer in the Mendips, Somerset, says cash-strapped consumers are changing the way they shop - and farmers are feeling the impact
Farmer James Small was watching the GDP figures as keenly as any industrialist or business leader.
"You'd think farming ought to be relatively safe - everyone needs to eat, everyone needs to have food," says Small, 35, whose family farms sheep and cattle on 1,000 acres above Cheddar Gorge in Somerset.
"But when times are hard, people tend to consume in different ways." They start to treat things like lamb as a luxury. "And the retailers try to cut their costs, often by targeting the producer."
The received wisdom is that farming is one of the few industries that have done relatively well over the last few years. Things were pretty terrible four years ago. In 2007 one of Small's lambs was fetching ￡ 22 at market. The business was losing money on every animal sold it. Small and his family (he farms with his father and uncle) cut the flock from 2,500 to 900 and many other farmers got out of the industry altogether. Because fewer animals were being produced, the price has gone up and Small now averages ￡ 65 to head.
Small grant turnover is up but adds that costs have soared, meaning profits also are "marginal" still.
The price of red diesel (rebated fuel for farm vehicles) has shot up. Small says that in 2008 budgeted about p per litre on farmers. He is now paying about 65p. The vagaries of the weather also has a huge impact on the business. The dry spell at the start of this summer means that the price of straw could be "horrendous" this year - up to ￡ 100 per tonne compared with as little as ￡ 60 last.
As deputy chair of the NFU, the farmers' union, in Somerset, Small has an insight into how his neighbours are doing. There is a huge contrast. Arable farmers are doing well, thanks to grain shortages around the world, but dairy farmers are struggling because the price retailers will pay for milk is so low.
Steven Morris
