A Unified approach
Lead writers from the tabloid media may think otherwise, but this year's dramatic expansion of the EU has created myriad opportunities for British business. Read on
Lead writers from the tabloid media may think otherwise, but this year's dramatic expansion of the EU has created myriad opportunities for British business. Ian Halstead reports
Companies and organisations from the Midlands are leading the way in developing commercial relationships with the new EU member states. Pleasingly, the oft-maligned concept of joined-up thinking is firmly at the heart of this drive to win business in the new Europe. Regional development agency Advantage West Midlands (AWM), for example, is working closely with both the regional office of UK Trade & Investment and the Confederation of West Midlands Chambers of Commerce to ensure that their overseas efforts dovetail.
David Burton, the Confederation's new chairman - and former Grant Thornton corporate finance partner - believes such an approach is vital. He's a veteran of the international trade scene, having reopened business links between this region and China a decade ago whilst president of the Coventry & Warwickshire Chamber.
"It's essential that we conduct our attempts to win business in Poland, Slovakia and the other accession countries in a sensible way," says Burton. "We don't want to see the same region bombarded by missions from the same area in this country, otherwise there is a danger of trade delegation fatigue, which I have seen in both China and South Africa."
The Confederation's policy director Richard Bindless has established productive links with companies and business organisations in the Czech Republic's second city, Brno, and his team is now co-ordinating a trade mission to Warsaw.
Burton, meanwhile, has been meeting senior officials from the Czech Invest agency, and business delegates from Romania. He's even used his decades of experience to help a Leicester-based firm, Clever Plastics, set up a subsidiary in Slovakia, extruding plastic components for automotive clients in Continental Europe and the UK.
"In the last three years, turnover has reached £33m from a standing start. Initially we exported production equipment from here, but now the business is strong enough to buy its own," says chief executive Mark Cook.
Francis Lee, who heads AWM's strategy and planning team for Europe, shares Burton's belief in a business-focused approach to potential openings in the new EU states.
"We are quite cynical about the business of trade missions. We are about economic regeneration, not about shaking hands," he says. "We have to take a hard-nosed view about every proposed point of contact, and to see how suitable it is for this region to establish relationships with each new area."
Lee is especially enthused by the opportunities for business with Poland, and certainly makes a convincing case.
"There may be ten accession countries, but Poland represents more than half of their combined population and around 40 per cent of their total GDP. There are also well-established links between that country and the West Midlands, which is why it is the country we are giving most attention to," he says. "This is about business. We see significant potential for West Midland firms in automotive technology and environmental technology, and also for professional advice and business services."
Birmingham Future is equally committed to developing links with Poland. Chief executive Simon Murphy is as committed a Europhile as they come, and he sees substantial business opportunities from the expanded EU. "It should be as easy for a firm from Birmingham to sell goods in Budapest or Barcelona, as it is in Bristol," he says.
And one firm that has made this work is hardware manufacturer Eliza Tinsley. Tinsley set up a plant in Poland manufacturing hydraulic fluid tanks, and the ambitious move even enabled it to solve a labour crisis back home. This autumn the firm brought 35 welders over from Poland to fill vacancies at its Cradley Heath site.
Tinsley's strategy was underpinned by advice and assistance from the Birmingham office of Fortis Bank, which very much models itself as a European bank with branches across the continent.
West Midlands regional director Matthew Porter says: "Companies are now realising the merit of working with a bank that is not only good in its home country, but is also good in other European countries."
He feels Poland offers most potential for Midland companies, and sees Fortis as well positioned to take advantage with six business centres already in that country. The bank's Zurich office is about to open, and others will swiftly follow in Prague, Budapest and Vienna.
Another major player on the international trading scene is the Royal Bank of Scotland (RBS), which sponsors the Midlands World Trade Forum. Its Birmingham-based regional sales manager, David Houghton, agrees that targeting the new Europe offers significant potential for local companies. But he is concerned at the growing perception that trading within Europe is somehow more comfortable than trading with, say, the Far East because of the ease of reaching its new markets.
Houghton stresses that the same principles must always be applied to a potential new business relationship, regardless of its location. He also has concerns that companies are not fully factoring the different impact of import and export trading into their current domestic strategies.
"The gap between payment and being paid can be stretched enormously by factors such as distance, transport times, the requirement of overseas suppliers to be paid before despatch, and overseas buyers' insistence on extended credit," he says.
Houghton says some companies are already beginning to look at the scope for trading with the next raft of countries to join the EU, including Romania, Turkey and Bulgaria.
Just as Fortis and RBS are eager to export their knowledge and services to the new Europe, there is also massive potential to provide skills and training, particularly within the former Eastern Bloc countries.
A 20-strong delegation of commercial officers from British embassies recently visited the Black Country, through an initiative by UK Trade & Investment, to learn first-hand about the latest techniques of urban economic renaissance.
Walsall Regeneration Company chief executive Dr Peter Cromar is bullish that such intellextual property exports can form a key element of the new trading relationships.
"We have a tremendous opportunity to pass on the skills and knowledge that we have accumulated about regeneration over the last 20 years. Many of the officers who came here work in former Eastern Bloc countries, where they face the massive structural economic problems that we have already tackled during the 1980s," he says.
A similar strategy has already evolved at Birmingham-based Matthew Boulton College (MBC) under principal Christine Braddock.
Its vocational and environmental science department regularly exhibits at overseas trade exhibitions. Matthew Boulton also won a significant contract in Russia following a contact made at a show in Amsterdam.
Lecturer Pam Blake says an MBC team went to Moscow to teach one of the city's biggest cleaning agencies about western standards of operational techniques, hygiene, and health and safety.
"This was a very new sector for the Russians. The agency we worked with had specialised in prestige contracts, but knew that it hadn't got the expertise.
"We trained ten of their staff in basic skills, and also two of their colleagues so they could act as assessors."
Blake and her colleagues have since attended cleaning exhibitions in both St Petersburg and Moscow, presented seminars, and carried out further training projects in Russia.
Relationships with the new Europe are taking all forms, and the most controversial is offshoring.
The temptation, particularly for hard-pressed manufacturers, to ship elements of production to, or import items from, low-wage industrialised countries is evident.
Banbury-based foundry group Swan has rapidly established a reputation for helping UK companies set up strategic partnerships in Eastern and Central Europe. Its main offshoring activity is sourcing castings from Poland and Russia for its British customers.
Director Keith Shepard, who has worked in the sector for some 35 years, says the family-owned firm first began to look at opportunities for business in Eastern Europe back in 1999.
"Our major SME customers in this country were under so much pressure for constant cost-downs that the long-term viability of our business and theirs was threatened," he says.
"We had to be open with them, and tell them if we gave them the cost-downs they required, then they would destroy us, and ultimately themselves."
Shepard says Swan's customers are still offered the choice between UK or imported castings.
"When we quote, customers have the option of sourcing from Poland, Russia or Banbury. They can have a rapid response turn-around from here, or wait longer for the cheaper imported items."
Swan's relationships with the former Eastern Bloc foundries have developed dramatically over the last five years.
Initially, only iron castings were brought in, but now fully-machined parts and even sub-assemblies are now being trucked in. Swan has also opened offices in Krakow and St Petersburg staffed by local engineers.
Swan says a recent presentation on offshoring at the West Bromwich-based National Metal-Forming Centre was well received by the trade, but not by representatives of BusinessLink or the Chamber of Commerce.
"They seem to think it means some British jobs will go, and they might. The alternative though is that they all go. It's about facing reality," he says.
"People can fight offshoring, and say they hate it, but we are living in a global economy and if our end users can't buy what they want at the right price, they will simply go elsewhere."
the path to growth
The first cross-border deal between a Midlands firm and Poland was completed just four days after the country joined the EU.
The deal was put together by the Nottingham office of Tenon Corporate Finance, led by director Ian Beswick.
He's been working with ProCam since 1989, which has established a nationwide reputation for helping growers with crop selection and protection issues, and boosted its turnover from £33.5m to £380m.
Beswick says the mature and shrinking nature of the UK agronomy sector saw White look overseas for continued growth.
"Poland was obvious. It's the size of France, has a 40 million population and is still heavily dependent on agriculture. However, its crop yields are less than half what can be achieved here, although their soil and weather is better, and the country has to import grain," he says.
The Polish venture has been immediately successful, is in profit and Botus is now on course for £310m turnover in its first year.
"They've been provided with all ProCam's growing systems and advisory systems, so they've got all the IP assets to sell to the growers, and via ProCam they have access to the latest global R&D," says Beswick.
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