job creation initiatives in the uk: the large company role

Industrial Relations Journal ISSN 0019-8692 S3.00

Job creation initiatives in the UK: the large company role

Colin Mason

I n recent years many large companies - mainly those making large scale redundancies - have made efforts to stimulate job creation in the localities in which they are based. Although this has succeeded in helping fo create jobs, it has been criticised, prompting major sponsors o f such initiatives to consider how job creation strategies

can be made more effective.

Since the mid-1970s much of UK industry has been faced with the need to rationalise and cut back its productive capacity in the face of an increasingly turbulent economic environment. The precise causes have varied by firm and by sector but include changes in the international division of labour, technological change, the emergence of product and factor substitutes, and declining demand. However, regardless of the cause the need has invariably been for cost cuts and the elimination of excess capacity which, in turn, has required the shedding of many thousands of workers that were deemed to be surplus to industry's requirements. The outcome has been a remorseless rise in the numbers unemployed; moreover, the uneven geographical distribution of job losses has resulted in many communities having an unemployment rate well in excess of the national figure, with all the ensuing social problems that this situation creates.

Many companies do little for those employees that they have made redundant other than to make the statutory redundancy payments in appropriate circumstances.

0 Colin Mason is Co-Director of the Urban Policy Research Unit at the University of Southampton.

Others respond to the problem of surplus manpower by means of short-term expedi- ents such as early retirement incentives, 'golden handshakes' and intra-company transfers. Some companies go to greater lengths by using job placement consultants to search for employment opportunities by contacting other local companies and provide retraining programmes, career counselling and business advice for those thinking about self-employment. But even these somewhat more enlightened corporate responses are now totally inadequate to cope with the scale of the unemployment problem and the general lack of alternative local employment opportunities for workers who have been made redundant, particularly if they are unskilled, or possess industry-specific skills. Some companies have therefore made special efforts to assist in job creation initiatives when faced with the necessity of declaring substantial numbers of redundancies in an attempt to mitigate some of the adverse consequences of such events on both the employees and the local communities that are affected. Their efforts are comp- lemented by the involvement of other companies such as banks, large retailers and accountancy firms in supporting job creation

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initiatives. Although these companies have not been shedding labour themselves they do have an interest in the health of the local communities in which they operate.

Job creation initiatives by large companies vary quite considerably in terms of their scale, length of commitment, target and numbers of other organisations involved. In terms of orientation schemes are of two broad types. Internal schemes are aimed specifically at the company’s own employees, particularly those that are to be made redundant, and seeks to assist them either in finding alternative employment or else in setting up their own business. The objective of external schemes, in contrast, is to increase the overall number of job Opportunities in the local community in which the firm is based, notably by encouraging the development of small businesses, regardless of whether they are formed by ex-employees of the company or not. The delivery of assistance comprises four main variants. A company may provide the assistance directly. Alternatively, i t might provide finance and other assets to an intermediary organisation (eg management consultant, non-profit organisation) to undertake the job creation initiative. Another possibility is for a company to form a consortium with other companies (and perhaps also with locallcentral government agencies) in order to pool resources for a job creation initiative. Finally, a company may join with other companies, govemment, trade unions and the voluntary sector in a broadly based community partnership. The precise orientation, form of assistance and delivery is likely to be determined by the particular circumstances of the company concerned. Factors which are likely to be taken into account include: the scale of redundancies; location of the plant(s); level of pressure from workforce, trade unions, communities and politicians; desired visi- bilitylanonymity in the initiative; presence1 absence of suitable partners; and the type of resources available for commitment.

Large firm job creation initiatives: some examples

The most common form of internally-oriented initiative by companies to assist employees who are to be made redundant is the establishment of a ’resettlement scheme’[l]. This offers detailed counselling on such topics as the psychological problems

which redundant workers might encounter, financial matters (eg investment, pensions), particularly for those workers opting for early retirement, and for those looking for alternative employment advice is available on techniques of job searching, job appli- cations and interviews. In addition, resettlement teams generally make contact with other employers in the local area (and some- times also further afield) in an attempt to find job vacancies which match the skills of the redundant workers. Considerable numbers of jobs that have never been advertised are often identified through this approach[2]. In extreme cases financial incentives might be offered to companies who take on redundant workers. For example, British Rail Engineering Ltd have offered job grants of €30 per week for a year to employers taking on employees made redundant with the closure of their workshop at Shildon, Co. Durham(3j. Similarly, Tate and Lyle has made venture capital available on Mersey- side and in Greenock where i t has closed sugar refineries to companies who agree to offer first refusal to its former employees[4].

Resettlement teams will also offer assistance to workers who are interested in self- employment, either by laying on ‘start your own business‘ courses or else by paying for them to attend such courses elsewhere. Help in identifying opportunities for self-employment might also be made available. Additionally, some companies provide help ’in kind’, for example in the form of start- up finance, premises, secondhand machin- ery and orders, to any of their employees who are intending to go into business on their own account. Such schemes are often successful in identifying significant numbers of employees who are interested in self- employment and encouraging others to think about the possibility of new business formation. One study of an unnamed company’s resettlement scheme for its management employees in North East England noted that 70 out of 229 employees (31%) who had contacted the resettlement scheme included self-employment amongst their options, although just 18 (8%) were pursuing only this option[5]. Moreover, while some viewed self-employment in a positive light, for example as the chance to fulfil a long-held ambition, for many others it represented a last resort after repeated failures to obtain alternative employment. In addition, most of the managers interested in self-employment

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simply intended to become employed on an ’own account’ basis (often as a business consultant) and were therefore unlikely to generate much additional employment. Another example is provided by Cameras Rothman which in 1984 invited the manager of the local enterprise agency to advise its workers in Basildon, all of whom were to be made redundant with the closure of the factory, on how they could start their own business. As a result, thirty employees did set up new enterprises(61.

Depending on the local economic environment and the types of workers involved, internal job creation initiatives may therefore result in the creation of relatively few sources of alternative employment or self- employment opportunities for redundant employees. For this reason many companies have preferred to focus their job creation initiatives more broadly at the local community in which they are based, particularly in situations where large numbers of workers have been made redundant, where unemployment is particularly high and few alternative job opportunities are available. Externally-oriented job creation initiatives seek to increase the overall number and range of job opportunities in the locality, primarily by encouraging the development of small businesses.

One of the first, and certainly the most publicised, initiative by a company in response to its own redundancy programme was the establishment by the British Steel Corporation of BSC Industry Ltd in an attempt to create alternative jobs for steel workers made redundant by the closure or rundown of steel works. BSC Industry was established in 1975 and restructured in 1978 with its own board of directors in order to give it greater autonomy. Its activities, which have been restricted to steel closure areas (18 in all), have four main strands: firstly, the provision of business advice and counselling to existing small business owner- managers and prospective new firm founders; secondly, assistance in preparing business plans and advising on the viability of projects; thirdly, help in putting together project funding, notably by obtaining for clients the maximum available government and EEC grants and loans; and fourthly, but most importantly, the provision of small factory and workshop complexes by the conversion of existing large factories and the construction of new nursery units. A

hallmark of such premises is their flexible tenancy arrangements, whereby a weekly or monthlylicence is offered with the minimum of legal formalities.

Amongst the most successful (and widely copied) of BSC Industry’s small premises initiative is the Clyde Workshops scheme at Cambuslang, south east of Glasgow, which became operational in 1978, following the closure a year earlier of the Clydebridge and Clyde Iron Works. The industrial and office buildings on the site have been converted and subdivided into over 80 workshops for small businesses which are leased on fully commercial terms but on the basis of a simplified short-term licensing arrangement. In addition to the rent the payment includes the cost of insuring the premises, mainten- ance and all service charges excluding rates. The scheme also provides a variety of central services, including managerial advice and access to common services such as exhibition space and conference, training, catering and secretarial facilities. In the screening of potential tenants the emphasis has firmly been on small local enterprises either starting up or relocating for good cause. Specifically excluded have been subsidiaries of larger companies and freight, storage or vehicle operations. The companies in the Workshops have created over 300 jobs, and in compari- son to the gross cost of the initiative to BSC Industry of around €340,000 this represents a very low cost per job[7]. A further eight managed workshops have subsequently been developed by BSC Industry Ltd.

BSC Industry has invested E22m in providing soft loans, advice and premises in the steel closure areas. I t claims to have helped some 2300 businesses which have, in turn, created 60,000 jobs. The cost-per-job created through the efforts of BSC Industry Ltd is therefore under fS00(8].

British Coal (formerly the National Coal Board) has adopted a similar strategy by setting up British Coal Enterprise Ltd - formerly called NCB (Enterprise) Ltd - in 1985 to help replace some of the jobs lost in mining areas as a result of colliery closures. They have released property that is no longer required for mining operations for conversion into managed workshops, provide loan finance at below commercial rates and financially support 90 enterprise agencies (see below). British Coal Enterprise Ltd was initially given a budget of E5m by the government, but this amount has twice been

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increased and is currently €40m. By the end of its second year of operation (March 1987) British Coal Enterprise Ltd had provided E27m of financial support to assist 1200 businesses. This will lead to the creation of over 16,000 new jobs a t a cost-per-job of €1700(9].

A number of other companies have undertaken similar, although smaller scale, loc- ally-based job creation initiatives to those of BSC Industry Ltd and British Coal Enterprise Ltd, but have employed specialist job creation firms as project consultants and managers. For example, Reed Decorative Products Ltd (part of Reed International) commissioned one such firm of consultants, Job Creation Limited (JCL), to undertake a feasibility study of ways in which the effects of the closure of its Sanderson wallpaper factory in Gosport, Hampshire could be ameliorated. Reed subsequently agreed to finance the proposals and awarded JCL the implementation contract which involved the conversion of the factory into a small business workshop complex and the provision of onsite free business advice and assistance(l0j. JCL has been involved in similar job creation schemes in either an advisory or a managerial capacity for other UK companies (including Plessey, Rank Xerox and NEI) and also for public sector agencies (such as the Highlands and Islands Development Board, Wirral Borough Council, Department of the Environment for Northern Ireland and London Regional Transport). The company also works extensively overseas on behalf of such clients as Philips (Netherlands), Siemens (Austria), Norsk Hydro (Norway), Standard Electric (Spain), Alfa Lava1 (France), Black and Decker (Ireland) and Azko (West Germany)(ll].

Another pioneering initiative is the Com- munity of St. Helens Trust which was set up in 1978 by Pilkington Brothers in response to the many thousands of jobs that it has shed since the early 1970s in St. Helens, where it is the dominant employer, as a result of technical changes in the manufacture of glass. The Trust, which is now also supported by a number of other companies, provides advice to small businesses and prospective new firm founders on such matters as business plans, premises and finance and has converted some property released by Pilkingtons into small workshops. In addition, the Rainford Venture Capital Fund, established by Pilkingtons with support

Fig. 7 Lorntions of Eirterprise Ageriries in r h l v U i ~ i f e d Kingdom

from BP, Prudential Assurance, National Westminster Bank and ICFC and managed by Venture Founders Ltd, provides a source of finance to small firms in the St. Helens area. The Fund operates on a commercial basis under the Business Expansion Scheme. Through all these efforts an estimated 6250 jobs are believed to have been created in both new and established businesses which the Trust has helped[l2].

This early initiative by Pilkingtons has provided the model for what is the most common employment initiative by large firms seeking to counteract actual or anticipated redundancies, namely the establishment of a local enterprise agency. The first enterprise agency was launched in 1979 and has subsequently been widely adopted by companies seeking ways to maintain and promote the welfare of the community in which they are based. Hence, by the end of 1986 over 250 enterprise agencies were in existence (Figure 1). The main growth in their numbers has occurred since 1981 (when

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just 23 were in existence) following the formation of Business in the Community (BIC) (and ScotBIC, its Scottish equivalent) which was set up on the recommendation of the Working Group on Community Involve- ment, chaired by Sir Alastair Pilkington. Its aim is to encourage industry and commerce to become more involved on a local basis with the economic, training, social and environmental needs of communities[l3]. Currently, over 250 major companies are active in BIC and ScotBIC. The 1982 Finance Act, which allowed companies to offset their contributions in cash or kind against corporation tax, provided a further boost to the development of enterprise agencies.

All of the enterprise agencies have been established and financed either by one large company on its own or, more typically, by a consortium of large firms, often i n conjunction with the local authority or development agency in Scotland and Wales (col- lectively termed the ’supporters club’), although frequently on the initiative of one company. The sponsors of the enterprise agency provide the finance to cover its running costs and the personnel who are seconded, typically for a one or two year period. By mid-1986 there were 4150 private sector sponsors and 574 public sector sponsors of enterprise agencies. Each agency had an average of 24 sponsors. Moreover, 314 organisations supported more than one enterprise agency[l4]. On average, multiple sponsors each supported 7.5 agencies. Most companies help to fund agencies in areas where they have - or had - establishments, but service sector businesses such as banks, accountants and retailers which have national networks of branches often support well in excess of twenty agencies throughout the country.

The primary function of enterprise agencies is to provide free independent advice and counselling to new and existing businesses on a wide range of business topics - for example, general management, marketing, premises, finance and taxation. In addition, agencies perform a ’signposting’ function, directing clients to sources of additional help and advice. As Table 1 shows, some agencies have more extensive functions, providing weekend, day or eve- ning courses on such topics as finance, book- keeping, VAT and marketing as well as courses on how to ‘Start Your Own Business‘, managing small workshop complexes, pro-

Table 7: Major Activities of Local Enterprise Agencies

Activity

counselling training courses/seminars education links newsletters exhibitions small business club property register access to loadgrant funds work spaces trade directory youth enterprise meet the buyer

percentage of agencies undertaking the activity

100 41 37 35 35 29 25 24 22 21 19 19

business competition 16 business to business 13 resource matching bureau 10

Source: calculated from Business in the Com- munity (1986) Directory of Enterprise Agencies

viding finance and organising exhibitions and trade fairs(l51. A handful of enterprise agencies have recently been set up in London and Birmingham specifically to assist entrepreneurs from the black community[l6].

Enterprise Agencies claim to be both very successful and very efficient at creating new jobs. According to evidence from BIC, the typical enterprise agency will, on average, conduct 750 counselling sessions each year, two-thirds of which concern potential new business start-ups. As a result of these efforts, 90 new businesses are helped to start, providing jobs for one other person plus the proprietor in their first year, and 180 jobs in existing businesses are either saved or createdjl71. When set against the average cost of running an enterprise agency of €93,000 per annum (including the salaries of secondees) this gives a figure of f250 per job created or saved. Detailed information on the performance of the Business Link enterprise agency in Cheshire, founded in 1979 by ICI to mitigate the effects of job reductions at its plants in Runcorn and Widnes, reveals that 59% of the clients of the agency in its first three years were either unemployed or facing redundancy; 38% of those facing redundancy subsequently set up in business

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for themselves as did 20% of unemployed clients. Altogether a total of 185 new businesses were started by clients of the agency, providing 491 jobs, while 139 established businesses were helped, many of whom subsequently took on additional employees. The cost-per-job created or preserved was €126[18].

However, these figures ignore the metho- dological problems of monitoring enterprise agency clients in order to assess the numbers of jobs created, nor do they take account of the durability of such jobs and the extent to which such jobs would have been created even in the absence of the help provided by the enterprise agency. On this last point a study by the Centre for Employment Initiat- ives suggests that the ’additionality’ achieved by enterprise agencies is quite low. On the basis of a survey of a sample of clients from 12 agencies it found that only 10% of firms regarded the enterprise agency as having played a crucial role in either their start-up or in preventing their closure, whereas 45% considered that the agency had no effect on such events. In terms of employment creation and preservation, 29% of clients considered, that the agency’s help had no effect, while a further 14% believed that i t had only a marginal effect; in contrast, only 19% regarded the agency’s help as crucial in either creating or saving jobs(l91.

Some companies adopt a more individual- istic approach to job creation initiatives. This may be because suitable partners are lacking in the local area, although some companies prefer to actwnilaterally because i t gives them direct control over the funds which they have allocated and operational freedom. In addition, by acting on its own a company gains the maximum visibility for its efforts. Companies initiating job creation schemes on their own typically seek to enhance the local environment for small firm formation and development in the locality where they are shedding labour by providing resources that are in short supply and hence constraining the supply of new businesses.

In some cases large companies have sought to address the difficulties which new and established small businesses encounter in obtaining start-up premises. For example, in Toxteth (Liverpool) and Brixton (London) BAT Industries plc has taken the initiative in converting redundant premises - a derelict transit shed in Liverpool Docks and a derelict

department store in inner London - into managed small workshops offered on ’easy- in, easy-out‘ tenancy terms, supported by on-site management advisory services and offering common shared services such as secretarial facilities, telephone and telex. The Toxteth workshops can accommodate 127 firms in units from 200 sq ft to 2000 s q f t while the Brixton premises contain 72 workshops, 60 offices and 20 shops[20]. In similar vein, Rank Xerox has initiated the Mitchel- dean Enterprise Workshops in the Forest of Dean to alleviate the effects of its labour shedding in the area[21]. More recently, a number of companies, including Barclays Bank, TSB, Shell, National Giro Bank and Lloyds of London, have established loan funds in specific geographical areas (mainly inner cities) to assist new and established enterprises which encounter difficulties in obtaining finance from conventional sources[22].

Some companies have directed their efforts at groups within a local community that have been particularly disadvantaged as a result of local economic decline. Under such a strategy it is frequently young people that are the target of the job creation initiatives. One example of this approach is ‘Self- Start in Business‘ which was launched by Monsanto Chemicals in Newport, Gwent where i t has almost halved the size of its workforce under the twin pressures of recession and technological change. The scheme reflects the local concern about the high levels of unemployment amongst people under 25 years old. The aim of the Monsanto initiative is to help young people to develop their own businesses by providing aspiring entrepreneurs with access to the company’s own workshop and equipment to develop their product ideas. Counselling and advice from Monsanto’s own staff (who have volun- teered to give up their time to help with the project) is also available[23]. In Middles- brough, ICI have also attempted to tackle the problem of high unemployment amongst young people by providing training facilities, even though they will be able to employ only a few of the trainees themselves. A training workshop gives school-Ieavers a range of skills such as joinery, fabrication, welding and motor vehicle repair in order to make them better suited to obtain employment in small businesses, while a one-year course provides trainees with a range of technical skills. The instructors contact local

Job creation initiatives in the UK 303

companies to try to find jobs for those trainees that ICI cannot take on[24]. The TSB enterprise loan scheme in Glasgow is targetted a t young people wishing to become self employedj251.

Motives

Only a small minority of large companies have undertaken employment initiatives of the kinds reviewed above and, as noted earlier, by no means all of them have been responsible for large scale job losses. More- over, such companies certainly do not consti- tute a representative cross-section of British industry. Many of the companies most often involved in job creation initiatives either individually or in partnership with other organisations have been innovators in other areas of social involvement such as employee welfare, protection of the environment and support for community projects[26]. Such companies are usually also major employers - and in many cases the dominant employer - in the localities in which they operate and so may be providing jobs for more than one member of a family, and have been long- established in such areas, perhaps providing employment for the fathers, mothers, grandparents and even great-grandparents of their existing workforce. Public sector companies have also undertaken job creation initiatives, albeit with government funding. The efforts of British Steel and British Coal to help create new sources of employment in steel and colliery closure areas are the obvious examples and have already been discussed, but British Shipbuilders and British Rail Engineering Ltd (BREL) have also helped to initiate and finance schemes in areas where they have made large scale redundancies, a s in Shildon, Co. Durham, where BREL closed its railway engineering works in 1984 with the loss of 2600 jobsI27).

The motives of companies which have introduced employment initiatives are both vaned and multidimensional, representing a mixture of social concern, public relations, long-term self-interest and notions of 'good employer' practices. Many companies are involved in job creation initiatives because of their genuine concern about the state of the British economy and society, a concern which was sharpened by the inner city riots in mid-1981 - ascribed by many commen- tators to the high levels of unemployment

in such areas, especially amongst young people - which undoubtedly shocked many chairmen and chief executives of major UK companies into making greater efforts to help improve local employment opportunities, particularly in older urban areas. One of the earliest expressions of this corporate 'social conscience' was in a widely quoted part of a 1977 lecture by the late C C Pocock when chairman of Shell:

'Industry cannot just opt out of society's problems, particularly those that press on the local community where i t operates . . . I believe that large-scale industry, whilst remaining efficienl and profitable (which is of course its overriding duty), also has a duty to help in its own localities"28j.

In similar vein Lord Sieff of Marks and Spencer has stated that 'those who lead responsible free enterprise organisations must not only implement a policy of good human relations at work but should have 2 constructive involvement in the communit) in which they operate a s we11'[29]. Hence for many companies the attempt to creatc alternative local employment opportunitie: - even if they have not been responsiblt themselves for job losses - reflects theii genuine desires to return something to thc communities in which they generate profit: after having fulfilled their overriding dut) of running their own business profitably(301 Marks and Spencer explain that thei involvement in local enterprise agencies i : because 'we wanted to put something bad into those 262 communities where we earl our living'[31].

However, many corporate job creatioi initiatives - particularly where they are response to a company's own redundanc! programme - have been stimulated by thl specific desire to help preserve the corn munity which was established and grew tc serve the enterprise and whose economil base is now threatened by its contractioi or closure, and a concern for the affectec employees, many of whom may have beel long-serving and have little prospect of find ing alternative work, and for the sons an( daughters of their employees who may alsc face the prospect of unemployment. AS ai

illustration, the rationale for the establish ment of BSC Industry reflected the philos ophy of its then chairman Sir Charles Villier that employers have a duty to replace thos jobs that they take away from communitie when a plant is rundown or cIosed[32]. Th

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job creation programmes introduced by BAT Industries in Bristol, Southampton, Liver- pool and London - communities where they were a long-established employer but in recent years have contracted their activities - have been motivated by similar consider- ations. BAT state that ’we helped these communities grow. Now we are putting something back to help regenera tion’[33]. Furthermore, at least some senior executives of major firms recognise that industry cannot simply ’walk away’ from large scale redundancies and leave other organisations to deal with the consequences. For example, Mr Anthony Pilkington, chairman of Pil- kington Brothers, has explained his company’s job creation initiative in St. Helens where, as noted earlier, i t has substantially reduced the size of its workforce in recent years, as reflecting both its ‘important civic responsibility’ and a belief that the company cannot ‘just pass our problems to the local authori ties’[34].

However, company motives generally also reflect ‘enlightened self-interest’, although i t is difficult to define where altruism ends and self-interest begins. In many cases the symbolic significance of job creation initiatives confers on firms substantial intangible benefits. Involvement in such schemes can enhance a company’s image as a good community citizen, provide a source of good public relations, raise staff morale and create goodwill in the local communities in which they operate. For example, i t ha6 been suggested that the way in which Pilkington Brothers handled its large scale redundancies in St. Helens during recent years brought it valuable support in its ultimately successful effort to fight off a hostile takeover bid from BTR in early 1987(35]. More significantly, attempts to create alternative employment opportunities may reduce the likelihood of worker opposition to closure and avoid problems such as deteriorating quality control which might arise from the rundown of a factory[36]. For example, it has been suggested that the establishment of a job creation agency - BSC Industry Ltd - by the British Steel Corporation represented a means of weakening potential worker opposition to closures. As a symbol of British Steel‘s good intentions towards its threatened workforce and by raising hopes of alternative local employment opportunities, it can be interpreted as a means by which BSC hoped to implement its redundancy

programmes without serious labour resist- ance[37].

I t is also clearly in the self-interest of companies who rely for their own profit- ability on the prosperity of the localities in which they operate to attempt to revive economically declining communities even i f they are not responsible for fedundancies. For example, since all retail sales are local so efforts by major retailers to promote local economic regeneration will ultimately be reflected in their own sales and profits; indeed, Marks and Spencer are motivated to support job creation initiatives by the idea that ‘prosperous back streets mean prosperous high streets”381. It is similarly in the interests of insurance companies and banks to promote the economic health of the communities in which they operate. Timothy Bevan, chairman of Barclays Bank, forcefully makes this point:

‘in essence we must recognise that a bank is in the long-run only as healthy as its customers; i f the community is sick, we will not prosper either’[39].

A similar view is expressed by Philip Rod, assistant general manager of community affairs at BP. He argues that ’no employer can afford to ignore the communities in which i t operates. We feel that the more stable and prosperous local communities are, the better i t is for ourselves and for industry generally’[40].

The creation of small firms to act as (low cost) suppliers and sub-contractors, and the opportunities which secondment provides to train able middle managers represent other ways i n which employment creation initiatives can be regarded as being in the self-interests of the sponsoring companies. On the last point, the secondment of considerable numbers of up-and-coming bank managers to local enterprise agencies where they are exposed to the realities of small business reflects the banks‘ major concern to develop their understanding of this major part of their customer base[41].

A CBI report suggests that employment initiatives are motivated by an even more basic form of self-interest amongst large companies: their fear ’that if they make no attempt to find solutions to community problems, the government may increasingly take on the responsibility itself. This might prove costly to employers, both in terms of new obligations and greater intervention in

lob creation initiatives in the UK 305

the labour market"421. Indeed, i t has even been suggested that corporate involvement in job creation initiatives is a way of ensur- ing the long-term survival of the private sector. Christopher Norman-Butler, a Bar- clays Bank executive on secondment to Busi- ness in the Community has stated that:

'if we want to retain a mixed economy i t is essential that the private sector is seen to be doing something on its own during a recession. It would be disastrous i f the myth that business didn't care which grew up in the 1930s. was allowed to be revived'I431.

However, not all corporate job creation initiatives can be ascribed either to altruistic or self-interest motives. Courtauld's decision in October 1985 to launch a job creation package in Clwyd, North Wales, where six months earlier i t had closed two textile plants with the loss of 1100 jobs would seem to be a direct result of strong political pressure, including a public rebuke from the Prime Minister who wrote to the chairman urging the company 'to do everything possible to mitigate the consequences of the closures' and criticism from the House of Commons Welsh Affairs Committee. The initiative, which is estimated to cost nearly f3m, includes the transfer of two sites to the local authority, removal of hazardous materials, re-training of displaced workers, employing an industrial regeneration consultant and secondment of a senior manager to the local enterprise agency, and represents the first that the company has launched following a closure (although it has set up specific job- hunting centres in the past when closures have been announced)[44].

Evaluation There are many criticisms of corporate efforts to mitigate the employment effects of their own disinvestment decisions. They have been dismissed in certain quarters as simply a cosmetic exercise. Others have claimed that such initiatives involve little expense for the companies concerned. Indeed, it has been suggested that such initiatives provide a cheap and convenient means whereby large companies who have been responsible for major job losses can salve their con- sciences. Certainly, UK companies are often criticized for devoting insufficient resources to community projects, including job creation initiatives, even tbough the actual

cost to companies in terms of cash and secondments is tax deductable. BIC esti- mates that on average UK companies spend about 0.1% of their pre-tax profits on community projects such as job creation schemes, whereas leading industrialists such as Sir Hector Laing believe that they should be donating at least 1% of pre-tax profits to such initiatives[45]. Indeed, some US companies donate between 2% and 5% of their pre-tax profits on community projects. Private sector companies do not even bear all of the costs of running local enterprise agencies. A recent BIC survey found that industrial and commercial sources provided only 27% of the cash resources of local enterprise agencies, with the balance coming from local authorit- ies, central government, MSC schemes and the Urban Programme, although this figure rises to 44% when secondments, gifts in kind and free advice to clients are taken into account [ 461.

There is also a concern that companies which are currently involved in job creation schemes might lack a long-term commitment to such initiatives. To date there is little evidence to support such fears; however, the decision of the British Steel Corporation to run BSC Industry Ltd on a self-funding basis since 1984 has been taken by some observers a s representing a straw in the wind. More generally, there is now less stigma attached to companies making large scale redundancies than in the late 1970s, thereby lessening the social pressures on firms to attempt to create alternative job opportunities to compensate for their own labour shedding.

There have also been criticisms that by helping to set u p local enterprise agencies companies are simply duplicating the work of other agencies and therefore confusing the small businessman about who to approach for advice[47]. One illustration of the extent of this 'overcrowding' is on Tee- side where there are 25 agencies to which a new or small firm could turn for information, advice or to obtain premises (although not all the agencies are concerned exclusively with small firms)[48]. However, this criticism has been contested by the suggestion that since many small firms operate in the 'black economy' they are likely to be fearful of contacting government agencies for business advice and counselling but will feel more at ease with a private sector organisation[49]. Consequently, the actual duplication between the activities of the various job

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creation agencies in a locality may be considerably less than would be anticipated on the basis of their numbers.

However, the bottom line in any critical assessment of the employment initiatives of large companies is their performance in creating jobs. On the face of it such efforts seem to have been quite successful; as noted earlier, many thousands of new jobs have been brought into existence and many other jobs saved by the direct and indirect actions of large companies, although the timescale of the job creation and job loss processes by no means overlap. Job losses typically occur if not ’overnight’ then certainly over just a few months whereas the equivalent number of new jobs takes considerably longer to create. For example, the 5700 jobs which British Coal Enterprise Limited claims to have created in its first year of operation compares with over 40,000 jobs lost in the mining industry since the end of the strike[50]. Similarly, total employment created by companies in the Clyde Workshops - BSC Industry’s managed workshops scheme which was discussed earlier - is equivalent to only one-fifth of the workforce in the ironworks in the mid-l970s[51]. The reason is that many of the new businesses that job creation initiatives have helped to create only provide employment for the founder and perhaps his immediate family. For example, 43% of the clients of the Business Link enterprise agency in Cheshire who set up new businesses employed only one person[52]. Indeed, few successful businesses with good long-term growth and job generation prospects have emerged from job creation initiatives.

A number of other qualifications can also be made of large company sponsored job creation initiatives. Firstly, there is the question of additionality. It is unrealistic to sup- pose that none of the new jobs would have emerged in the absence of large company employment initiatives; many new companies would still have been established, although those founders who have availed themselves of the advice and training provided under such initiatives might have been able to start on a more solid basis than would otherwise have been the case. Nevertheless, because many sponsors of job creation initiatives do not take account of additionality, their claims about the numbers of jobs created or saved are likely to be inflated. Moreover, where a new or estab-

lished small business has contacted two agencies for help, i t is not unknown for both to include that firm in their ’jobs created’ statistics.

A second problem concerns displacement. The vast majority of new businesses serve local markets[53], consequently the encour- agement of new formations might lead to the loss of jobs or even the closure of established local small businesses. The per- manence of the jobs which result from large firm employment initiatives is also question- able, not simply on account of the notori- ously high failure rates amongst new businesses, but also from the twin dangers of attracting ’cowboy’ employers and encouraging ‘dreamers’ who lack the appropriate abilities and temperament for self-employment to sink their savings or redundancy pay into dubious ventures. On the other hand, the success of enterprise agencies and resettlement schemes in dissuading such people from going into business for themselves is just as valuable an achievement a s assisting in the formation of new firms. For example, the Blue Circle Trust in Gravesend, Kent which was set up in 1981 advised 60% of its clients against proceeding with their business plans; as a result, by mid-1984 only one of the 88 firms assisted by the Trust had gone out of business[54].

A final problem of employment initiatives relates to their targetting. Evidence from steel closure areas indicates that the new businesses which have been helped into existence through the efforts of BSC Industry are rarely set up by ex-steel workers: recent figures suggest that only 7% of the businesses helped by BSC Industry are run by people with a steel industry background[55]. Indeed, employees in large plants, especially where such plants have been the dominant employer in the town, are unlikely to become entrepreneurs[56]. The paternalism of the employer (and also the unions), especially if long-established in the local community, is likely to have produced an ’employee culture‘ which is inimical to independent enterprise. More generally, the work ethic, experience and mores developed in a large factory do not sit easily with the demands of small businesses. Job creation initiatives are often too passive to have a significant impact on the development of local enterprise in such circumstances. Critics suggest that this objective requires a strategy designed to break down ingrained social attitudes which

Job creation initiatives in the U K 307

depresses the level of entrepreneurship. Of course, the difficulties of converting

redundant workers - especially manual workers - into entrepreneurs does not matter i f the employment initiatives have the more general objectives of diversifying the economic base of local communities and creating alternative employment opportunities. But the problem here is often one of mismatch. The redundancies which have prompted large firms to introduce employment initiatives typically involve workers displaced from 'heavy' manufacturing sectors whereas the majority of jobs created in new and expand- ing small businesses as a result of such schemes are in 'light' manufacturing and service industries. Evidence from steel closure areas indicates that the new firms which BSC Industry has assisted have provided few employment opportunities for ex-steel- workers: many of the jobs are for women while others require skills which former BSC workers do not have[57]. Employees from large plant-dominated, traditional, heavy manufacturing industries may also find i t impossible to adapt to working in small- scale manufacturing and service firms with their very different social relations and working practices.

Conclusion

The kinds of job creation initiatives that have been introduced in recent years by large companies in a n effort to offset large scale redundancies can have a favourable intangible impact on community attitudes in areas hit by factory closures and large scale redundancies. Longer term such initiatives might help to stimulate a local enterprise culture by highlighting the scope for entrepreneurial activity. And in the short term the symbolic value of corporate job creation initiatives and the rapid growth achieved by some new companies which such initiatives have assisted - no matter how rare and atypical such 'success stones' are - can be of great importance in increasing hope, morale and confidence, all commodities that are scarce in communities suffering from the erosion of their employment base. However, the evidence reviewed here on the tangible impact of such initiatives in terms of employment creation indicates that they provide a very partial solution to the problems result- ing from large scale redundancy and are

unable to do more than achieve a very limited reversal of economic decline in areas affected by corporate disinvestment. In consequence, as a recent Financial Times editorial on the social obligations of employers has noted, there is a pressing need for companies to develop 'more imaginative ways of cushioning the impact o f . . . changes in markets and technologies on their employees[58]. Now that the first rush of enthusiasm for helping small businesses has waned, some of the major large company sponsors of job creation initiatives are, in fact, currently re-appraising the most effective ways to create jobs. Indeed, the attitudes of large companies towards job creation initiatives can legitimately be regarded as having reached an important watershedI591.

One outcome of this re-thinking of strategies to create new jobs is a shift away from the traditional focus on start-ups and towards helping established small businesses to grow which many observers feel is likely to be a more effective means of employment generation. Accordingly, greater emphasis is now being given to helping small firm owner- managers to develop business skills[60]. However, there is a recognition that the most effective means of creating significant numbers of long-term, viable jobs is likely to be through helping areas to improve their economic base through inventing, developing and marketing genuinely new products and processes. Certain sponsors of job creation initiatives are therefore shifting their efforts towards schemes designed to promote the formation of technology-based enterprises, foster the technology transfer process, increase the adoption of new technologies by small businesses and encourage technological innovation.

One approach in such a technology-oriented job creation strategy involves the provision of what are variously termed Business Technology Centres, Advanced Business Centres and Innovation Centres - managed workshops which offer a wide range of common services including computer-based office technology. Such schemes help to raise the awareness amongst small firms of the benefits of computerisation as well as providing hands-on training, advice, program- ming services and other support services in order to realise these benefits without the need for firms initially having to acquire their own equipment.

This concept was originally proposed by

308 Industrial Relations Iournal

Job Creation Limited in a study on behalf of the Department of Trade and Industry and Shell UK Ltd in 1982[61]. Control Data has undertaken a similar initiative in Steven- age based on its earlier application of the concept in the USA[62]. A more detailed study by Job Creation Limited on behalf of Nottingham City Council and Plessey Communication Systems Ltd has led to the establishment of an Advanced Business Cen- tre in Nottingham(631. BSC Industry helps to fund the Strathclyde Business Innovation Centre. British Coal Enterprise has recently announced plans to fund an Innovation Cen- tre in Barnsley(641.

Technology-oriented job creation initiatives should also make greater -efforts to encourage the spin-off process from large firms. Corporate research and development activities produce many ideas which are never commercially developed, generally either because the market is thought to be too small, or because they do not fit into the company‘s existing product range, or through a failure to meet financial criteria. In such situations, large firms could usefully seek to transfer this technology to the small firm sector for commercial exploitation, perhaps by encouraging some of their own employees to set up in business for themselves in order to make and sell these products under licence or in exchange for a share option. This approach, already practised by Siemens, the West German electrical company, finds a use for a peripheral research idea which brings some commercial benefits to the company concerned as well as helping to increase local employment opportunities(65j. A study in the UK by Watkins and Horley confirms that large firms have considerable numbers of abandoned development projects and that many are willing to consider the transfer of this technology to small firms[66]. The first formal attempt in the UK to encourage this kind of deveIop- ment only commenced in early 1987, based once again on an idea from Pilkington Bro- thers. Nimtech has been formed by 14 major companies in North West England and is supported by universities and polytechnics in the region to promote new and improved technology (from which its name is derived) both amongst themselves and between large companies and small businesses. Part of the aim of Nimtech is to prevent unused or under-used technology from gathering dust in large companies when they could be

spun-out to small companies for successful commercial exploitation. In addition, Nim- tech intends to identify small businesses that are developing new technologies in which large companies could take venture capital stakes and identify suitable smaller companies to which large companies couId contract Q U t some research and development. Several of the sponsoring companies have seconded senior technical staff to act as ’field officers’(671. This complements recent efforts by 3i Ventures, a division of Investors in Industry, the largest providers of venture capital in the UK, to persuade large companies to look favourably on what they term as the ‘sponsored spin-out‘ - a situation where management teams who have developed potentially profitable new ideas which are outside their company’s mainstream activities can exploit them by setting up new enterprises with the parent company, 3i Ventures and the management team each taking an equity stake in the new corn-

The potential danger of this approach is that, unlike traditional job creation initiatives, i t is much more difficult to ensure that technological spin-offs locate in economically depressed areas. At the regional scale the concentration of corporate research and development activity in South-East England means that the scope for this initiative is greatest in what is the most prosperous region in the country[69]. And a t the intra- regional scale the beneficiaries may be market towns and suburbs rather than older urban-industrial and inner city areas. The dilemma, as always in industrial policy, is therefore between seeking to maxirnise the benefits accruing to the national economy and preventing the further widening of dis- parities in economic development between regions and sub-regions.

pany 1681.

Acknowledgement

I am grateful to Jeff Rattle of Job Creation Limited for the stimulus to write this paper and for his comments and those of his colleagues on a preliminary draft. However, the views expressed are solely mine.

References

1. For example, see Kransdorff, A,, ’A little extra effort eases the pain of redundancy’, Financial Times, 25th Setpember, 1981.

lob creation initiatives in the U K 309

2. 'Softening the blow of closure', Finnncir i l Times, 31 July 1986.

3. 'Former BR workshop jobs "being replaced"', Financial Times, 29th October 1985.

4. CBI, Company Responses to Unemployment, 1981.

5. Cross, M., 'The entrepreneurial base of the large manufacturing company', in J. Stan- worth, A. Westrip, D. Watkins and J. Lewis (eds), Perspectives on a Decade of Sninll Business Research (Gower), 1982, pp. 143-156.

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9. British Coal Enterprise, Ariiiirnl Review 7986/ 87, 1987.

10. Planning Exchange, 'Gosport Job Creation Project', LEDIS S h e e t A137, 1984.

11. For an example see R. Cornwall, 'Kassel enlists British aid in search for jobs', Finnticial Times, 13 August 1985.

12. 'Business in the Community: a survey', Finan- cial Times, 13th April 1983; 'Small businesses: a survey', Financial Times, 30th April 1985; Garnett, N. 'St. Helen's tackles industrial change', Financinl Times, 12th June 1985; Financial Times (1987) o p . cit. (note 8).

13. Pilkington, Sir A., 'Business in the Com- munity: where d o we go from here?', Policy Studies, 4, 1984 pp. 12-22; Financial Times (1983) o p . c i t . (note 12); Financial Times (1987) o p . cit. (note 8).

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Communify and the Broadening Role of Enterprl ise Agencies, 1984.

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29. Financial Times (1983) op. cit. (note 12). 30. CBI, The Responsibilities of the British Pirblic

31. 'Small businesses; a survey', Finarrciol Titties,

32. 'Small businesses: a survey', Firioncinl Times,

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(note 17). 47. Gibb, A.A. Enterprise Agencies: cxploring their

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and the N e w Firm (Croom Helm) 1982; Lloyd, P.E. and Dicken, P. Industrial Change: Locnl Manufactunng Firms in Manchester and Mersey- side (Department of the Environment: Inner Cities Research Programme No.6) 1982; Mason, C.M. N e w Manufacturing Firms in South Hampshire: survey results (University of Southampton: Department of Geography Discussion Paper No. 13) 1982.

54. 'Britain at work', The Economist, 5th May 1984, p. 19.

55. Batchelor (1987) o p . cit. , (note 8). 56. On this point see Fothergill, S. and Gudgin,

G., Unequal Growth: urban and regionnl employment change in the UK, Heinemann, 1982.

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Company, 1973.

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310 Industrial Rela t ions journal

has not yet come true'. fitiariciol Times, 30th January 1985.

58. 'Obligations of employers', Fir int icinl T i t ~ i ~ s , 11th October 1985.

59. Dawkins, W., 'Corporate venturing: reflecting on what is socially good', Fimnciol Tiiiics, 22 July 1986.

60. Ibid. 61. Job Creation Limited, Hdpirig S n d Firnis Stnrt

U p nird G r o w : cotiiniot7 services orid techriologirol suppor t (Department of Industry and Shell UK Limited), 1983.

62. 'Stevenage: an FT regional report', fItint7cinl Times, 17th January 1986.

63. Planning Exchange, 'Nottingham Advanced Business Centre', LEDIS Sheet A771, 1985.

64. 'Coal body in jobs project', Firinr7rinl Times,

65. Dawkins (1985) oy . L i t , (note 49). 66. Watkins, D. and Horley, G., 'Transferring

technology from large to small firms: the role of intermediaries', in Faulkner, T, Beaver, G., Lewis, J. and Cibb, A. (eds) Readiiigs i i i Stnnll Businesses, Gower, 1986, pp. 215-251.

67. Hamilton Fatey, I., 'An incubator for technology', Finnncinl Tinies, 20th January 1987.

68. Dawkins, W. '3i seeks support for "spinouts"', Financinf Times, 1st October 1985.

69. Howells, J.R.L., 'The location of research and development: some observations and evidence from the UK', Regiorinl Studies, 18, 1984, pp. 13-29.

13th September 1986.

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job creation initiatives in the uk: the large company role

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