30 years on, firms are facing tougher trading conditions (From The Northern Echo)

30 years on, firms are facing tougher trading conditions

3:05pm Tuesday 19th July 2011 in North-East Business Features

It is 30 years since the North was in the grip of the recession of 1981. Business advisors and accountants Clive Owen & Co LLP and one of their long-time clients, independent carpet firm Frank’s, The Flooring Store, recount the ups and downs of business from the Eighties recession to today’s economic struggle. Lindsay Parker reports.

AS far as advertising slogans go, it’s certainly one of the more memorable. “I love carpets, me” has been the catchphrase of Frank’s, The Flooring Store since 1996 and, whether you love it or hate it (it even has its own Facebook page) nothing sums up the business’ straightforward approach better than those four little words.

The hundreds of thousands of pounds a year the company spends on advertising is one of the biggest changes Billy Maguire has seen over the past three decades, certainly since the days his father, Billy Sr, started the first family carpet firm from small premises in West Auckland, County Durham, in 1981 in the teeth of a recession.

Mr Maguire who, with brother Jason, now runs the independent flooring empire, said: “Advertising and PR is our second biggest cost now after wages and we have always spent what we could afford. As the business has grown, we have increased the budget pro-rata.

“It was myself and a lady called Denise Adams, the head of our marketing company, who came up with the slogan. She said ‘your family love carpets, don’t you?’ and it went from there.

“The first six to nine months we used it, it didn’t work, then all of a sudden it just took off like a rocket and it started getting a cult following. We would get people shouting ‘I love carpets, me’ when they saw any of us. Looking back, we built the business around the marketing and the brand. I think one of the major changes with businesses now is that they spend more on advertising and getting their image right, even in today’s tight economic times.”

Mr Maguire believes his investment in advertising has helped the business stay ahead of his competitors, some of whom have fallen during the latest recession.

The “I love carpets, me” slogan, and the ethos behind it, of low prices for good quality, has certainly worked for the company as a whole. The group has about 200 employees, a £30m-plus turnover and more than 30 Frank’s, The Flooring Store retail outlets, five of which have been opened recently during the most difficult trading period in 20 years. Having been immersed in business for 30 years, Mr Maguire has seen the ups and downs of the industry and the wider North-East economy. He recalls the 1981 recession, but believes businesses are facing tougher times now than then. He said: “It seems to be a perfect storm in that we’re getting it from all sides. You’ve got the Government increasing taxes and the banks not wanting to lend. Then you have customers not wanting to spend and manufacturers putting up their prices. It’s very challenging now and I can’t see it getting better for another 18 months to two years.”

He said the modern-day business was not helped by red tape, which has increased over the past three decades.

He said: “I know there are some very unscrupulous employers, but the amount of time you spend dealing with health and safety and employment law and the cost that that generates is horrendous. It puts a massive burden on businesses.”

Clive Owen, the founder of accountancy and business advisory firm Clive Owen & Co LLP in Darlington, has worked with the Maguires for more than three decades and agrees about the red tape. He said: “There are far more rules and regulations than 30 years ago.

“For example, the amount of tax law is at least four or five times more voluminous. If you employ staff, you have to act as a tax collector for the Government and, increasingly, firms are being asked to submit more and more information.

“It is happening at a time when they face economic burdens. There does not seem to be as many firms going into liquidation as in the last recession, but many of our clients with successful businesses are having to cut costs and staffing. I think many firms are worried about 2011 and whether or not there will be another recession.

“When I started in 1983, it was following a major economic downturn.

Most of the clients I worked with were looking for good quality advice from an advisor who understood their business and the commercial issues they faced.

“They needed someone who worked with them and looked beyond year-end accounts. Being an owner manager myself, I enjoyed building relationships with them based on this philosophy. It’s a philosophy that has remained unchanged for 30 years.”

Clive Owen & Co, which employs 80 people at offices in Darlington, Durham and York, has not been immune to changes in the economy. Like many accountancy practices, it has expanded the services it offers to clients, such as payroll and IT support, in order to stay ahead.

He said: “We offer corporate finance now and help clients buy and sell businesses. We also have an extremely strong and proactive tax team.

“It is like supermarkets widening what they offer people. It is a sign of the times that many businesses now offer other services, not only to survive, but to grow.” The biggest change he has seen over three decades has been in technology. He said: “Thirty years ago, most people did not have a computer on their desk. You did not have the internet and you did not have mobile phones. We did not even have the fax machine, and that is now obsolete.

“The difference it makes is in our decision-making. I used to work for a partner who, when he got a difficult letter in the post and someone rang to say ‘have you got that?’, he would say no, because he liked to consider matters for 24 hours.

“If you said that today, all people would do is check the email was sent and re-send it. It is much more immediate now and people expect you to react straight away.

“Technology has affected the way we respond as accountants and today the Government is wanting as much information as possible to be sent over the internet. If you send a set of accounts to Companies House, you can send it encrypted so they can put it straight onto their system.”

The internet has opened the world to businesses. Gary Ellis, a partner at Clive Owen’s Durham office, said: “There also seems to be more competition. It’s a global market.

“Thirty years ago, we were working with more manufacturing businesses than we do now, in the car and garage industries. We would have independent clients selling vehicles, car services and petrol. Now it has moved more towards group ownership. Client-wise, it has also changed. We have quite a number in the environmental sector, in the IT industry and a few academic institutions, as we see these areas growing.

“Businesses are more cautious nowadays, but there are some clients who are looking at the recession and saying ‘what recession?’.

“These are businesses which have seen the Government cuts and they have not been affected by them yet. One engineering client, for example, has said they cannot take any more work on.

That is not something you expect to hear today.”

Another change Billy Maguire has seen has been the demise of manufacturing in the flooring industry.

He said: “When I first started, a lot of our products were bought in England.

Now it is Europe – Germany, Holland and France. It is a shame but we have become a nation of shopkeepers.

Manufacturing has almost died here.”

As well as investing in marketing, the firm has spent £1m on a new distribution centre on the outskirts of Bishop Auckland to house a second carpet-cutting machine and delivery docking area to increase the speed carpets are brought on the site.

Asked what the biggest plus had been during the past 30 years, he said: “That we are still in business. I do think we have to work longer and harder than we did 30 years ago, because the competition is so fierce. There have been difficult times, but we have worked hard. Who knows what the future will bring, but we want to grow into the largest independent retailer in the North-East and I think it will be down to reputation, word-of-mouth and marketing.”