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03 October 2004
Sunday Herald
Joined-up thinking time for clubs

GROUCHO Marx once declared: 'I don't want to belong to any club that will have me as a member.'

Such frivolity would not go down well with Scotland's business clubs and organisations, several of which are facing the tough challenge of declining subscription revenues, prompting a growing belief that they cannot all survive.

Business owners and corporates often pay multiple subscriptions to a number organisations such as the so-called ''Big Five': CBI Scotland; Scottish Council of Development & Industry (SCDI); the chambers of commerce networks; Institute of Directors (IOD); and Scottish Financial Enterprise (SFE).

Beside this group (which lobbies on common concerns such as transport, water infrastructure and business rates) there is also the Federation of Small Businesses (FSB), Forum of Private Business (FPB), the Entrepreneurial Exchange, and bodies such as Quality Scotland.

They command subscription fees ranging from just (pounds) 100 or so for the FSB to tens of thousands for SFE and, as competition for limited resources intensifies, tougher questions are being posed as to what benefits they can deliver.

It is a touchy subject. Ask each organisation if they are struggling and you will hear a chorus of denials and a long list of achievements but, privately, business sources claim that several are either already in trouble or face a crisis within five years.

The rumour mill focused most recently on the IOD, amid talk it is scaling down and plans to move out of its base in Edinburgh's Royal Scots Club.

IOD Scotland executive director David Watts denied this. 'Things are thriving at IOD Scotland membership is steady and on the up-and-up,' he says, although he did not rule out moving base in future as property consultant Stonemartin was looking at potential locations.

Watts said training was one of the IOD's key benefits to its 2000 individual members in Scotland and said courses were fully booked to next spring.

The Scottish Executive's recent decision to withdraw funding from Scotland The Brand prompted one business leader to remark: 'There will be another couple of organisations which will go the same road.' Quality Scotland is said to be facing an uncertain long-term future.

A number of organisations, such as Glasgow Chamber of Commerce founded by the city's tobacco lords in 1783 and headed by new chief executive Lesley Sawers, are working hard to remain relevant to the modern business community.

Sawers is confident about the future and said Glasgow chamber's biggest revenue source was from products and services such as training and export accreditation.

She is seeking to reposition the chamber to ensure it meets the needs of the 85% of its members who run businesses with less than 10 employees and updating its image to address generational and gender issues.

The bulk of Scotland's business groups are dominated by men, although the Entrepreneurial Exchange, whose members include Tom Hunter, Chris Gorman and Sir Tom Farmer, has around 15% female members.

The appeal of networking with multi-millionaires means this is the one organisation whose prime concern is not attracting members but ensuring that candidates for membership are serious about growing their business, said chief executive John Anderson.

But others are finding it hard to find new sources of revenue, leading to a growing belief that consolidation is overdue and inevitable.

Sawers added: 'There needs to be a sharper commercial focus to deliver clear commercial benefits or some of these organisations will die.'

A senior figure from the financial sector, who declined to be named, agreed: 'More mergers are inevitable the big banks are not going to keep coughing up for all of these memberships.'

Both The Royal Bank of Scotland and HBoS denied there was any move to scale back overall contributions but said they kept such matters under constant review.

A Royal Bank spokesman said: 'Individual membership organisations play a useful role in ensuring the collective voice of business and specific sectors are heard.'

Consolidation is being driven by two trends. Firstly, corporate spending on membership fees is coming under greater scrutiny with more pressure on boards to justify such investments in terms of measurable benefits. Secondly, as the big Scottish plcs gain in stature, there is less justification for them to join forces to lobby.

The first signs of cutbacks emerged in 1999 as the four members of the Committee of Scottish Clearing Banks - the Royal, HBoS, Clydesdale and Lloyds TSB Scotland - quietly gave notice to the SFE that they intended to cut their contributions.

According to informed sources, the SFE won a reprieve and the axe fell instead on their contributions to the SCDI, which was given a year's notice of their intent, allowing chief executive Alan Wilson time to instigate a successful drive to boost revenue from other sources such as such as events and research.

But early last year the SFE was put on notice of the banks' intention to scale down their collective annual contribution of around 150,000. The banks have not commented on the decision but an informed source said: 'The plan was to cut their contributions in half but not at one fell swoop.'

The banks still remain as members but, if they reduce collective fees by about 75,000, it would make a dent in the overall membership contributions, which amounted to 405,925 in 2003 according to the SFE accounts.

SFE does not face an immediate financial crisis, as prudent control of funds in the last few years has left it with a surplus of 213,173 in its last published accounts. However, the source said: 'Revenues have dwindled continually over the years I reckon it (SFE) could probably last another five years.'

SFE has suffered from a swathe of mergers in the financial services sector which reduced its membership base among life offices and accountancy firms. The challenge for recently appointed chief executive Amanda Harvie is to lay a convincing strategic plan for the future, a task she embarked upon this summer. She said: 'We asked our membership the tough question 'Is there a need for the SFE ?' and we got a very clear mandate to gear up and deliver more.'

Harvie said the SFE is recruiting members and has secured sponsorship for events such as the annual dinner backed by Ernst & Young this year.

A spokesman for the Royal said: 'The SFE continues to play an important role for Scotland's financial sector and the Royal continues to make a significant contribution.'

However, inevitably, the current situation has evoked comparisons with the late 1990s when merger talks were held between the SCDI and SFE and also CBI Scotland.

Alan Wilson, chief executive of SCDI, said: 'We had a look and blew kisses but that was that.' He added that differing priorities among the groups' members justify separate existences although he concedes that competition for funding is tough. 'People say Scotland is too small for all these organisations but ask people to surrender sovereignty and it's a different matter,' he declared.

One businessman put it more bluntly: 'There are too many snouts in the trough.'

The jury is out on which organisations will go hungry but they will have to fight harder for their daily bread.

VALERIE DARROCH



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