Examination of Witnesses (Questions 331
- 339)
TUESDAY 20 APRIL 2004 (Afternoon)
CONFEDERATION OF
BRITISH INDUSTRY
Q331 Good afternoon gentlemen. We
have been taking evidence all day. Some people are saying that
industry gets too much; others are saying that it does not get
enough; some who disagree with giving it anything say that probably
ECGD charges just about the right rate if you are going to have
it anyway. It would seem that your submission suggests that export
credit agencies in other countries do it better than ECGD. Is
that a reasonable summation?
Mr Jones: I think you know who
Andy and I are, but James is my Chairman on my CBI Export Finance
Committee and he is also the MD of Aon Trade Finance. When I get
into any difficulty in the next few minutes, I shall look that
way. That is a good summation. ECGD used to have a reputation
as a "can-do" organisation years ago. It has been in
existence for 80 years and now the attribute which would be more
frequently given to it by my members would be "can't-do"
and that other organisations in other countries are more flexible,
their response times are quicker, less bureaucratic and probably
less opaque. As a result, at the moment the activity level of
ECGD amongst our principal competitors is the lowest it has been
for a long, long time. In fact when I was gathering evidence for
this, one of my members said to me that what he actually does
is use ECGD to market test. He rings them up and if they will
cover it, he knows it does not need cover. That is the absolute
truth and that is not where we would want to see it. I guess it
is also true to say that if only we lived in a perfect world,
none of it would be necessary anywhere, but we do not, so we live
in a competitive environment where we as a nation have to be competitive.
That is not just my members having to be competitive; it is the
facilitation support in the nation having to be competitive against
its rivals in other countries, because that is the way the world
works. If we did not do it, believe me another country would.
Q332 Chairman: Which countries would
you regard as examples of the best practice?
Mr Jones: In this area?
Q333 Chairman: Yes. Your members
are international companies, they operate with other ECAs.
Mr Jones: If you asked the average
exporter that question, they would say America, Germany, France
and the Netherlands. It is interesting, because we rightly address
the philosophy behind it in terms of market failure: where the
market cannot provide, this is where we see this stepping in.
Therefore it is very important that it is seen as providing something
at a rate of return where commercial availability does not exist.
That is the philosophy behind it here. I do not think we would
disagree with that. If you look at the philosophy in America,
they say "It is to support US exports and US jobs. That is
why, period". If you are in the Netherlands, it is to create
conditions for exporters to compete on equal terms with their
global competitors. If you are in Canada, it would be to be the
recognised leader in providing ground-breaking commercial financial
solutions. In Germany they actually sat and told me "It is
industrial policy. Why wouldn't we do it?". They all come
at it from a different philosophy. We, I believe rightly, come
at it from "There's a market failure. Private sector can't
provide. Government should step in". If we do not, it is
not just about the jobs in Lancashire or indeed anywhere else
in Britain, it is actually the overall competitiveness and attractiveness
of Britain as a place to invest, because it is part of the suite
of available support, where an overseas investor decides where
to put down his tent.
Q334 Mr Hoyle: In your report you
say that there is a ". . . disinclination of the ECGD to
cover some constructional infrastructure and contracting work
in developing countries". Obviously you feel that it is deeply
regretted. Do you have any examples, or which examples do you
have in mind here?
Mr Scott: What that referred to
was when we were looking at the priority areas which ECGD was
identifying, which were defence related, civil aerospace related,
power and energy related, a lot of our members in the construction
related areas—which historically have been areas which have
been supported by ECGD—felt that whilst that was not excluding
them automatically from being covered, they were important areas
where the UK had strong expertise, where the UK was well respected
around the world and therefore they ought to be included within
those key areas which will be covered by ECGD. It was more a question
of when ECGD had identified priorities, whilst they were not specifically
being excluded, they had not identified that as being a key sector,
which they felt was one which warranted more priority.
Mr Larkin: One of the reasons
why construction overall was not made a priority was because there
had been fewer applications from the construction industry in
the UK. The reason for that was because in that particular area
ECGD was increasingly seen as uncompetitive and therefore people
were sourcing their construction projects from other countries.
Q335 Mr Hoyle: Yet we hear when we
go abroad that British companies are doing well and are winning
contracts.
Mr Larkin: As consultants perhaps.
Q336 Mr Hoyle: Absolutely. Is that
not fair of the construction industry in this country? The big
boys now are consultants and they employ everybody in. Is that
not the way the construction industry has now gone?
Mr Larkin: I accept that; it is
an international business.
Mr Jones: In the consultancy side
of construction we cannot even say we are doing well: we are probably
world class. Wherever you go we are the best in the world. It
is on the delivery of the risk at the end of the day; that is
what this is about and in that we have to fight every day and
we are no better or worse.
Q337 Mr Hoyle: That is reflected
in the answer. In the UK what the big boys have done is become
consultants and they just buy in whoever they need to do the job.
Mr Jones: On a local basis.
Q338 Mr Hoyle: Absolutely and that
is just reflected abroad and in fairness I think the report is
a little disingenuous in the way it is put across when that takes
place here as well.
Mr Jones: If you move one up from
provision of labour to the provision of management, which is where
the inherent risk takes place, I think we are not being disingenuous.
There you are seeing the risk aspect of project management being
an issue, but talking of the bottom level of it I think you are
right.
Q339 Mr Hoyle: Wherever we go we
seem to be hearing we win water treatment contracts, new roads
infrastructure, airports, you name it; we are involved everywhere.
We are doing really well and it is a great success story and let
us hope it continues.
Mr Jones: I would just say that
there is one problem when aid has been untied here and it has
not been untied in some of our competitor nations, so UK taxpayers'
money is often used to create jobs in France. But that is for
another day.
Mr Hoyle: We have to fight that, we always
have done and must continue.
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