APPENDIX 15
Memorandum submitted by UK Trade &
Investment
INTRODUCTION
1. UK Trade & Investment (UKTI) welcomes
this Inquiry. UKTI is the lead government organisation that supports
companies in the UK trading internationally and overseas companies
seeking to invest in the UK.
2. UKTI brings together the work of the
Foreign & Commonwealth Office (FCO) and the Department of
Trade and Industry (DTI), and draws staff and support from both
parent departments. It works closely with the Regional Development
Agencies (RDAs) in the English Regions, and with the trade promotion
organisations of the devolved administrations. UKTI also markets
the UK abroad as an investment location, working in close partnership
with the English RDAs and with development agencies in Scotland,
Wales and Northern Ireland to secure inward investment.
3. UKTI provides business with a network
of trade advisors in the English regions, and an international
network of specialist, business-focused help based in Embassies,
High Commissions and Consulates around the world. Through this
network, UKTI gives companies unrivalled access to a global government
organisation, supporting their trade and investment activities
around the world.
4. UKTI's recent success, and the value
it achieves for the taxpayer, is illustrated in the following
figures:
— UKTI is ahead of its PSA targets
on new-to-export companies reporting that UKTI had helped them
improve their business performance (55% to Q1 2006-07 against
a target of 40%), and on established exporters helped into markets
new to them (53% to Q1 2006-07 against a target of 50%).
— In 2005-06, 1,220 inward investment
projects were reported to UKTI, creating 34,077 new jobs, and
safeguarding a further 55,789. UKTI were significantly involved
in "landing"/facilitating 449 of the 1220 projects,
involving a total of 12,507 new jobs, and 5,940 safeguarded jobs.
This maintains the UK as one of the world's most attractive economies
for inward investors.
— Manufacturing projects accounted
for 23.6% of the total number of inward investment projects, and
26% of the new jobs, and half of the total jobs.
— Independent research for UKTI,
published in April 2006, shows that £65 million spent on
four key trade development schemes generated £1.1 billion
additional net benefit by enabling over 6,000 businesses, including
manufacturing and the services sector, to upgrade their international
marketing strategies.
— In 2005, nearly 2,000 companies
signed up for the flagship UKTI "Passport to Export"
development programme to help them prepare to trade internationally.
— Nearly 6,000 companies were
helped to move into markets new to them.
— Over 1,700 reports for British
companies were produced as part of the Overseas Market Introduction
Service (OMIS).
— UKTI's Enquiry Service dealt
with over 35,000 trade and inward investment related telephone
calls/emails in 2005-06.
GLOBALISATION
5. Globalisation means competition is intensifying
at a pace of change that is unprecedented. New communication technologies
and falling transport costs are breaking down geographical barriers
to trade and economic integration. Companies are internationalising
earlier and in novel ways. Some are choosing to outsource production,
while maintaining their high-value R&D facilities in the UK,
creating different and often more jobs in the longer term. Some
companies are born global—where it is no longer a question
of developing a home market first, then expanding incrementally
into a series of overseas markets.
6. Companies—large and small—need
to internationalise to remain competitive. Examples of how some
companies have done so are set out at Annex A. Globalisation
is a huge opportunity for the UK. The UK has many strengths including
the stability of its macroeconomic framework, its openness to
competition and trade and the strength of its science base. But
it needs to change the way it works and raise its game in its
efforts to market the UK's business credentials to ensure that
it keeps ahead of the competition.
BUDGET ANNOUNCEMENT
7. The 2006 Budget Announcement set out
an enhanced role for UKTI across both trade and investment with
responsibility for:
— marketing the strengths of the
UK economy internationally as a place to do business in and with;
— boosting trade with and inward
investment from emerging markets such as India, China, Brazil,
Indonesia, Mexico, Russia, South Africa, Turkey, UAE and Saudi
Arabia;
— focusing on knowledge-intensive
businesses and innovative sectors;
— implementing an International
R&D strategy in partnership with academic and business communities;
and
— promoting the City of London
working with the UK's regional clusters, as the world's leading
financial centre.
UKTI FIVE-YEAR
STRATEGY—OVERVIEW
8. UKTI published its new five-year strategy
"Prosperity in a Changing World" on 20 July 2006. The
strategy outlines how UKTI will respond to the Budget announcement
and co-ordinate the Government's efforts to create the environment
in which business can flourish in a global market place. UKTI
will focus its resources to ensure it is spending where it really
makes a difference and where the returns to the economy and the
taxpayer are greatest. UKTI will make significant internal changes
to meet these new challenges. It will restructure around its clients
and will bring in new private sector skills. It will focus resource
on the front line and emerging markets; and be more entrepreneurial
in identifying business opportunities and working with our clients.
By March 2007 it will have reduced its headquarters by some 40%
since 2004. Some 90% of its people will be in the front line overseas,
in the English regions, or in customer facing service delivery
in headquarters.
Marketing
9. Central to UKTI's Five-Year Strategy
is the marketing of the UK's business strengths as a world-class
source of products and services, partnership and business location.
UKTI is not starting from scratch. It has a good understanding
of who its customers are, what they want and how they perceive
the offer made to them. However, there are gaps in perception.
To ensure that all existing intelligence about overseas business
and perceptions of the UK are fully exploited, UKTI is undertaking
a review of existing research with its partners.
10. UKTI will work in partnership with business,
across government and with other agencies charged with promoting
the UK to create marketing synergies through more joint working.
From now through to December 2007 UKTI will develop detailed strategies,
supported by high quality promotional material, to target specific
overseas business sectors and individual companies on the basis
of core messages about relevant UK strengths and to assist UK
companies in selling themselves overseas. This work will have
a particular focus on high growth countries of strategic importance.
These strategies will include specific targets on investment and
trade, to be set by April 2007.
11. A new Managing Director of Marketing
appointed from the private sector will lead the strategy for marketing
the UK.
Emerging Markets
12. Building strong trade and investment
links with emerging markets is at the core of UKTI's Strategy.
Markets such as China and India are experiencing high economic
growth. They are already in the top 10 largest economies in the
world, and are forecast to increase their shares of global output
over the next ten years. As such, they present significant opportunities
for UK business. UKTI has identified a priority list of emerging
markets, based on an assessment of the relative importance of
different markets for UK business and the value of commitment
of further UKTI resources in those markets. Consultation of business
representatives during the development of the new strategy has
supported this approach.
13. In addition to assisting UK businesses
to develop their capabilities to internationalise, Government,
and UKTI in particular, has a role in emerging markets in helping
UK business to overcome barriers to market access and growth through
a variety of levers. These include the development of networks
underpinning bilateral trade and investment relationships; active
engagement with governments to improve the business environment
for British companies including Joint Economic and Trade Committees
or similar (see below) and, where appropriate, bilateral ministerial
support for high impact contract and other commercial opportunities;
and working with DTI and other government departments to influence
the removal of barriers to trade. There is now also good economic
evidence to support the conclusion that firms secure most value
if they enter emerging markets at an early stage.
14. One of the key features of UKTI's new
strategy is differentiation: the sort of services UKTI offers
in China or India will be different from those in France or the
United States. In emerging markets UKTI offers more support dealing
with governments and overcoming barriers to trade both formal
and informal. In more developed markets it focuses relatively
more effort in helping UK-based companies access key local contacts
and sources of information, and identifying inward investment
projects.
15. The Asia Task Force was set up with
the aim of lowering barriers to trade between the UK and Asia
and identifying opportunities to increase UK trade with emerging
economies across the world, not just in Asia. It has produced
significant evidence to underpin UKTI's developing approach to
emerging markets. Through its evidence-based research, the Task
Force has highlighted key issues for and barriers to increased
trade and investment in Asian and other emerging markets. It has
identified ways that Government can encourage and support companies
to do business in emerging markets and overcome these barriers.
These include ministerial visits with business to emerging markets;
on the ground support for UK business interests; lobbying for
market liberalisation; and targeted support for established exporters
to expand in emerging markets.
16. Joint Economic and Trade Committees
(JETCOs) or equivalent groups, chaired at ministerial level, have
been established for India, China and, most recently, Brazil.
The aims of these bilateral partnerships are to strengthen trade
relationships between the countries and provide an effective forum
for addressing specific issues, in particular barriers in priority
sectors, that hinder increased trade and investment. The JETCO
for India has already delivered liberalisation of air services
and discussions continue on market access issues including financial
and business services and the retail sector.
Innovative Sectors
17. The evidence set out in the Economics
Paper published alongside the UKTI 5-year strategy suggests that
returns to the taxpayer from UKTI support are likely to be higher
for innovative than non-innovative companies, for two reasons:
— Successful internationalisation by
innovative companies contributes to UK productivity and prosperity.
The evidence shows that there are strong links between companies'
innovation performance and overseas activity.
— Success in selling overseas increases
investment in innovation, and can enable innovative businesses
to meet growth objectives which would not be possible in the UK
market alone. There is evidence that innovative UK companies tend
to derive greater benefit from UKTI support across a range of
measures, and that benefits to the UK from inward investment projects
are greater when the project involves more R&D or other innovation
activity.
International R&D Strategy
18. UKTI, as part of its five-year strategy,
is developing initiatives to attract more business R&D to
the UK, building on the UK's undoubted strengths in this area.
The evidence is that overseas companies view the UK positively
as an R&D centre, but do not have precision on the available
opportunities, nor on how to enter the market. UKTI initiatives
help to overcome this.
19. UKTI will target a rolling list of 40
R&D intense companies. We shall deploy cross public sector
teams to work on persuading these companies to do R&D or more
R&D in the UK, through inward investment, partnership (with
UK based companies or research institutions), supply chain relationship
or contract research with UK universities or companies. The teams
will be helped by 20 specialists with knowledge of UK R&D
activity in specific technologies and of company drivers in R&D.
The teams will need to do detailed company research to help attract
companies' attention with specific and detailed R&D offers.
Typically this will entail introductions to UK professors with
commercial acumen, availability and a specific piece of R&D
of relevance to the company's development. UKTI will also work
with UK based R&D intense companies, providing tailored assistance
to achieve enhanced trade capacity. This will require specialist
training for UKTI English regional staff and adaptation of ways
of working with clients.
City of London
20. Financial and related business services
across the UK represent over 10% of GDP. But as financial markets
are becoming increasingly international—partly driven by
technology—there is increased competition from other financial
centres. To deliver the full benefits of the opportunities for
the UK, Government and business are working together to develop
a coordinated strategy for promoting Britain's financial sector
around the world to ensure it maintains its lead position.
21. Government's role is not intervention
but to create a coordinated framework for success. In support
of the Government's initiative, leading London markets and financial
sector bodies, including from the devolved administrations and
English regions, have participated in the setting up of a Financial
Services Working Group to advise the Government and the Chancellor's
High Level Group of practitioners announced in the March 2006
budget, on how best to take forward a strategy for promoting the
UK international financial services sector. This will be launched
shortly.
PARTNERSHIP
22. To maximise the impact in marketing
the UK business environment, UKTI will work in partnership with
the nine English RDAs, the devolved administrations in Northern
Ireland, Scotland and Wales, other government departments, as
well as the national bodies including Visit Britain, the British
Council, trade associations and other business organisations.
In addition, this co-ordinated approach will enable UKTI to leverage
the totality of public funding associated with trade and investment
to increase the impact of its activity and to deliver better value
to the taxpayer.
23. This strategy has been prepared in an
open and consultative way. Partners and stakeholders were consulted
widely on the development of the strategy. The RDAs' views have
also been reflected through the jointly chaired UKTI & RDA
Trade and Investment Partnership Group. The strategy sets the
course for UKTI for the next five years. The key actions that
it will deliver are set out in full at Annex B.
TARGETS
24. UKTI's task now is to deliver the strategy.
In addition to continuing to deliver on its existing Public Service
Agreement Targets, UKTI will also develop, in conjunction with
HMT, new top-level targets. They will also feed into development
of new Public Service Agreements during the Comprehensive Spending
Review in 2007. They will be independently monitored and published
twice a year. These targets will cover four broad areas set out
below:
— High value Foreign Direct Investment;
— R&D and innovative activity of
UKTI's customer base;
— UK businesses' performance; and
— The UK's reputation as a place to
do business in and with.
SUPPORT FOR
BUSINESS
25. Whilst co-ordinating and driving forward
this strategy across Government, UKTI will continue to deliver
current services and programmes to existing customers.
On trade, UKTI provides a range of services
to business including:
— Individually tailored packages
of practical assistance to help companies develop the skills and
capacity needed to trade internationally.
— Tailored information about opportunities
for specific products or services in particular overseas markets.
— Support for companies in the UK to
participate in overseas trade fairs, seminars and UK trade missions.
— Provision of a range of publicity
services.
— Political lobbying on behalf
of UK companies.
For inward investment activities involve
providing a free, bespoke and confidential service to potential
inward investors on a range of issues, including:
— a developing focus on key high-value
investors to facilitate their continued growth/retention in the
UK;
— providing specific information on
key commercial considerations, such as company registration, immigration,
financial incentives, labour, real estate, transport, utilities
and regulatory issues;
— providing comprehensive regional
and local analysis to help overseas companies choose the right
place to set up;
— introductions to sector networks,
such as industry leaders, chambers of commerce, universities and
other centres of R&D excellence;
— helping to build collaborative
technology partnerships between UK and foreign businesses through
UKTI's Global Partnerships programme;
— assisting overseas entrepreneurs
to develop UK business opportunities through UKTI's Global
Entrepreneurs programme; and
— providing continued investor "aftercare'
support through UKTI's Investor Development network, which
offers assistance to companies once they have established a presence
in the UK to encourage their successful development and expansion;
ando developing co-operation and operational guidelines between
the principal bodies engaged in inward investment promotion, through
chairmanship of the national Committee on Overseas Promotion.
26. The Trade Access Show Programme (formerly
SESA) remains a substantial programme, with 600 trade shows and
exhibitions in more than 50 markets. More than 100 Accredited
Trade Organisations, most of them trade associations, continue
to work with UKTI in delivering exhibition support in 2006-07.
27. UKTI will continue to have a strong
presence in developed markets such as the US and Europe. These
are still the UK's most important trading partners and a major
source of inward investment. UKTI will still provide help for
a wide range of businesses across a variety of sectors in many
international markets. But there will need to be a clear focus
on activity which delivers maximum added value for business and
the UK economy.
28. Passport to Export Success remains a
UKTI flagship assessment and skills-based programme that provides
new and inexperienced exporters with the training, planning and
on-going support they need to succeed overseas.
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