Select Committee on Treasury Written Evidence


Memorandum submitted by the Design Council

INTRODUCTION

  The Design Council welcomes the opportunity to respond to the House of Commons Select Committee's inquiry into Globalisation: Its impact on the real economy.

  This submission deals generally with the questions posed in the inquiry terms of reference and particularly to the question of the Government's domestic policy response to globalisation in respect of businesses. Our views are drawn from our knowledge of progress made in relation to an independent Treasury review carried out by Design Council chair Sir George Cox.

USEFUL DEFINITIONS

  In the context of this submission we will use the following definitions, as described in the Cox report (see 03 below):

  "Creativity": the generation of new ideas—either new ways of looking at existing problems, or of seeing new opportunities, perhaps by exploiting emerging technologies or changes in markets.

  "Innovation": the successful exploitation of new ideas. It is the process that carries them through to new products, new services, new ways of running the business or even new ways of doing business.

  "Design": links creativity and innovation. It shapes ideas to become practical and attractive propositions for users or customers. Design may be described as creativity deployed to a specific end.

COX REVIEW OF CREATIVITY IN BUSINESS

  The Chancellor commissioned Design Council Chair Sir George Cox to look into the question of the UK's long-term economic success and how the nation's creative skills could be exploited more successfully. The Cox report was published by the Treasury in December 2005.

  Our view is that rapidly emerging economies present new opportunities for the UK. Policies and practices that promote innovation and creativity will help the UK thrive in more intensely competitive markets such as the emerging economies of Brazil, Russia, India and China.

  This document in large part draws from the Design Council's response to the Cox report, which is broadly aimed at:

    —  Rapidly transforming businesses to enhance the skills and performance of SMEs.

    —  Enabling companies and public bodies to use design more effectively.

    —  Developing skills needed by entrepreneurs and designers for the future.

ECONOMIC AND POLICY CONTEXT

  The Cox Report highlighted that "...although it is manufacturing where the UK has so far felt the brunt of global competition, the build-up of skilled capability in the developing nations is equally a threat to the service industries. Indeed, thanks to advances in information and communications technology (ICT), it is often easier to relocate services than production facilities. The model of the UK becoming an all-service economy, the world's leading repository of professional skills, is enormously appealing—and totally unrealistic. It is naive to assume that countries will be content to leave such capabilities to the UK, while they simply concentrate on delivering goods and services, dependent on the creativity of others."

  The UK has a worldwide reputation for creative leadership and design ingenuity. While this reputation is hard-earned it is not ours of right.

  The government accepts that for Britain to prosper in an increasingly competitive world—the subject of this inquiry—we must create and support a business culture based on creativity, innovation, skills and the successful exploitation of science and technology. There is no other viable future in a world where fast developing economies are now competing for high-skilled as well as the low-skilled jobs, and are increasingly moving up the value chain to offer high-quality, high-value goods and services.

IMPACT OF DESIGN

  Design has a well-proven impact on company performance and competitiveness, meaning that it can also have a significant impact on national productivity and competitiveness. The key findings from the Design Council's annual National Survey of Firms (Design in Britain 2005-06, Design Council) show that:

    —  Every £100 a design alert business spends on design increases turnover by £225.

    —  Where design is integral, less than half of businesses compete mainly on price, compared to two thirds of those who don't use design.

    —  Shares in design-led businesses outperform key stock market indices by 200%.

    —  Businesses where design is integral to operations are twice as likely to have developed new products and services. In the past three years, four fifths of them have, compared to a UK average of 40%.

    —  On average, design alert businesses increase their market share by 6.3% through using design.

  (For further info please visit: www.designcouncil.org.uk/factfinder)

  The UK has many internationally acclaimed designers, but too often UK businesses do not make good use of the design talent that exists on their doorsteps. The barriers to a greater use of design by UK companies include lack of time, managerial mindset, risk aversion and lack of understanding of the value and role of design. Equally, the design industry has not always communicated and championed the value of design in business terms.

INTERNATIONAL LESSONS

  The Cox report identified the impressive nature of the emerging economies of the Far East that are successfully positioning themselves for the future. By building up new technology-based industries and investing massively in education, technical skills and creative capabilities it is now the high-skilled jobs in leading economies that are coming under threat.

  The growth of the Indian software industry is cited as a good example of this trend. In the early 1990s companies in North America and Europe started commissioning software from Indian sources on the grounds of cost; these days it is for advanced applications on the grounds of capability. In the first half of 2005, Indian exports of software and IT-related services were estimated to be worth over £5.5 billion.

  India is also fast becoming an international centre for research:

    —  Intell had 800 hardware and software designers based there.

    —  GE has 1,000 scientists in India.

    —  Microsoft has opened a new laboratory in Bangalore (third largest outside the US, after Cambridge and Beijing).

  (The Growing Competitive threat to the UK/Cox Report, November 2005):

  We also see other countries implementing comprehensive policies aimed at enhancing competitiveness and increasing GDP through design. China, for example, is putting a huge amount of effort and resources into building an indigenous design capability.

COX REPORT RECOMMENDATIONS

  For reference, we would like to refer the Committee to recommendations made in Sir George Cox's report. The recommendations were broadly grouped in the following categories:

    —  Raising awareness and changing behaviour.

    —  Providing support and incentive.

    —  Preparing future generations of creative specialists and business leaders.

    —  Using the power of public procurement.

    —  Creating greater visibility for the UK's creative capabilities.

PROGRESS WITH IMPLEMENTATION

  Given the active participation that has been required by the large number of Government and non-governmental bodies in taking forward the recommendations, progress has been laudable and is briefly set out as follows:

    —  Raising awareness and changing behaviour.

  The Design Council has led on the national delivery of a design programme for business. So far, one RDA—Yorkshire Forward—is delivering the programme and subject to funding delivery will start in a further three regions during 2006-07. Subject to funding, a further four RDAS are expected to start delivery in 2007-08.

    —  Providing support and incentive.

  The Inland Revenue has agreed to improve the administration of tax credits through the creation of specialist R&D units to deal with all SME R&D tax credit claims. Further activity will see wider take up of the scheme among firms that are currently not innovators in science and technology.

    —  Preparing future generations of creative specialists and business leaders.

  The Higher Education Funding Council of England has been the lead body in taking forward this task, and has met with heads of business schools and the engineering education community to develop this further.

    —  Using the power of public procurement.

  The OGC and Lord Hollick are undertaking work in this area, and are expected to report later this year.

    —  Creating greater visibility for the UK's creative capabilities.

  With the goal of creating a network of Creative and Innovation Centres, the London Development Agency has published a feasibility study into a London hub.

  Additionally, leading individuals from industry and the creative sector have periodically met at 11 Downing Street to consider aspects of implementation, with each meeting attended by senior government and parliamentary figures.

FURTHER DISCUSSION AND ACTION

  In the short time that has lapsed since the publication of Sir George Cox's Review, good progress has been made in building impetus behind its implementation so that the UK can secure its long-term economic success in the face of rapidly emerging economies.

  We would welcome further opportunities to discuss how we can continue to build on the impetus behind the report and address the critical questions posed by your inquiry.

September 2006




 
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