Exporting out of recession - Business and Enterprise Committee Contents

Examination of Witnesses (Questions 80-99)


23 FEBRUARY 2009

  Q80  Chairman: You have just written the recommendation for our report, I think.

  Lord Jones of Birmingham: But I repeat: they are volunteers, and they are busy, busy men and women.

  Q81  Chairman: There is one other volunteer around we have not mentioned, the Duke of York, who does a lot of work.

  Lord Jones of Birmingham: Yes.

  Q82  Chairman: How did you assess the contribution that he made?

  Lord Jones of Birmingham: I should declare an interest, which is that I am—

  Q83  Mr Hoyle: His caddy.

  Lord Jones of Birmingham: His caddy! Do you know, I have never picked up a golf club.

  Q84  Mr Hoyle: Well, you would not—you carry them.

  Lord Jones of Birmingham: Either as a player or as a caddy. That is one sport I do not do. I am continuing to be an adviser to him, unpaid, but nevertheless you should note my reply in the light of that as being an interest that I have. I did it before I was in government and I am doing it again.

  Q85  Chairman: Let us have the answer to the question, please.

  Lord Jones of Birmingham: The upside of his job as special representative to UKTI is in a particular market. He takes a brief extremely well and when he is on that job he works incredibly hard. Regardless of what you will ever read in a newspaper, those two facts are true. Get the right market, with the right people for him to talk to, he makes a substantial difference actually to particular companies' ability to sell into that market and invest in that market. If you treat it as, "Well, he's just a member of the Royal Family and we will send him anywhere and really he is going to do the Royal Family stuff and not the business accentuated stuff", do not be surprised if he does not come back with the result. When it has been properly done and properly directed—and one of the other things you asked me was how I made a difference, and UKTI while I was there did accentuate what he did and focus it and put it into the right place—it works. If you just say, "Go and do your Royal Family bit over there, sir", do not be surprised if it is not business focused.

  Q86  Chairman: I am quite impressed with the work he does—very impressed, actually—but I do sense sometimes some jealousy in the Civil Service and the sense that they do not have the control they would like, by definition, with a member of the Royal Family.

  Lord Jones of Birmingham: You could say that, Chairman; I could not possibly comment.

  Chairman: Thank you very much.

  Q87  Mr Hoyle: As you give advice to the Duke of York, I wonder if you could advise him that the next time he buys his daughter a car, he buys British and not BMW.

  Chairman: No, no, no.

  Q88  Mr Hoyle: That was stolen.

  Chairman: We are in very dangerous territory.

  Q89  Mr Hoyle: Because you know about using British cars.

  Lord Jones of Birmingham: As you may imagine from me, Mr Hoyle, point noted.

  Mr Hoyle: Thank you.

  Chairman: Well done.

  Mr Hoyle: What is wrong with that?

  Chairman: Very good. We do not want to criticise the Royal Family.

  Q90  Mr Hoyle: It was not a criticism; it was advice.

  Lord Jones of Birmingham: By the way BMW do have a fabulous engine plant in Birmingham.

  Mr Hoyle: Yes, but this one got stolen a bit too easily.

  Q91  Mr Clapham: Looking at UKTI and hearing what you have said about UKTI, bearing in mind that the strategy Prosperity in a Changing World was set back in 2006, before the economic change, identifying six themes relating to five particular sectors, given that there has been a dramatic economic change is there a need, do you feel, for UKTI to redefine the strategy?

  Lord Jones of Birmingham: I would not, because it has been such a success, having been bought into. I should have no credit for this at all, this is Sir Andrew Cahn pure and simple. He made a success of getting them to buy into it. When I arrived, it had already been in place a year and it was amazing to see how they bought into it. The last thing you do if you are trying to lead something in difficult times is chop and change. You really do lead something by keeping your head down, keeping your troops with you, going in the direction they have been told to go, and you go over the top first with them. On that basis, I would not change it at all. If this Government can find enough of your money and my money to do all the stuff it is doing in the financial sector at the moment, I would like to think it could find more money to beef up, to put more power behind—in overseas markets, not at home, not here, but in overseas markets—to put more people behind the whole drive of the five-year strategy, so that those sectors will come out of this better than we went in. That means trade our way out of it. Borrowing is deferred taxation. Let no one be in any doubt about what borrowing is. Government borrowing has to be repaid out of your and my money. I would like to see some of that going to putting more into UKTI at this time, not less. It is a bit like a business: in times of recession, you put more effort into your sales team, you put more effort into your marketing team, because without your sales you go bust. I would like to see that, so I would not change the strategy, I would put more into it. They have done this joint venture, for want of a better word, with HSBC as UKTI. It had nothing to do with me. I was told about it the day I was going to join, so it is nothing to do with me at all. That is about getting smaller companies around the country educated and trained in the way of international trade, holding seminars and teach-ins around Britain to say, "This is how you trade internationally, these are the markets, this is what you do, this is what you would watch for" and then helping UKTI and the world in saying, "We will support trade missions, we will make sure you have some qualified expert people with you," to get the country trading its way out of it. HSBC is doing that with UKTI. I do not know this, but I would not be surprised if over a period of time UKTI will do that with other things in other sectors and get that moving. The idea of five or six sectors being the fulcrum of how the nation goes forward, I think is a very good idea.

  Q92  Mr Clapham: Do you feel at this point in time there is a need perhaps to refocus or certainly to bring more investment to research and development so that, given the change that is likely to come next year, we are going to be in a position to exploit the export market?

  Lord Jones of Birmingham: Yes, is the short answer. I am pleased you have raised it because, at times of less money about and more worries about business, the two vulnerabilities are training and R&D. They are the two that finance directors chop first. If people think training is expensive, try ignorance. In terms of R&D, if we have restructured our economy over the last 20 years into value-added and innovation and away from making things which sell only on price, commodities—which we have done—and if as a nation we are attracted to inward investment at the value-added end of what we do, if you do not constantly research and develop your next products you are dead, you are finished. I think as a nation we have always put enough into research. Blue sky research universities and businesses is very good in this country. You will not read that in a newspaper, because it is good news. Why would you? In terms of development, the D bit of R&D, I do not think we are good enough as a country. We tend to research it here and develop it in other markets, and the sad thing is that you manufacture where you develop, you do not manufacture where you research. If you get the trend of research-development-manufacture, manufacture and development blends together and we are not so good at that. So more effort, more stimulus—maybe more money, but it is more about attitude and stimulus—at the development end of R&D. I think this nation could invest there quite profitably.

  Q93  Mr Clapham: Just looking at one of those sectors, which is energy, we see that one of the features that is going to remain after we come through this recession is that we are going to have high energy prices. Cheap energy has gone. Given the kind of situation there is now, do you feel there is perhaps a real need for us to be investing in the green technologies, in order to be able to reduce our dependency on those high energy prices.

  Lord Jones of Birmingham: I think there are three reasons we should be doing it, and in no order. One is that we are quite good at it and the world is going to move that way, so why do we not make a win-win out of it and sell our technology expertise around the world? I remember going to Wuhan, quite a small city in China, only eight million people, the size of London, in a province called Hu Bei, which has 60 million people, the size of Britain. They have big pollution issues, and there was a wonderful company from Kidderminster, a small business, selling some wonderful environmental engineering stuff to help clean up their water. A huge export of success, right in the teeth of a recession. First, it is because we are quite good at it. Second, as a mix, if we have nuclear in the equation, if we have sustainable in the equation, and the use of fossil fuel continued but in a cleaner way—which of its own is a technological advance—then you are not so reliant on some rather, shall we say, unstable parts of the world who choose to use energy as a power broking mechanism. On that basis, for the nation's sovereignty, if you like, I think it is important. Third, there is the genuinely held belief by so many people that this is the only planet we have got and we ought to be doing something about that too.

  Q94  Mr Clapham: Given your wide experience of dealing with British industry abroad, what would you say are the greatest challenges faced by British industry abroad?

  Lord Jones of Birmingham: Generally, you mean, not just environmentally.

  Q95  Mr Clapham: Generally.

  Lord Jones of Birmingham: Every day they come up against companies from their rival nations of the developed world whose governments support them more, put more money behind their promotions, whose politicians are more behind the business equation than ours—of all parties—are. Secondly, a challenge which the entire developed world meets every day is that the developing world, especially the BRICS economies, are commoditising innovation every day, so your value-added is a win-win of being able to say, "I'm selling this on innovation and value-added" if the price is not as important. If it is a commodity where the price is everything, go and get it done in Vietnam or India or whatever. Every five years or so that innovation product has been commoditised and it is now being done over there, so you constantly have to re-invent and re-develop value-added products, goods and services in the developed world because everything else is shifting that way. When you have got a billion Indians, of whom 800 million still work on the land, you have got the population of the European Union and America put together that is working on the land in India and is yet to be industrialised. When you have got something like a third of the Chinese population still on under two dollars a day, this is going to go on for your grandchildren's generation, and so the biggest challenge for British business overseas is how do you constantly sell on something more than price? If you are at the rarefied end,—Rolls-Royce aero engines come to mind; fabulous product—fine, but you cannot employ everybody in Britain, and so how do you do it so that you have enough economic activity at the value-added end in your country? If I were giving evidence as a German business person to a German politician I would be saying exactly the same, and American and French and Australian and Canadian.

  Q96  Mr Clapham: Do they do it better?

  Lord Jones of Birmingham: In terms of promotion around the world from a structured government point of view the best in class is probably Team Canada and it might be Singapore. UKTI does it better than the Americans or the French or the Germans.

  Q97  Chairman: It is export promotion generally?

  Lord Jones of Birmingham: Export promotion, yes, but, in terms of this mix of business and the public realm together that I was talking about earlier, we do not do it well.

  Q98  Mr Clapham: So, just to clarify on that question of support given to business abroad, our main competitors: the Germans, the French, et cetera, do they give better support to business products?

  Lord Jones of Birmingham: Yes, they do. I can give you two examples. One would be trade fairs, exhibitions, where it is about small business. It is about a small business having two things: money and confidence. The ability to go where you have never been before is a pretty frightening thing when you are a three-man band from Britain. This is not a UKTI critique because UKTI has only got one pot of money and it can only spread it so thinly so far. It is about how much is given to UKTI in the first place. We do not put anywhere near enough behind that. The Germans do. The second one is export credit guarantee. One CEO of a big manufacturing exporter said to me, "I use ECGD to market-test. If ECGD will cover me I know it does not need insurance", whereas if you were the French or the Germans you would be behind all your big exporters.

  Q99  Chairman: I do not want to interrupt your flow but there is just one thing you said which was quite interesting. Canada is a federal system with very competitive states and Germany is very much federal; the Länder are very competitive. We quite often get anecdotal criticism here that one of the things that undermines UKTI is the RDAs competing with each other which sometimes confuses those markets. Do you think that criticism is fair or not from your experience?

  Lord Jones of Birmingham: I think it has got a lot better. You asked me at the start whether I thought I might have made a difference at the time I was there. Because I was from somewhere north of Watford, because I had been in at the formation of the RDAs back in 1999, I understood them, I knew them, I had worked hard with them at the CBI. There was an element of mutual trust between me and the RDAs and I think the relationship got a lot better when I was there and I think it will endure, and there was a lot less of you went to the Detroit Motor Show and every RDA was there separately with UKTI. What a waste of public money that was. That has now come down to just two or three. It is far more focused. It could be better still but it is far more focused. Similarly, I have never understood why Scottish Enterprise always had to have a separate stand everywhere. It was fine if it was Scottish taxpayers' money but not when it was off my budget. That is also getting better, I think. I think there is a bit more will to pull the boat in the same direction. The Länder do not do it nearly half as much as the RDAs did, and Team Canada was very much a federal drive. I always said to UKTI, "You want to watch Team Canada and see where you can do it like them in certain areas". Singapore was different because Singapore came from a completely different walk of life in so many ways.

  Chairman: I am sorry to interrupt, but that is useful; thank you.

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