UNCORRECTED TRANSCRIPT OF ORAL EVIDENCE To be published as HC 199-iiiHouse of COMMONSMINUTES OF EVIDENCETAKEN BEFOREBUSINESS, INNOVATION AND SKILLS COMMITTEE
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Transcribed by the Official Shorthand Writers to the Houses of Parliament: W B Gurney & Sons LLP, Hope House, Telephone Number: 020 7233 1935
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Oral Evidence
Taken before the Business, Innovation and Skills Committee
on
Members present
Peter Luff, in the Chair
Mr Adrian Bailey
Mr Brian Binley
Mr Lindsay Hoyle
Lembit Öpik
Mr Anthony Wright
________________
Memoranda submitted by British Chambers of Commerce,
Sponsors'
Examination of Witnesses
Witnesses: Mr Adam Marshall, Director of Policy, British Chambers of Commerce; Mr Mike Josypenko, Chairman, Sponsors' Alliance; and Mr Andy Scott, Director of International and UK Operations, and Mr Gary Campkin, Head of International, CBI, gave evidence.
Q274 Chairman: Gentlemen, thank you very much indeed for coming and thank you very much also for your written evidence which the Committee has greatly appreciated. As I always do, can I begin by asking you to introduce yourselves and your organisations.
Mr Marshall: I am Adam Marshall and I am Director of Policy and External Affairs for the British Chambers of Commerce.
Mr Josypenko: Mike
Josypenko, I am Export Services Manager of the British Jewellery Giftware and
Finishing Federation and current Chairman of the Sponsors'
Q275 Chairman: Could you just explain briefly for the Committee what the Sponsors'
Mr Josypenko: Indeed. We are essentially an interest group made up of industry trade associations and chambers of commerce who engage in export promotion activity. Specifically we are generally accredited as an accredited trade organisation with UK Trade Investment. We work with UKTI on various activities, most notably the Tradeshow Access Programme but also in other areas including sector-based activities.
Mr Scott: Andy Scott, Director of International and
Mr Campkin: Gary Campkin, Head of the International Group for the CBI.
Q276 Chairman: The focus of this session is very much on export promotion. Our title is "Exporting out of the recession". In that context can I ask you what impact you think the recession has had on the ability of companies to export and what it has done for their hunger to find new opportunities to export?
Mr Scott: Clearly in
terms of the impact on companies the last 12 to 18 months has been a period of
huge uncertainty. What I think we have
been experiencing in the earlier part of this year and the back end of last
year was many companies just needing to take stock of what on earth was going
on in the market place, first of all, and how on earth they were going to be
funded and financed appropriately, so the whole trade finance issue was a key
concern for many businesses. Clearly
looking forward as we go into the balance of this year and into next year we
see a major opportunity for
Q277 Chairman: On this question of the hunger of businesses to export I have seen some smaller businesses in my constituency which have not traditionally been exporters suffering a downturn in the domestic market and therefore looking overseas much more aggressively to make good the shortfall, with a great deal of success in one or two cases as well. Mr Marshall is nodding.
Mr Marshall: I think that is the case. There are a lot of small and medium-sized businesses that have seen their domestic markets evaporate and have looked overseas. There is still a problem with SMEs. We did a survey earlier this year which found that only 31% of small and medium-sized businesses surveyed were actually exporting and 58% of those were still doing so reactively, so there is a culture issue here for a lot of SMEs in many parts of the country, and a lot of chambers of commerce are very involved in trying to overcome this particular cultural issue. Exporting is still not the first thing that comes to mind when trying to rescue their businesses in the face of a downturn.
Mr Josypenko: From our point of view, yes, we have noticed an increase, speaking with my trade association hat on, in the number of companies approaching us who are looking at exporting for the first time and the reasoning does seem to be the downturn in the domestic market. I think the concern we have sometimes is that they are actually looking for a quick-fix whereas breaking into exports does not tend to be a quick-fix, it is a marathon rather than a sprint so sometimes they may be coming with unrealistic expectations. Interestingly, yes, as Mr Scott said, we have noticed a general downturn. It varies across industry sector. In consumer goods where I am based there has probably been a 15% to 20% downturn in business generally over the last 12 months as a result of the economic situation and that has led to an increase in interest in exporting. The exchange rate situation seems to have driven some people to consider exporting. I think they have taken on board messages that have been put out into the press and elsewhere that the exchange situation makes sterling-based companies more cost-effective. The feedback I have had from my members is that is more relevant and more useful for companies who have been exporting for some time rather than new exporters. Companies that have been exporting for maybe four or five years and done the hard yards and made an inroad into a market are actually seeing a positive benefit because of exchange rates. People who are breaking in for the first time are facing the downside because the costs of breaking into the market have generally gone up because for instance if they go through the tradeshow environment where they are working in overseas tradeshows costs may be incurred in dollars or in euros and those have increased by 10%, 15% or 20% in the last 12 or 18 months. So there is a greater barrier to them actually getting into the market, hopefully a greater reward for them when they get there, but that reward may not come for one or two years.
Q278 Chairman: That is very helpful as a general introduction. I am going to ask some rather general high-level questions. That probably flatters the questions but you know what I mean. So do not answer in too much detail because you will have a chance to break it down into the individual issues later on. In broad terms how well do you think the Government has responded to the impact that the recession has had on companies that export? Do you think it should have done more to support exporters over the last year and could there be more in the next year in broad terms without being too specific about individual programmes?
Mr Scott: I think there are probably two ways to look at that. First of all, I think it is important to recognise that for the vast majority of businesses the export activity which they are engaged in will not necessarily be driven or even supported by individual government programmes. This particularly applies to many of the larger companies and mid-sized companies. We welcome the fact that UKTI has put more of a focus on those but if you think about many of our major exporting sectors, the automotive sector, the aerospace sector, the chemical sector, the drinks sector, those are all absolutely critical sectors for our export performance and what actually most influences them is the broader economic climate, so I think what has been happening over the last 12 to 18 months in terms of trying to first of all underpin and restore confidence in the financial system is important and then the broader economic climate in the UK is what heavily influences them in terms of their export performance. We can perhaps come later on to a bit more detail about some of the specific UKTI projects.
Q279 Chairman: Do you agree with that, gentlemen?
Mr Marshall: I think the
Government is seized of the problem that there is more to do. One thing that we have been very clear about
is we think we need a very clear political statement and vision supporting us
as an export-led country and export-led economy in the future. The Government has come up with a number of
programmes designed to support specific sectors, specific areas where the
Q280 Chairman: I was quite struck that in the
Mr Scott: Yes, we would indeed, absolutely.
Q281 Chairman: A couple of my colleagues will ask about the endless change in strategy that UKTI and its various predecessor bodies have been subjected to over many years, a wearying process of endless reprioritisation and new strategies. We have now got Prosperity in a Changing World as UKTI's current five-year strategy, of course written when times were good. Does that strategy need any modification at a strategic level or tactical level in the light of the recession that the world is still experiencing? The difficult times will go on for some time yet?
Mr Marshall: Can I first
declare an interest. The BCC delivers
two programmes directly on behalf of UKTI and regional chambers of commerce
actually deliver UKTI services in both the West Midlands and the
Q282 Chairman: We will return to those delivery mechanisms later on.
Mr Marshall: I want to put that on the record for now before answering. I think there is a question here about when the financial environment changed so drastically that actually was the point to reprioritise and re-organise some of what UKTI was doing rather than the endless bureaucratic and strategic reorganisations that preceded it. We found that in fact the strategy was a little bit inflexible and not updated to deal with the conditions that we were seeing. A couple of examples would be too much focus on the BRIC countries at a time when exports closer to home might have been a better way of focusing resource. There is still an issue with tick-box targets, advisers having to tick off the number of companies contacted rather than what they actually deliver and again not shifting the focus, as others have said previously, from first-time exporters to some of those existing exporters who could drive export volumes back up more quickly. All of those were issues we thought could have been responded to more quickly when the market changed so fundamentally.
Mr Josypenko: From our perspective when it became clear 12 months ago that we were heading for some problems, one of the things that we noticed very quickly was that a lot of companies who were participating particularly on the Overseas Tradeshow Programme were looking to either pull out or cut back their expenditure because particularly at that time they were in the eye of the storm and they did not know how bad things were going to get and they did cut back quite extensively. That was certainly the sign right through to the middle of this calendar year. At the time the Sponsors' Alliance called for government to put in an immediate infusion of cash across all sectors, and I think this is perhaps one of the things where we have had concerns that the work that has been done by UKTI has been done towards what it sees as the priority sectors whereas I think the problems occur for all sectors, and, as we said earlier, there is more interest from companies who want to go out to export and that opportunity is equally there in all sectors. What we would have liked to have seen this time last year was more cash going to schemes that actually directly facilitated exporting companies to get out into market places, either to discourage them from pulling their horns in or withdrawing from the market or to encourage them to get out into markets and to continue that expansion at a time when marketing budgets were under a lot of pressure.
Mr Scott: From our point of view both the chambers and the CBI were invited in by Andrew Cahn and his UKTI management board about a year ago to ask that very question: should they be fundamentally reviewing their strategy? Both of our views at the time was that this was certainly not the occasion to do a fundamental review of the strategy. The strategy in terms of overall direction was right when it was set and we believe it is right going forward. Tactically we felt there were two or three areas where it could indeed reinforce activities. We would particularly like to see UKTI - and it has been doing some of this - being more proactive in identifying individual business opportunities in the market rather than necessarily always responding to the individual project base or individual target as set for an individual company and looking much more at emerging opportunities and being more proactive in that. Secondly, I think there is always an issue of lack of awareness amongst many in the business community of the range of support services which UKTI has, so more activity in getting those out into the market place. Then a quite specific one which is where they have been doing some work which is looking at where in some of the stimulus packages there have been in various countries internationally there would be opportunities for UK business to be able to participate and benefit from those stimulus packages, notwithstanding the fact that many of those packages do have some elements that are more focused on their own indigenous and domestic industries. Those were a number of areas where we felt that there were some specific opportunities where they could perhaps have a more proactive stance as well as supporting the overall strategic direction.
Chairman: That answer leads very neatly on to the questions that Brian Binley wanted to ask you about priority markets.
Q283 Mr Binley: You have only to look at
the number of targets and target areas that UKTI is in to maybe think from a
business perspective that it is all a bit of a mess, quite frankly. Has UKTI chosen the right priority sectors
and markets? Can I ask you how you feel
how well it does to balance the need to explore new markets without neglecting
long-standing trade relationships with for instance
Mr Josypenko: From our
perspective first of all I should have declared an interest earlier on: we are an accredited trade organisation so we
work with UKTI to deliver the TAP programme and other initiatives. We tend to deal almost exclusively with SME
businesses. In my sector certainly which
is consumer goods the markets that we see as important continue to be the
mature markets - Europe, North America, the established markets in the
Mr Marshall: I would
certainly agree with that. I would
simply add that this goes back to the culture point that I mentioned
earlier. So many businesses especially
at the smaller and medium-sized end of the market find it easier and more
comfortable to begin their exporting life in Europe or in
Mr Scott: One has to have a degree of sympathy with the challenge that UKTI is trying to address. This is a complex matrix and it is going to be a different solution for different types of companies. The solution for a first-time-to-market, first-time exporting company is going to be a different one to that for established exporters which we want to encourage to grow their export activities. Perhaps what UKTI do not do as effectively as they could is try to paint a picture of that matrix which is the balance that they have to strike. They have key emerging markets. Sometimes they are referred to as growth markets; sometimes they are referred to as priorities, which can lead to the impression that the US and eurozone are not important markets. They are vitally important markets but they do not necessarily require the same degree and same type of support which is needed if they were going into more difficult and emerging markets. By the same token, I think it is important to recognise that it is not just a geographical focus. It is important to have the sectoral focus as well. The challenge that UKTI have is presenting this matrix in an easily understood way, and perhaps that is the challenge they could be addressing even more effectively.
Q284 Lembit Öpik: To what extent is identifying reliable emerging markets a matter of
guesswork or do you think with sufficient research one can fairly reliably
identify the right ones to invest in? For
example
Mr Josypenko: I will answer
that question and I will comment on Andrew's answer. To some extent this depends on the sectors
that you are in. The companies within
the sectors and the industry bodies within those sectors have a good track
record of identifying opportunities. The
individual companies and the trade associations in those sectors know,
generally speaking, how to assess markets so they can do that. In terms of the more complicated matrix, our
view of that is that maybe UKTI should not be trying to dictate a one-size-fits-all
matrix. One of the perceptions we have
from our members is that UKTI services are overmanaged and overcomplicated and
maybe there ought to be more flexibility within their trade promotion
programmes to allow industry sectors to match their needs according to the
priorities. In our industry nobody would
want to do business in the short to medium term with
Q285 Lembit Öpik: To conclude on this supplementary, are you suggesting that one potential modus operandi would be to have the industrial sectors driving the prioritisation of countries and that those different sectors could be interested in different countries?
Mr Josypenko: Yes. I think at the end of the day what it boils down to in its simplest form is listening to customers. One of my committee members had a discussion with one of his members on Friday, an SME exporter that turns over around £1 million so a reasonably well established exporter in that sector, and he made the comment that UKTI does not listen to exporters. I would caveat that to say that UKTI does an awful lot of good work and I would not want that to be seen as a comment, but at the end of the day any business survives by listening to its customers and aligning itself with what the customers want.
Q286 Mr Binley: That is very helpful. I want to pick up on the comment that UKTI is not listening to its customers in relation to priorities. I have certainly had a comment myself in this respect that UKTI sets its priorities and its focuses without actually talking to its customers enough and getting their input on this whole issue.
Mr Marshall: There is an issue here. I would not phrase it in exactly the same way. The issue is really at the end of the day should UKTI be a strategic organisation or a delivery organisation? We think quite fundamentally that UKTI can do some strategy setting but then when it comes to talking to businesses and finding out what those needs are and getting into those markets, they need to contract out more of their services. We have delivered some of them, the trade associations deliver some of them, et cetera, but it is up to organisations like ours that are much closer to the businesses in question to bring those views in so that UKTI strategy is not remote and not seen as being detached from customers. If there is a strategic reorganisation that will certainly help to address some of the questions that Mike and others have raised.
Mr Scott: I would not go so far as to say that UKTI does not talk to its customers nor do those discussions with customers not have an impact on the shape of their strategy. Again, I come back to my comment about it being a matrix. We do have a focus on what are going to be some key sectors and those sectors will vary depending on individual markets. In arriving at those judgments that is through discussion and consultation with those sectors. Could it be better? It could always be better, but I do feel that their approach to sector prioritisation does come through serious attempts and endeavours to discuss with those particular key sectors where are the most likely opportunities for the different types of business because again it will depend on the state of that business whether it is a first-time exporter or an established business in the market place.
Q287 Mr Binley: You seem to be suggesting that is the most important role in terms of focusing and targeting and so in some ways you are agreeing, are you not, that they are not listening enough?
Mr Scott: We can all listen to our customers more. That is a given. We can also influence how that programme evolves as to whether there are issues which for a particular market because of the way in which that market is evolving raises the priority or changes the priority from where it was a year or two years ago. Being close to the customer all the time and understanding that of course is important.
Mr Binley: Two very quick ones before my final question and the first is again pursuing this particular subject: is it the Government telling UKTI what to do and is that to its detriment? Secondly, can I ask if you think all of this massive focusing on priorities at the top is actually getting through on the ground where it matters to your members?
Q288 Chairman: It is clear that for many years the UKTI has had conflicting priorities set for it by the Treasury. Is that process continuing I think is the question?
Mr Marshall: The only point I would want to address from those two questions is whether or not services are getting through to our members. In some cases they are getting through very well. The Passport to Export scheme is a perfect example of one where our members especially first-time exporters, say they are benefiting tremendously from what UKTI are doing. Those who are lucky enough to get access to the Tradeshow Access Programme ---
Chairman: We will do those in more detail shortly.
Q289 Mr Binley: My concern is whether the plethora of focuses and priorities at the top is getting through to the coal face in UKTI in the countries where you want them to operate, not how your members think but whether it is getting right down the organisation because change seems to me to be an endemic part of what UKTI is all about at the top. I am just worried that the people at the coal face down below in that organisation find this immensely confusing and do not really latch on to it?
Mr Josypenko: I am not sure whether this is answering your question or not but certainly in our sector, and I think other of our members have in their respective sectors, we have found that the prioritisation actually filters through in terms of resources, particularly in the overseas posts, which reflects on the levels of service, commitment and response that we are able to get in terms of trying to build links, build bridges and develop international trade possibilities, particularly within the established European markets. We have noticed particularly in our sector there has been quite a large turnover in the European posts and every time you lose an experienced person you lose all the knowledge, the contacts and the expertise. In one or two posts that has happened once and we have had a new person in and then six months later they have moved on to another sector, so we have had continual upheaval and a process of re-education and in some cases you are losing that knowledge. Bearing in mind the posts are the eyes and ears of not only UKTI but also of ourselves and our members, that is what is being lost. I do not know whether that answers your question or not.
Q290 Mr Binley: I think that is helpful. The quick turnover thing is certainly a factor worth noting, I am sure.
Mr Scott: I think part of the issue which we do hear about when we talk to some of the individual posts on the ground is the translation of some of those priorities which then in terms of the impact on them come through in specific targets which are set for them and targets which they are required to meet. Targets have a clear role to play but if there is an over-fixation on the target per se without that being in the context of what people on the ground are seeing as the real opportunities then I think that would be and is a danger. We hear some evidence of that and some of our members would be concerned that there is a culture that had become more target-focused on the requirements which they are required to meet in the key targets set for UKTI. I think there has been some recognition of that more recently within UKTI to try to address that but that is a concern which we have heard from both from the posts and indeed from some of our individual members reflecting their contact with the posts.
Mr Josypenko: If I can
enlarge on a particular target that the posts get in terms of financial targets
in delivering OMIS reports, that is definitely having a tangible impact on our
activities and on the impression that is being made on companies. We have many incidences where commercial
officers in posts either visit groups at overseas tradeshows or come to the
Chairman: I will cut you short because we want to do this in detail later.
Q291 Mr Binley: My final question relates
to a trip we made to
Mr Campkin: If you are a priority that has meant that you get as part of the UKTI network more resources and the Committee will be aware of the shift of resources towards the priorities, so from that dynamic, yes, it has meant more resources, but of course shifting resources takes time particularly if you are dealing with people slots, so there is a bit of a lag behind some of this resource shift and having that fed through into the reactive and responsive nature on the ground.
Mr Josypenko: It also has an impact in as much as being nominated as a priority market means there is a tendency for sectors or for individual associations to try and work towards developing business in those markets because it is seen as a priority which then increases the workload and that can have impacts down the line.
Mr Campkin: Chairman, could I make one other point at this juncture and that is I know it is not the specific remit of this Committee but when one is talking of resources we do have some concerns about the overall resource squeeze on the FCO's network of posts. I would just flag that point up as part of the debate because it is part of the jigsaw that we are looking at quite carefully.
Chairman: That is an important observation.
Q292 Mr Binley: Are you fearful that that process might in fact increase at the very time when that would be almost the most debilitating thing that UKTI could do?
Mr Campkin: I think it is obvious that at a time when public expenditure is going to come under increasing scrutiny there is a real risk, absolutely.
Mr Marshall: In a time when we face public expenditure restrictions we sometimes have to look at other options like local staff who know the local business community better to deliver some of those priorities. I do not want to get too much into the detail here but that is certainly an option.
Q293 Chairman: Can I just test you on one thing you said in your earlier answers
which I am interested by and I am wondering if you bring your own sectoral
perspectives and membership interests to this rather than UK strategic interests. You talked about the need to put more
resources into the EU and less into BRIC countries. Can I put to you the view that a country like
India is a huge strategic opportunity for the UK in which it may not be good
for the jewellery sector just at present but for most of UK plc there is a huge
opportunity where our competitors are taking market share which we will not
easily regain in the future. Maintaining
a high strategic level of interest in
Mr Marshall: From the
perspective of our membership a lot of small and medium-sized companies do need
help to get into even close-by markets like the EU or familiar markets like
Mr Scott: I agree with that answer with just one caveat in terms of one additional comment. It comes back to a point that I made earlier which is I do think there are different types of support that are required in different markets. The support does not always have to be financial support. Support can be about looking at where there are market access issues where clearly government-to-government issues are absolutely critical and those are going to be more influential in some of those emerging markets. It is also about striking this balance between what we can do in terms of the short term. There are quick fixes for companies which they might want to be able to look at in 12 to 18 months as well as the strategic "where are we going to be in three to five years' time?" and those key markets are absolutely critical. The final point I would make is again this point about differentiating what is required in different markets. Some of those emerging markets, the BRIC countries and others similar to those, are going to be much more for the established businesses and for a longer term strategic approach, and those larger companies which it is critical to support in those markets do indeed have a key impact in terms of their supply chains where they bring the smaller companies with them, so for many of the SMEs it is not appropriate to be necessarily doing direct export into those emerging markets but it is critically important for them to be supporting into the major international champions who are there and who need a different type of support and that cascades down and brings the SMEs with them.
Q294 Chairman: I am really enjoying this discussion but I think we are taking too leisurely a pace. Unless Mr Josypenko wants to add anything of great importance I would rather move on.
Mr Josypenko: Yes, I take your point, there is never enough money to go round. I think there ought to be a basic level of services and I do feel from our experience that the general level of services across the whole export sector has suffered as a result of prioritisation. I come back really to sectoral choice; the sector will know what sectors are best.
Chairman: You have made that point very well.
Q295 Mr Hoyle: In the case of first-time exporters they have really had the benefit of the Passport to Export scheme. It has been considered highly successful and very useful. Do you think the scheme should be expanded to SMEs who are already exporting who are actually looking for new markets?
Mr Marshall: That is certainly something that we have talked about quite extensively, rebalancing the supports that UKTI offers to first-time exporters and to existing exporters. If we think about the statistics, we have 80,000 export companies out of a corporate population of 4.7 million in this country. A lot of those 80,000 exporters are going to be the ones who in the short term drive up our export volumes, as I said before, so extending successful schemes and learning the lessons of their success and reapplying them to existing exporting companies could be a very helpful thing indeed, especially for the economy in the short term.
Mr Josypenko: If I understand your question correctly, I believe UKTI has introduced in the last few months a service which is intended to fill that gap, Gateway to Global Growth, which I believe is intended to be a post Passport offering for companies that have outgrown the Passport itself. As I understand it, the difference is that there is more of a signposting and mentoring input and less of a direct financial benefit to companies, and perhaps that is one of the areas in looking at the future delivery of services where industry associations can play a greater part in helping to deliver services such as that.
Mr Marshall: Just to come back on Gateway to Global Growth specifically, our members have reported quite a bit of confusion about that programme. They say that in different regions of the country there are different levels of financing available or a different offering available. If that is intended to be the follow-on to Passport to Export a lot of members do not feel as if it is living up to that particular description.
Mr Hoyle: It is just another brand, another pot that you have got to bid for, another area that you have got to go into instead of expanding what is already there that people already understand.
Q296 Chairman: Why the regional differences?
Mr Josypenko: It may be that different regions have access to other streams of funding either through the RDAs or perhaps European money. The idea behind Gateway is that people will facilitate whatever needs doing so it may be in certain regions they can draw down on ERDF money rather than UKTI money and put it into a pot. At the end of the day they would probably take the view that it gives benefit to the company and adds to the level of the intervention that they can achieve.
Q297 Mr Hoyle: It is quite interesting that you have said "inconsistent, unreliable and falling". I think the only word you have missed is "failing". That is how you describe UKTI's funding for companies to attend tradeshows and you compare that with other countries and you feel that they are getting better benefit. Can you give us some of the differences where you feel other countries are boosting their export companies and how they are bolstering them? Also what do you think UKTI should copy from them or what should they do?
Mr Marshall: It is a
matter of prioritisation at the end of the day.
What those of our members who can gain access to it say about the Tradeshow
Access Programme is that it helps them a huge amount. They find it a very useful, popular and
effective programme. What they also say
is they have noticed that its funding has been cut in recent years. That has a demoralising effect on them sometimes
when they are seeking to break into these shows or enter particular markets and
missions, et cetera, and the lack of
Q298 Mr Hoyle: That is interesting. That takes me away from where I was going to go. So under the Tradeshow Assistance Programme, if it needs more money, where do you think the budget could be cut in other parts of UKTI to bolster what you believe your members require?
Mr Josypenko: The logical place for that is within the staff and administrative budgets. I guess like many government departments, UKTI is very intensive in staff and overheads costs and it seems to me that the proportion is wrong. The figure I heard most recently is that the amount of UKTI budget that goes to business schemes which directly benefit exporters is in the region of £30 million for the year just passed out of a budget of £320 million. There are other aspects as well.
Q299 Mr Hoyle: I think you are getting a message from behind.
Mr Marshall: I would also add that the OMIS scheme is another area where quite a lot of the staff resource that Mike was referring has been invested.
Q300 Chairman: We want to do OMIS in some detail later.
Mr Josypenko: Another thing within the wide gamut of staff and administrative costs that crops up very regularly in our association is the issue of regional delivery of international services and regional infrastructures. I believe that is something that is going to come up later in the meeting.
Q301 Mr Hoyle: If you have any further thoughts on where you think it might be able
to move the money around, rather than just put you on the spot for an instant
answer, it may be useful if you could supply that. The other thing I found interesting with your
evidence is that you are very concerned that local delivery is being taken
away. In fact I think it is the
Mr Marshall: I think there
is a competitive market for some of the contracts that UKTI awards and that is
certainly right at a time when we have to squeeze all the value we possibly can
out of the public pound. What I would
say is as a shill for my organisation and for chambers of commerce more
generally. We are often very effective
deliverers of international trade services whether we are talking about market
information, training, documentation, et cetera. We have a model going forward which we call a
hub and spoke model in particular regions where you have one chamber of
commerce that is really good at delivering some of these services and can help
chambers in other local areas deliver those services.
Q302 Mr Hoyle: What you are saying is really we should not have accepted the best price; what we should have done is make sure it is the quality that we are buying?
Mr Marshall: Both considerations are important at this particular time.
Q303 Chairman: Mr Marshall has just confessed to me privately in the confessional of this room that the chamber movement is not at its strongest in the South West, is it?
Mr Marshall: No, it is not.
Q304 Mr Hoyle: It has been taken off them for failing?
Mr Marshall: No, we do not have a presence in some parts of the South West, but to go back to your question what I would say is we need both quality and competitive price at this point in time.
Mr Josypenko: We would broaden the issue slightly and look at what services need to be delivered at a regional level. In terms of having a local point-to-point contact and perhaps a one-stop shop for sign-posting to other services, yes, there is a need for local delivery. A lot of the more complicated support mechanisms like the Passport do not necessarily require that same level of geographical proximity and could be dealt with through other channels, perhaps through sectoral involvement and perhaps through industry associations if they were accredited to that level of capability. Once you talk about detailed sector knowledge it can be done on the Internet, on the telephone, on a conference call; you do not need to drive to the guy's house and sit in front of him and look at his documents to give him advice.
Q305 Mr Hoyle: So you are quite comfortable with Circo?
Mr Josypenko: I would always prefer organisations that are delivering advice to be not-for-profit organisations. That is one of the reasons why the industry associations have a strong argument for a greater involvement. My personal view is that any penny that is taken out of the public purse into private profit ---
Q306 Mr Hoyle: Somewhere shareholders' pockets are being filled. I quite agree with that. Big bonuses - we are not into that.
Mr Scott: Can I just make one observation on this and say I think the issue is that it is important to look at different options. One can have views as to the merits or otherwise of individual options, but I think the message which your question started with was the right one which is there are various routes through which this delivery can indeed be delivered. It may be the chamber, it may be a trade association or it may be a private sector organisation. That is the issue it is worth holding on to. There is more than one way of doing this and I think it is well worthwhile exploring what those other options are and looking at the competitive merits of those different options. I think that is what we would say.
Mr Hoyle: That is interesting. Thank you for that, Mr Scott, because that ties me into my last question. The evidence we have been given is slightly contrary to what you are saying, or maybe I read it that way. In your evidence as a group it has been stated that the UKTI services that you used to host are now spread amongst a number of other organisations. Why did this happen and how many different organisations do you think should be delivering for you? Is it the fact that there are so many organisations people do not quite know where they are going? Are there too many?
Chairman: That question is really for Mr Marshall.
Q307 Mr Hoyle: Are you at loggerheads with the rest of them, Mr Marshall?
Mr Marshall: Andy has made a very important point here which is this: the private sector and the not-for-profit sector has an important role in delivering these services. I agree with Mike that proximity is important for quite a few of these services so people like ourselves or trade associations can do quite a lot of it. At the end of the day what we do not want is a very inflexible very similar public sector delivery model for these things across various regions of the country. Yes, diversity can be a difficult thing for both businesses and deliverers to deal with but in fact in this day and age, with constrained expenditure and with the value-for-money considerations being primary, we need to live with it and we need to learn to deal with complexity.
Q308 Mr Hoyle: Do you believe there has been a reduction in the quality of service by the plethora of different advisers?
Mr Marshall: I would not like to answer that question. Let me get back to you on that one.
Mr Hoyle: Anybody else want to add anything? If not, I am more than happy.
Q309 Chairman: I am encouraged by this. I do get a sense that the chamber movement in particular is a bit concerned at local level that there is a hidden agenda to drive towards a uniformity of delivery mechanism at local level, probably using a company like Circo, and all three of you have agreed that would not be the right way forward from a business perspective either for the Government or the users of the service. You are nodding.
Mr Scott: Yes, I think you would have to look at the case, what it is that you are requiring to be delivered and judge those options against the spec which is presented, absolutely. It may be a private sector company, it may be a chamber together with a private sector in that sense, or it may be a trade association, but I think it is important to judge the proposals and the options against the original specification as set.
Chairman: Thank you very much, that is very helpful. We will move on to market information services which have featured from time to time in your answers. Lembit Öpik?
Q310 Lembit Öpik: The Committee has received quite mixed reports about the value of UKTI's Overseas Market Introduction Scheme (OMIS) both in terms of the business usefulness of the reports and also the impact it has had on staff's ability to get out and develop business contacts in those countries. What is your view?
Mr Josypenko: From our
perspective within the Sponsors'
Q311 Lembit Öpik: So you are saying the inconsistencies come down to the actual quality of the individual staff?
Mr Josypenko: Not necessarily the quality, the knowledge base of the individual staff, but also the value-for-money aspect of it is affected by the target culturally of the need to drive sales. Many of the people we dealt with in post are people that five years ago would have given us as a trade association information for free and are now telling us that we have to commission a £500 or £1,000 OMIS to get relatively straightforward information.
Q312 Chairman: This is a very interesting point. I have seen an OMIS report at last (because they are always commercially confidential and they are quite difficult for us to see) and I was hugely impressed by it. It was a fantastic document from the Saudi Arabian post. Is there any way members of the Committee could see on a commercially confidential basis a good and a bad OMIS, if between the three of you you could find a good and a bad one just to inform our judgment? It would be in confidence to the Committee. It might be something our Clerks can explore with you afterwards.
Mr Scott: I agree absolutely with Mike, clearly the quality of them will vary and it will very much depend upon the knowledge and expertise of the individuals on the ground. There is not a black and white: this is what an OMIS does. OMIS gives you an opportunity to then respond to what the individual customer is looking for and again the strength of that response will be very much dependent upon the knowledge and expertise of the individual. That is one point. The second point perhaps you are also driving at is has the focus on delivering a target number of OMIS reports, irrespective of the separate issue about quality, been to the detriment of their ability to be doing proactive networking market intelligence? There is a real risk of that because there is a danger that if they are driven by delivering a certain number to meet a certain target that has to be at the expense of something else. The reports themselves might be very good or bad depending on the quality of the individual who is doing them, but clearly we would be looking for and have been arguing consistently that those posts have a key role in terms of the market intelligence, the networking opportunities and the proactive identification of where there are some emerging trends which they can then be cascading back into the business community in the UK.
Mr Marshall: Shifting a big part of a £100 million organisation to chase a £4 million commercial target for the OMIS scheme is the problem both Andy and Mike are referring to and we would certainly agree with that. It is not the sort of business model that will function for UKTI over the longer term so I would agree with the point about variable quality and everything else but it is that chasing of that particular commercial target which we think means that resources are not prioritised as effectively as they could be.
Mr Josypenko: Certainly I know that UKTI places great store on the chargeable element to perhaps discourage frivolous requests for information.
Q313 Chairman: UKTI or the Treasury? A voice from the audience: the Treasury!
Mr Josypenko: I would not like to comment on that. You gentlemen probably know far better than I do. They do place value on the element of charging. I think it does drive them. In terms of distracting them from getting out and meeting people, I would have thought in many cases having an OMIS as a basis to carry out some research is a good way of getting out because in terms of market research and making contacts, one of the best ways of doing that if the opportunity presents is either to get out to a tradeshow in the local market and talk to people there or just go and visit them. I know there is an element of desk work and Internet research involved but it must be possible to delegate that down to a level where it can be done. It does not require high-grade officers to do that. High-grade officers are probably better employed meeting key players and building contacts, whether it is for an OMIS that is in play at the moment or maybe for a future OMIS.
Mr Campkin: One thing I would add is in the latest UKTI report it did state that one of their goals was to progressively increase the level of charging. They have put that on hold given the current economic circumstances but that is an issue that we need to keep under close review because these things are generated from the dynamics of market failure. The private sector and other service providers would not be able to provide reports and information at that sort of cost, so we need to bear that in mind too.
Mr Josypenko: Can I add a point on the element of charging. One of the things that our members have concerns about is what we call "forced" sales of OMIS. Bearing in mind that OMIS as a service is ostensibly about market introduction and market information, but it is also used as a vehicle where you can simply buy the time and resources of the post, it is frequently used particularly where trade organisations and chambers of commerce are organising trade missions or events out in the market. It is used as a way of charging the organiser for their time or for organisational expenses.
Q314 Lembit Öpik: How does that work? Just explain the process of forced sales?
Mr Josypenko: If an association wants to do a trade mission in a particular market, an important element of that would normally be a briefing in the market and usually a reception or some sort of event, preferably at the Embassy where possible, so the organising body will be asked to commission an OMIS to cover the Embassy's time both for room hire and organisational costs, and quite often they will be asked to commission another OMIS for the formalities of identifying and inviting guests to attend an event. The feedback we have had in many instances is that does not provide very good value for money, but the organiser is quite often in the situation where they feel obliged to do it as part of the process. I had an instance given to me yesterday by one of my members based around an exhibition where they have historically brought in a commercial officer from the local Embassy on the eve of the exhibition to do a sector specific briefing to the companies who are in their group at that exhibition. Five years ago that would have been done free of charge by the commercial officer. Up until recently they charged £250. Now they are charging up to £500 for what is effectively a 20-minute briefing in a room which is already being paid for by the trade association at an exhibition. Effectively the trade association is inviting in the commercial officer to meet those companies to give him sales opportunities to produce OMIS reports and they are being charged a substantial amount of money for 20 minutes' time.
Q315 Lembit Öpik: On the point about price, the UKTI says that they have "improved the performance culture" and that is why they should charge. Explicitly what do you think about this charging process even at the current prices, leaving aside the yet-to-happen increases?
Mr Campkin: The CBI has always supported charging as a filter mechanism and I think our members would feel that a reasonable charge which does not discourage them from doing what they wish to do in terms of market access and export opportunities makes sense. The debate is more to be had around the level and the quality and the value that you get for what you pay.
Mr Josypenko: Generally I would expect - and perhaps this is naive - a post to give a general background overview on the market in relation to the sector as something free of charge, whether it is done as a physical piece of paper or as a briefing or as a report that is accessible on the UKTI website, I think generic information on the market in relation to that sector should be freely available. Market research, call it OMIS, call it whatever, should be something specific to the company as a vehicle for identifying business partners. Perhaps there is an element of clarifying what the offering is and maybe staging the price levels or staging the offering to meet the demand. It falls between two stools to some extent. People see it as a subsidised service and something they ought to get on board with and they accept that it is probably a cheaper price than if they commissioned a similar report from a commercial organisation. What they get in some cases is poor although, as I say, there are some excellent reports coming out.
Q316 Lembit Öpik: So maybe a graded service with different amounts for different quality of services?
Mr Josypenko: My personal view is that OMIS is something that needs to be looked at almost with a clean sheet of paper. Tinkering with it further just makes things more complicated.
Mr Marshall: I would agree
with that. I think businesses value what
they pay for. There is no question about
that. That is
Q317 Mr Oaten: On the other point you raised, you talked about going out and making contacts, and something that we were told in Abu Dhabi by various business people was that they really wanted the UK to have a bigger presence just there because the local culture meant that those countries, which were doing that and always had a relationship without always sending something at the time, did better than those that did not. Do you have a view on that in the context of what you are saying now about the focus being on OMIS rather than just a networking relationship really on behalf of British industry?
Mr Scott: If your point is does it help
in the market to have a more identifiable
Q318 Mr Oaten: I do not want to move too far down the path, but basically there is an opportunity cost to doing OMIS.
Mr Scott: Yes.
Q319 Mr
Oaten: The inference by some of what you have said,
not explicitly, is that, if they were not so focused on selling OMIS, they
might be more focused on selling
Mr Scott: I think it is a difficult
trade-off to make between those two.
Again, what we are talking about, just like we were talking about a
complex matrix for UKTI driven out of
Mr Josypenko: It may be that, as I said earlier, perhaps the concept of how a market report is delivered needs to be clever and perhaps, if there is a greater involvement from other sectors rather than the UKTI staff, that actually frees up other options, so it may be in some circumstances that there are other local partners in the market that can do fairly straightforward internet or desk-based research and free them up and, if there were a system maybe, that could perhaps work through, say, an organisation like the British Chambers or through the trade associations and maybe there would be some form of credit or voucher given to a company to undertake research through whatever means, and one of those means, where it is appropriate, could be through the posts. In other instances, it would not, and that would perhaps free up the people to get involved in other things.
Mr Marshall: Just on your point on
presence though, it does not always need to be an embassy-based FCO/UKTI
presence on the ground. I think we do
not do enough to take advantage of the network of graduates in the UK sense
throughout the world who could be great brand ambassadors for us in the country
and very helpful to us in delivering export opportunities in their own markets
and their own cultures where they understand the business trade better often
than an FCO-posted person would do, and I think that is a specific issue for
us. For example, we have a programme,
Link to
Chairman: I think we are going to look at this a bit later on actually, so we will move on just a little bit.
Q320 Mr Oaten: It is a fascinating area, by the way, and I look forward to the further debate on that. Just lastly in terms of the research itself, the British Chambers of Commerce basically runs on behalf of UKTI, if I understand it correctly, the Export Marketing Research Scheme, EMRS. What is the difference between OMIS and that?
Mr Marshall: The EMRS scheme, if I understand it correctly and I have been in my post for approximately three months, so give me a bit of leeway on this, is delivered to companies here who are seeking to export, who are looking to export and who are taking their tentative steps into a market, whereas OMIS can be a much more broad-commissioned report about the specific market for an existing or new exporter. The EMRS is a scheme which has been operating with the Chambers for a number of years, about 20 years, and, when it is evaluated, it always comes up high on value for money because I think companies, especially smaller and medium-sized enterprises, get a lot of value out of understanding what these potential markets could be and how they could actually break into them.
Mr Josypenko: It also has a great flexibility, from my understanding, and it is something that is perhaps underused by trade associations because I think that within that scheme there is a facility for trade associations to carry out research on more general projects rather than specific assignments that a company would undertake with a specific aim for their own company to break into a market. Certainly we have a high opinion of the EMRS scheme.
Q321 Mr Oaten: If it is so good, then why have two separate schemes? Why not just have one?
Mr Josypenko: From my understanding, OMIS is more a sort of initial snapshot. It is an overview of the market at the time you are looking to break in, perhaps to decide if the market is for you and initial research into potential business partners. The EMRS is far more in-depth; you are talking about research of the potential with a notional value of tens of thousands of pounds going into markets in detailed segments.
Mr Marshall: And the EMRS is very company-specific as well, whereas the OMIS generally is not.
Q322 Mr Oaten: I have used those kinds of arguments to justify stuff like this, but I have never even convinced myself! What lessons can OMIS learn then from the obviously successful EMRS scheme and, if it is so successful, why is less than half of the 2007/08 budget actually spent there? I think there is £1.5 million in the budget and I think £340,000 is actually spent.
Mr Marshall: I think there are some important lessons for OMIS and I think the key one of course is the one, going back to what I said before, around targets. OMIS is a product that gets sold, whereas EMRS is a product that responds more to the needs of individual companies. Now, at a time when we have seen export demand and companies actually retreat in the markets, it is probably understandable that less of the budget would have been spent in a year when we have seen a lot of companies pulling back from potential export markets, but I do expect that that would grow, going forward.
Q323 Mr Bailey: On the Strategic Investment Fund, first of all, Sir Andrew Cahn has announced three priorities. Now, were those priorities effectively UKTI's perception of what was needed, was there consultation with yourselves and, if there was not or indeed if there was, have you other priorities?
Mr Josypenko: No comment.
Mr Scott: Are you referring there to the extra £10 million that came to the UKTI over two years?
Q324 Mr Bailey: Yes, the £10 million which is prioritised on a trade show for the security sector, the Global Britons Network and a marketing campaign to encourage British exports.
Mr Scott: To the extent that UKTI came to us specifically and said, "We have £5 million each year. How would you wish us to spend that?", it was not actually presented in quite that way, no. Had we been making cases in the run-up to the Budget in which that was announced in terms that it would be valuable for UKTI to have some additional resources to help them in some of their activities, which would include, particularly we had said actually, marketing and promotion, it was then the judgment actually of where UKTI could most effectively devote those activities. Again putting them into context, this is £5 million per year in terms of an overall spend for programmes and operations of £320,000, so we had said that it would be valuable for UKTI to have some additional support to help them in these current times and particularly supporting the activities of getting out there and making people more aware of the services which UKTI has to offer.
Mr Josypenko: Having said I have no
comment, I had misunderstood your question.
We, Sponsors'
Q325 Mr Bailey: What I am not clear about is that you said that you wanted it invested across the sectors for export promotion, but that does involve some sort of process, some sort of strategy and whatever. Could you be more specific.
Mr Josypenko: Well, I would have hoped that some of that money would at least have come through to the Tradeshow Access Programme where it could actually have filtered fairly quickly. I would imagine that, if, for instance, an announcement had been made in May, for the sake of argument, that £2 million out of £5 million was going to the Tradeshow Access Programme, that could have been implemented within a matter of weeks, so the companies would have been taking that up ----
Q326 Mr Bailey: Could you very briefly outline what the Tradeshow Access Programme provides then.
Mr Josypenko: In the form of financial inducement, it facilities companies actually exhibiting at overseas tradeshows and in an environment, as we said earlier, where companies are either retrenching from markets and cutting down on their tradeshows or looking to exhibit in tradeshows and are perhaps nervous about the cost of doing so. It would have been an immediate leg-up to help both existing and new exporters to keep their presence or to generate a presence in overseas markets, and it could have been activated within a matter of certainly two or three months, I would imagine, so that would have had an immediate effect in supporting businesses.
Q327 Mr Bailey: So effectively it is a subsidy for companies to exhibit at tradeshows?
Mr Josypenko: It is a facilitation or an incentive, it is not a subsidy. It enables new companies to participate in shows. It might also help some companies to continue participating at a show at a time when they are feeling the pressure and having to cancel their participation and effectively pull themselves away from markets that they have been established in for many years.
Q328 Mr Bailey: I am not sure in this context what the difference is between a subsidy and a facilitation, but I am not going to get bogged down in it.
Mr Josypenko: One comment, if I may, is that, having lobbied the Government to put more money in, our organisation did not really receive any input from UKTI or we did not have any opportunity to consult UKTI on what was happening with this money. We did ask what was happening with it, and in fact one of the things we do want to take up with UKTI is that we still have not seen a formal confirmation of exactly where the money is going.
Q329 Mr Bailey: Coming on to the next question, there is some for the establishment of a new tradeshow for the security sector, and it expects this to be self-financing by the end of a two-year period. Basically, do you think this is realistic?
Mr Josypenko: My colleague, Phil (?), who represents the main trade association for the security industry, was not aware of this on Friday when I emailed him and he had to go away and research it, so I think they certainly were not consulted on that project. Whether it is realistic, you would have to seek out.
Mr Marshall: I think we would have a concern which is that there are so many big shows in the security sector specifically and there already is an established annual agenda of trade fairs and things like that in that particular industry. The question I would raise back to you, I would say, is whether that was the right place to put this small amount of additional resource coming to UKTI. There may have been indeed other sectors or other areas which were under-served where that money could have been better spent.
Q330 Mr Bailey: So you say that it is all very well served and that the amount of money is not likely to make things different? Is that a reasonable summary?
Mr Josypenko: We do not know whether it is well served, but it does not seem to be. There seems to be an absence of consultation on these and perhaps that would have been helpful, I think.
Q331 Mr Wright: On that particular point, are you saying, for instance, that that resource would be better earmarked for other tradeshows rather than that one? I know, for instance, that the TSCI is one of the biggest tradeshows for the security industry, including obviously the Forces. Would that be better earmarked for other trades rather than security?
Mr Josypenko: I would not like to make a judgment as to whether it is better served. It would have been nice to have a wider consultation process to have had the opportunity for other sectors to have bid into that. It does seem to have been decided without consultation, certainly without consultation with most trade associations.
Mr Marshall: I think that UKTI, to be fair to them, were caught in a very difficult position here. They were given a small amount of additional money which they were then asked to prioritise very quickly and try to get spent reasonably quickly as well. Had they done a very wide consultation, they might have put little pots of money in a variety of different areas where they would not have been able to have a very big overall impact, or they could have done what they did which was to pick a particular area and focus on it. They have done that and we have our criticisms of that because we do think it is a very well served area already, but I can understand the position that they were in at the time.
Mr Josypenko: If I can come back to the point I made slightly earlier in relation to the TAP programme, my colleague has just reminded me that we are talking about £5 million a year of additional money. The budget for the TAP programme as it stands for this year is only around £8-81/2 million, so £1 or £2 million out of that £5 million allocated into the TAP programme would actually have a substantial effect and it would not have been small amounts, but it would have had a substantial effect and it could have filtered through relatively quickly within weeks or months, whereas I do not know anything about this defence tradeshow and I do not know what the timescale is.
Q332 Mr Hoyle: So what you are saying is that, if they had got the money, they would have been able to spend it because no doubt somebody said, "Well, the trouble is, if we had put the money in there, they wouldn't have been able to use it"?
Mr Josypenko: I have been asking UKTI for more budget for our own TAP programme, asking for just small amounts, £1,000 or £2,000 for individual grants, so £1 million or more in the TAP programme would have had a substantial effect in many sectors.
Q333 Mr Hoyle: So basically the TAP programme could have spent the money?
Mr Josypenko: Yes.
Q334 Mr Bailey: Is two years long enough to make it self-sufficient? Are you able to answer that in the light of what you said previously? You are saying no, okay. Let us go on to the Global Britons Network which, supposedly, will tap into thousands of people around the world, business people and people doing other things who want to help Britain. It sounds a bit airy-fairy to me. Are you aware of any of your members getting involved in this network, and so far have you been able to identify any value from it?
Mr Marshall: No, we are not aware of members who have gotten involved, but, as Chambers of Commerce, we have a recognised brand and we are in cities, towns and countries around the world already, with bilateral chambers of commerce and everything else.
Q335 Chairman: It exists already?
Mr Marshall: It does exist already in a
variety of ways and we are running programmes already, such as Link to
Q336 Mr Bailey: Lastly, it also intends to use it for a marketing campaign to encourage SMEs to export. Now, from my own perspective as a representative of a constituency with many manufacturing SMEs, it would seem to me to be quite sensible. What I really want to know is (a) do you agree, do you think it is making a difference, and (b) how can the Department use this money to get its message across?
Mr Josypenko: This is a copy of the advert which appeared on railways stations in various cities and outside airports.
Mr Bailey: "Take it to the world".
Q337 Chairman: This is a poster which appeared in rail stations?
Mr Josypenko: On railway stations, outside airports, on the sides of taxis.
Mr Marshall: I think Wakefield Westgate Station is the last place where I saw this very recently and, if you are standing ----
Q338 Mr Hoyle: Probably the last place it should be at.
Mr Marshall: Looking at it, you probably would wonder exactly what it was referring to sometimes. I think the serious point I would want to make here is that a lot of businesses in constituencies like yours will know their local Chamber of Commerce as the people that can best help them get into export markets for the first time, so I think we could deliver a lot more and be of great assistance to UKTI and to others.
Q339 Mr Bailey: And a lot works through trade associations as well obviously.
Mr Josypenko: I hold this up as a frivolous example, but I know they have also advertised in Business magazine. My financial controller showed me a feature which appeared in, I am not sure which magazine, but it was geared towards financial control, which would have been more sensible and more relevant because that is more likely to filter through.
Q340 Mr Bailey: How would you do it?
Mr Scott: I would partly answer the point I was going to make anyway. I think we have always argued in our submission in advance of the question that we felt that there was merit in some additional support for UKTI to get greater awareness out of the marketplace with the range of activities which it has available because I think that is a cry we often hear, particularly from small and medium-sized companies that, "I just didn't know that this was a service which was available to me". Now, I think there is a danger that we could all become marketing experts as to what is the best way to do that. Whether we think that is the right way or not, I would not wish to comment, but I think one way which actually is very effective is just physically getting out in front of businesses and explaining what those services are. Now, that can be done through using the multiplier networks, and I think that is actually one of the most effective ways of just physically getting in front of as many SMEs as you can, explaining what those services are, answering their questions which they will legitimately have, such as, "How do I go about doing this? How does this fit with that? How does the whole jigsaw come together?" and that direct interface is actually often one of the most effective ways. Now, that actually costs some money, it costs time, it costs resource and that actually, I think, is partly what we were driving at which was to say that there is a resource issue, and then, if you had some additional funding to enable that to happen, that could be an effective way of getting better awareness out there.
Mr Marshall: I do not think we need to do it differently because we, as Chambers of Commerce, already do quite a lot of this marketing activity. If you think about the hundreds of events that the Chambers run every year on national trades, basically making members aware both of market information that is available through the Chamber network of specific face-to-face services and tailored services that their company can access, et cetera, it is going on a great deal already and it is going on through that single front door that I referred to earlier which any SME would know they can walk through and with confidence get some advice for their business on how to export.
Mr Josypenko: If I can just add a general comment, certainly talking to our members, there is a confusion of who they talk to. A lot of our members, when they talk particularly in relation to a tradeshow or particular programmes, they tell me they are talking to the DTI, they tell me they are talking to Business Link, and quite often these are people that they spoke to seven years ago and the person is still the same, but they have probably had five or six different business cards in those seven years, but, in their mind, they are talking to ----
Chairman: In a way, you will have a chance to expand a little bit when Tony Wright asks his questions, so the summary really is that that £10 million would have been better spent on doing things they are already doing better and more of rather than doing new things. That is the consensus view of the panel, it seems to me. A change of gear now.
Q341 Mr
Wright: A change really in the perspective, but also
in terms of duplication. We have heard
evidence that there is concern over the regional development agencies' overseas
marketing actually diluting the
Mr Josypenko: There are two elements to
this. There are RDAs working to attract
foreign investments where, I think, they work as RDAs and they sometimes work
in competition with each other. Our
perspective in terms of export promotion or trade promotion is that the RDAs
themselves are not the people there, generally speaking, but it is the UKTI's
regional infrastructures who tend to take the responsibility for international
trade promotion on behalf of the RDAs, so they step forward to the plate. Yes, we have seen that quite regularly
cropping up where we have seen regional groups at a major international
tradeshow, in some cases, not necessarily in competition, but separate from the
Mr Marshall: I think that is right. I think some of the RDA efforts in various countries were born out of frustration with the FCO-posted UKTI representatives who felt they were not getting enough out of those people, whether it is in Boston or Gwangju or wherever else it might be where we have seen RDAs opening offices, so there can be some level of sympathy for why they went about doing it in the first place, but I think it is undeniable that it does dilute the UK's brand abroad and that there is competition going on and, when we are in an era of tightened resources, that is exactly the sort of competition that makes headlines and exactly the sort of competition which we would like to see rooted out.
Mr Scott: I think there are two aspects to that. On the specific point, yes, we have been hearing these concerns. Our member companies have been telling us, as Mike and Adam have said, that out in the marketplace they were seeing confusion, and it is always difficult to know whether that is actually meaning that that is actually diluting effort or not, but certainly there was some confusion, and that has been there for quite some time, ever since RDAs started establishing themselves with physical presences in the variety of cities around the world. I think, to be fair, more recently over the last year or so, partly driven by efforts which UKTI have been co-ordinating, there has been a better cohesion between the RDAs physically on the ground, the UKTI activity and the embassies. There needed to be, but I think there has been, so I think there has been some progress in that and I do not think we see today the same degree of excesses which people might have seen before when you saw multiple RDAs attending at individual events, although I think there may still be some examples of that, but certainly there has been an improvement. I do think it is in the context of a broader issue which is what actually is the strategic role of RDAs, and I think that is an issue where, from our perspective, we feel that in a number of areas over a period of time there has, if you like, been mission creep in terms of what RDAs are there to do. We would wish to see RDAs being focused very much on providing that strategic influence and direction for regional economic development and leaving the delivery mechanism for many of these things, whether they be activities in the UK or abroad, to other organisations and reverting back to what their primary role was originally perceived as being, which was that vital interface between central government and local government. Precisely what format that takes is a separate debate, but I think it is that broader context which is important, to look at their activities internationally as well.
Mr Josypenko: To some extent, I would
support what Andy has said. Our sector
is a classic case of where it can work well.
We are organising a national group in a jewellery show in Germany in the
New Year and we are working with two regions in the UK, one of which being our
local region, the West Midlands, and they are doing individual stands within a
wider UK presence, so, when it works, it can work together and they can bring
something extra. The problem is where
there is duplication and I think there is also a tendency towards wasted
resources and certainly, when you are talking about a finite pot of resources,
we could question the need for regions to get involved unless there is a
specific role for them. There is also an
issue about inequality of opportunity where you have got a regional group
alongside a national group, particularly if that regional group has got access
to either European money or local money, and participants in one group can have
a greater level of financial support, so they are either getting a higher level
of support, or they are getting a better-looking presence because it has been
paid for by the region, than companies on a national programme which are getting
a lower level of funding, and that can even happen within a national
group. If companies are based in some
regions, they can actually get access to local support to participate in a
national group, so a Welsh company can get support from the devolved Assembly
in
Q342 Mr
Wright: I suppose it is understandable though, is it
not, with the way UKTI may well be helping to attract inward investment, that
the regional development agencies look more in region-specific areas to say, "Well,
if the West Midlands have gone for this, why didn't the eastern region go for
this?", so there is this element of competition in terms of where they want to
go. We saw evidence just a year or so
back where there was one of the Eastern European companies actually opening a
refrigeration unit in the
Mr Josypenko: I think there needs to be a clear lead from the national infrastructure, from UKTI, and certainly the trade promotions should be a nationally focused activity and the regional element should serve into that, but there needs to be a greater national focus and there needs to be better communication. The experience of our members is that even now, several years into this situation, there is still quite often not very good communication between UKTI and its stakeholders, in other words ourselves, and what regions are doing, so quite often a trade organisation will find out at fairly short notice that a region is planning to take a trade mission to visit a tradeshow which they are themselves covering. Now, commonsense suggests that, if you are organising a group at an exhibition and you are working nine to 12 months out, you need to be having a dialogue with anybody that is planning to supplement it and to bring people to look at that show a long way out and you need to co-ordinate, so there needs to be better information. I think the overall thing is that the trade policy should be predominantly national, unless there is a specific regional need, unless there are niche markets that are not served through a national strategy, or there is an overwhelming need to supplement it.
Q343 Mr Wright: Just to add specifically to Mr Josypenko, in your evidence you said that the trade promotion should "fundamentally [be] a national activity, and that any regionally focused export activity should be made secondary to a national strategy and programme". How would you envisage this working and what role do you think there is appropriately for RDAs to play in that particular trade promotion?
Mr Josypenko: As I say, in trade promotions it is not so much the RDAs, it is the international trade teams which work hand in hand with the RDAs in those regions. I think there needs to be better co-ordination between the regions within UKTI and the national management of the sectors and I think there needs to be an understanding that the target market should be driven nationally by the sectors and that the individual regions should play into that ideally as part of a co-ordinated strategy, and there may be grounds in some cases for some local funding to be added to it, but it should still be done under a national focus. If there is a particular niche market that cannot be served because it is not relevant enough to the wider sector programme to encourage a national activity, then that region, if it has the resources, the wherewithal and the demand from companies in that region, could take something forward, but there should be better communication, I think, and better co-ordination at the national sector level.
Q344 Chairman:
Before we go to the last area of questioning,
can I just put one thought to you. I do
still hear of regional visits for trade promotion purposes overseas, and the
officers I met in UKTI posts despair at getting a regional visit for trade
promotions. They say, "Who have they
come to see? The region has an identity.
We want sectoral visits and only
sectoral visits really for trade promotion visits unrelated to
tradeshows". Do you agree that sectoral
visits are always the way, except for the high-profile, prime ministerial-led
things to
Mr Scott: Yes, I would go for that. I think sometimes we have even seen examples where there has been a sectoral regional visit, or indeed I think what is probably more appropriate is a number of regions have got together and said, "If this is going to be our sectoral focus, who have you got within this sector?", so I think, as a general rule, and there are always going to be exceptions to every general rule, but yes, I think I would agree that the greater the focus can be on sectors, we are more likely to give a clearer direction.
Q345 Chairman: Also, one thing that the RDAs have said to me about both their trade promotion work, and they do do trade promotion work sometimes, they stretch their boundaries, and their inward investment activity is that, if they do not do it, the individual counties, the individual authorities and cities will, and it is better that the mess is less through a regional activity than a complete muddle with everyone at it, spending council tax money doing it instead of RDA money. Now, what do you make of that argument?
Mr Marshall: I think we are getting into these institutional architectures of sub-national governance in a country up to a degree. What I would say is to reinforce what Andy said earlier, which is that we do need something to help with economic development between the level of the national and the very local. Now, there is an open question about whether those organisations should be directly involved in international trade promotion and promotion of their local areas abroad or whether that is something we should leave to a strong UK brand rather than nine English regions, three devolved nations, et cetera, et cetera, so that we can get that brand across and get investment.
Q346 Chairman: But local councils do quite like sometimes, and MPs, for heaven's sake, as well, travelling the globe and seeing things themselves and that does not necessarily represent the best possible use of taxpayers' money in trade promotion or, not the subject of this inquiry, in inward investment terms.
Mr Marshall: If a local council can justify the spending of their council tax or their taxpayers' money to make a trade mission of their own, they will do so, but I think that, if we are talking about core trade promotion activities here, channelling those through UKTI and with a slightly more sectoral focus would help.
Chairman: Now, it is the last and distinct area of questioning where I think the CBI will have some strong views.
Mr Oaten: As a quick canter through the work of the Export Credit Guarantee Department and an overall question, am I right in assuming that, because of the recession, it is now harder for businesses to get hold of trade credit? Is that a general yes all round on that? Is there anything you want to add to that in terms of some really horrible examples or shall we just assume that that is the problem?
Chairman: For the record, they have all nodded.
Q347 Mr Oaten: Then, in terms of the role of the Export Credit Guarantee Department itself, do you think that they are being too conservative, too cautious in terms of some of the transactions that they are backing?
Mr Scott: You say we may have some views on this and indeed we have. I think there are again a couple of aspects to this and they interlink. We have had some long-established concerns about the Export Credit Guarantee Department even prior to the current economic downturn. We have felt that for too long it has actually lost some of its focus in terms of being there to primarily be driving and supporting UK exports, it has been too slow to respond to its established customer base, we feel that some of its internal processes have been too much driven by concerns in terms of their legalistic implication rather than actually responding to customers' demands and we have felt that there needed to be a review of how effectively ECGD was operating with its existing customer base, let alone those which, we could see, it could operate with in the current downturn. Then, when we obviously have started to see the situation deteriorating at the back end of last year, clearly ECGD potentially was a vehicle which could have been helping in terms of alleviating some of these immediate pressures on trade finance and trade credit in particular. We were in one sense encouraged that both the Government, DBERR as it then was, DBIS as it now is, and indeed even ECGD itself were at least starting to think about looking at some shorter-term measures and indeed also perhaps how it could help some of those businesses other than its traditional and established market. We were particularly encouraged by some of the comments though from Lord Mandelson and indeed Lord Davies who were specifically saying that they were going to be requesting ECGD to look more proactively at how they could be helping in the current climate, but, against a backdrop of not actually being, as we would see it, particularly proactive in any case, we felt that was quite a significant culture shift for the organisation to respond quickly to what was required, and that, I think, has been part of our concern. We have been asking for a number of particular measures, and we have particularly looked at the whole area of export credit insurance where we felt that was a real problem and we still do feel there is something there which would not necessarily even need a scheme, it could be quite creatively looking at how some of the existing ECGD products could be applied in that area. We have been looking for something on bond support where we felt that ECGD could have been introducing a scheme of that nature; again something which we had historically been saying they could support, but in the current climate, when there is increasingly further tightening in terms of the securities which are being required by banks and indeed customers and suppliers, again there were areas where, we felt, ECGD could be considering introducing some form of products. I think the simple answer to your question is that it is against a backdrop of where we have not been overly impressed by the responsiveness of ECGD and it has not helped in the current climate.
Q348 Mr Oaten: I will come on to how you have been trying to push them on those issues, but, just stepping back a bit, do you think that one of the problems is that there is a culture in the sense that the organisation is run by individuals who have a more sort of banking/finance background than necessarily a business or a sector understanding, and would that help if you had more businessmen and sector specialists in there rather than necessarily a more cautious banking approach being taken on these things?
Mr Scott: I do not think it is so much whether the banking approach is more cautious or not, but we certainly obviously think that having business intelligence and business knowledge within the organisation is very important. The broader issue around culture is that I think they have become overly preoccupied with concerns that they are going to be taken for judicial reviews on the way in which they have been handling some of their internal processes, and I think that has got them into a mindset where they have become much more conservative, much more cautious and much less willing to take measured approaches and pragmatic approaches.
Mr Campkin: If I can just add one point before we pick up the next question because I think it is related to what Andy has said, it is related to the attitudes in ECGD. We do feel quite strongly that there is a quantum difference between the way that ECGD operates within the OECD consensus within the international rules and some of the other export credit agencies of our competitor nations, so again that is part and parcel of that attitude. They are very, we would say, over-strictly interpreting the international consensus rules within which they operate.
Q349 Mr Oaten: Who have you been raising these concerns with?
Mr Scott: At all levels within Government, within ECGD, these have been issues which the CBI has raised.
Q350 Mr Oaten: So, when you have put it to the Secretary of State, for example, that you would like ECGD to do stuff on insurance and bond support, what has been the reason that that has been rejected?
Mr Scott: Well, I think, to be fair, they would still say even today, and I believe there is an announcement today on one additional product introduction which is on letters of credit and confirmations of letters of credit which again we would support, but I believe that even in that statement they made reference to the fact that they are still considering whether there is a case for doing anything further, ie, on export credit insurance, so I think they have still left the door open and we will, therefore, use that as a continuing pressure point to keep arguing for it.
Q351 Mr Oaten: Finally then in terms of this Committee and the kinds of recommendations we might want to make, the biggies in this area would be to speed up the move towards both the insurance and the bond schemes that you would like to see introduced?
Mr Scott: Those would be two specific examples of products they could introduce, yes.
Q352 Mr Oaten: Is there anything else you would like to add to that wish-list?
Mr Scott: Those would be the specific products which, I think, could help in the current climate. I think it is against the backdrop of having a more fundamental look at the way in which ECGD operates going forward.
Q353 Mr Oaten: Do the Committee have enough information about the insurance and the bond schemes?
Mr Scott: We could provide more if you need it.
Q354 Mr Oaten: If you could, then we could have a look at those.
Mr Marshall: Perhaps I could add one point to that from the perspective of small and medium-sized businesses around the country. Our members come to us on a daily basis and say that trade credit insurance is one of the biggest problems they face and one of the biggest barriers they face to getting their businesses restarted through exports. Now, we do not think that the Government's very cautious, as Andy put it, 'door is not closed and neither is the door open' view is appropriate. We would like to see a full state-backed trade credit insurance scheme. It is always put to us, "Well, the private sector markets are still functioning", but, according to our members, they are not. Secondly, the other argument which is put up against that is the question of state aid, and we have just seen the Dutch get approval from the European Commission for a time-limited, short-term trade credit insurance scheme to address specifically this type of market area, and that is something that leaves our businesses at a disadvantage to a country that is of a similar size in terms of its volume of exports in the international arena.
Q355 Mr Oaten: And you would recommend to the Committee that Dutch model?
Mr Marshall: The Dutch model probably deserves some exploration. I am not au fait with all of the particulars of it, but what I can tell you is that the Dutch have got it through the Commission, so there is no reason why we in the UK could not do something similar and have provisions whereby the fees build up a reserve to pay for any potential losses so that it does not impact negatively on the public purse.
Q356 Chairman:
The
Dutch model you have just talked about, not to be confused with the Swedish
model which is education, I know, are there any other parallels around
Mr Marshall:
Q357 Chairman: Just on one point that Mr Scott made in his remarks about the reasons for caution in the ECGD, he talked of the threat of judicial review and I do not know why he has picked up on that. Who, do you think, poses that threat? Who might bring the reviews against ECGD?
Mr Scott: Well, there have already been threats of judicial review which have come through from certain of the NGOs who had felt that, as a result of some of the consultations or some of the discussions which ECGD has had with its customer base, this was in breach of what they perceived to be open consultation processes which, they would argue, ECGD should have been supporting with all interested parties. Now, I think that has, therefore, influenced ECGD's willingness to both respond to some of the issues that we have raised and indeed also has influenced the culture within the organisation which has become very risk-averse.
Q358 Chairman: I think it is a potentially important point you have made there and, if after this evidence session you want to give us any more notes about that, we would welcome that. I think it is the first time we have heard this particular suggestion made and I am very interested to hear it.
Mr Campkin: Can I just make one other point, and I know it was not the main focus of this discussion today, but from the business community there is another dynamic which, we feel, is very important in terms of exporting out of recession, and that is pushing back against protectionism, ensuring that the WTO works properly, concluding the Doha Round by 2010 and to note in passing that we do support the conclusion of the first of a new generation of EU-Korea trade agreements.
Chairman: Well, this is not an inquiry into trade policy, but I think this Committee, from its previous record on this issue, would entirely share that view. We are looking at mechanisms rather than the policy today, but we note your comments and it would be nice to have the time to look at that in detail as well, but, sadly, we do not, although you make an important point because, unless we have open trading markets around the world, whatever we do is - and I can think of all kinds of unfortunate metaphors which I will not use at the end of what has been an extremely constructive session. Gentlemen, I just want to pay a particular tribute to you. You have been exceptionally helpful witnesses, who have spoken with great clarity, who have added to our knowledge and reinforced and complemented each other magnificently, and we are very grateful for what I regard as a very constructive session. Thank you very much indeed.