House of Commons - Exporting out of recession - Business, Innovation and Skills Committee

Exporting out of recession - Business, Innovation and Skills Committee Contents

2 Creating a culture of trade promotion

10. If the country is to be successful in exporting out of recession there must be a culture in government that supports trade promotion. Lord Jones starkly outlined the challenges that UK businesses face when competing with firms whose governments are seen as being more supportive of their business:

Every day they [British companies] come up against companies from their rival nations of the developed world whose governments support them more, put more money behind their promotions, whose politicians are more behind the business equation than ours—of all parties—are.[5]

This is not just a matter of financial support for industries and export promotion, it involves all parts of government working together, acknowledging the nation's strengths and being willing to go out and advertise them to the world.

11. As we have said in previous reports as a nation we are good, perhaps too good, at self-criticism. Whilst we must acknowledge our weakness we should be more willing to celebrate our strengths. At the start of our "Risk and Reward" Report we observed:

If, as some reporting suggests, Britain genuinely and wrongly believes itself a nation in which manufacturing is in decline, there is no high technology industry, and the scale of the service sector is a weakness rather than strength, then we will deter potential partners—from foreign investors to the young people in our schools—from participating in some extraordinarily successful businesses. That would help make sure that long-term economic decline becomes a self-fulfilling prophecy.[6]

12. This is not just the responsibility of government; the media seems to rejoice in painting the least flattering picture of the British economy possible, highlighting bad news and ignoring the positives. Lord Jones was particularly damning of this:

Think of retail: Asda's recent figures. Did they feature as number one in Robert Peston's article? No. And yet a fabulous set of figures. Look at Morrisons' recruiting some 5,000 people. It is all good stuff in one mass sector. Do we read about it at the top of the news? No.[7]

If we do not have confidence in our own businesses and industries it will send the wrong signals to other countries looking to invest and trade with the United Kingdom. Businesses also need to have more faith in themselves and be willing to sell themselves in foreign markets. Lord Jones believed that one key barrier preventing SMEs from exporting was a lack of confidence in the goods and services they had to offer: "we need exporters and small businesses to have the confidence to reach out to international markets."[8]

13. While it is not just the job of government to create a positive business culture that supports trade promotion, it is to government that we must address our Report. One way in which government can encourage trade promotion is to place a suitable emphasis on the activities of bodies involved in trade promotion. Lord Jones told us that he did not feel that UKTI was held in high enough esteem within government. He said that he wanted UKTI to "strut their stuff a bit more around Whitehall" and regard themselves with a bit more of the "arrogance" of other large departments, such as the Treasury and FCO.

Without the UKTIs of this world […] it is more difficult for companies to create wealth. If they do not create it, they do not pay tax. If they do not pay tax, you do not get schools and hospitals. It is not rocket science.[9]

14. As well as raising the profile of organisations like UKTI, whose focus is trade promotion, it is essential that other Government departments become more commercially minded. UKTI has two supporting departments, BIS which largely—but often imperfectly—understands the commercial imperative, and the FCO, which, historically has not. There is a change apparent with the FCO and we welcome the increasingly business-focused approach we saw in many of the FCO Posts we visited during this, and indeed, during previous inquiries. Lord Jones also welcomed this change in the FCO's mindset. Commenting on his time as a Minister he said:

The one thing I saw as a happy difference between when I started at the CBI in 2000 and when I was UKTI minister in 2007-08 was how more business attuned and wealth-creating attuned the Foreign Office had become, very much more in tune with promoting British goods, services, companies around the world. I thought that was fabulous to see, it was a happy thing to see.[10]

15. However, we cannot afford for this culture shift to be confined to the FCO, when there are many departments whose activities relate to those of British businesses and who could do more to promote their interests abroad. Lord Jones made this case very forcefully:

[…] it is not just the Foreign Office. Our higher education system can be sold around the world better, so why do we not have promotional sales people in the Department of Education? Our environmental engineering companies in the country are first class. They are doing some fabulous stuff in China and in India and in Latin America, making money for the country. It is enlightened self-interest. Why do we not have trade promotion people at the Department of Environment? Energy is another one. It should not just be put into a box called 'Trade Promotion UK and a bit of Foreign Office, thank you very much'. The whole ability for this nation to trade itself out of its current problems is something the entire government department, Civil Service, regions and countries in the UK should espouse and praise, not, "Oh, it's over there, we'll let those people do it. What are they called? UKTI. They can do it." It should be a common purpose of the Government.[11]

16. Following the recent machinery of government changes higher education and trade now sit in the same department. This presents an exciting opportunity for the better promotion of our education sector. Nevertheless we believe that the underlying point behind Lord Jones' comments remain valid. All parts of government should work together to promote UK business abroad where appropriate. If Britain is to have any chance of exporting out of recession—and to flourish after it is over—then all parts of government, not just UKTI and the FCO, must work to promote the country as an ideal place to trade and do business with. We urge the Government to use its reply to our Report to set out how it intends to spread a more commercial, business-oriented mindset throughout Whitehall. All departments must be made to realise that they have a major role to play to help Britain trade its way out of recession and sustain its long term prosperity.

High level ministerial visits

17. One action the Government can take to promote trade is to engage in more high level visits. During the course of our inquiry we were again repeatedly told about the importance of visits by ministers and the Prime Minister in the promotion of British trade, particularly in emerging markets such as the Middle East. As Lord Davies said "There is no doubt that the prime ministerial visits are very important […] We need a continuous stream of ministerial visits and the more senior the better […] the Middle East does need continuity, it does need senior calling, and we also need to make sure, which we are doing, that when the leaders are over in the UK, as they are very often, that we are seeing them […]".[12]

18. Britain is at a competitive disadvantage when it comes to arranging ministerial visits because parliamentary duties make it difficult for ministers, and particularly the Prime Minister, to be away from Westminster for extended periods of time. This is a particular problem faced by those countries operating a Westminster system of government. It is much easier for directly elected heads of state in other countries to engage in such activities. As Lord Jones put it:

If you are up against Sarkozy, if you are up against Bush, as it was in my case—now it would be after Obama, if you are up against Merkel—and these are quality countries with quality companies wanting the support of the boss of the country—it is easier for them to travel than it is a British Prime Minister. The system in this country militates against promoting the ability for this country to trade its way out of its current problems.[13]

The Middle East Association worried that while "overseas visits by the Prime Minister and Cabinet Ministers are particularly effective: Arab governments frequently complain of British neglect and contrast it with the attentions of competitor governments."[14]

19. Given this constraint it is perhaps unsurprising that recent trade ministers have sat in the House of Lords. Lord Jones observed that this meant he was better able to be "overseas banging the drum and promoting Britain" than some of his colleagues because "it is extremely difficult to do both the job of a political career, wanting advancement, wanting to be in the beltway, wanting to be seen around doing the job in Westminster, and also being in some far-flung market for British business."[15] To rectify this problem, Lord Jones recommended that there should always be a dedicated Minister working solely on trade promotion who can "be spared from what you would call the normal duties in Westminster, to get out around the world and sell your nation."[16]

20. These are not new issues to the Committee. We have previously commented on the challenges facing ministers when they attempt to arrange trade promotion visits. In our "Europe moves East" report we said:

We believe that British ministers—especially those in trade promotion roles—should follow the example of our competitors and travel abroad more frequently to promote the UK interest. To assist in this, firm agreements should be established between government and opposition to ensure that ministers on trade missions should not have to return to the House to vote, other than in the most exceptional circumstances. […] We note, however, that many of our competitors more regularly use much more senior ministers, including prime ministers and presidents to lead trade missions and assist in the negotiation of major deals than is the tradition for British ministers.[17]

21. We stopped short of recommending that the minister for trade promotion sit in the House of Lords, a move which would allow him or her to spend much more time away from Westminster, due to concerns about the accountability of ministers who sit in the Second Chamber.

22. It is still difficult for relevant ministers to spend time away from Westminster. Current arrangements constrain the ability of ministers to engage in overseas trade missions and damages UK competitiveness. It is necessary, and should be possible, for both the Government and the opposition to make arrangements to ensure that the activities of the Trade Minister are not constrained by their presence being required at Westminster.

British Trade Ambassadors

23. The Government has partly acknowledged the constraints that the Westminster system places on its ministers with its creation of the British Trade Ambassadors Network. The Network was launched in October 2008, and is described in the Government's submission as being a network of 17 of the UK's foremost business and academic leaders who work with Government to promote the UK's excellence internationally, and highlight trade and investment opportunities.[18] Lord Davies, now a member of the Network, described the job more plainly saying that they freely gave their time when in overseas markets "banging the drum for Britain."[19]

24. As of July this year, the Ambassadors have participated in 40 events in 15 countries,[20] and many of our witnesses were extremely enthusiastic and positive about the work that has been done. For example, when asked whether they were a good idea or a moderately good idea, Lord Jones replied that they were an excellent idea.[21] Lord Davies was equally as enthusiastic saying that they had done a "great job" in selling Britain. Furthermore Lord Davies also emphasised that he wanted the Ambassadors to do more:

I need more from them: and if that is reported and that becomes the headline out of this that is great; because we need them to do more to help us; because the more the merrier really. It is working well and we are learning many lessons as we go along.[22]

25. We broadly agree with this assessment and wish to make only one criticism. It is important that we have ambassadors that have detailed knowledge of all the key sectors in the British economy. While the current group have a very impressive range of knowledge, we are slightly concerned by the lack of representation in the life sciences sector, and the health sector more generally: theses sectors represent major opportunities for the UK, and must be better represented in this network. This concern was brought to our attention during our visit to the UAE, which highlighted the many opportunities which existed in these sectors; opportunities which UK industries are well placed to exploit.

26. We agree that the British Trade Ambassadors are doing a very good job selling Britain as a place to trade with and invest in. Having high powered individuals singing the praises of the country can only benefit UK plc. We ask the Government to provide us with yearly up-dates on the activities of each of the Ambassadors, and to inform us what steps it is taking to ensure that the specialist knowledge the network possess reflects all those industries which are of central importance to the UK's economic future.

5 Q 95 Back

6 Business and Enterprise Committee, Eleventh Report of Session 2008-09, Risk and Reward: sustaining a higher value added economy, HC 746, Summary Back

7 Q 2 Back

8 Q 190 Back

9 Q 26 Back

10 Q 35 Back

11 Q 51 Back

12 Q 203 [Lord Davies] Back

13 Q 36 Back

14 Ev 120 Back

15 Q 35 Back

16 Q 41 Back