4 Work of UKTI: Programmes
Programmes
46. UKTI offers a range of services to UK-based companies
looking to expand into overseas markets. These services include
mentoring new or inexperienced exporters, providing advice about
entering a new market and identifying and arranging meetings with
potential business contacts. It also offers direct financial support
for companies to attend trade shows. Feedback from businesses
on the services received has generally been positive: in 2008
75% of customers said they were either "satisfied" or
"very satisfied" with the service they received.[59]
Lord Davies was also highly complimentary about UKTI's work saying
that in his experience UKTI "does a great job. It produces
£16 for every £1 invested; it is very focused and adding
a great amount of value to the economy."[60]
47. In this section we explore three of the services
which businesses mentioned most frequently to us in their evidence;
the Overseas Market Introduction Service (OMIS), the Passport
to Export Scheme and the Tradeshow Access Programme (TAP).
OVERSEAS MARKET INTRODUCTION SERVICE
48. A traditional OMIS report provides individual
companies with tailored advice and information about a market,
and support to that company during an overseas visit. The service
includes an analysis of possible market entry strategies and the
identification of possible business partners. It can also include
arranging for companies to meet with key contacts when visiting
the overseas market. The service is normally accessed through
a local adviser, based in the United Kingdom and then delivered
by UKTI staff based in overseas markets. That said it can also
be accessed directly through overseas staff. [61]
The price of the service depends upon the exact nature of the
request that is made and can range from a few hundred pounds up
to £9,800.[62]
49. We saw during our visit to Paris and Milan that
an OMIS can cover much more than the writing of a report on a
potential market. It can also be used more broadly a mechanism
for providing services to businesses and charging them for the
use of Post resources. For example, if a company used a room in
an Embassy to host an event the cost of the room hire would be
charged to them as an OMIS. We saw particularly innovative uses
of OMIS in Milan, where the mechanism was used to charge companies
which had their products promoted at an evening with the singer
Paulo Nutini. We welcome
the more innovative use of OMIS highlighted to us in Milan and
recommend that this creative approach be disseminated across UKTI
on the basis of best practice.
50. Industry's opinion as to the value of a traditional
OMIS report has been mixed. According to the NAO, 69% of customers
who commissioned an OMIS were satisfied with the service they
received and 55% felt that it had helped improve their business
performance.[63] Sir
Andrew Cahn (UKTI) told us that "OMIS reports are highly
valued by our customers" and that "they add a great
value to British exporting."[64]
However, the Sponsors' Alliance was concerned about the variable
quality of OMIS reports: "feedback from exporters regularly
suggests that the quality of OMIS reports is variable and often
does not meet customers' expectations."[65]
This view was repeated during oral evidence: "There is excellence
and there is poor quality."[66]
Mr Scott of the CBI agreed with this view, saying "clearly
the quality of them will vary and it will very much depend upon
the knowledge and expertise of the individuals on the ground."[67]
51. In its supplementary memorandum UKTI explicitly
addressed criticism about the varying quality of OMIS reports.
It argued:
In terms of inconsistency, these exist because Posts
tailor their response very much to customer requirements. Also,
conditions and business cultures vary from market to market so
that in some places it takes very much longer to achieve the same
result than in others. The amount of information easily available
can also vary considerably between markets, even neighbouring
ones. The view of what constitutes quality will also vary from
company to company and individual to individual. Where differences
or lack of customer focus cannot be justified, we are working
hard to minimise problems and spread best practice.[68]
We hope that this assessment does not reflect institutional
complacency. Any accusation of complacency could certainly not
be applied to the many excellent UKTI staff we have met who have
frankly identified, in private conversation, Posts which are simply
underperforming.
52. Having seen a number of OMIS reports we can ourselves
vouch for the fact that the quality can vary widely.[69]
We have seen some extremely detailed and well researched pieces
of work that provided a great deal of information and the contact
details of key decision makers in potential business partners.
However this is not always the case and other reports we have
seen contained little extra information beyond what a quick search
on the internet would reveal. While we understand that each OMIS
presents UKTI with a different challenge such extreme variation
in quality is unacceptable, especially given that businesses are
paying for this service.
53. A well written
OMIS can, and often does, provide businesses with a wealth of
opportunities to take advantage of, while a poor one is a costly
waste of a company's time and money and a disincentive for first
time users to commission future reports. While we understand that
complete uniformity in the quality of the product is not possible
to achieve, the current gulf between the best and the worst is
too wide. UKTI needs to take steps honestly to address performance
in its Posts where business is providing negative feedback on
the support they are given. If poor quality is due partly to companies
commissioning vague and unfocused reports, UKTI needs to be more
willing to recommend that businesses not use this service when
it believes they would be able to add little value to a company's
operationsa recommendation there may be disincentives to
implement, given the target set for UKTI Posts.
Charging Policy
54. Perhaps unsurprisingly some industry representatives
have been critical about the decision of UKTI to charge for its
OMIS services. The Middle East Association argued that the practice
of charging for OMIS reports increased the cost for SME exporters
which would "only discourage potential exporters and reduce
the competitiveness of established exporters". They recommended
that, at a time when businesses are facing increased costs and
reduced availability of credit the fees should, at least temporarily,
be removed.[70] This
point was echoed by the British Marine Federation which advocated
"a significant reduction in fees for the Overseas Market
Information Service be introduced in recognition of the difficult
financial climate."[71]
In oral evidence, Mr Josypenko, from the Sponsors' Alliance, went
further:
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.[72]
Others, while not wanting charges abolished, recommended
a change in the charging structure. The Midland World Trade Forum
recommended that "the structure of OMIS [
] should be
reviewedits upfront payment without guaranteed return makes
it an unattractive commercial proposition to many companies."[73]
55. Lord Davies defended the decision to charge
for OMIS reports, arguing that charging had "improved the
performance culture" [74]
in UKTI. "I know it is a small amount but it has had a profound
impact on the culture and made people realise the value of their
services. The team is very keen to maintain it."[75]
This view was repeated by the UKTI staff we met in Milan, one
of whom commented: "You want to make sure you're providing
something of value when a business is paying for the work you
do." The CBI also argued that charging for reports stopped
companies making speculative requests. Mr Campkin remarked:
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.[76]
The Department also made this point in its supplementary
evidence. It noted that previously "companies were commissioning
unpaid reports and contact lists from a number of Posts and then
choosing one or not bothering to use them at all." Furthermore,
the Department argued that a willingness to pay a charge demonstrated
that a company was seriously interested in exporting.[77]
56. The National Audit Office report, UK Trade
and Investment: Trade Support, investigated the current charging
structure at UKTI. It concluded that the organisation "lacks
clarity on the objectives governing the charges it makes for its
services." It continued: "we found a lack of clarity
in the financial objectives related to each of the UK Trade and
Investment's services, such as those that should be subsidised,
by how much; and those which should be subject to full cost recovery."[78]
57. The NAO was also of the opinion that previous
estimates of how much of its costs UKTI recovered were incorrect.
The audited account for 2007-08 indicated that 70% of costs incurred
were recovered through fees. Subsequent work by UKTI has estimated
that only 7% of the total OMIS costs and 33% of the marginal costs
were recovered. This is probably due to the delivery of OMIS services
requiring more time than was initially predicted when the OMIS
was commissioned. There is also a belief that there was a reluctance
by staff to quote the actual cost when the commission has been
fully worked out. UKTI has said that it encourages staff and managers
to ensure that the costs charged reflect the time involved but
believed that it will be some years before it will be able to
routinely recover the full marginal cost of its OMIS service.[79]
58. We agree
with the NAO that there is a lack of clarity about the aim of
UKTI's charging structure. However we do not believe that UKTI
should aim for full cost recovery, but instead that charges should
be set at a level that is of the most benefit to UK companies
and the economy as a whole. This means the charge should be as
high as is required to discourage speculative requests and no
higher. In the long term the additional taxable revenue generated
will more than cover the cost of providing the initial service.
We also believe that there is scope for UKTI to be more creative
in the way it uses the charging system. For example, a lower price
could be charged to companies that wish to export into priority
markets to encourage them to do so. Cost recovery should be an
incentive to both UKTI staff and those who commission the report
to use them effectively. They should not be a Treasury-driven
way of reducing the costs of UKTI.
OMIS Targets
59. As part of the last Comprehensive Spending Review
settlement UKTI agreed with the Treasury to increase its revenue
from £2 million per annum in 2007-08 to £4 million in
2010-11. UKTI then set revenue targets for its Posts based on
this agreement. As we have already indicated we are unhappy with
this approach.[80]
60. Companies have argued that the existence of OMIS
targets have had a distorting effect on the services that UKTI
provide, and that they also impact upon the ability of staff to
get out of their offices and network with key contacts on the
ground. When we explored this issue with Mr Scott of the CBI he
said that this was a "real risk":
[If UKTI] are driven by delivering a certain number
to meet a certain target that has to be at the expense of something
else [
] 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. [81]
The British Chambers of Commerce's written evidence
made a similar point about the target driven nature of some of
UKTI's work. It believed "such targets clearly stand in the
way of staff getting on with the day to day task of helping businesses
export, and serve to cloud serious analysis of UKTI's successes
and failures."[82]
61. Some UKTI staff also raised the issue of targets
during our visit to UKTI's operations in the Middle East. The
officials told us that OMIS reports were valued by their customers,
but that the work was excessively target driven and that efforts
to meet revenue targets for OMIS meant that staff had less time
to spend out in the business community.
62. When we put these concerns to Sir Andrew, Chief
Executive of UKTI, he replied that the problem had been "overstated"[83]
and that OMIS reports were built upon networking and knowledge
of the local markets. In particular, he believed that to gain
such knowledge staff needed to leave the office and interact with
local businesses.[84]
63. The Sponsors' Alliance raised a specific criticism
that the OMIS targets had led to the "forced sales"
of OMIS reports in connection with overseas events. When we explored
with Mr Josypenko how the process of forced sales worked in practice,
he explained:
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.
He continued:
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.[85]
In its supplementary evidence UKTI provided the following
defence of its decision to charge for such services.
We charge for time in organising and participating
in receptions IF they are appropriate to the market and sector
and IF the organiser wants one, because a proper focussed reception
requires the presence of potential customers and intermediaries
relevant to the missioners business objectives. This entails a
level of research and effort in putting the right people together,
equivalent to researching contacts.[86]
64. This disagreement appears to stem from the new
definition of what constitutes an OMIS, which now covers a wider
range of activity than previously was the case. UKTI operations
that we have visited made clear to us that they viewed OMIS as
a charging mechanism for their time and resource, whether or not
it involved the production of a formal report. It also partly
reflects UKTI's new policy of charging "for most activities
overseas where a private company or group of companies stands
to profit from the help it provides."[87]
65. We do not
believe that there should be a fundamental tension between the
need for staff to meet centrally-set targets for OMIS revenue
and their ability to network and make contacts with local businesses.
Indeed without those contacts OMIS reports would be of a much
poorer quality. However we are alert to the pressures on UKTI
staff and the fact that OMIS targets have the potential to trap
staff behind their desks and skew their priorities. We recommend
that the Department monitor this issue and where necessary, empower
UKTI management to intervene and ensure that staff workloads do
not prevent them from developing the local and sector knowledge
necessary for them to provide a vital aspect of UKTI service.
PASSPORT TO EXPORT
66. The Passport to Export scheme supports first-time
exporters, providing them with a broad range of services including:
free capability assessments, support during visits to potential
markets, mentoring from a local export professional, free action
plans, customised and subsidised training, and ongoing support
once they have established themselves in the market.[88]
The scheme has received a 90% quality rating from businesses that
used it.[89] This positive
evaluation was reflected in the written evidence we received.
For example the Sponsors' Alliance described the scheme as an
"excellent service, providing a systematic approach to ongoing
mentoring."[90]
67. The scheme is only available to new exporters
and does not provide assistance to help existing SME exporters
expand into new markets and sectors.[91]
This restriction leaves an important gap in the current service
provisions, especially given UKTI's focus on high growth emerging
markets, an area where we are currently being out-performed by
some of our key European competitors.[92]
As we heard from the British Chambers of Commerce "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 North America".[93]
This is a problem because SMEs which are first-time exporters
do not automatically look for opportunities in the high growth
countries which UKTI has designated as a priority.
68. In his appearance before us Lord Jones made clear
the difficulties faced in getting business to consider these countries
as potential markets for their products. Using the example of
potential markets for UK exports in one Asian country he said:
If you said to small businesses in Manchester, 'Tell
me some exporting markets you think you could go at', a country
with 160 million Muslims is not somewhere where they think of
and yet it is teeming with people who are getting richer every
day and who would love to buy our goods and services [
]
You have got a big job to do to get certain markets with huge
potential onto the radar screen of the British business population.[94]
In addition businesses face a range of additional
practical challenges when trying to export to unfamiliar high
growth markets including: understanding the local business culture
and language; coping with the distance; sourcing a reliable local
partner, and developing products and services tailed to meet the
specific needs of that market.[95]
As one witness put it "there are enormous obstacles and complexities
that no new exporter ought to be faced with."[96]
69. The Government has acknowledged this problem
and in March 2009 launched its 'Gateway to Global Growth' package
of support for experienced exportersespecially innovative
SMEsto diversify into new markets. The Gateway to Global
Growth programme has received £3.5 million of funding. The
Department's memorandum describes the scheme as being "based
on UKTI's 'Passport to Export' programme for new exporters, but
recognises the potentially more complex demands facing experienced
exporters, especially those seeking to enter high growth markets
for the first time, or to enter global supply/value chains."[97]
70. When we asked business representatives about
the scheme, they welcomed the intention but had some concerns
about its implementation. Mr Marshall said that "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."[98]
71. If UKTI
is committed to increasing the number of companies exporting to
its priority high growth markets it needs to accommodate all companies
who are interested in entering those markets, regardless of whether
or not they are new to exporting. We welcome the aims behind the
"Gateway to Global Growth" programme but are concerned
about reports from industry that it is not living up to its billing
as a follow-on to the highly successful Passport to Export scheme.
The Government should re-examine the support the Gateway provides
to ensure it provides a properly tailored service to the needs
of business. We invite the Government to provide more information
about the operation of this scheme in its response to our report.
TRADESHOW ACCESS PROGRAMME
72. The Tradeshow Access Programme (TAP) provides
support for small and medium-sized enterprises to exhibit at trade
shows overseas, either as part of business delegations or on an
individual basis. Each delegation is led by an accredited trade
organisation. In 2008-09, the TAP Group programme comprised of
416 events. Grant support is primarily aimed at new-to-export
SMEs but established SMEs can apply if they are going to a trade
fair where they have not recently exhibited. Grants range from
£1,000 to £1,800. In the 12 months up to December 2008,
2,742 grants were awarded under this programme.[99]
73. Almost all evidence submitted by business groups
to the Committee emphasised the importance of trade shows to their
members. Equally they voiced their disappointment in the recent
reductions in UKTI budget for tradeshow support. For example in
its written submission the BCC stated that:
The Missions Programme takes exporters into potential
markets and introduces them to potential customers. It has always
been highly valued by businesses, who have found missions incredibly
successful in helping them find new markets. However, funding
for missions has been slashed by UKTI, and the current regional
Market Visit Scheme does not give companies the wide range of
dates for assisted market visits that they could have from access
to a national scheme.[100]
74. In 2006-07, £10.5 million was available
to help SMEs attend trade shows.[101]
In 2008-09, this was reduced to £7.7 million.[102]
The Energy Industries Council submission stated that "the
Government has whittled down TAP funding over the past five years,
to the point where it makes very little difference to our members."[103]
The BCC argued that funding available for UK SMEs to attend tradeshows
compared unfavourably with the UK's major competitors, describing
it as "inconsistent, unreliable and falling."[104]
The British Marine Federation argued that the "volume of
administration" and "significant lead times" that
SMEs face in accessing this funding discourages many from applying.[105]
Several submissions set out the view that the reduction in funding
for the TAP has led to a noticeable impact upon the representation
of Britain at several key trade shows.[106]
75. The Government's supplementary evidence stated
that £300,000 was added to the TAP 2009-10 budget of £8.2m
in September 2009.[107]
The Government also highlighted the fact the number of financial
grants for which an individual company could apply had increased
from three to six, subject to the grants being used in at least
two markets.[108] We
were told that the initial reasons for restricting the number
was because "there were some companies who were, if you like,
living on grants for years and years [
] we wanted to attract
more companies and I think we decided that perhaps we had tightened
the screw a little bit too much."[109]
We also note that some of the events being funded by the Strategic
Investment Fund[110]
(SIF), such as the £2.8 million being spent on showcase events,
may helpat least temporarilyto address businesses'
concerns about the lack of funding for trade show events.
76. We explored with Sir Andrew Cahn, Chief Executive
of UKTI, how UKTI supported businesses in making the most effective
use of trade shows. When questioned as to whether past performance
at tradeshow gave companies an advantage in gaining future funding
he replied: "No. If a company is eligible it
is eligible. It is a good question and I do not think I have a
very good answer for you. What we certainly do do is try and follow
up on where we see things have not worked properly and try and
change things."[111]
77. Companies
clearly feel that the Tradeshow Access Programme makes a valuable
contribution to their ability to export successfully. However,
given the current constraints on public finances it is difficult
to recommend that the Programme's budget is increased. Rather
we see an opportunity to make the use of existing resources more
efficient by developing a better evaluation mechanism for determining
future grants, the need for which was alluded to us by the Chief
Executive of UKTI. We call on the Government to protect the existing
levels of funding and to explore innovative ways of maximising
the effective use of the resources allocated to this scheme.
GAPS IN CURRENT PROGRAMME PROVISION
78. As part of this inquiry we explored how the support
the Government provides to its exporters compares with support
offered by some of our main competitors. On the whole we were
impressed by the UKTI system. Indeed, parts of the UKTI programme
are seen as a model for other countries. However, we saw one scheme
run by UBIFrance[112]
which we think that UKTI could learn from"Volontariat
International en Entreprise" (VIE), which roughly translates
as the international internship programme.
79. VIE places highly skilled recent graduates[113]
in French companies that are operating abroad, and pays a proportion
of their salary. Young people, up to the age of 28, can apply
for internships working for SMEs. The programme has been running
for five years and so far UBIFrance has received 40,000 applications
to join it. At present, there are 6,366 young people on assignment
in 139 countries. UBiFrance estimate that 11,500 SMEs have benefited
from the programme.
80. We learnt about this programme rather late in
the course of our inquiry and therefore have not had the chance
to gather formally the opinion of industry or Government about
the possibility or desirability of developing a similar scheme
in the United Kingdom. However, our first impressions are favourable.
VIE appears to provide highly skilled graduates with an entry
into business in a way which is tailored to meet companies' needs
and offers graduates valuable experience working both in the private
sector and in a foreign country. The
Government should study VIE closely, identifying the benefits
provided by the French system, and investigate the possibility
of running a similar scheme in the United Kingdom.
Monitoring the impact of programmes
81. UKTI has set up several mechanisms to monitor
the impact of its programmes on business performance. Since July
2005, the main system of monitoring is through a quarterly Performance
and Impact Monitoring Survey (PIMS). Each year, approximately
3,400 businesses are randomly sampled some four to seven months
after they have used a specific service. A smaller sample of 400
are contacted again a year later for a follow up interview.[114]
The results of these questionnaires form the basis of the PIMS
reports.
82. These interviews attempt both to measure whether
UKTI services have improved the performance of businesses, and
also to assess the financial benefit businesses received as a
result of these services. UKTI classifies a business as having
improved its performance if they:
- Expect that in five years time
the support will have had a positive impact on their productivity
(in terms of sales per employee); and
- Expect a positive impact on the profitability
of the firm (in terms of the proportion of turnover accounted
for by profit), and
- Expect to either win new orders, be invited to
tender or quote for work or see a 'significant increase' in total
sales as a result of the support.[115]
83. The PIMS questionnaire also asks for information
about the financial benefit that UKTI services have delivered.
This is how the often quoted figure of a "£16 return
for every £1 spent" has been calculated.[116]
However, the NAO had concerns about this figure. Referring to
the 2007-08 cost ratio the NAO noted that:
The underlying survey data demonstrates that 29 per
cent either did not know or declined to provide an estimate [of
direct financial benefit] [
] and 41 per cent forecast no
financial benefit.[117]
This suggests that UKTI is not getting a complete
picture of the benefits of its services to users. In some cases
this may be because not enough time has elapsed to allow businesses
to fully realise the impact of the support they had received.
84. The NAO's analysis of the survey data also highlights
an interesting point about the additionality achieved by the range
of services offered. When asked "Do you think you would probably
or definitely achieve similar results without UK Trade & Investment
support?", almost half replied either "yes" (19%)
or "yes but not as quickly" (27%). SMEs perceived a
higher level of additionality than larger businesses, possibly
because SMEs tend to have less experience in working in overseas
markets.[118]
85. While these figures are interesting we believe
that they should be treated with caution. It will always be difficult
to accurately assign responsibility for new business between UKTI
and the businesses they support. Precise figures which assign
an exact figure to UKTI support should always be treated with
a degree of scepticism. Judging the benefit that UKTI adds to
a company will necessarily be more of an art than a science.
86. We explored the difficulties of measuring the
financial impact of UKTI services with officials during our visits
to UKTI Posts. We were told that there was no systemic monitoring
of additional revenue that businesses received beyond the PIMS
mechanism. Furthermore companies were not required to inform UKTI
about any additional business they secured as a result of the
support they received. We discussed the possibility of requiring
all companies to report back to UKTI on the financial benefit
of their services as part of the initial agreement to commission
support from UKTI. The staff we talked to were supportive of this
idea and believed it would give them a better understanding of
the effectiveness of their work.
87. We believe
that the effectiveness of UKTI support to companies must be, as
much as possible, measured by its "bottom line" impact,
that is the direct additional financial benefit to companiesand
to the United Kingdomas a result of the services that they
received. Being able to demonstrate more fully the value it adds
to companies activities will help UKTI defend its budgets during
continuing pressure on public finances. We therefore recommend
that businesses who use UKTI services should be required to keep
UKTI updated about the benefit that they receive, over the medium
term as part of the agreement they enter into when using UKTI
services. This should not have to be an onerous process, a short
e-mail or phone call to their UKTI contact after a successful
business deal had been signed would be sufficient. We also recommend
that the timescale of the PIMS system is lengthened to allow companies
responding the time to realise the full impact of the support
they have received. Done well, this process should also enhance
relationships between UKTI and the businesses using its services.
Delivery of programmes
88. The delivery of many UKTI regional services within
the United Kingdom is contracted out to other organisations. Traditionally
this was a role played by the local Chamber of Commerce, but more
recently contracts have been awarded to "bodies which are
closer to government."[119]
The British Chambers of Commerce (BCC) argued that the effect
of this change was to "take trade services from a single
roof which employers knew and understood [and] spread them among
many different organisations."[120]
In Devon, Cornwall and Somerset, UKTI regional services are now
delivered by Serco, which also provides services to local government
and the private sector in the following areas: home affairs, defence,
science, nuclear, health, education, welfare to work, and IT.[121]
In its supplementary memorandum, the Government set out its partnership
arrangements with the private sector and describes how those partnerships
provided the benefits of a business perspective, increased credibility
and innovative working methods:
In UKTI's English regional network we have a private
sector delivery partner in each of the nine regions which employs
more than 300 people in international trade teams (including International
Trade Advisers) who are deployed on UKTI work. While UKTI offers
a national suite of services, our advisers work with businesses
locally to develop a deep understanding of the diverse range of
business needs that exist across the English regions.
In each region UKTI seeks delivery partners that
have a capability to deliver for UKTI, can generate synergy with
other business support services and offer value for money. [
]
UKTI will select the best value suppliers i.e. the best quality
at the most competitive price, to work with. [122]
89. The Government should obviously award contracts
to those organisations which can provide highest quality services
at the best possible price. This will not necessarily always be
local Chambers of Commerce, especially in areas where the Chamber
movement is less well developed, as is the case in the South West.
However, there are many advantages to local Chambers acting as
UKTI's primary delivery partner. Local Chambers provide businesses
with one location to access these and other services, and they
are already established in the locality. Local Chambers are also
in a position to use their knowledge of local businesses to promote
UKTI's services more effectively. While we have no doubt that
private companies, such as Serco, are very effective administrators,
it is clear to us that UKTI would benefit from having its UK-based
operations delivered by an organisation that has detailed knowledge
of, and regular contact with, local businesses.
90. Value for
money and high quality services should be the criteria used by
UKTI when it awards contracts for its UK operations. However a
partner with knowledge of local businesses and ability to promote
UKTI service to the widest possible range of companiessuch
as a Chamber of Commercewill be able to add a great deal
of value to UKTI UK-based operations. These are considerations
that UKTI should bear in mind when deciding who to partner with
for local service delivery. We also believe that the Government
should seek to strengthen local Chambers as a matter of policy.
STAFF COSTS
91. UKTI currently employs 2,400 staff, of which
1,400 of which are based overseas.[123]
Some groups have questioned the relative amounts spent on direct
business support and staff costs. Sponsors' Alliance argued that
its analysis of UKTI's overall operating costs for the 2007-08
budget year revealed that staff costs for directly employed staff
(by BIS and FCO) "amounted to approximately £63 million,
with an additional £16.4 million to maintain the International
Trade Teams in the English regions, plus a further £0.5 million
for international business specialists, seconded from industry."[124]
Administrative and overhead costs, both in the UK and overseas,
accounted for a further £144.1 million. According to Sponsors'
Alliance:
Altogether, UKTI staff, administrative and overheads
expenses amount to approximately £224 million, which is around
76% of its overall operating budget [
] UKTI spent less than
£1 in £9 of its overall operating budget on direct customer-facing
international business schemes in 2007-08.[125]
92. Mr Josypenko reiterated this point in oral evidence:
"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."
93. When we asked the Department to comment on these
figures we received the following reply:
Mr Josypenko is contrasting a figure for programme
spend (£30 million) which relates to his definition of direct
support (Trade Access Programme, Passports etc) against the total
resource consumed by UKTI (£323 million). UKTI's total budget
of £323 million is split between Trade Services £250
million and Foreign Direct Investment £73 million.
UKTI's Departmental Report and Resource Accounts
2008-09 (HC 482) show that direct support to business on trade
support amounted to £201 million (this figure excludes BIS
admin). [126]
The Government also argued that 90% of all UKTI staff
were either working overseas, in the regions or engaged in "customer-facing
work" at their Headquarters, and that there had been a 40%
reduction in HQ (that are London-based) staff since 2004.[127]
94. Having seen for ourselves the services that UKTI
provides we agree that it is very staff intensive. The on-the-ground
contacts, knowledge and mentoring services that UK businesses
value require the UKTI operations to have significant numbers
of staff to research and provide this information. This is especially
true of the traditional OMIS reports and the Passport to Export
mentoring programme.
95. Given the value that business place on these
services, which require a significant number of staff to be on
the ground in overseas markets, resources need to be, where possible,
concentrated in those Posts. However, care must be taken to ensure
that efficiency savings result in real efficiencies. Too often,
short sighted attempts to make savings lead to a unforeseen long
terms costs. For example, in Italy we saw that reductions in the
numbers of support staff had forced highly skilled, front-line
staff to fulfil functions such as office cleaning, reducing the
time they spent supporting businesses.
96. In the current
climate of constrained public finances it is especially important
that the maximum possible amount of resource is directed to front-line
services. However, we do not believe that wasteful spending exists
to the extent suggested by some of our witnesses. Neither do we
believe that UKTI needs to fundamentally re-evaluate the balance
it strikes between direct cash support it provides to business
and the amount it spends on staff, the majority of whom deliver
front line services to companies. However changes imposed on UKTI
have played their part in creating a top-heavy bureaucracy which
is now being slimmed down. This process must continuethe
evidence we have heard suggests that the real value to British
business of UKTI is its presence at the local level both in the
UK and overseas.
THE FCO ESTATE
97. We are also concerned about pressure from the
Treasury for the FCO to sell those of its embassies in high profile
locations in an attempt to reduce costs. Selling these buildings
would not only represent a downgrading of the UK's presence overseas
but would sacrifice an important weapon in UKTI's arsenal. The
ability of UKTI to offer companies the opportunity to host meetings
and events in such impressive locations can make a real difference
to their ability to win new business.
98. The importance of these buildings was brought
home to us during our visit to Paris. The location and grandeur
of the Embassy is seen as an incentive for people to attend UKTI
meetings and functions held there. In this way the Embassy acts
as an asset which allows the excellent UKTI staff in Paris to
sell the United Kingdom more effectively. Without it, it would
be more difficult for UKTI to reach its intended audience.
99. In the current
financial situation there will naturally be the desire to reduce
expenditure and make savings. However, to do so by selling parts
of the FCO estate, especially those based in such prestigious
surroundings, would be a short sighted decision and in the long
run could cost UK plc much more than was saved.
59 NAO, UK Trade and Investment: Trade Support,
HC 297, April 2009, p21. Although this was short of their target
of 80% customer satisfaction. Back
60
Q197 Back
61
NAO, UK Trade and Investment: Trade Support, HC 297, April
2009, p11 Back
62
https://www.uktradeinvest.gov.uk/ Back
63
NAO, UK Trade and Investment: Trade Support, HC 297, April
2009, p21 Back
64
Q 228 Back
65
Ev 134 Back
66
Q 310 Back
67
Q 312 [Mr Scott] Back
68
Ev 72 Back
69
The OMIS reports seen by the Committee were done so under the
conditional of commercial confidentiality and therefore have not
been reproduced in the evidence volume. Back
70
Ev 119 Back
71
Ev 90 Back
72
Q 315 [Mr Josypenko] Back
73
Ev 121 Back
74
Q 227 Back
75
Q 244 Back
76
Q 315 [Mr Campkin] Back
77
Ev 72 Back
78
NAO, UK Trade and Investment: Trade Support, HC 297, April
2009, para 11 Back
79
NAO, UK Trade and Investment: Trade Support, HC 297, April
2009, para 2.23 - 2.24 Back
80
See paragraph 57 forward. Back
81
Q 312 Mr [Scott] Back
82
Ev 82 Back
83
Q 229 Back
84
Q 228 Back
85
Q 314 Back
86
Ev 72 Back
87
Ev 72 Back
88
https://www.uktradeinvest.gov.uk/ukti Back
89
NAO, UK Trade and Investment: Trade Support, HC 297, April
2009, p20 Back
90
Ev 131 Back
91
Ev 83 Back
92
NAO, UK Trade and Investment: Trade Support, HC 297, April
2009, para 1.3 and figure 1 Back
93
Q 283 [Mr Marshall] Back
94
Q 103 Back
95
"UK Trade and Investment: Trade Support" NAO Report,
HC 297, April 2009, para 1.3 Back
96
Q 283 [Mr Josypenko] Back
97
Ev 63 Back
98
Q 295 [Mr Marshall] Back
99
"UK Trade and Investment: Trade Support" NAO Report,
HC 297, April 2009, p11 and 23 Back
100
Ev 82 Back
101
Under TAP's predecessor programme. Back
102
UKTI, Annual Report and Accounts 2008-09, p129 Back
103
Ev 106 Back
104
Ev 82 Back
105
Ev 90 Back
106
For example Ev 82 Back
107
Ev 70 Back
108
Ev 64 Back
109
Q 241 Back
110
Department for Business, Innovation and Skills, The UK Strategic
Investment Fund: Interim Report, October 2009, section 6.7.
See paragraph 108 forward for a fuller discussion. Back
111
Q 242 Back
112
The French export promotion service. Back
113
Not limited to French graduates. Back
114
NAO, UK Trade and Investment: Trade Support, HC 297, April
2009, para 2.5 Back
115
"NAO, UK Trade and Investment: Trade Support, HC 297,
April 2009, Table 5 Back
116
See paragraph 28. Back
117
NAO, UK Trade and Investment: Trade Support, HC 297, April
2009, para 2.25 Back
118
"UK Trade and Investment: Trade Support" NAO Report,
HC 297, April 2009, para 2.23 Back
119
Ev 83 Back
120
Ev 83 Back
121
http://www.serco.com/about/ataglance/index.asp Back
122
Ev 71 Back
123
Q 223 Back
124
Ev 131 Back
125
Ev 132 Back
126
Ev 71 Back
127
Ev 71 Back
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