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

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

5 Work of UKTI: Responding to the recession

100. The global recession has obviously had a highly detrimental impact on global trade flows. Therefore a continuation of UKTI's normal operations would not have been a sufficient response to these extraordinary market conditions. The Government has acknowledged this and has allocated £10 million from the Strategic Investment Fund to bolster the resources available for trade promotion. In addition, UKTI launched its Fiscal Stimulus Initiative to help British businesses take advantage of the recovery packages launched by many countries in response to the global economic downturn.

Fiscal Stimulus Initiative

101. In April 2009, the UKTI published Introducing the Specialist Network, which set out details of its Fiscal Stimulus Initiative, initially called the Fiscal Compass Programme, which was described as its "response to the global economic downturn,"[128] UKTI explained the programme as follows:

In difficult times, businesses need to be flexible and innovative and seek out opportunities where they exist. Fiscal stimulus packages and major spending programmes are being announced around the world, which will create global supply chain opportunities for UK firms. UK Trade & Investment has recognised this and has enhanced its support by focusing a team of nine Business Specialists to help companies of all sizes to identify these opportunities.[129]

The Programme identified nine markets—Australia, Brazil, China, France, Germany, India, Saudi Arabia, Spain and the USA—in which it would focus its efforts. Lord Davies said that the aim was to support a thousand companies by March 2010.[130]

102. When we questioned Lord Davies about the progress towards that figure, he told us that "I think we have had over 200 enquiries from companies that want advice and access to some of the fiscal stimulus programmes around the world. Launched in March; early days; but so far so good."[131]

103. While we support the aim of this new initiative we have concerns over the way it has been managed. In particular the name change from Fiscal Compass to Fiscal Stimulus Initiative is not helpful and the lack of clear branding makes it more difficult for UK businesses to effectively engage with the programme.

104. We support the aim of the Fiscal Stimulus Initiative to help British businesses benefit from other countries' fiscal stimulus packages. However, we believe that creating another new programme, separately identified, contributes to the bloated pool of existing programmes. UKTI should simply have shifted resources on a short-term basis to markets where new opportunities have been created. We invite the Government to provide us with a progress report on its aim to support a thousand companies by March 2010, given that this is now only two months away. We remind the Government and UKTI that to the greatest possible extent the British business community needs and requires simplicity in UKTI programmes to engage effectively with them.

Strategic Investment Fund

105. The April 2009 Budget Report announced the establishment of a £750 million Strategic Investment Fund (SIF). The aim of the Fund was to "support advanced industrial projects of strategic importance to the United Kingdom's economic renewal and future growth, [and] to help ensure that the United Kingdom is able to emerge from the economic downturn in a globally competitive position".[132] Out of that £750 million, £10 million was earmarked for UKTI. The recent interim report on the Strategic Investment Fund, said that UKTI was using this funding to "help UK businesses better showcase their strengths to overseas customers and markets."[133] All projects are expected to meet the following criteria:

High value and visibility to UK business;
Early impact with strong legacy which the private sector can run with;
Directly related to the New Industry, New Jobs strategy;
Leverage multiplying effects from partners to reach the widest possible audience.[134]

When he appeared before the Committee, Sir Andrew Cahn emphasised the importance of the second criteria saying that UKTI "wanted to ensure that we did not set up a scheme which would fall off a cliff in two years' time. We tried to find activities which will have a real impact on British exporters and inward investors during the recession and as we come out of it, but which we can stop in two years' time."[135]

106. So far UKTI has made the following spending commitments from this fund:

Up to £1 million (with potential to leverage £300, 000 from the private sector) for a major security sector event in February 2010, building on the success model offered by the Farnborough International Air Show;
A further package of up to £2.8 million for events across the spectrum of New Industry New Jobs (NINJ) sectors (advanced engineering, creative industries, energy, low carbon, construction, ICT and financial services) starting in September 2009 with London Fashion Week and the London Design Festival. Other events include a showcase for the advanced engineering sector in Brazil in October, Technology World in Coventry in November and a consumer electronics show in the USA in January 2010;
As part of the suite of actions being coordinated by the Office for Life Sciences, an investment of up to £1 million over two years to promote UK life sciences and the NHS at flagship events in the UK and overseas. UKTI will hold a new high-level technology partnering event later in 2010 that will bring life sciences decision-makers to the UK;
Enhanced showcase marketing of up to £1 million to support the sectors events and extend the Take it to the World campaign which encourages UK businesses to export;
Other projects being developed include a global network of around one thousand influential voices to promote the reputation of the UK for innovation and creativity, and an enhanced foreign direct investment (FDI) aftercare service in key sectors and across the English regions to nurture opportunities for further FDI;
Beyond this, in 2010-11, a further package of up to £2.5 million for sector-based showcase events.[136]

107. When asked how he planned to deploy this additional investment, Sir Andrew Cahn highlighted three projects as being of particular importance: the Security Sector Trade Show, UK Global Connections (previously called Global Britons Network) and the increased funding for marketing activities. We discuss these three programmes in detail during the remainder of this chapter.

SECURITY SECTOR TRADE SHOW

108. The first initiative is the creation of a trade show for the security sector modelled on the Farnborough Air Show for the Defence/Aerospacesector,[137] to be first held in March 2010.[138] The Department has set aside £1 million (including money leveraged from the private sector) for the establishment and running of the event over its first two years.[139] The Government hopes the event will be self-sustaining after that period.[140]

109. Sir Andrew Cahn justified the decision to spend this money on the security sector by arguing that it was "one of the sectors where Britain is particularly strong—in fact globally leading." He believed that although the industry was growing rapidly, there was still "huge demand" for this kind of event and that the Department could "do better for the sector."[141]

110. However, industry representatives we spoke to were less convinced about the need for Government to support an event in a sector they regarded as already being well served:

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. […] There may have been indeed other sectors or other areas which were under-served where that money could have been better spent.[142]

Furthermore, our witnesses were unable to give a view of whether or not the event could become self-financing in two years.[143]

111. We are puzzled by UKTI's decision to spend a sizeable proportion of its Strategic Investment Fund Money to create a trade show for the security sector when there already exist a range of events that fulfil this function. The Government has yet to convince us that is a sensible use of the Strategic Investment Fund. We recommend that it sets out in detail the rationale behind this decision and provides the assumptions underpinning the assertion that this event will become self-funding within two years.

UK GLOBAL CONNECTIONS

112. A second initiative—"UK Global Connections"—will also be funded by the Strategic Investment Fund. During oral evidence Sir Andrew Cahn described it as a network that would tap:

the thousands of people around the world—business people and people doing other things—who are Britons living overseas but are friendly and want to help Britain; and also to those who are foreigners who are alumni of our universities or our schools and who are friendly to us.[144]

The Department expanded on this rather vague description in its supplementary evidence, saying that it intended to create:

a new global network of people who have real influence and are willing to work with us in promoting the benefits of the UK as a great place to do business. […] The network will make it easier for UKTI people to spot and deploy capable partners, from the network, willing to work with us as speakers at our events, mentors to new exporters or inward investors, people who can enable business opportunities or influencers who can make the things we want to see happen.[145]

113. The specific objects of the network will be to:

Improve the UK's reputation as the international business partner of choice;
Attract high value foreign direct investment to the UK by communicating the strengths of the UK as a place to do business; and
Help UK businesses internationalise by:
- Sharing market insight & best practice;
- Signposting and facilitating key contacts, and
- Identifying/encouraging/generating offers that facilitate exports.[146]

114. Network members would become part of a database used by UKTI staff to identify speakers for key events, participants in round table discussions with potential overseas buyers or inward investors, and mentors for less experienced companies. The Government's memorandum stated that individuals who join the network would be expected to participate in at least two activities each year.

115. Members of the network would be provided with facts about the United Kingdom and encouraged to use these facts informally, for example when talking to usual business contacts. The Government hopes that the network's members would use these informal conversations to promote the United Kingdom as the business location of choice. While not limited itself to specific markets or sectors UKTI says that it will "seek to focus network member activities in priority areas—particularly linked to the New Industry New Jobs agenda and priority market."[147]

116. The network is due to be launched early in 2010 and the Department aims to have around 100 members initially, expanding to between 500-1,000 members by September 2010. The Department told us that initial member nominations had been sought and that initial invitations to join the network would be sent out in December. The main costs for the set up and ongoing operation of the network would be the creation and maintenance of a web portal for network members, the cost of which would not exceed £75,000. It would also have a small secretariat of around two or three people.[148]

117. Perhaps because this initiative has yet to be fully implemented, none of the business representatives we spoke to were aware of the programme.[149] However, Mr Marshall raised concerns that some of the network's objectives were already being achieved through programmes run by the Chambers of Commerce and that there was a risk of duplication:

as Chambers of Commerce, we have a recognised brand and we are in cities, towns and countries around the world already… [This network already exists] in a variety of ways and we are running programmes already, such as Link to China, which I mentioned earlier, which would accomplish the goals of this new scheme without setting up something additional.

We have to question what this scheme adds to UKTI's existing range of initiatives. It appears to be duplicating work which is already being done by the British Trade Ambassadors,[150] which seeks to use high profile British businessmen, academics and others to promote the United Kingdom as a place to do business.

118. The UK Global Connections initiative is still in its infancy and therefore we are unable to judge its contribution to trade promotion. That said, we are not convinced that this scheme will address a real gap in the current programme offered by other organisations, and are uncertain what value it will add to the UK's trade promotion activities. Between them the British Trade Ambassadors and existing bilateral chambers of trade should provide precisely the networks which are needed. We see no need to reinvent the wheel.

MARKETING CAMPAIGN

119. Increasing the awareness of the work of UKTI is of critical importance. The NAO's report states that UKTI's own research "indicates that large numbers of existing exporters are not aware that [UKTI] exists or are not convinced of the potential benefits from any external assistance, suggesting that many businesses have yet to access the services provided by UK Trade & Investment."[151] The CBI echoed this point remarking that "a cry we often hear, particularly from small and medium-sized companies is that, 'I just didn't know that this was a service which was available to me'."[152] We also heard anecdotal evidence which supports this view. One company we spoke to learned about the services available to him only when UKTI moved into a neighbouring office. Another discovered UKTI after selling a bench to the British Embassy in Paris.

120. The Government has acknowledged the problems it faces in marketing the services UKTI provides more effectively. Lord Davies told the Committee that he did not think UKTI "should be defensive" about this challenge:

It is a hugely difficult task to cover over four million SMEs, whether you are an RDA or UKTI. I think there is closer and closer partnership […] We had to spread the message through our regional offices and through the RDAs that small businesses can export and can do it without having to travel the world searching for markets. […] We need to find better ways continuously of bringing opportunities to small companies, and that is exactly what we are doing.[153]

121. Some business were critical about how UKTI promotes itself. The Manufacturing Technologies Association described the UKTI's marketing campaign as "seemingly generalised and unfocussed."[154] The Association mentioned "one member recently reported seeing an UKTI billboard advertisement on a suburban railway platform in North London—it was unclear to what purpose."[155] The Committee was shown an example of UKTI's "Take it to the world" poster by Mr Josypenko, who commented that it had appeared "on railway stations, outside airports, on the sides of taxis."[156] Mr Marshall remarked that "Looking at it, you probably would wonder exactly what it was referring to sometimes."[157]

122. Our witnesses were not entirely critical of UKTI marketing methods. They noted that adverts had also appeared in trade magazines which they believed to be a much more focused use of resources. However there was a consensus that by far the most effective way to raise awareness of UKTI was for UKTI staff to get in front of business and tell them what support was available. Mr Scott's of the CBI, opinion was that:

one of the most effective ways [of raising awareness] is 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.[158]

He acknowledged that this was quite resource-intensive but said that the additional resources that were being dedicated to marketing out of the SIF provided an opportunity to take this work forward.

123. We welcome the Department's decision to allocate more resources to increase awareness of UKTI's services amongst businesses, as there are clearly many businesses that are unaware of the help that is available to them. However, we believe this money should be used to develop a more carefully targeted communication programme, including sending UKTI staff to meet business rather than buying poorly-targeted advertising space to spread unfocused generalised messages.

124. We also heard complaints that UKTI was too reactive; it depended on companies asking UKTI to investigate a market for them. Rarely does UKTI contact businesses when it sees an opportunity for them to make inroads into a foreign market. Mr Scott commented that the CBI "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."[159]

125. This may be starting to change. The Fiscal Stimulus Initiative appears to be a more proactive scheme than existing UKTI schemes—but a new initiative and acronym should not have been needed to achieve this. We also saw some innovative practices in Milan, where Commercial Officers were contacting firms and offering to write them a report on a "no win, no fee" basis, whereby the company would only pay for the report if it led to a meeting. That said we are sure that the enterprising approach we saw in Milan is not the exception to the rule and that many other Posts are engaged in similarly innovative activities.

126. In addition to raising awareness of the services business can request UKTI needs to be more proactive in alerting companies to opportunities in their markets. We saw some promising new activities in Milan, we recommend that the best practice exemplified in Milan—and what we are confident is being developed in other UKTI Posts—is disseminated across the organisation.

UKTI'S ADMINISTRATION OF STRATEGIC INVESTMENT FUND SUPPORT

127. The Government's decision to use some of the Strategic Investment Fund to bolster the funding of UKTI rightly reflects the importance of exports for the UK's economic recovery. It should also be seen by UKTI staff as a vote of confidence in the work they do. However, as we have already discussed, we have concerns about the way that UKTI has decided to deploy those additional resources.

128. UKTI does not seem to have properly consulted industry when deciding how this new money would be best deployed:

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.[160]

[…] we did not have any opportunity to consult UKTI on what was happening with this money.[161]

Mr Marshall was more sympathetic. He acknowledged that UKTI had been given very little time to decide how to spend those new resources and that a lengthy consultation process could have delayed their deployment or resulted in the money being too thinly spread:

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 […].[162]

129. That said, UKTI does not appear to have succeeded in informing business which initiatives would be supported by this funding once the decision was made. We were unable to gain a clear understanding about exactly how this money was being spent until relatively late in the course of the inquiry. Some groups we spoke to were not aware of this additional funding until we mentioned it to them. This was certainly the case with the Chairman of the Sponsors' Alliance who told us that:

one of the things we [the Sponsors' Alliance] do want to take up with UKTI is that we still have not seen a formal confirmation of exactly where the money is going.[163]

Speaking specifically about the decision to establish a security sector trade show, Mr Josypenko reported that a colleague who represents the main trade association for the security industry reported that he or they had no knowledge of UKTI's decision on that issue.[164]

130. We asked business representatives how they would have spent the money had they been able to make the decision. There was a consensus from the panel that the £10 million would have been better spent on doing existing things better rather than doing new things.[165] For example Mr Josypenko noted that the Tradeshow Access Programme could have been used to quickly disperse the additional money in a way that would directly benefit small businesses. He asserted that such a decision could have been "implemented within a matter of weeks".[166] He also remarked that the size of TAP grants, on average £1,000-£2,000, meant that a relatively small increase in funding could have supported a large number of additional businesses.[167]

131. We have already highlighted in this Report the importance of UKTI listening to its customers when deciding how to prioritise its activities and deploy its resources. But this appears not to have happened in the case of the allocation of funds from the Strategic Investment Fund. While we understand the need to deploy resources quickly in some cases the haste with which decisions were taken has resulted in poor choices being made. This could have been avoided if UKTI had properly consulted businesses when making these decisions. Without undertaking such consultation it is highly unlikely that the maximum potential benefit of an unexpected increase in funding from the SIF investment will be realised.

132. We also note a tendency of UKTI to use Strategic Investment Fund money to embark on new initiatives. The consensus view of industry was that it should have been used to improve and expand existing programmes. We appreciate the Government's desire to be seen to be engaging in exciting new activities, but additional funding for existing mechanisms could have led to a quicker and more direct impact on businesses. The problem stems from the fact that the Government appears to have decided on a welcome but essentially arbitrary increase in funding for UKTI. We have seen no convincing rationale behind the decision to give UKTI £10 million, rather than £5 million or £15 million. This does not seem to be a strategic use of the Strategic Investment Fund.

128 www.pera.com Back

129 www.pera.com Back

130 Q 219 Back

131 Q 219 Back

132 Department for Business, Enterprise & Regulatory Reform, Annual Report and Accounts 2008-09, HC 447.July 2009, para 1.16 Back

133 Department for Business, Innovation and Skills, The UK Strategic Investment Fund: Interim Report, October 2009, section 6.7 Back

134 Department for Business, Innovation and Skills, The UK Strategic Investment Fund: Interim Report, October 2009, section 6.7 Back

135 Q 216 [Sir Andrew Cahn] Back

136 Department for Business, Innovation and Skills, The UK Strategic Investment Fund: Interim Report, October 2009, section 6.7 Back

137 Q 216 [Sir Andrew Cahn] Back

138 Ev 73 Back

139 Ev 73 Back