Conclusions and recommendations
1. Creating
a culture of trade promotion
1. 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. (Paragraph 16)
2. High
level ministerial visits
2. 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. (Paragraph 22)
3. British
Trade Ambassadors
3. 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. (Paragraph
26)
4. UKTI
strategy
4. We
agree with our witnesses that there is currently no need for UKTI
to engage in a fundamental re-evaluation of its strategy. UKTI
has been forced to undergo too many changes in recent years and
it now needs time to improve incrementally. A period of relative
stability is needed to allow it to address its remaining shortcomings.
We agree that the current position of the pound, which has made
it more attractive for some companies to export, can be accommodated
within UKTI's existing framework. That said that it would be prudent
for UKTI to consult with industry, in advance of 2011, on whether
or not it will deliver on its strategy. (Paragraph 32)
5. Emerging
markets
5. We
fully support the increasing emphasis that UKTI is placing on
emerging markets, including Abu Dhabi and Saudi Arabia. Neglecting
these markets would not be in the long term interest of British
business. (Paragraph 42)
6. We are grateful
to the Minister for acting on our concerns about a lack of staffing
for UKTI operating in the Middle East. We anticipate that the
additional staff will assist the office, providing a more effective
service to British businesses in a market which presents companies
with a large number of opportunities, but recommend that the situation
is kept under review. (Paragraph 43)
7. It is obviously
sensible for UKTI to direct its resources to the locations where
it can have the maximum possible impact. However, the plethora
of different priority and high growth markets and sectors that
UKTI has set itself could easily cause confusion. UKTI needs greater
clarity in explaining its priorities to industry. Furthermore,
UKTI needs to reassure business that concentrating on these strategic
priorities will not undermine the level of service provided in
established markets where the majority of the UK's trade is conducted.
(Paragraph 45)
6. Overseas
Market Introduction Service
8. 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. (Paragraph 49)
9. 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
operations—a recommendation there may be disincentives to
implement, given the target set for UKTI Posts. (Paragraph 53)
10. 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. (Paragraph 58)
11. 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. (Paragraph 65)
7. Passport
to Export
12. 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. (Paragraph 71)
8. Tradeshow
Access Programme
13. 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. (Paragraph
77)
9. Gaps
in current programme provision
14. 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. (Paragraph
80)
10. Monitoring
of the impact of programmes
15. 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 companies—and
to the United Kingdom—as 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.
(Paragraph 87)
11. Delivery
of programmes
16. 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 companies—such
as a Chamber of Commerce—will 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.
(Paragraph 90)
12. Staffing
costs
17. 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
continue—the 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. (Paragraph 96)
13. The
FCO estate
18. 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. (Paragraph 99)
14. Fiscal
Stimulus Initiative
19. 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. (Paragraph 104)
15. Security
Sector Trade Show
20. 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. (Paragraph
111)
16. UK
Global Connections
21. 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. (Paragraph
118)
17. Marketing
Campaign
22. 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. (Paragraph 123)
23. 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. (Paragraph 126)
18. UKTI's
administration of Strategic Investment Fund Support
24. 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. (Paragraph
131)
25. 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. (Paragraph
132)
19. Regional
Development Agencies and trade promotion
26. Regional
Development Agencies have been given an important role to play
in trade promotion. However, we continue to hear worrying accounts
of unnecessary duplication of programmes and competition between
different agencies. If this is allowed to continue the benefit
of the RDAs' work, and that of UKTI, will be undermined. In particular,
RDAs should be required take a more co-ordinated approach to trade
missions both with other RDAs or UKTI—so that the problems
of duplication are avoided. (Paragraph 143)
20. Export
Credits Guarantee Department
27. We
welcome ECGDs decisions to examine the possibility of extending
the bond support it offers by entering into a risk sharing agreement
with banks. We urge it to make haste with these discussions and
to provide us with an update on these negotiations in its reply
to our Report. (Paragraph 153)
28. The European Commission
waiver of the Short Term Communication provides the Government
with an opportunity to address the failure of the market to provide
business with trade credit. Neither we, nor any of the businesses
who we have spoken to, have seen evidence that this situation
is improving and therefore the Government's decision to merely
"monitor the market" is inadequate. We strongly recommend
that the Government reassess its decision not to use the opportunity
presented by the Commission's decision to re-enter the short-term
trade credit market until the financial situation improves. (Paragraph
159)
21. Organisational
culture
29. We
are concerned by reports that businesses feel that ECGD is not
properly reacting to customer demands. It is especially important
that during these challenging times ECGD are properly equipped
to deal with, and able to focus upon, businesses' needs. (Paragraph
163)
22. Support
for Airbus
30. The
UK aerospace sector is an example of UK excellence in higher value-added
manufacturing, and we believe that the Airbus proposals for simplifying
export credit arrangements for customers in the aerospace sector
merit consideration. Clearly the current system involving three
different organisations is not ideal. However, we have not yet
had time to examine this proposal in full and we shall return
to it in our Report on the motorsport and aerospace industries.
(Paragraph 164)
| 
