House of Commons - Business, Innovation and Skills Committee

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

Memorandum submitted by UK Trade and Investment

HOW UKTI IS ADAPTING ITS PRODUCT AND SERVICES TO DELIVER HMG PRIORITIES IN THE RECESSION

1. Introduction

1.1 UK Trade and Investment (UKTI) welcomes this Inquiry and the opportunity to set out how UKTI is adapting and refocusing to deliver for its business customers.

1.2 UKTI is the lead Government organisation supporting UK companies looking to develop their international business. We also support overseas companies wishing to invest in the UK. We work closely with partners in the public and private sector in delivering a wide range of services through our network of trade advisors, in the English regions and overseas. These services are also available through the trade and investment organisations in the Devolved Administrations. Our services include market intelligence, advice on regulations, sales leads and financial and practical support. We employ around 2,400 staff, of whom 1,300 are based overseas, and have a budget of some £316 million for 2009-10.

1.3 In the midst of the harshest recession in 60 years, UKTI is helping companies to sustain and build their business strengths by working with them to explore new markets overseas that continue to offer export opportunities. We will also help businesses to take advantage of improving global economic conditions as the recession starts to lift.

1.4 The key elements of the UK's trade and investment response to the recession—marketing the UK as never before; focusing on export markets that continue to grow and on the UK's high value sectors; and working with our partners in the public and private sectors—are based on UKTI's 2006 Strategy, Prosperity in a Changing World. These were already in place as the recession began to bite in early 2008. This Memorandum will look at how this strategy is being adapted to meet the challenges our customers—the companies exporting the UK's goods and services—now face. It will also look at the role UKTI is playing to facilitate an export-led recovery, through delivering the international component of Building Britain's Future—New Industry, New Jobs, the Government's strategy to secure the UK's future economic prosperity.

1.5 We note that the remit of this Inquiry focuses on exporting out of the recession. UKTI, with the Regional Development Agencies and Devolved Administrations, also leads on attracting inward investment to the UK, and around a quarter of UKTI's resources are dedicated to this. Much of the work described in this Memorandum, on marketing the UK economy internationally and our focus on key business sectors such as life sciences and information and communication technologies, is as relevant to inward investment as it is to exporting. For this reason there is strong cross-working within UKTI on these two aspects of our role. Annex 1 provides an overview of some of our inward investment work and we can provide more details if this would help the Committee's Inquiry.

2. EXPORTS AND THE ECONOMY

2.1 Exports are critical to individual companies and to the wider economy.

2.2 For companies, investing and selling overseas tends to improve productivity, innovation and financial performance. Selling overseas helps businesses achieve economies of scale and levels of growth and revenue not otherwise possible; reduce their dependence on a single or small number of markets; and increase the commercial life span of their products or services, with raised returns on investment. These companies are more likely to have capital to invest in new innovation and product development in the UK, and to maintain or create jobs.[1]

2.3 For the economy as a whole, the UK benefits significantly from trade and inward investment which boosts competitiveness and productivity, and sustains economic growth. UK businesses have a strong track record of exporting and investing heavily in open global markets. Over the period 1996 to 2004, 60% of British productivity growth came from businesses that export.[2] In 2008, UK exports totalled £417 billion, some 29% of the UK's GDP.[3] The UK has the second-largest stock of global outward investment, after the US.

Impact of the recession

2.4 The world economy is experiencing a sharp and synchronised downturn. The UK's traditional export markets, in Europe and North America, have been disproportionately affected. In 2007, the United States and the EU together accounted for 68% (£251 billion) of total UK exports of goods and services. A recent World Bank forecast is that volumes of world trade in goods and services are expected to drop 6.1% in 2009, and that global GDP is expected to contract by 1.7% in 2009—the first decline in world output on record. High income countries are in deep recession, with OECD economies likely to contract by 3% and other high income countries by 2%. GDP among developing economies will grow at 2.1%, compared to 5.8% in 2008.[4]

2.5 As a result, the UK economy went into recession in the fourth quarter of 2008. The latest Government forecasts, in the 2009 Budget statement, are that the economy will emerge from this recession earlier than many of our international competitors, returning to growth in 2010.

The Government's response to the recession

2.6 The Government has taken exceptional, active measures to deliver confidence and stability to the UK economy and has led international action to combat the financial crisis and its impact. In the UK, this has included securing the stability of financial institutions in the autumn of 2008; the Real Help for Business campaign launched in January 2009; and a range of financial help for businesses, such as the £1 billion Enterprise Finance Guarantee scheme and the £75 million Capital for Enterprise Fund.

2.7 The G20 London Summit in March 2009 set out an ambitious programme to promote global trade and investment, and will have positive consequences for the duration of the recession and the financial and trading health of global markets. Outcomes included an additional $1.1 trillion programme of support to help the world economy through the crisis and restore credit, growth and jobs; a commitment to reject protectionism; and reaffirmation of commitments to meet Millennium Development Goals to build an inclusive, green and sustainable recovery.

2.8 In April 2009 the Prime Minister and Secretaries of State for BERR and DIUS launched their strategic vision for Britain's economic recovery, Building Britain's Future—New Industry, New Jobs. This strategy sets out, in the spirit of a new industrial activism, the Government's role in ensuring UK businesses and workers can compete successfully for the jobs of the future, across the world. UKTI is tasked with delivering the international business aspects of this strategy, alongside trade finance initiatives that will be taken forward by the Export Credit Guarantee Department (ECGD).[5]

2.9 New Industry, New Jobs confirmed that the Government will ensure that the scope and effectiveness of its assistance to UK companies will remain of the highest calibre, and that UKTI will continue to be the chief means of supporting UK businesses to internationalise. Its focus is on industry sectors where future economic growth will come from, sectors that UKTI is also supporting. New Industry, New Jobs sets UKTI's work firmly in the context of a wider Government response to the recession, and to helping re-shape the post-recession recovery.

2.10 This approach is built on firm foundations. More than a decade of supply side reform has given the UK flexible and competitive labour and product markets. We have one of the world's economies most open to trade and investment. This flexibility and our openness will be important assets in the years ahead. They will be the foundations of our future competitiveness.

2.11 The 2009 Budget announced a £750 million Strategic Investment Fund that will deliver the New Industry, New Jobs strategy. UKTI will have access to this fund to deliver the international aspects of this strategy.

Real help through the recession, preparing for the return to growth

2.12 The return to global growth will accelerate those trends that are reshaping the global economy—above all, fierce competition in our domestic and global markets. It is crucial that government policy not only offsets the risks to our competitiveness that come with a downturn, but ensures that we are in a stronger position to take advantage of the opportunities as the global economy returns to growth.

2.13 Government cannot predict the economic future and it is not equipped to run businesses. But it has a range of tools that used intelligently, pragmatically and in a focused way, can help individuals, firms and regions be more competitive and productive. This ultimately is the basis of our national prosperity.

2.14 The task ahead, in developing new strengths in Britain, will require that we continue to improve the business environment across the board, and focus on our strengths as a knowledge economy with high-technology at its heart. We must also take steps to help firms and workers grasp opportunities in particular key markets and sectors.

New approaches from Government

2.15 The key roles that Government can play are:

— A greater use of the Government's function as a procurer, regulator and legislator to drive innovation in Britain, and to set clear and stable frameworks and incentives for firms and workers to invest in innovation and change.

— A greater alignment between government departments and different levels of government in delivering a strategic vision for the British economy on the ground, where it really matters.

— A greater focus on key markets and sectors. There is a role for government in delivering targeted interventions to unlock potential in markets and sectors with the potential for growth, where there can be wider spill-over effects on productivity and the creation of high value-added employment.

— A clearer recognition of the circumstances where effective government action can complement the dynamism of markets to ensure the best long term economic outcome for the UK.

Export Competitiveness

2.16 Britain's ability to access export markets and the capacity of its firms to exploit that access will underpin Britain's future prosperity. The rising incomes of the emerging economies and the massive expansion of the purchasing power of the global middle class will present significant opportunities for UK firms, alongside the developed markets of the OECD. This will be particularly important if sterling remains competitive by historic standards for the first half of the next decade.

2.17 The Government recognises the need to ensure that the scope and effectiveness of the assistance it provides to UK companies looking to break into new export markets remains of the highest calibre. New Industry, New Jobs noted that UKTI has acted as an extremely effective catalyst for UK exporters and will continue to be the chief means the Government has of providing this assistance.

3. UKTI's Strategy

3.1 UKTI launched its strategy, Prosperity in a Changing World, in July 2006. The key elements of the strategy are to:

— lead the marketing of the UK economy as the international business partner of choice;

— focus on high growth, emerging markets (we identified 17, including India, China and Brazil) and on those high value, innovative business sectors where the UK has strengths in depth; and

— put more staff in the front line, delivering services with partners in the public and private sector that make a real difference to the success of our business customers.

3.2 The UKTI Executive Board (which currently includes three independent members) has kept the Strategy under continuing review since it was launched. The Board last reviewed the Strategy in detail in December 2008. Taking account of the changes in the global economy since it was launched, the Board concluded that it remained the right one for the circumstances we now face.

3.3 This said, the delivery of the Strategy and its emphasis has been refined since 2006. We have in place a methodology for measuring and evaluating what we do—an independently-conducted Performance Impact and Monitoring Survey (PIMS) of customers using our services—which enables us to target and build on what adds most value for business. This provides an evidence base for developing the services we offer—most recently seen in the launch in April 2009 of our new offer to companies with two-ten years experience of doing business overseas, Gateway to Global Growth. PIMS also provides evidence for moving resources within UKTI, to maximise service delivery to our business customers.

3.4 We have in place challenging, measurable targets for the current Spending Review period, 2008-09 to 2010-11. These have been agreed with HM Treasury and reflect the value we add for the economy. Our most recent performance results, from March 2009 and recording the outcomes of UKTI support to the year ending September 2008, show that we exceeded our targets. We assisted 20,700 businesses, of which 17,300 were innovative; 51% of these improved their performance as a result of our help; and 1,860 businesses increased their R&D activity as a result of our trade and inward investment support.[6] The net result was a total estimated benefit, in terms of additional profit attributed by UKTI clients specifically to the support received, of £3.6 billion—a return of £16 for every £1 UKTI spends on trade support services.

3.5 We are also tasked with delivering 525 inward investment successes in each year of the Spending Review period. In 2007-08 we exceeded this target with 549 successes; results for 2008-09 will be available by mid-June.

3.6 More details on UKTI's response to the recession are set out in Section 6.

4. How UKTI Prioritises Sectors

4.1 UKTI focuses on those sectors where we have evidence that we can add the most value, in the markets where the potential for growth is highest.

4.2 UKTI has 11 dedicated sector teams covering Advanced Engineering; Construction and Major Sporting Events; Creative Industries; Education and Skills; Energy; Environment and Water; Financial Services; ICT; Life Sciences; Mass Transport; and Agri-Technology. There are also cross-cutting initiatives around Aid-Funded Business; Low Carbon; the Olympics; and Science & Technology. Business-led Sector Advisory Groups guide and support the development of activity plans for showcasing UK excellence in each sector. In addition, the setting up of the UKTI Defence & Security Organisation on 1 April 2008 supports the strategically important sectors of defence and security.

4.3 The current sector focus for trade is influenced by an independent report commissioned by UKTI in 2005 on the prioritisation of sector resources. We are currently in the process of reviewing our evidence base for prioritising sectors.

4.4 In targeting sectors for attracting inward investment, the same UK strengths identified for sector-focused export development hold true. The `UK proposition' to new and existing investors is built largely on the very same world-leading technical and creative excellence which is the basis for the UK's attractiveness and competitiveness as a place to invest and grow an international business. There is also a close correlation between the sectors highlighted in the Government's New Industry, New Jobs strategy, and those prioritised by UKTI.

International marketing strategies

4.5 In five key sectors identified in UKTI's 2006 Strategy—financial services, creative industries, life sciences, ICT and energy technologies—we have developed international marketing strategies.

4.6 The purpose of these strategies is to enhance the UK's reputation internationally by uniting the main sector interests—companies, business organisations (trade associations and other representative bodies), academia and government around an agreed marketing platform for the sector as a whole. The strategies are supported by high quality marketing materials and other activities—such as trade missions and marketing events—to help UK companies win new business, and to attract high value inward investment to the UK. They target specific overseas business sectors with the core messages about relevant UK strengths. UKTI acts as a catalyst for these marketing strategies, developing a genuine partnership between business and Government to deliver a collective marketing effort for the sector as a whole.

4.7 March saw the launch of two new marketing strategies, showcasing the UK's strengths in Advanced Engineering and in Low Carbon Technology. More details of UKTI's sector activities are at Annex 2.

5. How UKTI Prioritises Markets

5.1 UKTI has a presence in 98 markets around the world, with some 1,300 staff deployed on UKTI work overseas. The total UKTI resource overseas is some £167 million, and of this around £60 million—just under 500 staff—is in high growth markets.

High Growth Markets

5.2 Focusing more resources on high growth markets such as India, China and Brazil was a key part of UKTI's 2006 Strategy. Building strong trade and investment links with high growth markets is strategically important to the UK's future economic well-being, and they offer significant opportunities for UK business. There is good economic evidence that firms secure most value if they enter high growth markets at an early stage.[7]

5.3 Markets were assessed as being "high growth"' by assessing them against a list of criteria including economic development, demographic issues, corruption and transparency, and commercial regulation. Further analysis was then carried out taking into account the strategic, economic and political importance of the markets; and the impact UKTI could have by removing barriers to doing business and by promoting opportunities which matched UK capabilities.

5.4 From this we identified 17 markets—Brazil, China, India, Indonesia, Mexico, Russia, South Africa, Turkey, Saudi Arabia, UAE, Malaysia, Qatar, Singapore, South Korea, Taiwan, Thailand and Vietnam. We moved £5.6 million of resource to these markets, and now 38% of our staff deployed overseas are in these markets.

5.5 As a result, the volume of services delivered in these markets has increased. For example, the number of commissions delivered under the Overseas Market Introduction Service, one of UKTI's principal support services, increased by 179% in the high growth markets compared to 92% in the remaining markets.[8] Likewise, UKTI's latest independent monitoring survey, released in March 2009, shows that some 51% of businesses assisted in fast growing markets through UKTI trade services, improved their business performance as a result of UKTI support.[9]

5.6 Similarly, for Russia, Brazil and Turkey, we have established inter-Governmental fora covering bilateral trade issue affecting companies doing business in these markets. The Brazil Joint Economic Trade Committee has, among other things:

— enabled the UK aerospace industry to re-establish itself as a potential supplier to Embraer, Brazil's largest aircraft manufacturer;

— developed closer links in the science and innovation field, including a visit by the Governor of Sao Paulo to look at UK expertise in science parks with a view to establishing the science park concept in Sao Paulo state; and

— created a close working relationship between the UK Accreditation Service and their Brazilian equivalent, securing a contract to provide training for hospital accreditation in Brazil.

5.7 Across the board, emerging markets are expected to continue to grow more strongly than advanced economies in 2009 and 2010, according to the latest (April 2009) IMF projections.

5.8 The need for UKTI help is greater in these markets, because of market access issues and a higher need for government to government dialogue. Even in high growth markets, 85% of the companies helped by UKTI are SMEs (as compared to 90% overall). This reflects the importance of global markets to companies of all sizes.

5.9 Clearly, the global recession has impacted on emerging markets in different ways; none has been left unaffected. Our focus will continue to be flexible to adapt to changes and challenges in the global economy. There are other countries which currently have higher growth rates than some of those on the list. Often, growth in these markets is dependent on or dominated by a single sector (notably energy) and, where this is the case, although the market isn't designated "high growth" by UKTI, nevertheless we support activities in these specific sectors.

UKTI's presence in the UK's top export markets

5.10 The US and seven European markets are in the top 10 markets identified by companies seeking UKTI help to export.

5.11 The US is the UK's largest export market, and our biggest source of foreign direct investment. We have eight UKTI offices in the US and look to the US to bring in 10% of UKTI's trade targets and 30% of our inward investment projects. Similarly Europe is a major market for the UK. We have staff in 42 locations; our biggest markets are Germany, France, the Irish Republic, the Netherlands and Belgium.

Value of Trade

5.12 In terms of value of trade, the UK did over £114 billion worth of trade with high growth markets in 2007 compared with £108 billion with the USA and £411 billion with the EU in the same period.

Shifting resources around the UKTI network

5.13 We set clear targets for UKTI Teams overseas that enable us to monitor closely performance in each of the markets where UKTI has a presence. Targets are linked closely to resource and, where resources are showing signs of stretch and we believe there is scope to do more for customers, we move some additional resource there. For example, excellent performance in Bulgaria in 2007-08 led to increased resource being directed there. Where Posts are not delivering against their targets, and we believe this reflects a lack of customer demand, we can and do shift resource elsewhere. Over the last year we moved resources from Guyana, Malta, Bolivia, Guatemala and Senegal.

6. UKTI'S RESPONSE TO THE GLOBAL RECESSION

Britain's basic frameworks for competitiveness

6.1 Britain's basic approach to competitiveness over the last decade has been to maintain an economic environment that promotes business growth and competition and which attracts inward foreign investment. This has been augmented since 1997 with a succession of supply side reforms that have given Britain one of the most open and dynamic economies in Europe and the world. Britain has:

— One of the best environments in the world to start and grow a business, ranked by the OECD as the best in Europe and 10th globally.

— An internationally acclaimed competition regime, boosted by Britain and the European Union's relative openness to trade.

— An openness to inward direct investment that, coupled with Britain's strengths as a financial centre, its location in the European Single Market and its general enterprise climate, have made Britain the largest recipient of inward direct investment in the world after the US.

— Flexible labour markets that enable firms to respond quickly to changes in the market place, but which ensure that are fair standards and support for people when they need to move between jobs.

— A high level of productivity growth that has allowed it to close the productivity gap with its key comparators over the last decade.

6.2 These fundamentals are the foundation of Britain's competitiveness and its capacity to produce strong firms. They are also the basis of Britain's exceptional performance in attracting inward investment. They must be preserved and refined.

6.3 Against this background, UKTI has reviewed its high level messaging, which promotes the UK economy internationally as a Springboard for Global Growth. We recognise that the international climate for doing business has altered radically and that companies are facing an unprecedented harsh trading environment. Nevertheless, we contend that the underlying `unique selling points' of our economy remain true:

— That in this changed economic environment, the UK still provides the best environment for business to grow in.

— The UK is a centre of excellence in creativity and innovation.

— The UK provides a unique gateway for international connections.

6.4 For this reason, we still believe that the UK is the best place to do business in and with, and remains a Springboard for Global Growth for companies, both UK-owned and those investing from overseas.

6.5 What we have done continually, however, is to ask ourselves what more we can do to deliver the support businesses need in response to the recession and changes in the global economy.

New marketing initiatives

6.6 Our marketing initiative launched in November 2008, "It's time to explore new markets", is encouraging UK businesses to consider market diversification as a cushion against the recession. It focuses in particular on the help UKTI can provide to businesses seeking to access opportunities in 17 high growth markets.

6.7 High-level marketing so far has included a Financial Times supplement, specific market and sector materials and a series of events in partnership with the Institute of Directors. The Asia Task Force has run a series of events involving over 370 companies and aimed at galvanising companies to take a closer look at opportunities in Asian markets. The "Britain in the Region" event in Dubai in November 2008 involved 250 UK companies, included a delegation of 150 travelling from the UK, who were able to access UKTI experts from across the regions, participate in detailed briefing on sector opportunities in UAE, Qatar and Saudi Arabia, and access local experts for advice on local business practices.

6.8 The "China Buyers" mission in February/March 2009 is another good example of the kind of activity UKTI carries out to help UK companies access new markets:

— On 2 February Premier Wen visited London for the UK-China Business Summit with 100 Chinese companies; 300 UK companies attended UKTI's business event.

— On 27 February Minister Chen Deming led a 150 company buyer mission to the UK, during which contracts worth $2.2 billion were signed. The UK gave Chen a list of 1,000 UK companies interested in selling to China; and 400 UK businesses attended UKTI's business event.

— On 15 March, Ministry of Commerce officials led a Chinese inward investment delegation to the UK. This coincided with an UKTI/Think London inward mission from China of over 40 hand-picked companies interested in Olympics-related investment.

6.9 Similarly, in support of the cross-Government Real Help for Business campaign, in early March we launched "Take it to the World", an advertising and marketing initiative. This aims to get more businesses exporting by encouraging them to explore opportunities overseas with confidence, with expert help from UKTI. At 22 April, some 3,000 views of the "Take it" campaign had been recorded on the UKTI website.

New support measures for business

6.10 Positioning Britain in global value chains and building new sources of strength will play a key part in Britain's economic prosperity in the years ahead. Ultimately, our success will depend on the ability of British companies and the workers they employ to adapt to new trends and to compete to provide the goods and services that will characterise them. British firms are well placed to respond to increasing demand for high value-added, technologically advanced goods and services. These are areas where the productivity and trade performance of British firms has been strong. However, others will also be responding to that challenge.

6.11 To help UK companies meet this challenge, in September 2008, the Government's Manufacturing Strategy announced new UKTI initiatives to help UK SMEs access global value chains, initially in China and India—some 600 companies will benefit over the next year.

6.12 On 12 March the Prime Minister announced our "Gateway to Global Growth" package of support worth £3.5 million, for experienced exporters—especially innovative SMEs—to diversify into new markets. This is based on UKTI's "Passport to Exports"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. Services under Gateway to Global Growth began to be delivered from 1 April.

6.13 At the beginning of March we also launched our Fiscal Compass Programme. This aims to help UK companies capitalise on opportunities arising from major overseas recovery-related spending programmes such as fiscal stimulus packages and sovereign wealth funds. The Programme recognises that overseas governments will target these packages at indigenous companies, but that the size and scale of some initiatives mean there should be niche areas for UK companies, or capacity issues that will result in supply chain opportunities for UK firms. The Programme complements and builds on the UKTI supply chain work in China and India, which was announced in the Manufacturing Strategy.

6.14 From April 2009 our "Tradeshow Access Programme" will increase the number of financial grants for which an individual company can apply, from three to six (subject to the grants being used in at least two markets).

6.15 In the 2009 Budget, the Chancellor announced an extra £10 million for UKTI, to help UK businesses to export so that they are better placed once the downturn ends. This will be spent over the next two years, to support businesses in showcasing their strengths to overseas customers and markets, at high profile events in the UK and overseas. This measure supports two commitments, one made at the London Summit to "Promote global trade and reject protectionism to underpin prosperity", and the delivery of the international dimensions of Building Britain's Future—New Industry, New Jobs.

6.16 We are not complacent. We know we have more to do and can do more to help UK business. A particular concern is that, while we help some 20,000 companies a year and have 28,000 companies registered on our website, UKTI survey evidence suggests that currently just 35 per cent of exporting companies use UKTI services. So we know we can do more to help that proportion of exporting companies that currently do not use our services. Add to this those businesses that currently don't export but could, with the right help, succeed in doing business overseas, then it becomes clear that there is enormous untapped potential waiting to be reached.

6.17 We are actively pursuing a variety of approaches to reach these companies, including using our public and private sector stakeholders and partners to raise awareness of UKTI, and using advertising to raise awareness of UKTI's services (the Take it to the World campaign).

6.18 We are utilising UKTI's network to provide UK business with current information on economic developments in key overseas markets. Similarly, we are using our network and our contacts with companies to gather feedback on how the recession is impacting on them, and we share this intelligence across Whitehall. For example feedback from UKTI's customers on access to trade credit was fed in to Whitehall colleagues working on the issue and helped shape the workable solution announced in the 2009 Budget: a "top-up" trade credit insurance scheme, which will deliver real help for businesses.

6.19 We also recognise that in the challenge of the global recession, there are opportunities. One is that the weaker pound makes our exports even better value for money. This is a chance to set up new export markets for those companies that have so far only looked domestically, and for existing exporters to consider a more diverse set of markets overseas.

6.20 The Minister for Trade and Investment, Lord Davies of Abersoch, is meeting with Ministerial colleagues across Government. A key objective of these meetings is to raise the specific concerns of international and UK-based businesses where current or proposed regulation and/or legislation will have a potentially detrimental impact on UK competitiveness as a place to invest in, and as a base from where to grow a successful international business. It is vital that Ministers and policy makers across Government understand the potential impact of proposed policy changes on businesses' ability to compete in Global Markets.

6.21 These bilateral meetings also affords the opportunity to deliver more confident messages about the UK economy and our business strengths, to support the global competitiveness of our companies. And, as indicated earlier in the Memorandum, we are delivering the international component of New Industry, New Jobs, alongside ECGD.

Other business support activities

6.22 We are working hard with public and private sector partners to secure the business legacy from the 2012 Olympics, in order to deliver two of the Government's Olympic Legacy Objectives: "to maximise the wider economic benefits of the Games across the UK, including those for tourism and business promotion"; and "to promote positive images of the UK to international audiences". Our delivery programmes include:

Host2Host

CompeteFor

6.23 The formation of UKTI Defence and Security Organisation from 1 April 2008 (following the transfer of the Defence Exports Support Organisation from MoD) brings together a key sector for jobs and wealth creation with UKTI's international marketing network. This gives companies in the defence and security sectors access to UKTI's support in many more markets than before and opens up new opportunities for export success to these companies. It also gives for the first time a focus on security as a key growth sector, one in which the UK has leading edge expertise.

6.24 The Business Ambassadors Network was launched in October 2008. The Network of 17 of the UK's foremost business and academic leaders works with Government to promote the UK's excellence internationally, and highlight trade and investment opportunities. In the current challenging economic climate, the Business Ambassadors' business expertise and international experience is providing real support to UK business interests in global markets.

6.25 There is an extensive Business Ambassador programme in place and the Business Ambassadors have already undertaken engagements on behalf of the government in Australia, Dubai, Oman, Abu Dhabi, Switzerland, UK, Denmark, Spain, Mexico and Japan. There is a confirmed programme of events going forward over the coming year.

6.26 Business Ambassadors have also supported UKTI's international marketing strategies, in the Creative, Low Carbon Technology, Advanced Engineering and Life Sciences sectors.

6.27 At each of these engagements the Business Ambassadors deliver key trade messages supporting UK businesses' global engagement, and promoting the strengths of the UK economy. In doing this, they are playing a vital role in helping UK businesses through the current economic crisis and in restoring international confidence in the UK economy. Feedback from their engagements to date, including very positive overseas media coverage, reinforces that this message is being delivered.

7. CONCLUSION

7.1 UKTI's strategy is, we contend, the right one for helping the UK economy to meet the challenges posed by the global economic downturn. It's also the right one for helping our business customers meet the extra challenges they now face as they do business in overseas markets. We believe our approach, of encouraging and supporting companies to explore opportunities in new markets, is right for them and for the economy. There are real strengths in depth in a range of high value sectors where the UK is and can remain world class, and UKTI leading in marketing the UK economy internationally with positive messages that highlight these strengths is even more important now.

7.2 Indeed, the UK's response to the global recession demands that UKTI pursues its mission—to deliver maximum value for the UK economy and for business in an increasingly globalised and competitive world; and market the UK as a spring board for global growth—with ever greater urgency, vigour and success.

Annex 1

UKTI INWARD INVESTMENT ACTIVITIES

A.1 UKTI's high level messaging promotes the UK economy as a Springboard for Global Growth, the place to do business in and with. We get this message across in a variety of ways: through the Business Ambassadors network; through our Embassies, High Commissions and Consulates; Ministers, senior diplomats and officials; investment experts in the UK and around the world; and through high quality marketing materials.

A.2 For inward investment, our aim in positioning the UK as a springboard for global growth is to influence key decision makers internationally, so that potential investors in both high growth and high value economies see the value of choosing the UK as an investment destination. Our message is that the UK globalises companies; it is an investment multiplier that grows companies' bottom lines, but also develops their culture, brand and overall competitiveness. The attractiveness of the UK as a springboard for global growth is underpinned by the UK's pro-business environment, our position as a global leader in creativity and innovation, and our position as a gateway to international business connections.

A.3 This positioning of the UK is underlined by the fact that, apart from the USA, the UK is the world's largest recipient of inward investment (measured by capital stock and flow), and similarly the largest (apart from USA) outward investor in the world. Also, there are more European HQs of overseas companies in the UK than in the other major EU economies combined.

A.4 In the financial year 2007-08 there were 1,573 foreign direct investment projects from 48 countries recorded in the UK, a 10% increase on the previous year. Over one third of the total number of projects were assisted by UKTI's network overseas and in the UK, working in partnership with Regional Development Agencies, Devolved Administrations or other partners.

A.5 The intervetions by UKTI's senior representatives and experts are designed to have a positive impact on the timing, scale and sustainability of projects. The emerging evidence from latest evaluations of UKTI's work shows significant impact in these areas, including a real impact on decisions to come to the UK. UKTI recognises the need constantly to improve, but these are encouraging findings.

A.6 Part of UKTI's strategy is to focus effort on key sectors where the UK has the strongest competitive offer internationally. Of the total 1,573 inward investment projects in financial year 2007-08, the great majority—1,062—were in high value, high impact areas such as software (234), advanced engineering (182), ICT (146), business services (140), life science (135), financial services (108), environmental technology (59) and creative and media (54).

A.7 The UKTI Global Entrepreneur Programme, established in 2003, has been instrumental in enabling over 100 technology businesses and entrepreneurs to set up headquarters operations in the UK, and has helped to raise over £100 million in capital. In financial year 2007-08 the GEP helped 35 companies and entrepreneurs in ICT, cleantech and life science to establish their global hub in the UK. The GEP business model is highly innovative, relying on the skills of dealmakers—successful entrepreneurs themselves—who work for GEP on a part-time basis. Based in the UK as well as in other key markets, these dealmakers help identify the highest calibre dealflow and provide the experience and capital-raising contacts needed to set up and succeed in the UK.

A.8 The UKTI R&D Programme supplies the UKTI network, and its partners, with R&D specialists across a range of high priority areas. They provide key expertise to help deliver inward investment projects, and other valuable collaborations, to the UK.

A.9 Investors to the UK have access to an aftercare service offering comprehensive support to assist them in growing their business in and from the UK. With UKTI as a hub, the UK's centre, the nine English regions, three Devolved Administrations and the UKTI overseas network in 33 priority inward investment source markets (and a further 66 markets beyond) are firmly interconnected, providing an aftercare service which puts knowledge, experience and contacts at investors' disposal.

A.10 Recent changes are designed to ensure that every advisor working with businesses has improved access to information on issues affecting investors, from developments in the economy and changes in government policy—whether on taxation, immigration or other relevant areas—to information on new markets.

Annex 2

SECTORAL MARKETING STRATEGIES

(i) Financial Services

The City Strategy is a partnership between government and the private sector which promotes the City as the world's leading international financial centre and UK financial and professional services more broadly. Launched in 2006, it is overseen by the Financial Services Sector Advisory Board and facilitated by UKTI. Activities are focussed on five priority markets—China, India, the Gulf, Russia and the US—as well as key UK strengths such as Islamic Finance. Recent highlights include:

China

— The President of the Law Society visited Shanghai in January 2009. He signed a bilateral co-operation MoU with the Shanghai Bar Association. A programme of training for Shanghai-based lawyers is in preparation.

— In January 2009 the Economic section of the British Embassy hosted a corporate bonds workshop with CSRC and the Shanghai Stock Exchange. Among the 90 UK representatives there were speakers from Standard Chartered, HSBC, Clifford Chance, Reuters and ICMA.

— Sir David Brewer led a financial and professional services mission to Hong Kong, Dongguan, Foshan and Dalian in February 2009 with excellent access to senior municipal government officials. Seminars on held on insurance, London listings and wealth management.

India

— Lord Mandelson's visit with a large business delegation in January 2009 included the well received launch of material demonstrating the UK's efforts in financial inclusion in India.

— Two MoUs on membership reciprocity between the Institute of Chartered Accountants in England and Wales and Institute of Chartered Accountants in India and between the Chartered Institute of Management Accountants and Institute of Cost and Work Accountants of India were signed in late 2008.

Russia

— The Lord Mayor's visit to Moscow, St Petersburg and Ekaterinburg in September 2008 stimulated much positive interest in the UK, including meetings with key Russian ministers and attended high-level business events.

— A series of four "Promoting English Law" arranged by the British Embassy in Moscow to showcase UK law firms.

The Gulf

— Royal Sun Alliance subsidiary granted licence in Saudi Arabia on 5 January 2009. Its CEO says: "Specifically, getting our Chairman John Napier on to the UK trade delegation which accompanied Gordon Brown in November was a big success for us. I am sure that both this and the wider Embassy support has played a significant part in the overall process."

Islamic Finance

— Successful UK pavilion at the World Islamic Banking Conference in Bahrain in December 2008. A MoU between UKTI and Bank Negara Malaysia (Central Bank of Malaysia) was signed in February 2009.

(ii) Creative Industries

The Creative Industries Marketing Strategy, a partnership of government and the sector launched in 2007, seeks to place the UK as the world's "creative partner of choice". New marketing products supported by the strategy will enable UKTI, partners and businesses to market themselves professionally and effectively at strategic opportunities worldwide leading up to London 2012.

The strategy also encourages cross-sector networking both within the sector and across a diverse range of sectors. One of the first major initiatives was to show case the importance of UK creative companies to the motorsport sector at an event hosted by the Duke of York last July. The UK's presence at established events, such as the South by South West Festival in Texas, have been expanded to include additional creative sectors with an enhanced cross-cutting promotion and marketing campaign.

CREATIVE INDUSTRIES MARKETING TOOLKIT

Designed to support international marketing activities, these are sector-led marketing messages on the UK's creative strengths, backed by evidence, case studies and imagery, delivered via a new web-based toolkit, as a resource for UK business and government to complement other marketing.

LOVE AND MONEY, 50 YEARS OF CREATIVE BRITAIN

A film exhibition, designed to support business events both in the UK and in overseas markets, features examples of UK creative commercial success from the 1960s to now, (eg Rolling Stones and Biba, the Mini and Dyson, Norman Foster, Alexander McQueen, Leona Lewis, "Slumdog Millionaire"). It also highlights design skills and manufacturing processes that underpin the UK's creative success.

Its first international showing on 22 April was in support of the UK presence at the Milan International Furniture Fair—a strategically important event for the design sector. The exhibition will be run alongside the "British Design Embassy", a business matching and meeting facility for UK companies attending the fair.

SHANGHAI EXPO 2010

The Creative Industries Strategy will also be instrumental in the design and delivery of workshops led by UK creative leaders during the Shanghai Expo 2010, providing a strategic platform for accessing trade opportunities and new partnerships in Asian markets.

(iii) The UK Life Sciences Marketing Strategy

The UK Life Science Strategy was launched in November 2007. It has already made some key contributions to benefit the UK Life Science sector:

We have created a committed, high-level industry board interfacing with UKTI and government.

We have formed a dynamic, industry agreed set of marketing messages around the themes of Science and Innovation, Talent and Skills, the NHS and the Business Environment.

In addition we have launched four country workstreams for the US, India, China and Japan, all led by board members which have created events and deliverables to be taken forward.

We will shortly be launching an online marketing toolkit going containing short promotional BioPharma and Healthcare videos, fortnightly UK "good news"' newsletters, image library,case studies and evidence.

In particular the Finance workstream is actively promoting the UK offer to corporate venture funds including Lilly Ventures. Lord Davies will be using the BioFinance event at the end of April to trail and highlight some of the ways in which we are helping businesses prosper in the downturn.

We are fully joined up with other government departments—having become the fourth marketing pillar of the Office of Life Sciences six month action oriented plan to support the sector.

We have helped over 900 companies to internationalise their Life Science businesses through a variety of UK and overseas events.

UK presences at major international Trade Shows BIO (US), Medica and Arab Health and many other events delivering a complete picture of the UK LifeScience offer internationally.

(iv) Information and Communication Technologies

The UK ICT Marketing Strategy launched in December 2007 has developed a coordinated range of activities based upon clearly defined priority markets—India, China, Japan the US—and sub-sectors. The strategy has provided industry with an evidence base in conjunction with Gartner on the strengths of the UK Industry in relation to overseas capability. This has recently been updated and the revised version will be available from May 2009 in an online toolkit which will summarise key selling messages and marketing collateral of UK Technology and the UK itself.

Companies will be able to draw the most appropriate material to promote themselves and by following others, will be able to enhance their presence in foreign countries and to foreign companies. By increasing the reputation of the UK and focussing on its strengths overseas, the strategy would encourage further Foreign Direct Investment into the UK.

The showcase event for the ICT Marketing Strategy was TechnologyWorld08, which was held at the Ricoh Arena, Coventry. The themes of the event were drawn from the strategy. The results for business were 1,325 meetings between UK and overseas companies; with 399 UK delegates and 266 UK companies, leading to £27 million of reported potential business wins for UK companies. UK company satisfaction of the event stood at an impressive 80%.

At Mobile World Congress 2009 UKTI supported 160 UK companies at the show. Support included the generation of around 750 business leads from the UKTI stand at the show which promoted UK excellence in the sector to overseas multinationals and SMEs. Further to this support, UKTI, in conjunction with the Minister for Trade and Investment focused on the strength of UK companies in the field of sports technologies and the Future of Mobile, in association with Mobile Monday London. Both events attracted around 100 delegates and helped to raise awareness of the UK capability in the sector and direct opportunities to UK companies.

(v) Energy

The Energy Excellence Strategy was launched in December 2007. It has already made some key contributions to benefit the UK Energy sector:

— joining up the oil, gas, power, renewables and nuclear sectors under one UK Energy brand;

— supporting over 1,600 UK Energy businesses with a full programme of activities in a wide range of markets, which has helped deliver millions of pounds of orders; and

— delivering powerful messages about the strengths of the UK Energy sector at key international Energy events, such as the World Future Energy Summit (WFE) in Abu Dhabi.

In addition to the WFE event mentioned above, the strategy and its messages about the UK Energy sector—its key strengths of Innovation, Quality, Adaptability, Sustainability and Knowledge—have been showcased over the past year at, among others, the World Petroleum Congress in Madrid, Offshore Northern Seas in Stavanger and All Energy in Aberdeen. The coming year will see even more engagement globally at the Offshore Technology Conference in Houston, Offshore Europe in Aberdeen and World Gas in Buenos Aires.

The Strategy has a number of workstreams, including the development of a UK Energy capability website, complete with a marketing toolkit tailored for use by any UK Energy business, which will be launched at Offshore Europe later this year. A DVD is in development highlighting the sector's key selling points, while the brand identity and collateral will be used at major Energy shows across the world, both standalone and at TAP-supported events, where appropriate.

(vi) Advanced Engineering

The Advanced Engineering Strategy was launched in March 2009. As part of its development, a major series of share fairs, showcasing UK advanced engineering capability, was delivered in India in May 2008. The roadshows, in Bangalore, Pune and Chennai, tested the propositions about UK advanced engineering strengths in this key market. Our messages about the cutting-edge, innovative, flexible and adaptable nature of the sector were very well received, and work in India continues apace.

The Strategy has developed a marketing toolkit and website for use by UK companies, which is being fully populated with information on key global markets. The first of these is Brazil, as the first major campaign under the Strategy will take place in Brazil later this year.

A promotional DVD highlighting UK advanced engineering strengths is already available and has been used in 2008 at events such as the Farnborough International Air Show and the International Astronautical Congress. UKTI supported over 1100 UK Advanced Engineering businesses in 2008, again with reported real impact on delivering orders.

(vii) Low Carbon

The UK Low Carbon International Marketing Strategy was launched in March 2009. It has brought together a partnership of UK businesses and organisations, from across a range of sectors, and Government to join in and benefit from the collective UK marketing effort that will result in increased trade and investment in low carbon solutions. The Strategy's messaging will provide a platform to help UK companies succeed in the intensely competitive global low carbon market, whilst concurrently improving the UK's low carbon reputation, thus encouraging high value investment into the UK. It aims to create a unified international low carbon commercial presence that generates and maintains a reputation attracting buyers and investors to the UK.

At the end of March these partners attended an event organised by UKTI and the Carbon Trust to mark the strategy's journey so far. The emerging messages are already being deployed to promote the UK's low carbon expertise at events overseas—for example at an exhibition and conference in Australia in March/April 2009 focused on Green Business—transition to a low carbon economy. Next steps for the strategy include further development of its messages and delivery of activities such as overseas trade missions and inward meet the buyer events across a range of sectors to promote the UK's low carbon expertise and solutions.

WORK ON OTHER SECTORS

(viii) Infrastructure

UKTI organises overseas missions and business to business activities in construction, global sporting events, water, environment and mass transport. In 2008-09 it provided support for over 2000 infrastructure businesses.[10] Key activities included:

— June 2008. A Low Carbon Conference in London focusing on environmental goods and services and renewable energy enabled around 75 UK companies to meet overseas buyers with a view to securing orders.

— November 2008. Masdar (Eco City) Partnership seminar. 130 attended a seminar at which Masdar representatives outlined procurement opportunities at this eco city in Abu Dhabi. The seminar was followed by 80 business one to ones between UK companies and Masdar representatives.

— February 2009. As a result of the UK—China Summit the Chinese sent a 100 strong buyer mission to the UK. Over 400 companies attended the UKTI sponsored business forum to meet the delegates.

— March 2009. At Railtex, the UK's foremost rail exhibition, a successful "Meet the Buyers" session in partnership with the Railway Industry Association brought 80 UK delegates together with procurement specialists from over 20 international client organisations with some 300 meetings taking place. Both buyers and supply companies reported the potential for new business relationships. 70 delegates attended a seminar at the BERR Conference Centre where senior international speakers spoke about project and procurement opportunities in their own railway markets. Speakers from 10 markets including Hong Kong, Taiwan, Saudi Arabia, Mexico, Poland, France, Germany and Spain. UKTI Commercial Officers from some 15 markets also joined the seminar.

— April 2009. UKTI has appointed a mandarin speaking infrastructure specialist in Wuhan to take forward the commercial aspects of the Sustainable Cities initiative in China. A second specialist to be based in Chongqing should be in post shortly.

— UKTI through its Global Sports Projects Team is delivering a strong focus on helping UK companies identify, understand and secure business from the global sports events held around the world. In April 2008 UK Trade & Investment's Global Sports Projects Team held the international conference "Winning Beyond 2012" in Manchester. This major conference attracted many leading figures in the global sports events industry and provided around 85 UK companies access to international sports infrastructure buyers. Within the last year the Global Sports Projects Team delivered two of its most successful overseas missions: a March 2009 mission to Russia attracted over 40 delegates from 20 companies providing unprecedented access to buyers for the Sochi 2014 Winter Olympics; a mission to Brazil in November 2008 attracted 22 delegates from 16 companies and provided similar access to buyers for the 2014 FIFA World Cup and the Bid Committee for 2016 Rio Summer Olympic Games.

(ix) Education

Each year UKTI brings 20-30 overseas buyers to key education sector shows in the UK-BETT, The Education Show, The Special Needs Show—offering tailored programmes of meetings with UK companies.

UKTI encourages parts of the sector which have been domestically focused, to look at the export potential of their products and services. The Special Educational Needs segment is a good example, with many SEN companies now much more international in their thinking.

UKTI has been recently working to promote the concept of exporting to companies and organisations (eg universities) in the fields of Corporate Training and Education for Sustainable Development (ESD

— UKTI organises UK corporate training fairs to connect UK companies to Central and Eastern European buyers. We also offer regular business briefing to groups of 20-30 universities under the Top Management Programme, to alert universities to the export potential of their training courses.

— UKTI is working to promote the UK as partner of choice in the fast-developing area of ESD—brining low carbon resources and technology to all aspects of education, from school building, through classroom resources to best practice and teacher training. We have run events in Switzerland, Hong Kong and Dubai, with further projects due in Malaysia, the USA and Iberia.

UKTI promotes the UK as the centre of excellence in vocational training, through our support for TVET UK—a one-stop shop for connecting overseas buyers to UK capability. Our support has helped the vocational sector forge important bilateral relationships in key markets such as Egypt, South Africa and Kazakhstan.

UKTI encourages disparate parts of the education sector to work together to create exporting synergies. One current example is a joint venture between the Training Gateway and Business English UK at a corporate training event in the UAE.

28 April 2009