Rebalancing the Economy: Trade and Investment: Government Response to the Committee's Seventh Report of Session 2010-12 - Business, Innovation and Skills Committee Contents

Government response

The Government welcomes the Business, Innovation and Skills Committee's Report, "Re-balancing the Economy: Trade & Investment". This paper sets out a detailed response to each of the Committee's recommendations.


UKTI is a key delivery body in the Government plans for economic growth. The fact that it took a year to publish its strategy—and that publication was delayed by five months—does not reflect well on the Department. The Secretary of State told us that the strategy was outlined in the Trade White Paper and the Government's Plan for Growth. We therefore see no reason why the Government did not publish the UKTI strategy alongside either one of those documents. (Paragraph 20)

1. The coalition Government has made clear that exports and inward investment are central to the recovery of the UK's economy and therefore are a key priority for Government action. Developing a new strategy for UKTI involved wide consultation and was done in alignment with the Trade & Industry White Paper (TIWP) and the Government's growth reviews. Indeed, it takes forward the trade and investment promotion aspects of the White Paper and 'The Plan for Growth, and provides more details on how these will be delivered.

2. UKTI continued to perform strongly before the strategy was published, delivering year-on-year productivity improvements. In the year to 31 March 2011, we helped just under 24,000 UK businesses to export and they tell us that this helped them generate £6bn profit. We also helped UK companies secure £6bn of new defence business, a 22% share of the global defence market. And in attracting inward investment, we had record results in securing 849 inward investment projects, which created 16,425 new jobs and safeguarded a further 33,472.

3. The Government was also committed to ensuring that the Trade & Investment Minister, Lord Green, who took up his appointment in January 2011, had the fullest opportunity to consider what is a five year strategy, and for his views to be taken fully into account in shaping the strategy before it was launched.

While we welcome the Government's commitment to rebalancing the economy through an increase focus on trade and investment, its message and the perceived importance of this policy has been weakened by the late publication of the key strategy to deliver on this. We are concerned that this delay created uncertainty within UKTI at a critical time in the economic recovery and could have undermined its effective support for business. (Paragraph 21)

4. We do not agree that the perceived importance of the Government's policy on rebalancing the economy has been weakened by the delay in publishing UKTI's strategy.

UKTI continually reviews the services and support it offers for business and the timing of the launch of the new UKTI strategy, 'Britain Open for Business', did not stop UKTI from starting work on many of the initiatives that are set out in the strategy. This included work on the Catalyst Network; the Tech City initiative in London; setting up a Strategic Relations Team; and awarding a contract to private sector firm PA Consulting to undertake delivery of a national inward investment service in England

It is also important to note that UKTI's new strategy represents the rapid evolution of an already successful approach to supporting exporters and investors, and targeting key markets and key sectors. UKTI's Performance and Impact Monitoring Survey (PIMS) shows that the organisation has continued to deliver effectively for business since the 2010 Election, and that the effectiveness of its services has not been undermined by the delay in publishing the strategy.


For a Government to place such emphasis on trade policy without providing either a clear strategy or a Minister with responsibility for its delivery for so long was not a shining example of clear and decisive policy-making. Furthermore, it did not send out the right message to the business community. Given that BIS is a key department tasked with rebalancing the economy, we would have expected it to do better. (Paragraph 22)

5. UKTI has always followed a clear strategy. The new strategy builds on UKTI's success to date. Over the next five years, the new strategy will help to direct UKTI in a way that ensures it continues to deliver maximum benefit for taxpayers and business, in a rapidly changing domestic and international economic environment.

6. We do not accept that the Government has sent the wrong message to the business community. From immediately after the 2010 Election, the Prime Minister and his Cabinet colleagues have made clear that exports and inward investment are key to rebalancing and rebuilding the UK economy, and are a high priority for the Government. In Lord Green, we have a Minister for Trade and Investment with a wealth of private sector experience at the very highest level, and we welcome the Committee's recognition of this in their very positive comments on his appointment in paragraph 24 of its Report.

7. We also note the following comments from key business leaders following the launch of UKTI's new strategy:

  • David Frost, Director General of the British Chambers of Commerce, said: "Britain's recovery and long-term economic prosperity depend on improving our international trading position, and so we welcome these measures to put trade, investment and growth at the heart of UK foreign policy"
  • John Walker, National Chairman, Federation of Small Businesses, said: "The Federation of Small Businesses (FSB) welcomes the strategy from UKTI and seven point charter from the FCO as they address many of the issues that small businesses face when exporting and will go some way to encouraging new firms to enter the export arena."

We recognise the importance of the ministerial visits overseas and the impact that they have on the world image of "Britain is open for Business". We welcome the appointment of Lord Green as Minister for Trade and the start he has made in this very important post. (Paragraph 24)

We welcome the establishment of the new cross-government Strategic Relations Unit within the UKTI and a Cabinet sub-Committee with responsibility for trade and investment. We trust that these two new initiatives will link together to get the message across Whitehall that all Departments, and all Ministers, should be thinking about the role of trade and investment. (Paragraph 31)

8. As the Committee notes, the Strategic Relations Team, based in UKTI, will coordinate activities across Government and is tasked with improving communication between the various government departments that deal with key investors and exporters. It will support government teams and Ministers in developing long-term strategies for the Government's relationship with these key investors and exporters.

9. The Strategic Relations Team also has a major role to play in managing relationships with key international institutional investors (such as Sovereign Wealth Funds (SWFs) and pension funds). This will help to ensure that UKTI has a clear sense of their investment appetite; that appropriate propositions are put to them; and that high-level/political relationships are coordinated effectively.

10. The Economic Affairs Cabinet sub-committee on Trade and Investment (EA (TI)), chaired by Lord Green, has a wide cross-Government membership at Minister of State level. It aims to ensure an integrated approach by all Government Departments to trade and investment policy and promotion.

11. Much of EA (TI)'s focus so far has been on overseeing the implementation of commitments made in the Trade and Investment White Paper. It is also encouraging collaborative working across Departments, to embed a 'whole-of Government' approach to trade and investment issues. The Committee will also oversee a co­ordinated approach to a major programme of overseas visits by Ministers with commercial objectives often accompanied by business delegations. The Prime Minister, Deputy Prime Minister and many other Ministers are engaged in this. Even when the primary purpose of a visit is not commercial, UKTI will ensure Ministers are carrying appropriate commercial briefing. Lord Marland was invited by the Prime Minister, in May 2011, to lead a series of SME business delegations over the coming year.

We welcome the publication of the FCO's Charter for Business and will monitor its implementation. We will expect the Department for Business, Innovation and Skills to ensure that progress towards implementation of the Charter complements its own work on trade and exports. We recommend that in its response to our Report the Department's sets out the Government's progress in this regard. (Paragraph 34)

12. The Government's ongoing Growth Review and the policies set out in the Trade and Investment Growth White Paper make clear that promoting exports and winning inward investment will require a whole of Government effort. As explained above, the EA (TI) Committee, chaired by Lord Green, will help ensure an integrated approach by all Government Departments to trade and investment policy and promotion, providing accountability through their assessment of Growth review measures.

13. FCO, BIS and UKTI officials are working jointly to develop a more integrated approach to HMG's market access work. UKTI and the FCO jointly produce a regular Ministerial Visits/Live Commercial Issues paper for EA (TI) to ensure we are spotting gaps and planning strategically.  This helps to ensure FCO and BIS Ministerial travel is strategically planned to further economic and commercial priorities and that Ministers routinely meet business and London-based foreign correspondents before their overseas visits. FCO are also working closely with UKTI's new Strategic Relations Team to ensure the FCO plays its full part in developing priority business relationships, including with SWFs.

14. From September, FCO, BIS and UKTI officials will be jointly carrying out a stock take of how we handle market access issues, and seek to ensure we are fully utilising the UK's diplomatic network overseas and Ministerial visits to help address these barriers. This work will kick off with an FCO scoping paper about how to extract the best possible value from HMG's market access. Beyond this we will extend the dialogue to other departments such as DFID, DECC, etc. The three principal objectives of this work will be to:

  • To identify any significant gaps in our assessment of barriers to trade facing UK companies in our priority markets;
  • To raise sufficient awareness of this work amongst different government departments; and
  • To create a robust mechanism to respond to issues raised by businesses, chambers of commerce and other multilateral organisations.

15. The outcome would be that HMG utilises fully the UK's diplomatic network overseas and Ministerial visits to assist in delivering value to UK business.


We recognise the concerns of SMEs, the creative industries and the food and drink industry that they are not fully represented on the Ambassador's Network. We recommend that the Government ensure that all sectors of the UK economy have a representative on the Network who can speak for their interests and that this should not be limited to individuals from big business. (Paragraph 42)

16. The Business Ambassadors act as powerful advocates of the UK abroad, championing the UK as the international trading partner and inward investment location of choice. The network includes amongst its numbers those who have built successful global businesses from small company beginnings. As internationally recognised business leaders, they use their experience of doing business in the UK and overseas, and their unique market and sector knowledge and insights, to promote the UK's excellence internationally.

17. The recently appointed Chairman of the Business Ambassadors Network, Lord Marland of Odstock, aims to build on the success of the Business Ambassadors Network. His plans include adding two or three new members to increase its overall sectoral coverage, and a programme of sectorally-focussed overseas missions.

The British Business Ambassadors Network is a useful tool at the Department's disposal. While we appreciate that the Ambassadors give their time for free, we agree with Nick Fry (a member of the Network) that they should have both a clear remit and measureable targets. We do not necessarily recommend individual assessment but we believe that the effectiveness of the Network would benefit from review. It may be that the Ambassadors themselves would be best placed to judge their effectiveness against the criteria set out by the Department. We recommend that the Department publishes these assessments—in terms of activities and outcomes—at regular intervals. (Paragraph 44)

18. The Network was reviewed after the 2010 Election and was relaunched in November 2010, with a number of existing members standing down whilst the overall size of the Network increased to 33. The network is viewed by Ministers as adding value, and plays an important role in promoting UK business excellence around the world.

19. The Business Ambassadors are supported by a dedicated UKTI-based Secretariat, which is responsible for managing the overall programme and ensuring that Business Ambassadors are properly briefed for each event with the main objectives, key facts and lines to adopt on live issues if appropriate.

20. Measuring the impact of the Business Ambassadors has included assessing the Network's effectiveness in communicating core messages about the UK, and promoting UK excellence to as many potential customers and inward investors as possible. This includes where appropriate media coverage and feedback from UKTI trade teams overseas on events; and from discussion with the Business Ambassadors themselves to ensure we learn from each event and tailor activities to the strengths and interests of each Business Ambassador. A summary list of activities undertaken by the Business Ambassadors throughout the year will be published annually, online, at


We welcome the creation of 'Catalyst' as a useful lever to attract inward investment. However, given the fact that this was an existing activity in UKTI we see little merit in a rebranding exercise which diverts valuable resources from delivering meaningful services to business. If it is a different programme then the Department should set out in detail how it has changed and how it will utilise the diaspora in this country and alumni of UK universities living abroad. (Paragraph 48)

21. Catalyst UK is a new programme and does not involve rebranding of any existing activity. Catalyst UK was trialled as a pilot for some months before its launch. Catalyst UK is an international network of business leaders and influencers, located around the world, who share a connection with the UK. The objectives of the network include promoting and enhancing the UK's reputation on the global stage; attracting high-quality foreign direct investment (FDI) and increasing R&D activity; offering a broader industry context to our customers; and assisting UK companies to internationalise into new markets. There are currently 125 members in the UK and overseas, including CEOs and Managing Directors of large corporations, and established entrepreneurs. It adds a valuable dimension to have such senior business figures highlighting the quality of the UK as an inward investment destination and supporting exporters.


We take the view that the mercantile spirit in the UK is alive and well, but we also recognise that in difficult economic times hard-pressed small businessmen and women may be so busy concentrating on domestic business that they do not have the time or resources to consider the international market. In this context additional support from UKTI is vital and we look forward to hearing whether UKTI can deliver on its outreach target. The Government should also consider what incentives could be put in place or reintroduced to encourage companies to explore moving into international markets. (Paragraph 55)

22. It is important to note that UKTI's 'reach' is significantly larger than the 23,400 or so companies that it currently assists each year. That figure is purely those we significantly assist, but we raise awareness of export and exporting opportunities with many more companies. UKTI plans to launch an online network—a peer-to-peer self-help community —of UK companies, so that they can support each other and share knowledge in order to internationalise their businesses. The network will be run by a business partner and the online content will include financial, sector and market data, as well as information based on the practical experience and wisdom of the users.

23. The journey for new exporters can be fairly long, from raising awareness of overseas opportunities to actually taking the first step to export. Consequently, we target potential exporters to raise awareness both of the business opportunities that they may be able to take advantage of, and of the support available to them from UKTI to help them do this. This is backed up by access to an appropriate programme of support services, such as Passport to Export, trade missions and Gateway to Global Growth, to help companies compete for and win business overseas. Help can include attending significant trade events (regionally and nationally); electronic-marketing; PR and news coverage generation; networking and lead generation activity; outward missions to international markets; and targeted marketing initiatives. Companies can also use UKTI's website and social media activity, such as Twitter, linked In and YouTube to drive enquiries.

24. To supplement the marketing and sales activity delivered direct from UKTI, we also engage with our target audience through a variety of intermediaries who have access to a larger audience than we can reach on our own. These include organisations such as the CBI, Institute of Directors (IoD), Federation of Small Business (FSB) and trade associations. We also work with other intermediaries such as professional service providers, banks, accountants and lawyers, who have a client base that matches our target audience both to broaden awareness of our services and to support exporters with our complementary expertise. Lord Green will be leading a big new push on the use of networks to promote exporting among SMEs including at a major conference in November.

Additionally, UKTI will be holding a flagship event in November, specifically aimed at those business intermediaries and professional services whose target customers are SMEs, so that we can reach their customers more effectively and help them to respond to the export challenge.

The fact that survey data suggest that few businesses are pro-actively pursuing export opportunities highlights the importance of an aggressive marketing strategy, run by UKTI, to highlight to SMES the benefits of exporting. In that respect, the outreach target of UKTI developing contacts with 25,000 UK companies represents a modest figure considering the fact that there are just under five million SMEs in the UK. (Paragraph 56)

25. Marketing the benefits of exporting is crucial to the successful delivery of the UKTI strategy. UKTI has developed a new marketing and communications strategy which is focused on increasing awareness of UKTI's services and driving the right customers to access them. This involves UKTI maximising the use of digital channels.

  • Since UKTI's new website launched in summer 2010 we have published over 4,000 business opportunities to our clients. Over 80% of our users are SMEs, 71% of whom are looking for such opportunities.
  • Social media is integral to our activity, providing a growing and effective two-way interaction with our customers. We have 8,000 LinkedIn members and 11,000 Twitter followers, with whom we market opportunities, share best practice and provide advice and support.
  • Our popular business magazine, Springboard, is another key channel for promoting the benefits of exporting. It has some 25,000 subscribers, is available in business class lounges in airports around the world, and has an estimated readership of 55,000.

26. In reality our outreach is significantly greater than the 25,000 target as we are also reaching customers through intermediaries and developing thought-leadership and partnership programmes with third party multipliers as described above. To date, we have held a series of successful seminars and fora in partnership with the IoD under their International Trade Forum umbrella. This has included the launch of a report on SMEs and exporting titled "From surviving to thriving: doing business overseas" which is based on research of their membership. Lord Green's new push to multiply our reach through networks has been described above. We will also facilitate a major programme of business-to-business support with many of Britain's biggest companies helping SMEs and mid-sized firms to export effectively, as announced by the Chancellor in his speech to the Daily Telegraph Festival of Business on 16 September.


We welcome the Government's assertion that it will be more active in shaping EU trade policy. However, we note that previous Governments have used similar rhetoric with mixed rewards. The Government will be judged on its delivery of an EU trade policy which benefits the United Kingdom. As a key negotiator in world trade the EU will play an important role. (Paragraph 60)

We recognise the fact that the UK's influence on the WTO can only be exercised through its membership of the European Union. However, the lack of a direct influence should not deter the Government from using established bilateral relations to press for an early conclusion to the Doha round. This is a complicated area of international agreement and we support the Government's desire for an agreement which will deliver the right environment for free trade. We look forward to an update on progress when the Government responds to this Report. (Paragraph 65)

27. The Trade and Investment for Growth White Paper, published in February 2011, sets out the Government's strategy for securing the benefits of greater openness for the UK economy, for the global economy and especially for the world's poorest people. The White Paper outlines 62 new policies, actions and positions which will enhance the UK's framework for trade and investment. These actions are being implemented by Departments working collaboratively in a 'whole-of Government' approach under the oversight of the EA (TI) chaired by Lord Green, the Minister for Trade & Investment.

28. Within the White Paper we set out our ambition for delivering ambitious and comprehensive EU-Free Trade Agreements (FTAs). On 1 July 2011 the EU-Korea FTA was applied. In concluding this FTA, the EU has taken significant steps in expanding its trade relationship with South Korea in what is the most comprehensive FTA to date, worth up to £500 million a year to the UK economy. We will continue to push within the EU for the conclusion of ambitious FTAs which will deliver on UK priorities and generate new market access for UK businesses in important international markets, including India, Brazil, Singapore, Canada and Japan.

29. Doha WTO negotiations have once again stalled, despite the commitments made by G20 leaders at the Seoul Summit in November 2010 and the best efforts of the UK Government to press all the key players to show the leadership and flexibility needed to conclude the Round this year. At the WTO Trade Negotiations Committee on 26 July 2011, Director General of the WTO, Pascal Lamy, announced that attempts to conclude an early harvest package[1] this year, rather than the full round, had failed. He believes the WTO membership should now look at what non-Doha deliverables (e.g. the Government Procurement Agreement) can be agreed at the WTO Ministerial in December 2011, along with agreeing a post-December Doha workplan. In parallel to this, work will continue on getting as much as possible for the Least Developed Countries (LDCs).

30. The Government is obviously very disappointed with the lack of progress, particularly on the issues for LDCs. We will continue to work closely with the EU Commission, and other key partners, to find the best way forward for Doha in 2012 and beyond. Ministers will continue to raise Doha at all relevant opportunities and particularly with the main players, i.e. the US, China, Brazil and India, to ensure all contribute to the discussions, and are as flexible as possible. We will continue to support the WTO, and push for a substantive outcome at the December Ministerial to ensure we maintain credibility in the multilateral system. We are clear that the WTO membership must reach agreement on the future of Doha at the December Ministerial, to prevent the DDA simply drifting indefinitely.


We are concerned with the lack of clarity over the FCO UKTI budget which pays for overseas posts. We find it hard to believe that Ms Haird, the Acting Chief Executive of UKTI, thought the figures had been published when they had not and still refused to acknowledge they were not in the public domain even when questioned on the matter. Furthermore, the Secretary of State of BIS was also not aware that the figures had yet to be agreed by the Foreign Office. It is disturbing that the Acting Chief Executive of, and the responsible Secretary of State for, such a highly important body do not have a grip on the details of the UKTI's FCO budget. (Paragraph 77)

While we understand the need for all departments to deliver cuts in their expenditure, we are not convinced that the Department for Business, Innovation and Skills has given sufficient thought to where its cuts will fall. UKTI is a key delivery agency for the expansion of UK exports and a reduction to its budget appears to be in direct contradiction to the Government's commitment to increase growth through trade and investment. We concur with our predecessor Committee that "care must be taken to ensure that efficiency savings result in real efficiencies. Too often, short-sighted attempts to make savings lead to unforeseen long term costs". (Paragraph 84)

We welcome the candid acknowledgement of the Secretary of State that budget reductions will result in a short-term decrease in the number of companies supported through some of UKTI's programmes. Equally, Ministers have assured us that in the longer term UKTI will be able to do more with less. This is a bold statement and the Department will have to demonstrate to us and the House that it is delivering on that assertion. (Paragraph 85)

31. UKTI set out the position on the overseas resources at the start of the spending review period in our letter to the Committee dated 19 July 2011, attached at Annex A. The FCO agreed that UKTI resources for overseas delivery would be held at existing levels over the spending period. UKTI expects the total number of people employed on UKTI activity overseas to remain at around 1,249 over the period. Savings delivered from a more efficient use of the overseas platform (e.g. estates, IT and corporate services savings) are expected to provide funding for any resource pressures overseas such as in-country inflation.

32. UKTI has given considerable thought as to where expenditure cuts will fall. Within overseas markets we plan to increase support to high growth and emerging markets to deliver more, and to reduce support in mature markets. Within the UK we are reducing our back office support function by not replacing staff that leave and through a small staff exit scheme. We are maintaining staff on the front line and are focussing our resource to those schemes which benefit business the most and deliver more productivity for the UK economy.

33. In addition to expenditure cuts, UKTI aims significantly to increase income generation through its charged-for Overseas Market Information Service (OMIS), by extending the scope and flexibility of this service and increasing the price of OMISs. We are also targeting other areas of income generation, including securing corporate sponsorship at key events, and negotiating better prices for exhibition space.

34. UKTI also intends to achieve more with less, including through the use of incentivised private sector delivery contracts such as that signed with PA Consulting for our inward investment activity.


If it is the Government's plan to get SMEs exporting it seems incoherent to be cutting the number of trade advisers at the 'coal face' by 19%. In the words of the Acting Chief Executive these are the very advisers who work with those SMEs that are new to exporting or that need help moving on and diversifying. We are concerned that these short-term efficiency savings will be at a long term cost of reducing the number of SMEs moving into exports. (Paragraph 91)

35. The reduction in the number of International Trade Advisers (ITAs) was due largely to a reduced level of funding. UKTI continues to make efficiencies in running its business and, since the start of this financial year, we have re-cycled savings into the frontline and enabled our delivery partners to recruit ITAs. This is starting to make good the shortfall following the spending review. We believe we can achieve more with less through the intelligent use of networks to multiply our impact and by working in partnership with organisations who present a complementary offer to exporters such as banks.

We support the Government's aim to make the UKTI a more entrepreneurial organisation by bringing in private sector expertise to UKTI posts. However, with UKTI managing significant budget reductions cuts we are not convinced the Department will be able to offer competitive packages to the business personnel it hopes to attract. (Paragraph 95)

36. Recruitment to the civil service is regulated by the Office of the Civil Service Commissioners and the Commissioners ensure all recruitment is conducted in a fair and open manner. Salary is not the only factor that attracts good candidates for senior civil service positions. Those applying for these positions tell us that the breadth of the experience gained by working in central government is extremely valuable and is in itself an important part of the overall package. We already have highly experienced private sector figures in many of our leadership posts and have recently recruited another to lead our strategic relationship management work. UKTI's frontline is already strongly private sector oriented. The overwhelming majority of our ITAs in the regions and locally employed staff overseas have private sector backgrounds. The new contract with PA Consulting for our inward investment work demonstrates UKTI's determination to identify further ways of developing our entrepreneurial approach.

We are disappointed that the office of Chief Executive of UKTI was left vacant for four months before it was filled on a permanent basis. This recruitment process should have run faster at such a crucial time for the UKTI. (Paragraph 98)

37. The recruitment process for the new Chief Executive of UKTI was focussed on recruiting the best candidate for the post.

The strong leadership provided by the Acting Chief Executive and the Senior Management Team since January 2011 means that the organisation has maintained its unwavering focus on the needs of its customers.

We welcome the appointment of Nick Baird as new Chief Executive. That said, we were surprised that the post was filled by a career civil servant rather than a business leader with a track record of success in the private sector. (Paragraph 99)

38. The appointment was made through open competition. The selection panel was chaired by a Civil Service Commissioner and included representatives from business.

39. The recruitment process has succeeded in putting in place a Chief Executive who has the experience and skills needed to lead UKTI in delivering its new strategy, one that will place the nation's commercial interests at the heart of its foreign policy and help to create sustainable growth, jobs and future prosperity for the UK. As well as working very closely with business in his previous roles including as Ambassador to Turkey, Nick Baird has a wide knowledge of emerging markets and a track record of leading successful cross-government initiatives which will be key to achieving a truly whole-of-government approach to the trade and investment agenda.

We welcome the Government's ambition to make UKTI more entrepreneurial. However, we remain unconvinced that UKTI can attract suitable applicants from the business world at a time when cuts to its funding will put a strain on its ability to offer competitive packages to the business world. This may already be evident in the recruitment of a career civil servant rather than a business leader as the new Chief Executive of the UKTI. (Paragraph 100)

40. The new Chief Executive of UKTI competed successfully against stiff competition from candidates from both the private and public sectors. The recent recruitment of private sector figures to senior roles within UKTI demonstrates an ability to attract suitable applicants.

41. If it would be helpful to the Committee, the new Chief Executive would be delighted to given an early presentation of his plans for implementation of the new strategy.


Overall, Passport to Export is well-received by business but there remains more to be done. We are concerned at how this is to be achieved with fewer resources to pay for training and fewer trade advisers out in the regions helping SMEs. The Department, and UKTI in particular, must guard against relying on statistics and process activity to demonstrate success in delivery. Results for business is the only real measurement of the programme's success. (Paragraph 107)

We received little, if any, evidence on the Gateway to Global Growth we note that the programme was a key factor in UKTI winning a global trade promotion award. We recommend the Department provides us with details on its assessment of the service in light of customer feedback. We remain concerned by the proposed cut in companies being served over the spending review period. (Paragraph 110)

42. As we mentioned earlier, in our response to Recommendation 2, UKTI monitors the benefit to business from using its trade services through the independent Performance and Impact Monitoring Survey (PIMS). This includes feedback on the Passport to Export and Gateway for Global Growth services. At Annex B there is short summary of PIMS trade results, in which a review of these programmes can be found, notably in table 4.

43. At Annex C there is a summary table of results over time for these two services, together with a further table that is indicative of PIMS survey timings.

44. Examples of the success of Gateway for Global Growth can be seen in the following:

  • Ford, a family-owned company based in the North east, produces precision engineered products for the aerospace, automotive, power generation, construction and defence markets. The company signed up to the Gateway for Global Growth programme in 2010 in a bid to exploit business opportunities in China.

Mark Podmore, Operations Director at Ford, explained: "We've now completed the Gateway programme and its support has been invaluable. It enabled us to make further visits to China" …. "to date we've had enquiries about orders in excess of £400,000 and we've secured and delivered orders worth £80,000 for manufacturing components for two steel mills in China in Handan and Chenggang. As a result we're now investing in new machinery that….will be installed in January and we're certainly hoping to win more orders in 2011."

Ford have since expanded further into China, appointing agents in Anshan and Xian , and received their first order from Xian Superb. Ford's strategy is to have at least £250,000 of sales p.a. in the next 5 years.

  • Miller UK, which has its main site in Cramlington, manufactures buckets, quick couplers and other attachments for earthmoving equipment. Having established a joint venture in North West China to manufacture its products, it was keen to develop its Chinese market further and signed up to the Gateway for Global Growth.

With support from UKTI, Miller UK carried out a review of the potential opportunities in China, commissioning an Overseas Market Introduction Service (OMIS) report to gain a more detailed knowledge of the market, potential partners, customers, suppliers, distributors and agents.

The company is now planning for selling into the Chinese construction and earthmoving industries, and hopes to open an office and storage facility near Shanghai.

Jacqui Miller, Director at Miller UK, explained: "Although China is a huge market, as with any other investment you really need to know what you want to achieve and what you're prepared to put into it before you start, if you want to ensure success. Bill, our UKTI adviser, has been supportive and his help in identifying opportunities and funding to help us develop the markets we're interested in has been very useful.

Although the services of UKTI are welcomed and appreciated by businesses, there remains the concern that UKTI still focuses more on processes than outcomes. Businesses want to be able to assess before embarking on working with the UKTI, clear evidence that it will benefit their bottom line. A more entrepreneurial culture within UKTI should help improve this mindset, but the challenge remains for UKTI to continue to demonstrate its real value to UK businesses. (Paragraph 114)

45. As a service delivery organisation UKTI has a strong commitment both to ensuring that our high quality services and support make a real difference to companies, and to robust independent evaluation of our activities. The results of this evidence-based evaluation are at odds with those who appear to be of the opinion that we are driven by process rather than outcomes.

46. PIMS results for 2010-11 clearly show the level of benefit accrued to UK business as a direct benefit of UKTI trade services. These results show that over 23,400 UK businesses were able to exploit overseas opportunities through UKTI assistance, generating an estimated £6 billion of additional profit and that every £1 spent by UKTI on trade services helped generate £22 additional profit for UK business.

47. Results also showed that we helped UK business to secure defence exports of just under £6 billion, a 22% share of the global market, with security exports valued at £2 billion.

48. In 2010/11 UKTI was involved in supporting 849 new inward investment projects—which created nearly 50,000 jobs—a six per cent increase on the previous year.

49. PIMS captures the views of clients as to the benefits to their bottom line profit, as well as about the nature and extent of qualitative benefits to their business. These benefits include overcoming barriers to entering new markets; increasing skills or changes to behaviour which are likely to increase the productivity and competitiveness of the business, such as improvements to products or services; and informing the company's approach to doing business overseas. All PIMS results, including results for UKTI trade clients' estimates of benefit to their bottom line profit, and their views relating to the nature and extent of other business benefits, are published on the UKTI website.

Business Link is still considered by many to be the major deliverer of UKTI trade advice services despite the fact that it is being closed by the Government and as yet has no replacement. It is unclear who will be providing trade advice services in the regions following the winding up of Business Links. This is not an acceptable situation and clarity on how these services will be provided, advertised and supported is urgently required from Government. (Paragraph 118)

50. In every one of the nine English regions, the Business Link service was contracted by the Regional Development Agency. UKTI made separate arrangements for the delivery of its own international trade services in each of these regions. In five regions (Yorkshire and Humber, North East, East of England, South West and East Midlands), the Business Link delivery contractor was also UKTI's delivery partner. In these circumstances, UKTI will ensure that the closure of the Business Link has no impact on delivery of UKTI's services and support for business. We have arrangements in place to 31 March 2012 to ensure continuity of delivery through an offer of grant (as opposed to permanent contract) to our various regional service delivery operators, such as Business Enterprise North East. We are considering the need for any new procurement activity to maintain UKTI delivery beyond 31 March 2012.

We have heard from a variety of industries the importance of Trade Shows and therefore the invaluable services of the UKTI's Trade Show Access Programme. A more selective approach to supporting Trade Shows may be both beneficial and more efficient but we recommend that funding from the programme is reviewed before it is cut. We also look forward to detail from UKTI on how the Trade Show Access Programme will be enhanced in 2012 with potentially less funding. (Paragraph 124)

51. UKTI has reviewed its Tradeshow Access Programme (TAP) with the aim of delivering a higher quality UK presence within a more focused event programme. From 2012/13 TAP will provide matched funding for eligible SMEs and a bespoke package of support for all exhibitors in the UK group at selected fairs. The services will come from a menu covering pre-event publicity, exhibitor training, national branding (to provide a clear UK and UKTI identity), matchmaking/networking activity and central meeting areas to facilitate face-to-face interaction. TAP sector panels comprising UKTI and business representatives will select both the overseas events and the support model for each one. Accredited Trade Organisations will deliver this support in partnership with UKTI. The dual aim of these changes to TAP is to provide direct support for SMEs and an improved presentation of UK capability to an international audience.

We welcome the new services proposed in the White Paper, but there is little detail on how these services will be delivered, or what they will provide. First, it is unclear how the peer-to-peer advice website will help prospective exporters and how experienced exporters will be encouraged to provide advice. Second, there is as yet no explanation of the business mentoring scheme, or how it will be provided by Catalyst. The Department needs to set out clearly, the role of mentors, the number of companies they will be working with on average each and the outcomes on which they will be judged. (Paragraph 127)

52. UKTI ran a grant competition over the summer of 2011 for a proposal to design and deliver the online peer-to-peer export service. UKTI is in discussion with a winning bidder and expects to reach an agreement shortly on the delivery of the service over the coming weeks. The service will be designed to provide SMEs in the UK with current, wide-ranging information to help them break into new markets faster and with a greater chance of success. Individuals are likely to become contributors because doing this will raise their own reputation as well as that of their business, and help them forge stronger connections with potential business partners or clients. Service providers (e.g. law, accountancy, consultancy firms, UKTI staff, etc) are likely to share content through the service. This will help SMEs with information and contacts, and also serve as a platform for service provider to make themselves known in their respective fields. Further detail on the Project will be made available towards the end of the year.

53. It is too early in the development of the Catalyst network to judge how many companies will be touched by Catalyst mentoring activity. In total we aim to recruit some 500 Catalyst members by summer 2012. These are businessmen and women around the world who have such a strong affinity for the UK that they are willing to contribute their time to working with us to promote the UK as a great place to do business. The majority of members so far have also expressed a willingness to engage in mentoring activity. Some are willing to participate in an ongoing 'traditional' mentoring role, helping a small company over a considerable period. Others have said that, while they would be happy to offer informal, ad hoc advice and guidance to companies, they do not want the ties of a more formal mentoring arrangement. We have therefore decided to keep our approach within the Catalyst programme flexible to allow the development of those mentoring relationships that best fit the mentor and mentee. UKTI will track Catalyst member activities and from this we will be able to assess the number and value of mentoring interactions.

We believe that British Chambers of Commerce and trade associations can play a larger role in promoting the importance of exports to SMEs. We were concerned by the lack of active engagement between business organisations and their members on the issue of exporting. This situation has to improve. The provision of export support should not solely be the responsibility of the UKTI and the Government. We recommend that the Government and UKTI work with the Chambers, trade associations and banks to project a clear message on exporting with clear signposting on where to go for help, advice and financing. (Paragraph 133)

54. We strongly believe it is a function of Government to help other organisations to develop their capacity to help exporters, as well as to deliver support services ourselves. UKTI already undertakes a substantial amount of partnering with Chambers and trade associations, as well as with banks. We value these partnerships as their support provides an enhanced business perspective, credibility and innovation to our service delivery. In four of the nine English regions, Chambers of Commerce or their representative bodies are partners in UKTI's trade delivery organisations. In all regions, UKTI will partner with different Chambers on a range of other activities such as business networking events or overseas trade missions. UKTI has significant contact with some 100 trade associations, particularly in support of overseas exhibitions via our Tradeshow Access Programme.

55. We recognise there is scope to do more, in reaching out to SMEs and promoting the benefits of exporting. Consequently, UKTI's new strategy highlights a range of support to help SMEs including leveraging partner networks. In our strategy we said:

"…. we will leverage the communication channels of business partners such as the British Chambers of Commerce, the Confederation of British Industry, the Institute of Directors, Trade Associations, business schools and Local Enterprise Partnerships to reach the high growth and innovative companies with the potential to benefit by exporting. We will also develop outreach partnerships with the UK's major commercial banks and with the accountancy and legal professions. And we will plug into the business networks of communities with overseas connections and activities."

56. We have already embarked on an extensive dialogue with partner organisations which will lead to a major conference in the autumn, bringing together partners to focus on the need to encourage more SMEs to export.

We welcome the Department's commitment to refine UKTI's relationship with larger companies and the development of a more business-orientated account management style through the High Value Opportunities scheme. Those companies have the potential to help SMEs in their supply chain to also benefit from exports by introducing them to overseas markets, though we note that this relationship is a complex one. UKTI can play an important role in providing incentives to larger companies to take their supply chain with them, and we recommend that the Government consider how companies receiving UKTI support through the scheme be encouraged to help 'pull through' their SME supply chains. (Paragraph 141)

57. The High Value Opportunities (HVO) programme is a key strand of the new UKTI strategy. It aims to identify, prioritise and deliver support to companies of all sizes in pursuit of opportunities from major, high-value projects overseas.

58. The potential value to UK SMEs through accessing supply chains under the HVO programme is vast. A core element of the programme seeks to assist UK SMEs to access supply chains, even in situations where the prime contractors are located overseas. We have undertaken initial research to identify many of the overseas prime-contractors involved in major infrastructure projects globally and are carrying out further work to analyse their supply chains and procuring habits. We also recognise the important role of major UK companies and the potential 'pull through' to UK SMEs through their supply chains.

59. Our work to support SMEs in pursuit of supply chain opportunities has three strands. The first focuses on raising awareness among UK SMEs of potential supply chain opportunities stemming from high value projects around the world. The second seeks to raise awareness of UK supply chain capability among both UK and foreign prime contractors as part of our developing strategic relationship management function. The third looks at Government's role as a 'facilitator' in bringing together prime contractors and supply chain companies.

The Government is right to concentrate on emerging markets but it needs to strike an appropriate balance between new and existing markets. Many SMEs look to start exporting to the EU and the USA as they are perceived to be both easier and safer. The confidence which comes from exporting to existing markets should not be underestimated and UKTI should be mindful of this when it develops its market strategies. (Paragraph 152)

60. UKTI fully recognises the continued great importance of developed markets to SMEs and also the shift in economic power to high growth markets. UKTI's new strategy confirms that we will continue maintain a proportionate presence in developed markets whilst also moving more resources to high growth and emerging markets over the lifetime of this strategy, to match both the growing opportunities and the demands from our customers.

61. Our level of resource in developed and high growth markets is closely linked to demand. This provides a strong indication of where there is a potential mis-match between the level of resource and customer demand, and gives an evidence base for moving resources around the network. UKTI remains committed to ensuring that companies who are interested in business in major developed markets and those looking to high growth markets receive the support they need.

The additional support necessary of SMEs to enter the emerging markets has been recognised by Government and it has increased UKTI staff in both China and India. There remains, however, a gap between UKTI support for SMEs overseas and its capacity in the UK to highlight the opportunities and advantages of exporting to those markets. Budget constraints mean that it will be difficult for UKTI to do both. In the UK, UKTI should demonstrate to us how it will be utilising local partners, including Chambers of Commerce, trade associations and local banks to provide domestic support to SMEs. (Paragraph 153)

62. In our response to Recommendation 28 we explained some of what we are doing with partner organisations to encourage more SMEs to export. Lord Green has already held outreach events with banks, accountants and lawyers on this subject. A partners' event is scheduled for 10 November and as well as professional bodies, it will include Chambers of Commerce, trade associations, representative bodies such as the CBI, FSB, IoD and the Local Enterprise Partnerships. Our response to Recommendation 10 also explains the range of marketing and communications activity we are undertaking to utilise local partners and networks.

We believe it is right for UKTI to have a sectoral focus which will concentrate its efforts on those areas where the UK has a competitive advantage We note the Department's plans to establish Sector Group Task Forces and Sector Advisory Groups staffed by the private sector. As we highlight earlier in this Report, the Department will need to demonstrate how it will attract suitably qualified personnel from the private sector at a time when UKTI's funding is being reduced. (Paragraph 158)

63. UKTI draws great benefit from its network of 18 Sector Advisory Groups, which play a vital role in business planning and implementation, advising, validating and challenging sector teams on the markets and activities that will make the biggest difference to business. A leading industrialist or business specialist leads each group, with members drawn from major companies, SMEs with a strong international focus and inward investors, all on a pro bono basis. Together, this group of some 200 business leaders keeps UKTI closely connected with the practical concerns of business.

64. During the autumn, we shall also establish, and integrate within this structure, the new Sector Group Task Forces announced in the Strategy to further strengthen our business focus and provide an additional steer on key cross-cutting themes.

65. We are confident that the nature and focus of these groups will allow us to attract high quality candidates.


We welcome the Government's recognition of the importance of inward investment. However we are concerned with the delay at announcing the contractor for regional inward investment services in the UK. The Government needs to be more proactive in attracting inward investment; the delay in awarding the inward investment contract following the winding up of the RDA's has not been convincing. In its response to this Report we will expect to receive a detailed update on the structures which will be put in place by the partnership arrangement with PA consulting, OCO and British Chambers of Commerce to deliver a high level service across the country. (Paragraph 164)

66. In recent years, UKTI has focused more of its resource on attracting higher value investments, for example linked to new technologies and services, R&D, headquarters functions and high tech manufacturing. Our goal is to ensure that investment projects which come to the UK deliver the greatest impact on UK prosperity and jobs.

Setting up a national inward investment operation

67. UKTI's new five year strategy builds on the UK's long-held position as the most attractive location in Europe for FDI but recognises that international competition for investment is increasingly fierce. It sets out the work UKTI is doing to lead efforts across Government to ensure a strong and continuing pipeline of investment projects to the UK. This will be achieved by promoting UK strengths and capabilities to a global audience; high impact sector showcasing; inward and outward missions; focussing resource on markets of real opportunity; building enhanced relationships with key potential investors; and encouraging global entrepreneurs and early stage technology companies to globalise their businesses from a UK hub.

68. Following the award of the UKTI contract on 31 March 2011, PA Consulting Services, now branded as the "UKTI Investment Services Team" (UKTI IST) will be supported by their delivery partners, OCO Consulting and the British Chambers of Commerce. PA Consulting assumed full responsibility of the former Regional Development Agency (RDA) network (minus London) on 3 May 2011 for the sub national management and delivery of attracting inward investment into England. From the start of this "service transfer" (the 'Transition' phase of the contract), resources were in place to manage the existing project pipeline transferred from the RDA network, and to take the lead on handling new projects entering the pipeline from a variety of sources, including UKTI.

69. The contract's 'Transition' phase ended on 30 June, and a contract 'Stabilisation' phase began on 1 July. This Stabilisation phase includes the deployment of professional and expert staff resources, some transferred from the RDA network under the Transfer of Undertakings (Protection of Employment) Regulations (TUPE), to work on new and existing pipeline projects to ensure a seamless delivery of investment support services to clients. The 'Steady State' phase, effectively 'full-service' delivery, is expected to commence in early October, when the remaining vacancies in the UKTI IST, i.e. those not 'job matched' by those RDA staff transferred under TUPE, have been filled through an open recruitment process which is currently underway.

How UKTI IST will operate

70. UKTI IST is tasked with landing 476 new investment projects in 2011/12 in England (excluding London) and with facilitating—with UKTI's counterparts in the Devolved Administrations—the wider national target of 750+ projects across the UK. To enable this, the IST is entering into a series of Memoranda of Understanding with the Devolved Administrations, London's own delivery organisation (London & Partners) and the evolving cadre of Local Enterprise Partnerships all of whom will be critical to UKTI meeting its FDI targets.

71. UKTI's contract with PA Consulting includes a financial incentive to exceed set targets and a 'gain-share' arrangement where efficiencies and savings are identified and implemented without compromising the achievement of numerical and quality targets.

72. UKTI IST has established a cohesive sector based delivery structure, comprising (by October 2011) a cohort of 70+ client facing business specialists, largely dispersed outside London. These specialists combine a focus on a number of key target sectors, those considered most likely to yield high quality investment opportunities, together with a relationship management function focusing on existing strategically important client companies. These UKTI IST specialists are supported by a small FDI 'Hub' management and sector support function. This Hub manages/coordinates the newly established single national pipeline and provides research and bespoke proposition development and account management functions in support of the field force, all linked to UKTI's strategic focus of attracting high quality inward investment.

73. UKTI's strategy ensures that the work of UKTI IST is aligned with the whole of Government effort to rebuild the UK economy in a balanced and sustainable way.

74. UKTI IST will work very closely (effectively through a 'one team' approach) with UKTI's FDI teams overseas and in those in HQ to ensure that we approach potential investors with best options and opportunities based on a UK First approach to winning new investment

75. Key to the longer term success of the contact is the effective engagement with strategic partners involved in attracting inward investment to the UK, in particular the three Devolved Administrations of Scotland, Wales and Northern Ireland; London & Partners and the developing network of Local Enterprise Partnerships across England. UKTI IST is in the process of negotiating a series of Memoranda of Understanding with each of these partners. These memoranda will enable each partner to participate fully in the national effort to attract new inward investment, ensuring they have the opportunity to pitch for new projects entering the pipeline where they have a competitive proposition to offer. In doing so, IST will be fully compliant with its obligations to UKTI and to clients around effective data security.

76. A governance structure is in place to ensure that the UKTI IST delivers against its contract and meets its obligations on how the project pipeline and success criteria are effectively and efficiently managed. The FDI Executive Steering Committee, which will meet quarterly, is chaired by UKTI's Managing Director - Business. This Committee is supported by an FDI Operations Group and an FDI Contract Management Group, both of which meet monthly.

77. A BIS Internal Audit Review of UKTI's procurement process in selecting PA Consulting for this contract received a 'green' rating, identifying it as an example of best practice delivered against a tight timescale. Similarly, a series of Gateway Reviews gave an 'Amber/Green' rating for the procurement through to the Transition Phase, recognising that a full 'Green' rating could not be awarded until the project had entered "Steady State" in the autumn.

We recommend that the Government set out its "rules of engagement" in this area of Ministerial assistance to inward investors and the criteria under which companies will be eligible to receive this enhanced service. In the spirit of transparency, we also recommend that the Department sets out the form of assistance and access it provides to major investments, on a quarterly basis. (Paragraph 168)

78. The Government is committed to a whole of government approach to developing strategic relationships with major exporters and investors. This is a key part of the Growth agenda and part of a wider drive by Government to improve relationships with companies of all sizes and from all sectors. Many companies have interests that are covered by more than one Government Department. We are aligning the way Government interacts with these businesses. Under this approach Ministers will be responsible for ensuring that issues raised by companies are shared across relevant departments. By making sure that these issues are understood and by creating and reinforcing connections across Government, all businesses can benefit.

79. This approach is about benefits to the UK as a whole, and the Government will be able to better placed to attract investment to the UK if it takes a more strategic and long-term approach to relationships with investors. The first set of targeted companies has been chosen based on current and potential investment or export capacity in the UK and the potential for the approach to add value to our relationship. The list of companies will be dynamic, and we anticipate it will grow with time.

80. Ministers have been assigned based on existing relationships with industry and their current portfolio and will be guided by the Ministerial Code in their interactions with selected companies. As happens now, information on meetings between Ministers and external organisations will be published. As is currently the case, some details of these meetings will be limited due to the obligation to protect commercially sensitive data.

Local knowledge is important and we recognise the value of involving LEPs in giving an informed local view for investors. However, until there is an established and comprehensive coverage of LEPs across England, the Government will need to ensure that valuable opportunities are not being missed by areas which have yet to establish a LEP to promote their locality. There needs to be greater clarity of what is expected of LEPs with regards to attracting inward investment and their interaction with PA consulting, the Foreign Direct Investment contractor. Although PA Consulting holds the contract, it is for Government to set the parameters for LEP involvement. We recommend that the Department sets out in its Response a detailed explanation of the level, range and extent of LEP involvement in delivering inward investment, alongside the costs and resources necessary for them to carry out this role. (Paragraph 176)

81. UKTI recognises the importance of local knowledge and contacts in helping to secure and retain foreign direct investment (FDI), and that local enterprise partnerships will be well positioned to provide this. UKTI is in discussion with LEPs regarding their potential roles and what they might need from UKTI. It will be for individual LEPs to decide what their priorities are going to be and what resources to commit. UKTI would welcome them using their local knowledge to develop compelling sector-based propositions on their local offer and the international comparative advantage that it provides. This could include dealing with local issues such as planning, site finding and dealing with utilities for both potential investors, as well as managing relationships with existing inward investors.

82. UKTI acknowledges the Committee's concern about the risk of missing opportunities in those areas without an established LEP. LEPs now cover 98 per cent of England but, in the few remaining areas without an established LEP or in other areas where LEPs are not yet sufficiently established (and with that LEPS agreement), UKTI has been engaging directly with local authorities.

83. We note the Committee's view that there needs to be greater clarity of what is expected of LEPs with regard to inward investment. In recognition that LEPs are likely to need help in understanding how they can best work in partnership with UKTI, since April 2011 senior UKTI staff have been meeting LEPs to explain UKTI's role and approach to inward investment and to discuss with them how they would like to work with UKTI. These meetings have been followed up with comprehensive briefing material and meetings between UKTI's new Investment Services Team (IST, led by PA Consulting) and individual LEPs. We are now discussing with each LEP a Memorandum of Understanding (MoU) to cement our working relationship and build a transparent network of organisations bringing the best investment experience to individual foreign companies. Where LEPs do not exist, UKTI's IST has been engaging with the relevant local authorities to agree ways of working. Although the IST is leading on the MoU discussions, UKTI centrally has provided clear guidance on what is expected of them in terms of LEP engagement, and senior UKTI officials continue to keep close to these discussions with LEPs.

84. However, the Government's position is absolutely clear that it is for LEPs themselves to decide what their priorities should be and where they put their resources and individual LEPs may want to work with UKTI on inward investment in different ways. It is not, therefore, possible to meet the Committee's request for clarity on the costs and resources necessary for LEPs to carry out an inward investment role, as there will be many different approaches taken by LEPs. UKTI will try to be as flexible as it can, consistent with its national UK-first approach to inward investment, in adapting its approach to individual LEPs. The IST has nine offices around the country providing support to investors, working closely with LEPs and local authorities, and this resource will help ensure that there is comprehensive coverage of the country regardless of the approach individual LEPs choose to take.


We welcome the positive assessment of UKTI's trade services work as set out in its PIMS performance measurement system. The fact that the PIMS system is highly rated by the National Audit Office gives greater credibility to the PIMS results. While we cannot confirm the accuracy of the claim that UKTI generates £22 benefit for each £1 of Government spend on UKTI trade services, it is clear that UKTI does provide a service valuable to UK companies. (Paragraph 187)

Reductions in its budget and resources will put additional pressure on UKTI in maintaining its current performance levels. While we recognise that UKTI will have to do more with less, we believe that the Government should keep a close eye on PIMS data. Any significant reduction in the satisfaction levels of companies with UKTI's services will have to be addressed at the earliest opportunity. (Paragraph 188)

85. UKTI will continue to track progress on all PIMS measures over time. Latest results (July 2010 - June 2011) show that value to business, in terms of reported additional bottom line profit, continues to rise over time, as has quality. This has been achieved in the context of a substantial increase in the number of clients helped against no increase in resources representing rising real productivity. PIMS results for services delivered in the financial year 2011-12 will begin to be available from December 2011, and UKTI will continue to track these trends closely.

86. For ease of reference and for the Committee's information, a short summary of PIMS trade results over time is attached at Annex B.

The contracting out of the delivery of inward investment services will make it more difficult to assess the performance of UKTI in this area. However, that does not mean that it is any less necessary. The PIMS system of monitoring export support should be assessed as a possible vehicle for the monitoring of all inward investment services. (Paragraph 191)

87. As an integral part of UKTI's inward investment delivery operation, those services now delivered by UKTI's IST will be monitored through PIMS, thus continuing PIMS monitoring of UKTI's inward investment activities.

88. We would argue that the awarding of the single contract for sub national delivery of FDI into England to PA Consulting will not make it more difficult to assess performance. On the contrary, the greater simplicity afforded by having a single contractor as part of UKTI's overall ownership and responsibility for attracting inward investment, in place of eight (excluding London) competing regional agencies, improves our ability to assess and benchmark performance across the UK. In addition to PIMS reporting, PA's contract with UKTI, and the underpinning Service Level Agreement which is soon to be finalised, will allow UKTI to have a clearer view of their, and the overall network's, performance.

We are concerned that although companies that use the services of the UKTI value them, only 6% of SMEs in the FSB have accessed UKTI services. We recognise that the UKTI is trying to reach out to these SMEs but we believe that more proactive work can and should be done. This needs to be addressed if the Government is to fulfil its growth aim of getting more SMEs exporting. (Paragraph 195)

89. The Federation of Small Businesses (FSB) has a large membership base of around 200,000 small and medium sized enterprises (SMEs). The FSB published a survey called 'Made in the UK - small businesses and an export led recovery' in December 2010 which showed that almost a quarter of their members (23%) are exporting and there is an appetite among that group to do more in the future, particularly to countries in the European Economic Area), USA and Canada. This was a far higher number than they had previously thought and they have been in discussion with UKTI on how we can do more to support their members.

90. As part of a strategic programme of engagement with our stakeholders and intermediaries, we have developed a close working relationship at national level with the FSB. Specifically we work with the FSB's public affairs and policy team and regular dialogue occurs at a senior level between UKTI and FSB colleagues, as well as at Ministerial level. This applies as well across BIS. Specifically, we at UKTI are exploring how we can work collaboratively on a number of upcoming projects in the next 6-12 months on the exporting agenda, to include contributing to the FSB's upcoming survey on exporting and our participation at their national conference next March. Lord Green also hosted a FSB-led workshop on exporting at the Business Start Up Show on 19 May to outline the government support available to SMEs on exporting.

91. We have also engaged with the FSB on the initiative led by Lord Green which looks at the contribution that intermediaries can make, working alongside Government, to drive up the number of SMEs who export. UKTI is to launch an online peer-to-peer network of UK companies, so that they can support each other and share knowledge in order to internationalise their businesses.

92. FSB has fed back on the proposed agenda and format for the national event, scheduled to be held on 10 November, and will be invited to this and the regional programme of events which will follow.


Responses to general observations

93. The Committee commented that "ECGD has failed to support the wider business community, and in particular SMEs for far too long" and that "the majority of ECGD activity supports a core of large aerospace exporters".

Support for SMEs

94. The Government considers that these particular comments need to be set in context. The privatisation of ECGD's Insurance Services Group in 1991 changed the landscape for the provision of short-term trade credit insurance to exporters in the UK. Until then, ECGD had been the dominant provider and it served many thousands of exporters. The privatisation opened the provision of credit insurance more widely to private sector insurers and led to an expansion in the numbers and capacity of those insurers seeking to support both domestic and export trade. This gave UK companies much wider choice. Increased competition resulted in innovation, with more products being made available, and to reductions in the cost of insurance cover in the form of lower premium rates. At the same time, substantial contingent liabilities for the Exchequer and taxpayers were removed. Until the onset of the economic downturn in 2008, the credit insurance needs of the vast majority of exporters selling on short terms of payment (with most exports being sold on terms of payment of up to 180 days) were being adequately met by the private market and it was unnecessary for ECGD to intervene (other than to provide reinsurance to the private sector credit insurers in the first few years immediately following the privatisation).

95. The privatisation led to ECGD focussing the provision of its support on exports of capital and semi-capital goods and related services. Buyers usually require medium/long-term finance to pay given the high value of such exports; but, because of the amount and tenor of the risks, private market provision may not be available, especially for such exports to less developed countries.

96. This change of focus resulted in a marked reduction in the number of exporters that required ECGD support and a concentration of its support in certain sectors, e.g. civil aerospace, where the UK has particular strengths. Although ECGD did not directly support many SMEs, it continued to do so indirectly through the supply chains of major exporters of capital equipment. Hence, many companies have benefited from Government support since the privatisation of ECGD's short-term trade credit insurance operations.

97. Against this background, the Government does not accept that ECGD has "failed" the business community, in particular SMEs, for too long. But the Government has recognised that, as a result of the economic downturn in 2008/09 and the dislocation to financial markets including the credit insurance market, some exporters, mainly SMEs, still faced difficulties in obtaining all the support they needed. The Government accordingly asked ECGD to offer new products, particularly, but not exclusively, targeted at SMEs; these were announced in the Trade and Investment for Growth White Paper in February this year.

98. The aim of these products is to help to fill gaps in the provision of credit insurance by the private insurers and of the financing of exports by banks. In providing them, the Government is not seeking to displace the private market; its policy remains that ECGD should complement the private market and not compete with it. This necessarily means that ECGD will remain, in effect, an insurer of last resort, acting to address specific market gaps without exposing taxpayers to undue risk. As a result it will continue to have a narrower customer base than the private market and be exposed to concentrations of risks. The great majority of support for exporters will continue to be met by the private sector. Hence it is not expected that ECGD will see substantial increases in the volume of exports it supports, bearing in mind that ECGD responds to demand, rather than seeks to create it. Further, ECGD will not dilute its risk standards in a way that would imperil the achievement of the financial objectives set for it by the Government and, thereby, place an unacceptable risk on the Exchequer and taxpayer.


99. Written and oral evidence to the Committee highlighted that in 2009-10, 90 per cent of ECGD support was provided to exporters in the civil aerospace sector, dominated by Airbus S.A.S. The very high level of support in that particular year again needs to be put into context; it reflected unusual economic conditions. The dislocation in financial markets caused many projects in the civil non-aerospace business sector to be delayed or cancelled, whereas Airbus had firm contracts with specific delivery dates, but its customers were unable to raise sufficient finance from market sources, so the export credit agencies (ECAs) stepped in to fill the breach and to maintain the delivery of exports. This included the Export-Import Bank of the United States, the US export credit agency, in respect of support for Boeing; 75 per cent of its support for medium/long-term business in 2009 was provided to Boeing.

100. The average balance of ECGD exports supported over the last eight years to March 2011 was: civil aerospace 46 per cent; civil non-aerospace projects 28 per cent; defence exports 26 per cent. ECGD's Annual Report and Accounts for 2010-11 which were published in July reported that the sectoral breakdown of its support in that year was: civil aerospace 62 per cent; civil non-aerospace projects 34 per cent; defence exports 4 per cent. ECGD expects that these levels will be broadly maintained in 2011-12. Over the last two financial years ECGD has seen a significant increase in the volumes of capital/semi-capital goods exports that it has supported.

Responses to specific recommendations

We welcome the improvements to trade finance provided by ECGD. As these products are new to the market we expect the Department to update us on their availability and their take-up by business in its Response to this Report. ECGD has failed to support the wider business community, and in particular SMEs for far too long. It will have to make significant efforts to restore business faith in its operations and we expect it to demonstrate, in detail, how it is going to re-engage with all sectors of the economy and in particular with SMEs. Furthermore, we will expect the Department to prove, through regular publication of statistics, that ECGD is supporting more businesses from across the sectoral spectrum. (Paragraph 211)

101. The Government considers that ECGD has an important role to play in helping to improve and enhance the UK's export performance. The Government is therefore pleased that the Committee has welcomed the introduction by ECGD of its new products. These were all launched by ECGD within the timescales set by the Government in the Trade and Investment for Growth White Paper. As stated earlier, these products will help to fill gaps in the provision of support to exporters by the private market.

102. The Government also agrees that a challenge for ECGD is to engage with a community of exporters which has not needed its help for many years. In the few months since the development and launch of the new products, ECGD has embarked on an extensive programme to raise awareness of its new products amongst exporters across much of the UK, working alongside such bodies as UKTI, the banks, trade bodies, chambers of commerce and professional service firms, to help market its services. To date, ECGD has attended over fifty roadshow events around the UK to publicise its new products; in doing so it has directly engaged with over two thousand companies who already export or are interested in starting to export. This has been accompanied by publicity for the launch of the new products in the media, particularly through the trade press and the publications of organisations such as the British Chambers of Commerce and the Institute of Directors.

103. This work will continue and widen over the coming months. ECGD is mobilising staff resources to support the delivery of the new products by intensifying its awareness campaign and by responding to the enquiries and applications made to it for support on particular export transactions. Since the new products were launched, ECGD has received over one hundred new enquiries about its revised short-term insurance product and it has provided support for export transactions under its new Export Insurance Policy and Bond Support Scheme that will facilitate exports of over £40m.

104. The number of new enquiries to date in relation to ECGD's new products and widened business domain is provided below.

105. ECGD routinely publishes details of business it has supported in its Annual Report and Accounts. In future, this will include business supported under its new products. ECGD will examine the possibility of publishing information more frequently on the uptake of the new products on its website.

We find it surprising that an organisation tasked with providing a wider range of services is doing so at the same time as reducing its headcount. Efficiencies can always be found, but should demand for ECGD services outstrip capacity further reputational damage may be occur. We will expect to receive a detailed assessment of potential demand for ECGD services and an assurance that ECGD capacity can meet that demand in the Department's response to this Report. (Paragraph 213)

106. In the face of public expenditure constraints, the Government requires all departments and public bodies to reduce operational costs and to improve efficiency, while maintaining appropriate standards of service delivery. The Government expects ECGD to play its part. The staff reductions made by ECGD in recent years were focussed in its back office functions and were carried out in order to secure efficiencies and to reflect its lower business volumes up to 2008. While ECGD is charged with securing further reductions in its operating costs in the period up to 31 March 2015, there are no plans to reduce the number of staff in the exporter-facing part of ECGD.

107. The Government takes this opportunity to clarify the comparison of ECGD's staffing levels with its European counterparts. The British Exporters Association (BExA) witness quoted increases in headcount over the past decade in respect of the French, German, Italian and Belgian export credit agencies as follows "France up 258%; Germany up 37%; Italy up 325%; and Belgium up 188%". In fact, these figures relate to increases in business volumes as stated in a BExA survey, rather than staff headcount. The correct figures for changes in headcount (for state account business) since 2005 are: France down 8 per cent, Germany up 7 per cent, Italy up 18 per cent and Belgium up 16 per cent (since 2004). In 2010-11, ECGD supported broadly the same volume of new business as it did in 2003-04 with 41 per cent fewer staff, so staff productivity has greatly improved.

108. It is difficult at this stage to determine the likely level of future demand on ECGD particularly in relation to business transacted under its new products. However, the Government can assure the Committee that it will seek to ensure that ECGD has the requisite level of staff resource to meet the demands that are placed upon it, so that exporters receive the support they need.

We support the OECD rules which govern all Export Credit Agencies. We also acknowledge that many NGOs do not have faith that all ECAs abide by them. We look to the Government to work towards the highest level of transparency in ECGD transactions so that all interested parties can have confidence that ECGD activities abide by both the letter and the spirit of the OECD rules. (Paragraph 219)

109. It is ECGD's policy to comply with international agreements that affect the operations of export credit agencies, including those of the OECD.

110. In regards to transparency, ECGD is one of the most transparent export credit agencies. It makes publicly available large amounts of information about its operations and the business it supports, in accordance with the Government's transparency agenda and its obligations under the UK's Freedom of Information Act. It will continue to consider what further information can be made available while abiding by the law of confidence, which sets an entitlement to confidentiality on the part of individuals and businesses.

1   The early harvest package was exclusively focused on the Least Developed Countries (LDCs) with the aim to implement issues of interest to LDCs. Among its aims was to extend complete duty-free quota-free trade access to the rich world's markets for exports from the least developed countries, the world's 49 poorest nations, and make progress in reducing cotton subsidies. Back

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Prepared 3 November 2011