Examination of Witnesses (Questions 133-171)
Q133 Chair: Good
morning and thank you for agreeing to speak to us today. Just
before we go into the formal questions, in order to check on transcription
levels and so on, would you like to introduce yourselves, starting
from the left?
Nick Fry: Good
morning, my name is Nick Fry, I am the chief executive of the
Mercedes Formula 1 team, based in Northamptonshire.
Sir Roger Bone:
I am Roger Bone and I am the president of Boeing UK.
Lord Powell: I
am Charles Powell, chairman of the Asia Task Force.
Paul Skinner: Paul
Skinner, chair of Infrastructure UK, within the Treasury, and
I was previously involved with Shell and Rio Tinto.
Q134 Chair: Thanks
very much, I appreciate you coming. Before I go into the questions
there is one particular question that I should ask Sir Roger.
Comments have been made that you represent Boeing, which has
been involved in lawsuits against a British company, or British
interests. Is there not a conflict of interest in you being an
ambassador?
Sir Roger Bone:
Chair, I have two points to make to that. The first is that we
are very much a British company. We are onshore in the United
Kingdom. We are a British subsidiary of an American company,
we do an enormous amount of business here and we are heavily dependent
on the UK aerospace supply chain. We spend billions of dollars
on business here and therefore I am in a good position to comment
on the supply chain. We are also growing our footprint here;
we have recently signed a contract with the Ministry of Defence,
whereby we will be taking between 250 and 300 MOD civil servants
onto our books, who will become Boeing employees. So we belong
to the UK in a very big way. The second point I would make is
this: speaking as the head of the British subsidiary of a huge
American company perhaps adds to my credibility when I talk positively,
as I can, about the UK aerospace industry.
Q135 Chair: Has
the Boeing legal action helped or hindered the development of
your British footprint?
Sir Roger Bone:
It has no impact. The dispute at the WTO is a highly complex issue,
which is running its course at the moment. It is an intergovernmental
issue at this stage, rather than an inter-company issue. There
are very strong views on both sides of the fence; I don't want
to go into all the detail now, although I am happy to if you wish,
Chair. I think the best course is to let that run its process
through in the WTO, and for both sides to respect whatever judgment
the WTO comes to, to listen to it, to respect those judgements,
and then to move on.
Q136 Chair: We
will watch that with interest. Can I move on to more general
questions? I would stress that not every member of the panel
needs to feel obliged to answer all the questions. If you feel
that your particular response has already been covered by another
speaker, please, in the interests of brevity, move on. Can I
just start with a very general question? Since the start of this
inquiry we have heard that the UK has lost its "mercantile
spirit": that it gives the impression it does not have the
capacity or interest in exporting. What do you see as your role,
as British business ambassadors, in reversing this?
Lord Powell: Shall
I start, Chair, as a volunteer? It is not true that Britain has
lost its mercantile spirit. I think that is absolutely wrong.
I would, however, say that its mercantile spirit needs to be
liberated; I think it has become rather submerged by regulation
and tax, and reforms in the economy are strongly needed to set
it free again. Secondly, I think when we talk about our mercantile
spirit, which is a term of which we were very proud in the 18th
and 19th centuries, we have to remember that the competition globally
is very much stronger these days. Therefore, the idea of Britain
as virtually the only trading nation out there is a bit dated,
so we are up against it. What do we do as Business Ambassadors?
In my view, we work alongside companies and the Government in
promoting what Britain and British companies have to offer in
world markets. We use the access that we have through our own
business activities, and the networks that we have built up, to
advance the British cause. Above all, we talk up Britain; we
don't play down Britain, as the media so often does.
Q137 Chair: Anybody
wish to add to that?
Paul Skinner: Just
a small point. I think that one of the issues we have, in relation
to Britain's export performance and capability, is that there
is a general unawareness of the data. The car industry is an
excellent example; we are a very large manufacturer of automotive
vehicles in this country. We export a huge fraction of the number
produced. That does not have the transparency or visibility that
would help to dispel concerns that we may have lost our appetite
for global trade and manufacturing. So I think one of the things
we need to focus on is lifting the transparency of hard data like
that. I do agree with Charles Powell's comment that there is
a tendency to talk ourselves down in this area, when I think we
have every reason to talk ourselves up. That is one of the primary
roles of business ambassadors, given the opportunity on public
platforms in overseas markets.
Q138 Chair: Could
I just follow that point in the context of the motor industry?
Paul Skinner: In
which I am not an expert.
Chair: Because we have
foreign-owned, British manufacturing of cars, there is a domestic
perception that we don't produce cars any more. Is that reflected
abroad as well? Does that impact on the ability of our British-based
manufacturers to export even more cars than they do?
Paul Skinner: Well,
I think it is a positive point because if you flip the argument,
the reason that a number of these foreign owned car manufacturers
are here is because we have created the conditions for them to
come here, invest, create jobs and export value.
Q139 Chair: I
agree with that, but it is not really the point of my question.
What I am trying to get at is: does this prevailing perception
that we no longer actually produce cars in this country affect
our potential for foreign purchases of cars made in this country,
albeit by foreign-owned companies?
Paul Skinner: Personally
I don't think so, but there is certainly clarity to be added to
explaining why a number of our major manufacturers in this country
are foreign owned. I don't think that diminishes the economic
value of their presence here.
Nick Fry: As the
car guy, maybe I can add a little bit? Regarding your first point,
I think we have severely underestimated what I consider to be
the competitive threats. Maybe the penny is now dropping that
there are a lot of countries out there that are winning a lot
of business, notably in Asia. Hopefully, with initiatives like
this, we can up the ante in doing something about it. Regarding
the car business and a more general point about advertising what
we are good at, I think there are a lot of untold stories. Not
many people seem to realise that last year we made about 1.2 million
cars in this country. The majority of Ford's diesel engines globally
are made here. A large percentage of their gasoline engines—about
a quarter, I think—are made here. Not many people in or
about my business seem to realise that Michael Schumacher's MercedesBenz
is made in Northamptonshire, as is the engine. That is a point
that we made last week to the Prime Minister. There are a lot
of good stories. Going back to the question you asked, because
we don't tend to talk ourselves up enough and we tend to be a
bit self-deprecating, it does reflect on how people perceive us.
The brand of the UK is extremely strong, and we are the ones
that need to get out there and talk it up, because a lot of people
do think very well of us and, in many ways, we seem to be our
own worst enemy.
Sir Roger Bone:
I would endorse that, Chair. The area of British industry that
I know most about is the aerospace sector. That is still very
much a jewel in our crown; we have something like 16% of global
markets for exports in the aerospace sector. That is an extraordinary
achievement for industry here. Certainly from my own company's
point of view, we still come to the UK for the cutting edge of
high technology that we find here. We are just launching the
new 787 Dreamliner aeroplane, and there is a very substantial
contribution to that by British industry. The issue that confronts
UK industry is how we go forward, and whether we can maintain
the levels of investment in research, development and human resource,
to enable us to maintain that cutting edge.
Q140 Chair: Thank
you. Lord Powell, did you indicate? No? That's fine.
You have spoken about talking up British business
excellence, and I don't think anybody could quibble about that.
Is there anything more specific that you feel defines your role
as a British business ambassador? Perhaps if you have done something
particular you could tell us about it. Lord Powell?
Lord Powell: Yes,
I think there are very special things that all of us can do.
In a sense I feel that I have been doing what needs to be done
for quite a few years, even though I have only been a British
business ambassador for a few months. First of all, we can focus
on our areas of particular expertise and knowledge, and I have
tried to do that in Asia. In Asian markets I have been preaching
the China message for 20 years now—the potential of China's
growth and its markets. I have been engaged in setting up the
Singapore British Business Council, I have been chair of the ChinaBritain
Business Council for about 11 years. I now chair this Asia Task
Force and that I think is a role for a British business ambassador,
because it is really trying to get more British companies out
there, to export to the market. So in one sense it is an inward
facing role. It is getting out the message, and we have been
doing it through organising a series of events right round the
UK, which usually a senior Minister and I will address. Then we
organise what are called country clinics. We get our Ambassadors
or High Commissioners from the Asian region, or the Trade Advisers
from the Embassies and High Commissions if they are back in the
UK, to come and run these clinics. Companies can go there for
45 minutes and get real first-hand expertise about the markets.
They can ask questions and get knowledge about what help is available.
That is a very specific role that one can play, and I try to
do that.
Of course, abroad there are many other roles you
can do: lobbying on behalf of British companies, lobbying for
better market access and for overcoming specific business problems.
I was down in Indonesia last week for three days and saw several
Government Ministers. There are a lot of obstacles in Indonesia
to British, and other, companies. It is telling the Indonesian
Government, and making them recognise these sorts of problems
that I think is a helpful role for business ambassadors to do.
Q141 Chair: That
is interesting, because I would have thought that was a political
role as well.
Lord Powell: I
don't think one has to distinguish in this case; it is a political
role, and Ministers do it as well, but I think it does not hurt
at all to have businessmen doing it alongside them.
Q142 Chair: Any
other comments on that?
Sir Roger Bone:
Chair, I look back over the last 15 to 20 years of my professional
activities, and before I went into the private sector eight years
ago I had a decade as a British Ambassador overseas. Much of
what I do now I see as a kind of continuation of the work that
I was doing with UKTI in its infancy, 10 to 15 years ago. It
is a mixture of advocacy, of targeting potential inward investors,
as well as helping, in a handson way, potential exporters
overseas. In my own case, as an ambassador for British business,
I have both interacted with business men on the west coast of
the United States, potential investors here, and spoken at a forum
of SMEs at Loughborough University in the West Midlands, preparing
to invest overseas in emerging markets for the first time.
Q143 Chair: You
talk collectively about lobbying and making connections and so
on. Can you give any evidence of where there is a definite, measurable
impact of something you have done as ambassadors? Or maybe something
one of the other ambassadors you know may have done?
Lord Powell: I
think the question of specific impact is always very hard to measure
in the whole trade field. This applies not just to business ambassadors,
but to UKTI and to Ministers too, because at the end of the day,
we don't do the business. It is the companies that do the business
and that is where the impact is felt. I would say that yes, I
think I have contributed to raising awareness of Asian opportunities
across the UK, particularly amongst SMEs. That is quite specific
but you cannot measure it in pounds gained in export orders.
You can see export figures for Britain go up, and you can think
"Maybe I helped with that", but you cannot give anyone
credit for that other than the companies that actually make the
sales.
Q144 Chair: Have
you actually had any companies tell you that, arising from your
advice, they have managed to do this?
Lord Powell: Yes,
comments come in two ways. One is through our Embassies and posts
in the area, who say they are getting many more inquiries from
smaller British companies now and they are seeing more coming
out of trade missions and so on. In terms of specific company
comments, again, yes, through things like the ChinaBritain
Business Council you do hear that these efforts are helpful and
supportive. Are they ever clinching in a deal? Very rarely.
Nick Fry: I have
only been involved in this for one month, so maybe I could just
comment on what I hope should be the case and what I hope we can
achieve. I think we do need very specific targets; I think the
business ambassadors need a clear mandate, and to be given objectives.
The way we run our business is with an almost laserlike
focus on achieving results, and if this initiative is to be a
success we do need to follow through from general advertising
about how good we are, to setting out the things we hope to achieve
with very clear targets. Then we can get back to measuring whether
we achieved these and if not, why not. Possibly it has not been
the case in the past, but we need to be a lot more focused about
this and be clear on what we are trying to achieve and measure
whether we do it or not. If we don't, then we need to improve
the situation for the future.
Paul Skinner: I
have a brief addition to the points that have been made. In periods
where I have been in a leadership role in a global corporation
hosted in the UK, there have been occasions where, in overseas
markets, it has been possible to get a public platform because
of the recognition of the company I have been associated with
at the time. That has been a helpful supplement to local diplomatic
or trade representation, who might otherwise have found it more
difficult to pull a large gathering of local businesses and other
interested people together. That is something that I think our
larger companies can do. Also, I think there is a role for our
leading global corporations, hosted in the UK, to play a supportive
role towards small and medium-sized enterprises, who are trying
to get more involved in overseas markets. The larger companies
are perhaps going to have a better understanding of the ways those
markets work, and they will probably be operating supply chains
from which smaller UK-based companies can benefit, all other things
being equal.
Chair: Just before I go
on to my final question, Nadhim Zahawi would like to come in.
Q145 Nadhim Zahawi:
I just want to pick up on Nick Fry's point. I completely get
the idea that it is hard to measure the work of the ambassadors,
and I also understand the narrative—that we should talk
ourselves up not down. However, there is a bit of a rude awakening
in what is happening elsewhere in the world because of competition.
What I would like to ask the rest of the panel is whether they
agree with the newcomer, i.e. that there should be real targets
based on outcomes? We have heard in previous evidence sessions
that most of these targets are about how many people you can get
to a particular conference, rather than outcomes of real deals
on the other side. What are the views of the rest of panel on
the point Nick Fry has raised?
Sir Roger Bone:
I agree with the comments Nick has made. I think one should always
try to be as specific as one can about the achievements. As a
business man too, I am very focused on concrete achievements,
concrete targets—how you meet those targets and how you
don't. If I could recall my time as an Ambassador overseas, it
was actually much easier to set specific targets and to measure
your achievement in that role because you were there the whole
time and you could follow through a process that you might initiate.
You could actually see on the ground the consequences of what
you were doing. The role of British business ambassadors is slightly
different, in the sense that we dip in and out of the process.
We give of our time as and when we are somewhere, and when we
can add value to an ongoing process. Looking back on it, I sometimes
feel that it is difficult for us to get a feel as to how much
our personal contribution has been to the process or target.
So, more feedback from UKTI on how we have done would certainly
be welcome.
Lord Powell: I
do not think you can set specific financial targets for something
you are not in control of. I am not in control of selling motor
cars in a specific market. If I was in my own business I would
be able to set a target, but you cannot if you are just a business
ambassador. So, I think in terms of specific targets, you cannot
do much more than the number of visits you have made to a market,
the number of events you have spoken at or chaired and that sort
of thing. That may sound a little amorphous but it is quite useful.
I do not think it is feasible to have specific financial targets.
You cannot do it in Government in this sort of role either.
Paul Skinner: Just
one point. I think what the group of business ambassadors does
constitute is a resource available to Government and UKTI to shape
the priorities for trade and investment policy as a collective.
I think perhaps this is something that, in my experience, has
not been particularly well utilised in the past. Within the ambassador
network there is quite a lot of useful opinion that could be a
valuable input into the policy formation.
Q146 Nadhim Zahawi:
So do you need to structure that?
Paul Skinner: You
do.
Q147 Mr Binley:
We have had the great privilege of going to a sizeable number
of countries looking at UKTI, and if I hear the word "process"
again I shall go mad. They are for ever giving us figures about
the numbers of people that attend this and that, and the number
of exhibitors they have. When I say "Okay, what is the outcome?"
they haven't got a clue. I must tell you that process is only
a part of the game, and Nick Fry is absolutely right—and
I am delighted that he mentioned Northamptonshire, my home county.
We are interested in outcomes, and there are ways of measuring
outcomes. One of the things I hoped you would do is inject into
UKTI the concept that, although process is fine, it is not the
be all and end all, it is only the start of the game; outcomes
are the real game. How can we do that, recognising your experience?
Lord Powell: Well
as you heard from my last answer I am sceptical when it comes
to very specific outcomes for people fulfilling the sort of function
we are asked to do. We would all like to see exports increase;
we know that in some markets there is a definite target. For
instance, when the Chinese Premier met the Prime Minister in Beijing,
they agreed to set a target for two-way trade between Britain
and China of $100 billion by a specific date. That is a
general target, it is not one that we find in many countries,
and it is very much related to the nature of the Chinese system.
To say that every business ambassador should be able to deliver
$5 million or $10 million worth of contracts, is something
I think you cannot make work.
Q148 Mr Binley:
Forgive me Lord Powell, that is not what I said. I said how can
you, using your expertise, get UKTI and the Government to recognise
they need to monitor outcomes? We need to be aware of how successful
we are being; otherwise this is simply an accolade bestowed upon
you, a sort of honour in another way.
Paul Skinner: I
would like to go back to the response I gave to an earlier question,
if I may? I think there is scope for more dialogue, not only
in policy and strategy formation, but the way in which UKTI itself,
which is the accountable agency in this case, goes about the business
of setting sensible priorities and, perhaps, targets. However,
they are the prime accountable organisation. We can and should
help them in that, but we do need to arrive at some kind of more
structured engagement with them in order to deliver that. I think
we could do that.
Sir Roger Bone:
To echo a point I made earlier, we do need more feedback from
UKTI as to how effective our own contribution has been. I can
assure the Committee that that is a point I have raised with Ministers.
Q149 Chair: That
is just the cue I want to move on to the relationship between
the business ambassadors, UKTI, BIS and No. 10. It has been put
to me that some of the ministerial visits happen at the conclusion
of what may have been a lengthy round of negotiations, in effect
to crown contracts that were going to happen anyway. In comparison,
Angela Merkel and President Sarkozy will dash out to a foreign
country in order to facilitate a deal, not just to crown it.
First of all, do you think there is something in that? Secondly,
as ambassadors, do you feel that you have a role in your interaction
with BIS and No. 10 to set a foreign business agenda that may
benefit from a political intervention, in some cases from the
most senior level? Lord Powell?
Lord Powell: I
think the answer to your last question is yes. I don't think
there is a great difference between what British Prime Ministers
do and what other countries' Heads of Government do. Part of
it depends on the nature of the market you are dealing with.
In China it is still the habit to sign contracts at the time of
senior visits; in other markets it is not at all a part of a prime
ministerial visit just to be there to sign deals. In my experience,
different Prime Ministers have done it in different ways. I worked
for many years for a very active Prime Minister in the contract
field, who was very keen to know, everywhere she went, who the
specific British companies that were trying to win a contract
were. She would belabour the Governments concerned to make sure
that we did win them. Others, perhaps, have not been quite so
active. My impression, from the breakfast that all of us attended
at No. 10 the other day, was that this Government seems very committed
to help British companies and make supporting British companies
in winning contracts a major part of all its foreign Ministerial
visits. They want to be briefed every time they go to markets,
as do we, on what are the pending negotiations that could lead
to a successful contract. I have lived and worked in Germany
and I see quite a bit of France these days, in a business sense,
and I do not think there is a great difference between what is
done there. In fact, in some ways I think we are actually more
effective in the process—I know Mr Binley doesn't like the
word; it's the first time I've used it—but maybe not in
the results. That is more down to the sort of products where agreements
are being signed than it is to the nature of the political effort.
Q150 Chair: Is
there anybody who wishes to add to that?
Nick Fry: Regarding
the first part of your question, I don't know enough about it
to make any accurate comparisons, so that is for others to comment
on. I think the meeting we had with the Prime Minister a couple
of weeks ago was very good as what I would consider a kick-off
meeting. I think the scene was set very well. Subsequent conversations
with Lord Green were promising in following up on that. The important
thing is what we do next, and putting in place a very structured
plan to come back with clear objectives as to what we are supposed
to achieve.
Q151 Chair: You
talk about a structured plan, is there any formal process of interacting
with senior Ministers and the Prime Minister?
Sir Roger Bone:
Chair, there is no formal process at the moment for that. We
interact with Ministers as and when we do so as part of our normal
activities, and where there is a specific point to discuss in
relation to our trade ambassador role. There is no formal structure
for doing that, as such.
Lord Powell: There
are some exceptions. With the Asia Task Force we meet with Ministers
two or three times a year.
Paul Skinner: I
think in the meeting that took place recently with the Prime Minister
he made it very clear where his expectation level sat in relation
to the activities of this network, and that he would expect to
be engaged at intervals with the network to understand what they
were managing to do.
Q152 Nadhim Zahawi:
I want to ask you about the meeting itself. Before I get to that,
I think you raised an important point about the attitude of the
Prime Minister to business development, Lord Powell. You gave
the example of Margaret Thatcher wanting to know every deal that
was on the table with a particular country, and then badgering
the other side to make sure that deal got signed. One of the
things that we have been aware of, and I think the Chair alluded
to it, is that we are very good as a nation when it comes to the
service industries and selling those abroad, yet we have been
much weaker when it comes to manufacturing, construction and so
on. The French certainly have been much more proactive in pushing
other sectors beyond just the service industries. Aerospace is
probably the only exception to that rule. Do you think it is
a trickledown effect from the Prime Minister downwards,
and that it is the attitude of saying, "I want to know every
deal" which makes the difference?
Lord Powell: I
think it is a very important influence. If Government servants
and business know what the Prime Minister's priorities are, and
they are clearly expressed, then they tend to follow that lead.
This Government has said that commercial diplomacy is right at
the top of its list of priorities, so I would expect the machine
to fall in behind that, and rightly so. Your first point is a
very important one. The French have a much bigger and better
nuclear power industry than we do. Big deals tend to get signed
because they tend to be GovernmenttoGovernment or
have a high Government component. Germany, obviously, in the
machine tools and automobile industry is extremely strong. Those
are things that many of the main markets are looking for at the
moment, particularly in Asia. If you look at China, Korea and
markets like that, those are the big-ticket items that you will
see. Ours often tend to be less headline-catching deals, outside
the aerospace industry and Rolls-Royce in which I am heavily involved—we
do get very large orders in the aero-engine business and perhaps
we don't make enough of them publicly as we should. I would not
denigrate what the City of London and our services sector do,
but it is not just financial services: our engineering specialists,
our consultants and so on do very good business. It is not as
visible, you cannot have such a big contract signed under the
glare of the television lights, but it is there underneath. I
cannot escape the overall point that yes, our export performance
is not as good as it should be, we need to improve it and the
Government are quite right to make this a very high priority.
Q153 Nadhim Zahawi:
Thank you for that. Returning to the meeting on the 11th, I just
want to go further into the detail about what was discussed and
your impressions, specifically Lord Powell. Is this Prime Minister
like Margaret Thatcher or is he like other Prime Ministers?
Lord Powell: Well
he was certainly very vigorous in expressing himself at this meeting,
in setting the priorities. I was with him on his visit to China
in October or November and he certainly seemed to give a very
high priority to business there. He travelled with the business
delegation and spent a lot of time with us on the aeroplane. He
took us to his meeting with the Chinese Premier, he attended a
reception and he spoke at the ChinaBritain Business Summit.
So the evidence I have is that he is very strongly committed to
supporting British business. I don't think anyone would pretend
to emulate the precise style of Margaret Thatcher. I notice that
you used the word that she would "badger" foreign Governments—I
think that is a very diplomatic term for what used to happen.
Q154 Nadhim Zahawi:
Just on that point—Paul Skinner, you mentioned that the
Prime Minister outlined the details of what he expected from the
ambassadors at the meeting. Can you just shed a bit of light
on that expectation, or more detail on that?
Paul Skinner: Well,
he opened the meeting and spoke with intensity and passion about
delivering superior trade and investment performance, and made
it very clear that he was relying on this network to help facilitate
this. Lord Green, who had only been a day in office at the point
of this meeting, was also able to demonstrate that from experience.
The key point, for me, was that the Prime Minister made it very
clear that he expected all our overseas representation to start
to develop an increasing trade and investment bias, and that he
was going to show regular interest in the progress that was being
made. I don't think you could have wished for a more enthusiastic
expression of intention in this area.
Q155 Nadhim Zahawi:
Thank you for that. Could I move on to the role of UKTI when
it comes to you fulfilling your role? Are you briefed by UKTI
before you go on a visit? When you give an answer to that question
could you also shed some light on how helpful you find those briefs
from UKTI, and say if there is anything else that you would like
from them. What is the level of administrative support that you
are getting from BIS? How are you funded? Is adequate funding
there for you to carry out the role?
Sir Roger Bone:
Perhaps I could go first on that? Every time we undertake a commitment,
UKTI produce a brief on the issues that they think might come
up. In my case they produce a background brief on the current
state of play within the UK aerospace supply chain, and any issues
currently arising that I might need to know about. I am given
good administrative support. The understanding is, with the commitments
that we undertake, that they are done in the margins of our existing
travel and our existing diaries. So the onus really rests with
us to tell UKTI where we are going to be at any particular point,
and it is then for them to decide and to advise whether there
is anything we can do for them, as part of our regular travel.
So in that context we find the administrative support quite sufficient.
On funding—there is no specific funding for us on this.
We give of our time free. We receive no payment for this; very
occasionally a minor expense might be incurred, for example an
additional night in a hotel in order to undertake a commitment,
but that is the extent of it.
Lord Powell: Could
I just amplify that in one small way? When you are talking about
briefing by UKTI I think you also have to comprehend it as briefing
by UKTI staff in our posts overseas. That is a very important
part of it. I find it absolutely essential and invaluable to go
to the Embassy or High Commission and get briefed there, when
I am in the country. They are really up to date on how matters
stand, trade obstacles, progress with specific contract negotiations
and so on. So UKTI in the wider sense, I would say, are very
good about briefing.
Paul Skinner: I
would agree that the briefing received more than meets the requirement.
I think the challenge for this network, and the way it will become
effective, is if it can personalise the messaging. That is the
merit of having people from various fields active in this way,
so it is a question of taking the core messaging as to the UK
position and intentions, but somehow packaging it in a way that
will add to the credibility and impact of the message by virtue
of the people who are delivering it so that they are not, as it
were, from the mainstream Government organisations; they have
come from the side with a special, experienced point of view,
which, hopefully, will add to the credibility of the message.
Nick Fry: To add
to what has just been said, my experience so far is that all the
admin, support and briefing is first-class; there is no issue
with support. As to what has just been said on budget, I do not
think I have called for anything so far. I think they would be
extraordinary circumstances if one had to ask for something special
because it fits into our normal schedule. My only "could
do better", which we have to move towards, from what I have
seen so far, is that briefings need to be taken down to an absolute
focus, which comes back to: what are we trying to achieve here?
In my business I am used to very specific objectives. When we
go out to get sponsorship or do business it is very focused indeed.
When we go to a reception obviously we target certain individuals
to whom we need to speak with a certain outcome in mind. From
what I have seen, at the moment the briefings could probably be
honed a little more towards, "This is the mission. What do
we want to come out of this with?"
Q156 Nadhim Zahawi:
I think that is coming through from the responses we have had
up to now, i.e. it would be helpful to have a bit more structure
using all the experience and backgrounds. Last week we heard from
the CBI that the previous ambassador scheme had worked very well
but had tapered off. How can we avoid that tapering off and continue
the momentum of this scheme? Everything we have heard up to now
is incredibly positive, but the danger is that obviously these
things fade away and nothing really is achieved.
Sir Roger Bone:
My only comment is to say that I joined the scheme halfway through
2009, so I was not one of the original members of the group but
I did do this with the previous Administration. We came to a
point early last year when I suspect the Department felt it was
not quite sure what would happen on the political scene and whether
there would be an appetite to continue this through any change.
I undertook one commitment for UKTI in July of last year which
was pretty soon after the election, but it had been in the diary
for some time and was linked to the Farnborough Airshow. There
was a slight hiatus while the new Administration got to grips
with exactly how they would like the scheme to continue.
Paul Skinner: I
think you have to put in place a regular set of interactions between
the trade interests in Government and this network, which is something
that happens regularly. Perhaps not everybody can participate
every time but at least to maintain the currency of the arrangement
and its vibrancy is critically important. The only way to do that
is to make sure you have things happening with a regular drumbeat.
Nick Fry: I believe
Lord Green is planning to set up a follow-up meeting every two
or three months. It is imperative that that happens to keep the
momentum going.
Q157 Rebecca Harris:
Lord Powell, from your experience what has been your advice, and
perhaps was at the meeting on the 11th, to the Government on how
to improve both our trade exports and inward investment? We talked
earlier about the brand but I mean beyond that.
Lord Powell: The
first point must always be that in exports it is the domestic
base that counts. Exports will happen as a result of how companies
are performing in this country and the conditions in which they
operate, so it is getting the economy right, reducing the burden
of regulation, improving education, vocational education, training
and all these things which make companies more effectively generally
and which can also contribute to making them more effective exporters.
In that sense that is a very broad bit of advice but it is probably
one that we would all tender to Government of whichever political
party. Beyond that, the second point is that the political backing
is very important. We have just been discussing that. This kind
of campaign does not work unless the Government are wholeheartedly,
visibly and audibly committed to it and giving a lead in it, that
Ministers travel to markets and when they are there they are thoroughly
briefed to raise issues of interest to business and perhaps take
business delegations with them and so on. That also helps the
effort. Over the years it has rather fluctuated. It has not
always been as good as it should be, so the standard needs to
be kept up. Following on Mr Zahawi's point, it is very easy for
momentum to flag after a bit. Any Government perhaps tires towards
the end of an electoral period, but it must keep up the pace.
That is another bit of advice we would give them. Then there
are more specific points but I think it would be tiresome to go
into all the details. To give just one example, I think very
large trade delegations do not really work because so much effort
is devoted to shepherding them, getting them onto coaches and
saying who is going to which meeting and so on. I experienced
several very large delegations and I thought their effectiveness
was much less than a high level but quite small business delegation
supporting a Prime Minister or Minister.
Paul Skinner: For
me, the overriding consideration is to ensure that between Government
and the business community and the network of ambassadors there
is real clarity as to what the priorities are, certainly in export
markets. One thing we have not talked about at all in this conversation
is inward investment, which is another important dimension in
this. Currently, I am working in the field of infrastructure
where we have a potential investment gap and where encouraging
inward investment is critically important but also in manufacturing.
For me, it is: how do we make the priorities clearer so that
everybody across our business community in the UK is clear about
what we want to do?
Q158 Rebecca Harris:
What have we been getting wrong? Why is there an investment gap?
Paul Skinner: In
terms of inward investment?
Q159 Rebecca Harris:
Yes.
Paul Skinner: I
think we have had remarkable success. Let's not view this negatively,
but in certain areas, of which infrastructure is a good example,
there is potentially a significant investment gap as a result
of the requirement to renew large tracts of our energy and transport
systems, for example. We need to ensure that the opportunities
which are there are widely understood in international markets.
If we do not do that we are at some risk of a shortfall occurring.
Chair: Can I just bring
in Margot?
Margot James: My
question was rather general.
Chair: Okay, we'll finish
with yours then, and then we'll give you a chance.
Sir Roger Bone:
If I may come at this in a rather specific way through the aerospace
manufacturing sector. As has been acknowledged already we have
a first-class UK aerospace supply chain. Companies like mine
continue to do enormous business with the UK aerospace industry.
If I am frank, I worry about how it will look in four or five
years' time. By that I mean that the aerospace industry is a
hugely competitive global marketplace. The reason why in the
past Boeing has come to the UK is because of the cutting-edge
technology we find here. We are an industry that works in huge
cycles, so the key thing is what happens the next time we launch
a new generation of products or build a new aircraft. Perhaps
that will be the replacement for the single-aisle aircraft. I
do not know. That might be in a number of years' time. I would
like to think that when we get to that point UK industry will
be as competitive as it has been in the past in winning contracts
with big companies like mine. If UK industry is to be in that
position the absolute priority at this stage is investment in
the research and technology base and the human resource to ensure
that those standards are maintained. As a UK citizen sometimes
I worry as to whether we will maintain that cutting-edge position.
I like what I see in terms of the new Government's policies in
this area; I like the emphasis they are putting on investment
in research; and I like the ideas of technology innovation centres
with which no doubt the Committee is familiar. I am also personally
familiar with a number of excellent, world-class research centres
in the UK. For example, at Sheffield university there is an absolutely
first-class advanced manufacturing research centre with which
we are very proud to be associated. Therefore, we can do it.
There is progress there, but it is absolutely vital that that
should be sustained as we go forward.
Nick Fry: I think
that success or failure of the initiative will come down to consistent
leadership from the top and keeping up the level of energy and
keeping things going. The other important thing is availability
of senior people to break down barriers when they occur. From
a business point of view sometimes one can easily get bogged down.
When one asks for help it is very dependent on whom you get. Sometimes
it is very successful if an individual takes up the cause and
pushes it through; at other times a lot of people get involved
and nothing happens to the point where business tends to give
up asking for support. When there are issues and we have objectives,
if there are barriers they need to be addressed in a very timely
fashion.
Q160 Gregg McClymont:
This is also a broad, general question. Reference was made to
our manufacturing capability. Do you think we have a problem
in this country with the breadth and depth of our manufacturing
base? Supply chains have been mentioned. Obviously, in aerospace
we have that scale and capacity, but is there a problem? Do we
have enough sectors of that kind that can support the supply chain?
Sir Roger Bone:
I can talk only about the sector I know about. Nick may be able
to talk about the automotive sector a little more.
Nick Fry: If I
take advanced engineering, which I guess is what I represent,
we have 4,500-odd companies, all small and medium-size, that operate
in the sector. It is of a reasonable size: I think it has a turnover
of about £6 billion of which about £4 billion is
exported, so it is quite important. The slightly worrying thing
is that although a lot of the companies involved in the sector
continue to exist, from our perspective there has been a noticeable
shrinkage in their capabilities. When we go out to our supply
base this year versus last year or previous years, it is noticeable
that they have fewer people and less capability to cope. We need
to reverse that and encourage those businesses somehow to get
out there, win more business and employ more people. At the moment
it is tending to slip in the opposite direction.
Paul Skinner: I
would like to comment on opportunity. I remember very well the
way in which the UK developed the North Sea as a hydrocarbon basin
and created a supply chain which is still printing value for the
UK in global markets. It is diminishing a bit but it is there.
I think that in the energy transformations ahead of us we have
the opportunity with very large levels of expenditure in prospect
to create new supply chains in renewable energy and parts of the
nuclear industry if we choose. Those opportunities do not come
along very often, so we should think very hard about how we seize
the opportunity to create new economic platforms that will be
valuable to us for a long time. But they need skills. The point
made earlier, which I endorse, is that the flow of science and
technology skills into our economy is something about which we
should be very concerned. We had better not miss that as something
that will influence the outcome.
Q161 Gregg McClymont:
Has the flow been disrupted, or is this a longer-standing problem?
Paul Skinner: I
think we have seen an erosion of the number of those engaged in
science, technology and engineering, not only graduates but at
different levels of professionalism, flowing into UK industry
in recent years. A lot of people have switched their ambition
towards services activities. In some way we have to recreate
the enthusiasm for those core technical skills on which so many
of our great industries in the past have been built.
Q162 Gregg McClymont:
How do we go about doing that if, as I understand what you say,
a lot of our better graduates in these fields now migrate towards
the City and financial services? What practically do we do to
redirect that talent?
Paul Skinner: Ultimately,
the market will determine those flows. In some way we as employers
have to create careers that are attractive in price for people
who aspire to them. That is where we have to start our thinking.
Sir Roger Bone:
I referred earlier to the technology innovation centres, which
the Government are keen to promote. I think that is one way to
encourage developments in the industrial base to which you refer,
but private industry too is doing its bit. For example, just
two weeks ago I was privileged to attend the opening of an advanced
forming research centre at the University of Strathclyde which
will be absolutely state of the art in that aspect of advanced
manufacturing. That is a very encouraging sign. We and a number
of other big companies are certainly participating in that.
Chair: We are moving slightly
away from the role of ambassadors. Perhaps we can refocus it.
Nadhim, Brian and Margot have indicated that they want to ask
questions on this section, but first I ask Rebecca to conclude
her questions.
Q163 Rebecca Harris:
Nick Fry said at the outset that the UK plc brand was quite strong.
I just wonder whether everybody agrees with that. From your
travels how do you feel we compare with our competitors in terms
of our brand and the effort we put into inward investment and
exports?
Lord Powell: Broadly,
our brand is still pretty strong but not as strong, particularly
in the manufacturing sector, as the German brand. There is no
point in ducking that. German manufacturing industry, particularly
engineering, is very strong and exports hugely across some big
product sectors and is very respected. But I do not think that
should make us disheartened. Our brand is still a very recognisable
one. A lot of progress has been made in recent years in getting
away from Beefeaters, red London buses, processions and that sort
of thing. The brand has been refocused quite successfully on
what we are actually doing in advanced materials, information
technology and so on. To give you one example, in the World Expo
in Shanghai the British pavilion won the golden award for being
the best and showed very much the sort of brand that one would
want Britain to have. I have a terrible memory of the 1980s of
going with Margaret Thatcher to various Expos and the British
pavilions were awful. The prime exhibit was usually a cardboard
model of Concorde with a rather bent nose and it did not really
tell you very much about what Britain was really offering. I
think that side of things has improved greatly.
Nick Fry: My view
would be that we need to do more work to hone what we actually
are. I think the brand is reasonably strong but, looking at it
from the marketing perspective, it needs to be defined better
than it is at the moment. What are we good at? What are we going
out there to sell? Almost in advertising terms, what is the elevator
speech about what we are good at? I do not think we have honed
it down to that level. As Lord Powell says, there is a bunch
of things from which we have moved away. But what are we? The
only other observation I make is that, with all due respect to
everyone, possibly we are a little too polite. We go back to
places with our Grand Prix schedule every year. It is quite a
nice cadence because you can see the level of change, which in
most parts of Asia is immense. The people are very young, enthusiastic
and committed to commercial success.
Q164 Rebecca Harris:
We are not pushy enough?
Nick Fry: We are
not pushy enough, absolutely; we are a little, "After you."
I think that has changed but—I refer to it again—compared
with what the competition are doing, we are not focused enough.
Q165 Rebecca Harris:
What should we be learning from the competition?
Nick Fry: I come
back to the point I have made several times. I think we need
very clear objectives of what we are trying to achieve. We cannot
be good at everything. Quite a lot of business analysis needs
to be done of our strengths and weaknesses. Where do we need
to focus? Then we should lay out clearly what we are trying to
achieve. I come back to measuring it. As Mr Binley said, we
need some measurable objectives.
Paul Skinner: We
have underlying brand strength, but our brand identity has become
a little blurred. There is confusion in the minds of a number
of our international trade counterparties about what the UK economy
is all about these days. Have we lost our manufacturing base?
The answer is that we have not, but there is a perception that
it has gone. Therefore, there must be something about the way
the brand is being projected for that confusion to endure.
Q166 Rebecca Harris:
My last question is about SMEs. In our session last week we talked
about some of the difficulties SMEs had in exporting or attracting
inward investment. Some of those were possibly down to their
own lack of confidence or knowledge about the possibilities.
How are you as ambassadors able to relate to them and promote
them? What kind of relationship do you have with, for example,
different trade bodies and that kind of thing?
Paul Skinner: I
made the point earlier that our larger global companies with big
international networks and that typically have extensive experience
of operating in many countries can be more helpful to small and
medium size-enterprises than historically they have been. That
can be good business in the sense that the more a large company
is creating a supply chain and partnership opportunity for small
businesses the better that will be for all concerned. That is
one priority I would have for this network. How can it positively
help our smaller and medium-size enterprises that aspire to play
a role in international markets?
Sir Roger Bone:
I am very conscious speaking from the point of view of a large
multinational company that we are wholly dependent on SMEs for
our business. In this country we have links with more than 250
companies altogether that feed into our supply chain, so whenever
I speak about the aerospace community here I am very conscious
that I speak on behalf of all those SMEs whose livelihoods depend
upon our success.
Q167 Rebecca Harris:
Is it more about big businesses bringing in others in their wake
rather than directly helping them import or export?
Sir Roger Bone:
I am not sure I heard all of that, but perhaps it comes to the
same thing in the sense that when we are successful it helps the
export potential of those SMEs.
Q168 Rebecca Harris:
Lord Powell?
Lord Powell: On
the last point, I do not think we have done as well as we should.
For many years I have heard about how big companies were bringing
in SMEs in their wake. They do not, or almost never, or certainly
not in a targeted way, in that they bring in whoever is the most
efficient supplier or the people they believe are best adapted
to the particular contract. Generally, SMEs are great users of
Government services through UKTI and the various business councils
and things like the Asia Task Force. At our events over the past
two years we have had close to 3,000 companies of which 98% will
be small and medium-sized companies. We certainly interact with
them. Of course, they need different help from the big companies.
First, they need to have their eyes opened to the opportunities,
through just telling them about the opportunities in Asia for
instance which are not always very apparent; second, it is telling
them about the kind of help they can get in accessing the market:
trade missions, various financial grants and advice through UKTI
and others that they can get. Lastly, it is a matter of supporting
them when they get out into the area. For instance, the China-Britain
Business Council has offices in 11 or 12 cities in China where
a small company trying to get started in China can set up for
the first two or three months and can have a desk, telephone,
access to a secretary, advice and so on. We can give them very
specific kinds of help and that needs to be done. The interesting
question is: however many SMEs you help, in the end will it make
a huge difference to British exports? The honest answer is that
British exports depend predominantly on the very big companies;
those are where the real figures come from.
Q169 Mr Binley:
I put two questions just to mop up. The first relates to Sir
Roger's comments about the state of technology in four, five,
six or seven years' time, which is vitally important in the aerospace
and motorsport industries. We did a review of both industries,
which are becoming increasingly allied—I suppose that was
one of our surprises when we did the review. But we were under
the impression that quite a lot was happening. For example, the
Composites Centre at Bristol was important. Where are our weaknesses?
Can you point to specific weaknesses in this respect? We still
have time to pick those up and your advice on it would be very
helpful.
Sir Roger Bone:
In my view, it is not so much a question of spotting where the
weaknesses are but those areas into which research should be put
at this particular point to ensure we maintain that cutting edge
in four or five years' time. Composites is one very good example.
I am absolutely delighted that we have that emphasis at the Bristol
centre. In my business, any aspects of research on improving
performance in aerodynamics, environmental impact, fuel consumption
and emissions are the touch-points that matter to us. In many
of those areas there is excellent research under way in the UK.
I would not want you to conclude from what I have said that there
are necessarily huge, glaring weaknesses. My concern is that
those efforts should be sustained in the period ahead.
Q170 Mr Binley:
I think that is a helpful message we can pass on to the Minister
from this Committee. My final question is about the make-up of
the ambassador team. You will know that there has been some criticism,
not least from the British Chambers of Commerce, about the fact
that genuine SME creators are not properly represented. Do you
agree with that? If you do, how can we improve that? They tend
not to be the stars in the way that you are, gentlemen.
Lord Powell: One
simple point is: if they are very small SMEs will they have time
to do this kind of thing?
Paul Skinner: I
am very supportive of the role that SME companies can play in
our domestic economy but also in our export markets. As a matter
of pure practicality, I guess that they will perhaps not have
the resource available to them and the corporate recognition to
enable platforms to be created through which the ambassadors can
become effective and amplify the UKTI messaging. That is just
the way life is, I think. For this network to lose sight of the
importance of SMEs would be to miss a beat. As to whether or
not the network should be more populated by SMEs, I think you
come down to some very practical considerations.
Nick Fry: Perhaps
a way of achieving a good result in this area would be to engage
rather better through some of the trade associations. In motorsports
we are blessed. We have the Motorsport Industry Association which
represents a large number of companies. I think that engaging
with them as a vehicle to get to those smaller companies, which
probably do not necessarily have the time to deploy personnel
first hand on this, might be a way to achieve the objective.
Chair: I think Margot's
question has been covered, so I will bring in Nadhim.
Q171 Nadhim Zahawi:
Very quickly Chairman—thank you very much—I want to
pick up the point about inward investment. Part of the new world
in which we exist, certainly in the motor industry, is to attract
inward investment so we can export more through the companies
investing here. Paul Skinner, you picked up this point earlier.
In the league table of inward investment we have fallen from
second to fifth. One area of which you will be very aware is
that when you travel around the world, as many of us have done,
the competition is now not necessarily from the usual suspects,
i.e. there are new entrants who are building infrastructure to
be able to attract that kind of inward investment, certainly in
transport infrastructure. There are lots of good things happening
on transport but I would love to hear your view on airport infrastructure.
I was staggered to see the new airport being built outside Dubai.
It has five runways on top of what they currently have. I refer
to Singapore and other places. If we are to attract that kind
of inward investment—we have real advantages in terms of
language, time zone and so on—what is the panel's view on
infrastructure?
Paul Skinner: It
is an area in which I am currently working. I do think that it
is a very important driver of economic growth and competitiveness.
When you talk to potential foreign investors, whether they are
corporates, sovereign wealth funds or institutions, the quality
of infrastructure, and the infrastructure investment opportunity,
is rising on the agenda. I think we have to be very mindful as
a country that we maintain competitive economic infrastructure
if we want to attract investment in the wider sectors of the economy
and not fall behind our competitors. To some extent, we have
slipped a bit behind the curve. I think there is a serious attempt
in energy, transport, water, waste, digital—across the whole
spectrum—to reestablish our position, and I think
the spending review recently reflected those priorities, relatively
speaking. It is important and we had better not lose sight of
it.
Chair: Thank you very
much. It has been a good session. I thank you for your attendance.
Again, if there are any comments you would like to make that
you have not had the opportunity to make please feel free to send
us further evidence, and if we feel there is a question that for
some reason we have not asked but would like to we will do likewise.
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