4 UK Trade & Investment
The Role of the UKTI
66. UK Trade & Investment (UKTI) is the UK's
trade and investment promotion body. Under the previous Government,
the UKTI's last five year strategy, Prosperity in a Changing
World, set out the work of UK Trade & Investment from
2006 to 2011:
We will help business to internationalise and
contribute to the prosperity of the UK. We will make the marketing
of the UK professional and world-class. To deliver this we need
to change how we work, the skills we use and the way we serve
UK business and inward investors. We start from a good position.
UKTI is well regarded internationally, our staff are dedicated
and we have met our targets. But now we must do much more: we
must change our culture and raise our game.[71]
THE NEW UKTI STRATEGY: BRITAIN OPEN
FOR BUSINESS
67. The UTKI strategy (when it was finally published)
answered some of the criticisms we had heard throughout this inquiry.
The foreword to the strategy set out the overall mission for UKTI:
This strategy sets out how UKTI will provide
practical support to exporters and investors over the next five
years. It marks a step change in the way that UKTI and the rest
of government will focus its efforts, by adopting a proactive
approach to bringing opportunities home, and focusing on the export
and investment markets that provide the best opportunities for
growth.[72]
The strategy set out four main plans for the UKTI:
i. Targeting services at innovative and high
growth SMEs to encourage more companies to export, and help existing
exporters reach more high growth and emerging markets.
ii. Winning high value opportunities in overseas
markets for UK businesses of all sizes.
iii. Delivering high quality inward investment,
with a drive to market large British infrastructure and regeneration
projects to foreign investors.
iv. Building strategic relationships at the highest
levels with the most significant inward investors, including overseas
institutions such as Sovereign Wealth Funds, and with the UK's
top exporters and major overseas buyers.[73]
68. In response to the strategy, the International
Chamber of Commerce UK told us:
Whilst we welcome the core elements of the "Britain
Open for Business" strategy, we think that more detail is
required about how the proposals will work in practice—and
specifically what needs to change to deliver a better service.
In this connection, it is our view that careful consideration
needs to be given to how the various strands of the strategy can
best be implemented to provide real "value-added" for
UK businesses.[74]
Funding and Personnel
69. One of the main concerns we have heard throughout
our inquiry has been funding and staffing levels of the UKTI in
light of the Comprehensive Spending Review. While we welcome the
publication of the strategy, it is lacking any real detail on
manpower or resources available to UKTI.
70. UKTI has three main funding streams. It has its
own directly funded UKTI Programme Vote for which the UKTI Chief
Executive is the Accounting Officer and has overall financial
authority. In addition, it receives funding from both the Department
for Business, Innovation and Skills (BIS) and the Foreign &
Commonwealth Office (FCO), for which the UKTI Chief Executive
has a level of delegated budgetary control cascaded from the BIS
and FCO Accounting Officers as appropriate.[75]
UKTI's FCO funding is contained within the FCO Vote, and the UKTI
element pays for front line staff based overseas delivering key
programmes.[76]
71. The Department provided us with partial information
on the levels of funding available to UKTI over the course of
the Comprehensive Spending Review. This information is set out
in the table below and is considered in subsequent paragraphs.
| UKTI Budget Baseline Profile for 2010-11 and SR10 (2011-12 to 2014-15) on a cash basis
|
| 2010-11
| 2011-12 | 2012-13
| 2013-14 | 2014-15
| difference £m's |
difference % |
| UKTI programme Vote |
| | |
| | | |
| Gross | 94
| 91 | 88
| 86 | 85
| -9 | -10%
|
| Income | 5
| 7 | 8
| 9 | 11
| 6 | 120%
|
| Net | 89
| 84 | 80
| 77 | 74
| -15 | -17%
|
| | |
| | | |
|
| FCO funding | 204
| | | |
| | |
| | |
| | | |
|
| BIS funding | 40
| 39 | 38
| 36 | 33
| -7 | -18%
|
| | |
| | | |
|
| Total resources | 333
| 327 | 322
| 317 | 277
| -56 | -17%
|
| *No further figures are currently available for FCO resource.
|
Figures provided by UKTI Ev 148
UKTI PROGRAMME VOTE
72. The funding in UKTI's own Programme Vote pays
for front line trade and foreign direct investment activity including
grants and business support services, for example, Passport to
Export and the Trade Access Programmes (which we discuss in more
detail later in this Report). Susan Haird, acting Chief Executive
of UKTI, explained to us that the Programme Vote:
Is essentially the money that is spent directly
with customers. For example, it includes the grants that are given
to companies to exhibit at trade fairs overseas and the grants
given to companies going through Passport to Export. It includes
provision for our frontline staff in the English regions, who
are paid for out of programme[...]. Those things paid for out
of programme spend are indeed frontline spend on customers, and
they are being cut because our programme budget is being cut.
There is nothing that can be done about it.[77]
That Vote was subject to a 17% cut as part of the
Comprehensive Spending Review settlement.[78]
DBIS AND RDA FUNDING
73. UKTI's DBIS administration funding is ring-fenced
within the Department, and pays for front line and support staff
based in the UK, and their associated costs.[79]
74. This funding, which covers inward investment
as well as trade services, is also being reduced as a result of
the abolition of the RDAs. Susan Haird told us that regarding
inward investment "the RDAs used to top up the money we gave
them with money of their own, and that money has gone".[80]
With regard to trade services, she also explained that while the
Department funded the contracts which delivered UKTI's international
trade advice in the English regions "the RDAs used to put
more money into the delivery partners that we have there. That
money also has gone as a result of the abolition of the RDAs."[81]
To conclude she acknowledged that the Spending Review and the
demise of the RDA had resulted in "a net loss in terms of
money available".[82]
FCO FUNDING
75. The Foreign and Commonwealth Office (FCO) funds
the overseas posts for the UKTI. When we asked the Department
for the figures from the Comprehensive Spending Review for this
we were told that they had not yet been decided and were therefore
unavailable. In oral evidence, Susan Haird told us:
The Spending Review set the totals for the overseas
network for the next four years, so those figures are available.
In terms of the amount available to individual overseas posts,
that will be coming out shortly, jointly between the Foreign Office
and us.[83]
However, we were later told by Departmental officials
that the Foreign Office figures had not been finalised. At a subsequent
evidence session Ms Haird was questioned again:
Q499 Nadhim Zahawi: Ms Haird, you told us on
Tuesday that the Foreign Office funds for UKTI were published
as part of the Comprehensive Spending Review. Your officials have
since told us otherwise. Can you shed some light on the situation
when it comes to the UKTI overseas budget?
Susan Haird: As I understand it, they have sent
to you the overall totals for the spending review. That was sent
in yesterday evening. [...]
Q500 Nadhim Zahawi: We were told that these were
just assumptions and estimates by UKTI but not published, contrary
to what we were told on Tuesday by you.
Susan Haird: Maybe I did not use the word "published"
in a strictly correct manner. I meant that they were available.
They will be in the accounts and so on. The way funding works
between us and the Foreign Office is complex. We have some money
allocated through a ring-fenced budget, which pays for certain
things; we have some money allocated direct to post, which pays
for other things; and there are overheads to do with accommodation,
the cost of school fees and so on.[84]
76. When the Department sent in their supplementary
memorandum[85] following
the evidence sessions the FCO figures were still not available
(see earlier table). We pursued the issue of funding for overseas
staff with the Secretary of State when he came before us. However,
he was unable to shed any further light on FCO funding for UKTI:
No, I am not in a position to tell you exactly
the number of personnel and what they are doing. We know the aggregate
financial figures, of which I think you are aware anyway. This
is a cash reduction overall of about 17%.[86]
Following the evidence from the Secretary of State
we again asked for the figures and have yet to receive them from
the Department.
77. 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 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.
INDUSTRY CONCERNS
78. There is concern about whether services will
be lost as a result of the Government spending cuts. The CBI,
for example, highlighted the importance of the Passport to Export
Scheme and Gateway to Global Growth and stated that they should
be expanded not cut.[87]
In Business, Innovation and Skills Questions in the House in March
the Chair of this Committee sought clarity from Secretary of State
on the matter:
Mr Adrian Bailey (West Bromwich West) (Lab/Co-op):
Over the next four years, UKTI is set to have its budget cut by
some 17%. The schemes most commended by the CBI are passport to
export and gateway to global growth. Will the Minister give an
assurance that among the budget cuts those services will be protected?
Vince Cable: I can assure the hon. Gentleman
that UKTI is capable of and committed to providing an increased
range of activities and a better service even within its budget.[88]
79. A number of other witnesses were concerned that
the UKTI financial settlement would adversely affect its ability
fully to support UK companies wishing to export. Graham Chisnall
from A|D|S argued that "if export is one of the highest priorities
then one has to pay attention to those enabling mechanisms".[89]
He believed that the Government needed to find savings which did
not result in "losing the resources affiliated with the UK's
export agenda that can help rebalance and grow the UK economy".[90]
80. Airbus, one of the UK's major exporters, believed
that budget reductions in UKTI had the potential to:
Lead to a reduction in the trade advisers based
not only in the UK but also in the Embassies abroad. They play
an important role in briefing the Ambassador on industry issues.[91]
This view was supported by representatives of other
sectors of the UK economy. Feargal Sharkey from UK Music gave
the following assessment:
If we are to fulfil this ambition of developing
our overseas markets and pushing and expanding, that is going
to take more time, more effort, more in the way of resource and
more investment. So quite clearly, if anything was going to scale
back or put further pressure on that, it is quite clearly going
to have an impact and my instinct would be that it would be a
negative one.[92]
Richard Mollet from the British Publishers Association
agreed:
Where the government is giving that money, we
need those levels to be sustained or exporters will suffer. [93]
81. The Secretary of State told us that the number
of companies helped through the Passport to Export Scheme would
be sustained despite the cuts, but with regards to Gateway to
Growth there would be a temporary dip from 1,750 to 1,250 in the
number of companies supported. It was his intention that the number
of companies supported should return to previous levels by the
end of the spending period.[94]
82. We have noted previously in this report that
UKTI plans to 'reach out' to 25,000 companies each year up from
an average of 20,000 over the last three years.[95]
When we questioned the Lord Green on how more could be done with
less we were told:
I think there is scope to use more internet-based
assisted networking and sharing of experience among SMEs as they
get engaged in international markets. I do not think as much of
that has happened as could do, and that is an area that is extremely
cost efficient[96]
He also said:
In the ideal world you would want a larger budget,
because the evidence is that the more you do, the greater the
payoff. That would not be true all the way up the curve, but it
looks as though we are at a point in the curve where that would
be true, but there is the real world in which UKTI operates.[97]
In conclusion, the Minister gave the following summary
of the Government's position:
We still believe that you can, if you will, wring
the sponge and make it more efficient.[98]
83. In the previous Parliament, our predecessor Committee
had a similar debate with the then Government on the need for
adequate UKTI funding. It concluded 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.[99]
84. 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".
85. 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.
UKTI staffing
86. UKTI employs 1,300 people and delivers services
in 162 locations in 96 overseas markets. In evidence, Susan Haird,
Acting Chief Executive of UKTI, gave us a helpful breakdown of
composition of that figure:
15% of our staff are diplomats from the Foreign
Office. Some 85% are locally engaged staff, engaged for their
market knowledge. Many of them will have business backgrounds.
In the English regions our services are contracted out to organisations
such as Business Links and Chambers of Commerce. The majority
of the international trade advisers, our frontline staff in the
English regions, are people from business. In headquarters we
are civil servants, who are, in the main, drawn from the Department
for Business, Innovation and Skills and the Foreign Office, but
we also make use of a large number of business specialists. For
example, our R and D scheme has a business specialist running
it. Our sector champions are drawn from business backgrounds.
The staff working on our new high value opportunities were aimed
at bringing back really high-value opportunities and matching
them proactively with the capabilities of British companies. These
are all business specialists. We are a mix.[100]
HEADCOUNT: OVERSEAS AND UK
87. During her evidence, Susan Haird provided us
with an assessment of how the reduction in UKTI's budget would
affect its headcount:
Overseas we hope not to lose headcount overseas.
The decline through the spending review is lower on the Foreign
Office side than elsewhere. There are ways in which we can save
quite a bit of money overseas without cutting headcount, including
in particular continuing the policy we have pursued for a number
of years of localising posts where possible.[101]
88. On 11 May 2011 the Foreign Office announced that
it would be increasing staff in its embassies in the emerging
high growth economies. The Foreign Secretary told Parliament:
We will embark on a substantial reinvigoration
of the diplomatic network to make it ready for the 21st century;
to expand our connections with the emerging powers of the world,
and to signal that where Britain was retreating it is now advancing.
[...]
The only way to increase our national prosperity
and secure our growth for our economy is through trade, and our
Embassies play a vital role in supporting British business. [...]
We will strengthen our frontline staff in China
by up to 50 officials and in India by 30, working to transform
Britain's relationship in their fastest growing cities and regions.
We will also make a substantial expansion of
our diplomatic strength in Brazil, Turkey, Mexico and Indonesia.
We will add diplomatic staff in all of the following
countries or places: Thailand, Burma, South Korea, North Korea,
Taiwan, Mongolia, Malaysia, Nigeria, Angola, Botswana, Chile,
Argentina, Colombia, Panama, Peru, Pakistan, Vietnam, and the
Philippines.[102]
89. In respect of UK staff, Susan Haird explained
that out of a team of 265 trade advisers there was likely to be
a 19% reduction:
As to the English regions, where there is a loss
not only of UKTI funding as a result of the spending review but
also [...] a loss of RDA funding because the RDA has topped up
the spending on trade in those regions, it looks like we will
lose about 50 international trade advisers.[103]
She also admitted that it was these regional trade
advisers who:
Work very much with companies that are new to
exports through Passport to Export and companies that are moving
on, perhaps after a couple of years of export experience, and
want to diversify.[104]
90. We questioned the Secretary of State on this
point and he told us:
We believe they can improve their service even
within a small budget because they have already shown in the last
few years a very big increase in their physical productivity.
If you measure the activities they have undertaken in relation
to the number of trade advisers, they have increased by about
50% over four years. Their expenditure in order to achieve a particular
result has improved by about 25% over three years, so we believe
that greater productivity and better organisation can deliver
these improvements.[105]
91. 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.
Encouraging Entrepreneurship
within UKTI
92. The Plan for Growth also signalled the Government's
desire to drive a cultural change within UKTI with far more emphasis
placed on an entrepreneurial approach which "makes better
use of private sector expertise".[106]
The UKTI strategy built on that view:
UKTI will become a more entrepreneurial organisation.
We will bring more private sector expertise into strategic relationship
management of major exporters and inward investors.[107]
93. We questioned the Minister about this strategy
and how people from business could be attracted to work in or
with the UKTI within the current budget restraints. Lord Green
told us:
I think the real issue arises when you want levels
of senior leadership within UKTI. I believe that we need more
people from the private sector engaged in key positions in UKTI.
For example, I would like to see the unit [...] that supports
relationship management and big-ticket inward investment headed
by somebody we recruit from the private sector, and there plainly
you are into considerations of cost per head.[108]
He added:
To the extent that we are successful in recruiting
some key private sector people into UKTI, we have to look at their
packages and make sure they are competitive, and maybe those have
to have some kind of performance-related component. [...] We have
to get it right, but clearly you have to be competitive, and the
fact is that most industry has a component of incentive performance
in people's compensation.[109]
94. It would seem this process of recruiting from
the private sector has recently begun. On 23 May 2011 the Government
issued a press notice announcing that a former Ernst and Young
Global Board Member, Michael Boyd, had joined UKTI as Managing
Director of the Strategic Relationship Management Team. The aim
of his role is to build and ensure high level relationships with
significant inward investors, including overseas institutions
such as Sovereign Wealth Funds.
95. 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.
THE NEW CHIEF EXECUTIVE OF UKTI
96. On 11 May, four months after the previous Chief
Executive of UKTI retired, the Department announced the appointment
of the new Chief Executive of the UKTI.[110]
The successful candidate was Nick Baird, a career civil servant
from the Foreign Office.[111]
Having previously been the Ambassador to Turkey, Mr Baird has
most recently been Director-General for Europe and globalisation
at the FCO.[112]
97. We have yet to meet Mr Baird and therefore cannot
comment on his suitability for the post. However, we find it surprising
that, at a time when the UKTI is trying to commercialise its operations,
it recruits a head of the organisation with no reported commercial
experience. As the Independent newspaper commented "there
was some hope that UKTI might recruit a big-hitter from the private
sector for the job - the word is the money on offer wasn't good
enough".[113]
The Financial Times reported ahead of the appointment:
Wanted: new figurehead to promote UK plc: Air
Miles membership handy, independent wealth essential. [...] A
decision to slash the salary of UKTI's next boss may have left
the shortlist looking a little more threadbare than ministers
in the Department for Business Innovation and Skills would wish.
[...] Paring the salary of the head of the country's main trade
promotion body sends out entirely the wrong message.[114]
98. 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.
99. 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.
100. We welcome the Government's ambition to make
UKTI more entrepreneurial. However, we remain unconvinced that
UTKI 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.
71 UK Trade & Investment, Prosperity in a Changing
World Back
72
UK Trade & Investment, Britain open for business, May
2011, p 1 Back
73
UK Trade & Investment, Britain open for business, May
2011, p 11 Back
74
Ev 215 Back
75
Ev 147 Back
76
Ev 147 Back
77
Q 404 Back
78
Ev 147 Back
79
Ev 147 Back
80
Q 435 Back
81
Q 430 Back
82
Q 390 Back
83
Q 393 Back
84
Q 500 Back
85
Ev 146-149 Back
86
Oral Evidence taken before the Business, Innovation and Skills
Committee, The Government's Strategy for Growth, Oral HC
945-i, Q 32 Back
87
Ev 167 Back
88
HC Deb, 31 March 2011, col 499 Back
89
Q 200 Back
90
Q 200 Back
91
Ev 157 Back
92
Q 270 Back
93
Q 270 Back
94
Oral Evidence taken before the Business, Innovation and Skills
Committee, HC (2010-12), 945-i, Q 12 Back
95
UK Trade & Investment, Britain open for business, May
2011, p13 and para 54 Back
96
Q 498 Back
97
Q 497 Back
98
Q 498 Back
99
Business, Innovation and Committee, Third Report of Session 2009-10,
Exporting out of Recession, HC 266, para 95 Back
100
Q 389 Back
101
Q 389 Back
102
"For the first time in decades our diplomatic reach will
be extended not reduced" Foreign Office press release,
11 May 2011 Back
103
Q 503 Back
104
Q 511 Back
105
Oral Evidence taken before the Business, Innovation and Skills
Committee, HC (2010-12) 945-i, Q 8 Back
106
HM Treasury and Department for Business, Innovation and Skills,
Plan for Growth, March 2001, p 7 Back
107
UK Trade & Investment, Britain open for business, May
2011, p 8 Back
108
Q 512 Back
109
Q 513 Back
110
Department for Business, Innovation and Skills press release,
"Britain open for business", 10 May 2011 Back
111
Department for Business, Innovation and Skills press release,
"Britain open for business", 10 May 2011 Back
112
Department for Business, Innovation and Skills press release,
"Britain open for business", 10 May 2011 Back
113
"Nick Baird Chief executive, UKTI", The Independent,
11 May 2011 Back
114
"Wrong Signal", Financial Times, 26 March 2011 Back
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