Conclusions and recommendations
Government Strategy
1. 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)
2. 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)
Ministerial Responsibility and Whitehall
3. 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)
4. 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)
5. 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)
6. 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)
British Business Ambassadors
7. 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)
8. 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)
Catalyst
9. 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)
Exporting Culture
10. 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)
11. 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)
Global Factors
12. 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)
13. 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)
UKTI Funding
14. 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)
15. 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)
16. 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)
UKTI staffing
17. 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)
18. 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)
19. 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)
20. 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)
21. 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. (Paragraph 100)
UKTI Trade Services
22.
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)
23. 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)
24. 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)
25. 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)
26. 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)
27. 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)
28. 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)
29. 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)
30. 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)
31. 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)
32. 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)
UKTI Inward Investment Services
33. 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)
34. 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)
35. 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)
UK effectiveness and efficiency
36. 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)
37. 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)
38. 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)
39. 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)
Export Credit Guarantee Department
40. 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)
41. 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)
42. 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)
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