Rebalancing the Economy: Trade and Investment

Further written submission from UK Trade & Investment

Introduction

1. This paper supplements the written evidence submitted jointly by the Department for Business, Innovation & Skills (BIS), UK Trade & Investment (UKTI), and the Export Credits Guarantee Department (ECGD) in September 2010, to the BIS Select Committee’s "Government Assistance to Industry" Inquiry. The evidence submitted here responds to the Select Committee Announcement No. 24, 24 November 2010, of its new Inquiry, "Rebalancing the Economy: Trade and Investment."

2. This paper presents responses from UKTI to the points being considered by the Select Committee. BIS has advised that the Committee is being provided with copies of the Trade and Investment for Growth White Paper (CM 8015), and that this covers the questions relating to BIS and ECGD on providing support for exports and investment .

3. The points relating to UKTI are now considered in turn.

How the Government Measures Success in its Support for Trade & Investment

4. UKTI has developed the Performance and Impact Monitoring Survey, PIMS, to measure the impact of its trade services on the companies using them, and UKTI’s performance in delivering these services.

5. PIMS enables UKTI to evaluate the benefits that its customers derive from using its trade services. An independent market research company carries out quarterly telephone surveys of a statistically representative group of users of UKTI services. Altogether, some 4,000 businesses are interviewed each year. An annual survey of UK exporters who have not used UKTI services is also carried out, as an additional way of assessing the difference UKTI’s services can make to companies.

6. In a 20 minute interview, the PIMS survey asks business owners a series of questions about the benefits their company has experienced as a result of using UKTI’s services. This includes both qualitative and quantitative business benefits; financial benefits; access to information / contacts not otherwise available; improvements to overseas marketing strategy; and their assessment of the quality of, and overall satisfaction with, UKTI services.

7. The PIMS survey covering 2009/10 show that UKTI helped some 23,600 UK businesses, with the following specific impacts:

· British companies attributed an additional £5bn to their bottom line profits as a result of working with UKTI, up from £3.6bn the previous year.

· This represents £19 benefit for each £1 of Government spend on UKTI trade services, up from £16:£1 the previous year.

· The £5bn additional profit reported by UKTI clients represents over £35bn additional UK exports generated as a direct result of the support UKTI provided.

· 41% of companies reported new or safeguarded jobs as a result of using UKTI trade services.

· 67% of UKTI customers reported significant business benefit from upgrading their approach to overseas markets, gaining access to contacts and information not otherwise accessible, and overcoming legal or regulatory difficulties or cultural differences affecting access to opportunities overseas.

· 39% of UKTI clients expect substantial growth over the next five years compared with 23% of other UK exporters. Some 87% of UKTI trade clients expect at least moderate growth, compared with 78% non-user exporters.

· On average, UKTI trade support generates an additional £65k of research and development (R&D) per trade client. This reflects the role trade support can play in increasing the UK ’s overall innovation capability and R&D.

· Some 53% of all businesses assisted through UKTI trade services improved their business performance as a direct result of UKTI support.

· Around 70% of businesses assisted reported improved productivity and competitiveness.

· Users of UKTI services are much more likely than non users to be in high growth markets (61% vs. 44% for non users); are more likely to plan to increase exports in response to the depreciation of Sterling (47% vs. 37%); and are more likely to have benefited from the depreciation overall (33% vs. 25%).

8 . On inward investment, UKTI supports overseas companies looking to invest or expand their operations in the UK , through managing relationships and working closely with key clients. Consequently, efficiency and productivity are not measured in exactly the same way as trade services. We undertake an extensive analysis of the effectiveness of our inward investment network, providing a rigorous assessment of performance that allows us to optimise our use of resources. Nearly half – 758 of the 1,619 inward investment projects landed by the UK in 2009/10 – were assisted by UKTI. Of these, nearly 80% agreed that UKTI (or its RDA delivery partners) had a significant, favourable influence on the decision to locate or expand in the UK , or on the scale or scope of the project. This assessment, that UKTI has assisted in the decision made by a company, is arrived at by satisfying a set of criteria, populated by data from investing companies and agreed with UKTI’s partners in the English Regions and the Devolved Administrations. Other data analysing the decision to invest, made by companies assisted by UKTI, is taken from PIMS’ inward investment survey, October 2010.

The role of UKTI with regard to identifying opportunities in:

· Established m a rkets;

· Emergi n g markets;

· Key sec t ors; and

working with businesses both large and small to take advantage of these opportunities.

9 . The economic crisis and globalisation have shifted economic weight east and south. This means that the emerging powers in Asia, Latin America and the Gulf are essential to our interests.

1 0 . UKTI uses a range of criteria - including market size and potential for growth, strategic importance and match to UK capability – to assess the importance of individual markets and the likelihood of UKTI helping British business interests. In this way we can determine which high growth and emerging markets to prioritise in order to deploy our resources to best effect.

1 1 . In prioritising emerging and high growth markets we need to be mindful that 70 per cent of Britain ’s exports in 2009 went to the European Union, North America, Japan and Australasia . These markets also generated over 7 0 per cent of our new investment projects. So we need to retain a proportionate presence in developed markets where real barriers still exist.

1 2 . UKTI’s new strategy will, therefore, confirm that we will maintain a proportionate presence in important developed markets, but over time additional resources will be moved to the high growth and emerging markets, in order to match both the opportunities and the demands from our customers.

1 3 . One of the aims of Government policy is to rebalance the economy to achieve sustainable growth. This means focusing efforts on the sectors where we add most value, in the markets where the potential for growth is highest, and on the businesses of tomorrow. UKTI has undertaken a comprehensive review of its sector focus, in cooperation with BIS sector teams and economists, so we can target resources where they will have the greatest impact. The results will be available in the near future.

1 4 . Promoting UK companies and institutions that provide environmental solutions and technologies in response to climate change, with green export campaigns in the markets where research has identified the greatest potential, will be at the heart of UKTI’s sector focus.

1 5 . In order to take advantage of the opportunities arising in these markets and across these Sectors, UKTI will step up its efforts to support UK companies through an expanded programme of outreach events:

· A new High Value Opportunities programme will target carefully selected large scale opportunities around the globe, such as telecommunications, railways, ports, hospitals and education, covering construction, supply and maintenance. These major projects also offer niche opportunities to SMEs. This will enable the UK to compete in a space traditionally dominated by other major European countries and marks a shift in government trade support towards ‘bringing opportunities home’.

· There will also be a new online "peer-to-peer" self-help community network where UK companies can share knowledge and mentor each other to build international capability.

· Catalyst UK is a global network of 100 "advocates for Britain" from the business and academic communities, which we aim to grow to 500 by summer 2012. The network is made up of people who are trusted in their fields and can make a compelling case for investing in the UK and doing business with UK companies. They are able to share valuable know how and insights with less experienced exporters. In this way they will mentor companies, especially SMEs, taking their first steps into new markets.

· UKTI will make best use of the new UKTI website to raise awareness of global opportunities among UK businesses.

· The Government is increasing its support for all exporters, especially SMEs, through an expanded range of ECGD products to complement the private sector. UKTI and ECGD will forge an operating partnership to promote the new products to UK businesses through UKTI’s regional network.

How other countries, similar to the UK, export to emerging markets and what our Government could learn, if anything from them.

16. Broadly speaking, the Trade and Investment Promotion Organisations (TPOs) of other Countries provide equivalent services for businesses in their markets. There are always variations and UKTI examines the case for new ideas based on services delivered by other TPOs, against its existing portfolio of services and the resources available to deliver them.

17. UKTI takes part in regular informal and formal meetings with counterparts. In the last year we have discussed our trade services with counterparts from the Netherlands, who were undertaking a review of trade support for Dutch companies. UKTI is represented at both European Trade Promotion Organisation and the World Trade Promotion Organisation meetings, and is a regular presenter at them. In 2010, UKTI was judged the best TPO from a developed country, at the International Trade Centre’s TPO Network Awards, recognising excellence in export development initiatives for our "Gateway to Global Growth" service.

18. UKTI also meets with its counterparts in Canada, Australia and New Zealand, at annual CANZUK meetings. As an example of the benefits gained from these meetings, UKTI has adopted a management tool developed by the Canadian Trade Commissioner Service. In turn, other TPOs have looked at adapting UKTI’s PIMS survey to monitor and evaluate their performance. PIMS is very highly regarded by other TPOs; no other comparable system exists and other countries have expressed envy at the rigour of our system, and we believe we are world leaders in this field of performance measurement.

19. However, direct comparisons between TPOs are difficult to make. Some are highly centralised, others are regionally-based. Some offer predominantly on-line access to services. Some combine trade and investment, others keep their trade and inward investment services separate. Some offer services free of charge, others raise a significant proportion of their income through charging.

20. For these reasons, although we meet and have regular contacts with other TPOs, benchmarking UKTI’s performance against them using formal metrics based on impact is difficult, as organisations have different structures and evaluation systems. In addition, specific evidence detailing how they export to emerging markets is not clearly available.

The Business Ambassadors Network

21. The Business Ambassadors Network, supported by UKTI, is made up of 32 of the top leaders from the business world and academia, who bring with them a wealth of commercial experience and knowledge from a wide range of sectors, within the UK and overseas.

22. Members of the Business Ambassador Network act as powerful advocates of the UK companies overseas, especially SMEs, and help to promote the UK as the international trade and inward investment partner of choice. At home, they promote the benefits that can be gained from pursuing overseas business opportunities.

23. The key objectives for the Network are to use each Business Ambassador’s individual experience of doing business internationally, and their unique market and sector knowledge, to:

· Promote the UK ’s excellence and the UK ’s favourable business environment;

· Help UK businesses recognise and exploit overseas opportunities; and

· Support UK businesses, Heads of Mission (HM Ambassadors and High Commissioners) and UKTI trade teams overseas.

24. Since the network’s creation in October 2008, Business Ambassadors have provided a tremendous impetus to the UK’s trade and investment activities, encouraging UK companies to explore overseas business opportunities and helping to secure inward investment projects. The new, expanded, network, launched by the Prime Minister in November 2010, includes a wider range of expertise and experience and a new generation of entrepreneurs and business leaders. The new Network will continue to complement and support the work of UKTI in marketing the UK as the international business partner of choice, and is expected to help increase our reach to wider audiences, countries and sectors.

25. The role and extent of activities undertaken by individual Business Ambassadors will be flexible, taking into account their availability. UKTI seeks to tailor activities to the relevant interests and expertise of Business Ambassadors, both geographically and sectorally.

26. The Business Ambassadors Network will continue to complement the work of the Duke of York in his role as UK Special Representative for International Trade and Investment, the Minister for Trade and Investment, and the work of other Departments and Ministers across Government in support of trade and inward investment.

23 February 2011