3 Exports and manufacturing support
schemes
UK
Trade and Investment
30. UK Trade & Investment (UKTI) "is the
UK's international trade and inward investment promotion organisation".[83]
It is a non-ministerial government department, the aim of which
is to help "businesses understand how to trade successfully
in international markets".[84]
In 2013-14 UKTI stated that it "provided significant support
for more than £20 billion of exports".[85]
UKTI has also achieved successes in the so-called BRIC countries
(Brazil, Russia, India and China), where UKTI stated that:
Exports of goods and services to high growth
markets are at an all-time high. Since 2010, exports have increased
by 52 per cent to China; 24 per cent to India; 39 per cent to
Russia; and 37 per cent to Brazil. Over the same period, exports
to established markets such as the USA and the EU have continued
to increase.[86]
An outline of UKTI's 2013-14 performance against
its key performance measures is given in Table 2.Table
2 Performance of UKTI in 2013/14[87]
31. We heard that "awareness of UKTI has increased
significantly over the past 4 years, from an average of 51 per
cent in 2010 to 65 per cent in 2014".[88]
However, awareness of its work and the support on offer was inconsistent,
with significant regional variations. Simon Moore, the International
Director of the Confederation of British Industry, told us that
it was "difficult for businesses, particularly outside London,
to access UKTI if they do not have access to people".[89]
32. It was suggested to us that UKTI could be more
effective in terms of outreach and awareness if it worked more
effectively with trade associations, which could form a "bridge"
between businesses and the Government.[90]
For example Dr Marshall, Executive Director of Policy and External
Affairs at the British Chambers of Commerce, told us that:
There is certainly a role for increased partnership
between UKTI and various trade associations and business organisations.
[…] You have quite a lot of exporters who want the security
of being able to access help either through a Government front
door or through a business or trade association front door. Working
in partnership allows you to do that.[91]
33. One of the most eye-catching Government objectives,
in terms of trade and exports, is for the United Kingdom to be
exporting £1 trillion of goods and services per year by 2020.[92]
When it came to UKTI's role in achieving this target, the Department
stated that:
UKTI has a unique role to play in helping the
UK meet the Chancellor's challenge of achieving one trillion pounds
of exports by 2020. This is a motivating aspiration for UK plc,
which requires every Government department to play its part.[93]
The Minister and his Officials told us that, while
the target "originated from the Treasury",[94]
it had been endorsed "at the highest level".[95]
34. At present UK exports are worth "around
about £500 billion".[96]
It therefore seems that significant progress is required to achieve
the £1 trillion target. Despite having such a way to go,
Nicola Bolton, the Acting Managing Director at UKTI, told the
Committee that the organisation was "committed" to the
target and "we are doing everything that we can do. It is
an energising aspiration".[97]
She assured us that UKTI was:
Working very hard and joining up across Government,
working with the private sector and businesses, focused by markets
and by sectors, towards the 2020 ambition.[98]
35. The Department further explained that UKTI had
been set four targets to ensure it contributed to the "UK's
ambitions" in this sector, as part of a new performance framework.[99]
These included:
· To
assist 50,000 businesses a year by 2015;
· To help generate
"business wins"[100]
of £20 billion this year, £25 billion in 2015-16, £32
billion 2016-17, £39 billion in 2017-18, £45 billion
in 2018-19 and £50 billion in 2019-20;
· Ensure 80 per
cent of our customers report positively on the quality of UKTI
services; and
· Ensure 70 per
cent of our customers report significant business benefit.[101]
The full framework is outlined in Table 3 below.Table
3: UKTI Performance measurement framework[102]
Given that the £1 trillion target has been endorsed
"at the highest level", we were surprised that it was
not included in UKTI's performance measurement framework.
36. We were pleased to review generally positive
evidence about the performance of UKTI. For example the Federation
of Small Businesses wrote to us and said that:
Government export support is generally recognised
as being effective by FSB members who have used them, with 57
per cent of FSB members who have accessed Government export support
assessing it as quite of very effective.[103]
37. The
performance of the UKTI should be judged against impact as well
as awareness, with the long-term benefit to the UK economy being
a fundamental driver for this organisation. We welcome the Government's
ambition for UK exports to reach £1 trillion by 2020. However,
we are not convinced that this is a target the Government expects
to meet. The Government should provide clarity about whether this
is an "energising aspiration" or a serious objective.
If the latter, it should provide projections for how we should
expect exports to grow over the next six years, given current
predictions for the broader economy. It should then report progress
against these projections each year in its annual review.
UK Export Finance
38. UK Export Finance (UKEF) is the UK's "export
credit agency",[104]
which supports exports by assuming financial risks on behalf of
British businesses when they export.[105]
For example, amongst other products, UKEF sells insurance to exporters
to mitigate the risk of overseas buyers failing to pay them for
supplies.[106] This
results in "a risk transfer from the private to the public
sector".[107]
Mr Garner, the Chief Executive Officer of Norton Motorcycles,
explained his first-hand experience of using UKEF:
The way that works is that, if we have £100,000
worth of motorcycles going to Australia. […] The banks are
unwilling to lend against that, because they do not have the security
of the motorcycles. The Government have enabled UKEF to underwrite
that individual invoice, or the individual export contract, to
give the bank the confidence to lend against the invoice when
it does not have the asset of the invoice.[108]
This, he explained, enabled businesses to move away
from relying on banks as the "first port of call" for
export assistance.[109]
39. The Department stated that there had been "a
steady rise in the numbers of companies directly supported over
the last five years, up to 130 in 2013-14 from just 10 in 2009-10".[110]
Of those 130 companies, 92 were SMEs, however more than 50 per
cent contracts, by value, was awarded to the non-SME sector, as
shown in Figure 2.Figure
2: Cumulative value of all contracts by size of business supported[111]
40. UKEF also highlighted that, by supporting an
exporting company, it could have a positive impact on other supply-chain
companies. For example, it told us that, when guaranteeing the
sale of an Airbus aircraft, it "indirectly supports around
1,700 UK companies in the Airbus supply chain and an additional
c. 3,000 if Rolls-Royce Trent engines are fitted to the aircraft".[112]
Despite this increasing activity, the number of SMEs supported
by UKEF constituted tiny fraction of the total 4.9 million SMEs
in the UK.
41. UKEF received broadly positive feedback from
the witnesses we spoke to as part of this inquiry. For example,
Lloyds Banking Group told us that UKEF played "an important
role in supporting businesses".[113]
However, we heard some concerns about the reach and awareness
of this facility. For example, the Engineering and Machinery Alliance
told us that the fact that UKEF's products were principally made
available through mainstream banks rendered them inaccessible
to some businesses.[114]
Similarly, Lloyds Banking Group concluded that "UKEF should
be simplified and SMEs made aware of its benefits".[115]
42. David Godfrey, the Chief Executive Officer at
UKEF, assured us that he was aware of these criticisms and was
working to improve the UKEF's effectiveness. He told us that he
believed closer working with the British Business Bank could help
improve awareness of the UKEF:
There are ways in which we think we can work
more closely together. We can learn from them through their delegation
model to delegate some of our authority to banks and brokers so
that they can get more quickly and more efficiently into the private
sector.[116]
43. There
is no doubt that UKEF's activity is increasing. However, this
increase is measured from a low baseline. In 2013-14 only 94 SMEs
were supported through this scheme, out of a population of 4.9
million. There is a risk that SMEs, the very businesses that the
support of UKEF could be most beneficial to, may be those which
are excluded by the apparently complex nature of its products.
There is potential for UKEF to engage more effectively with SMEs.
We recommend the Government undertakes an assessment of potential
demand and review how this scheme is marketed to SMEs, which should
include consideration of the role of trade associations in raising
awareness of this facility. In addition, we would expect the support
offered via the UKEF to be included in a menu of financial services
developed by the British Business Bank and Growth Hubs.
Manufacturing
Manufacturing Advisory Service
44. The manufacturing sector is vital in creating
highly skilled jobs, supporting innovation, and contributing to
the desired increase in UK exports.[117]
The industry employs around 2.6 million people in the UK[118]
and its work accounted for 10 per cent of the UK's economic output
in 2013. The Secretary of State has described the significance
of manufacturing to the UK as "incontrovertible",[119]
yet some of our witnesses told us that Government support for
the sector had tended towards "grandstanding", with
the sector getting "second-best" in terms of support
or attention.[120]
45. The Manufacturing Advisory Service (MAS) was
set up to help manufacturing companies improve their productivity
and competitiveness through the provision of professional advice
and expert support.[121]
It aimed to create and safeguard jobs in the manufacturing sector,
in addition to producing a measurable return in terms of gross
value added.[122] The
Government has described the Manufacturing Advisory Service's
performance to date as follows:
MAS has performed strongly over the past three
years, recording consistently high levels of client satisfaction
and exceeding all its contractual targets. Manufacturers using
the service have increased profitability by around 25 per cent
on average based in sampling evidence. Since January 2012, MAS
has helped over 17,250 manufacturers with the overwhelming majority
(nine out of ten) saying that it represents good value for money
and time invested and would recommend it to other firms. It has
provided funding for around 9,000 in-depth business improvement
projects which are forecast to help deliver £1.8bn of economic
growth (Gross Value Added) and create 24,800 new jobs against
targets of £1.2bn GVA and 23,000 new jobs.[123]
A summary of the Manufacturing Advisory Service's
work with businesses of different sizes and progress towards achieving
its targets is given in Figure 3 below.Figure
3 Achievements and targets of the Manufacturing Advisory Service[124]
46. Despite the Manufacturing Advisory Service having
exceeded its contract-specified outcomes, we heard a number of
criticisms of its support for manufacturers. In particular, we
heard that, although the Manufacturing Advisory Service can help
improve business productivity in the short-term, it lacked the
capability to provide the type of strategic advice that could
drive significant future growth in the manufacturing sector. Dr
Julie Madigan MBE, Chief Executive of the Manufacturing Institute,
said that the Manufacturing Advisory Service's work was driven
by productivity, or "getting the project out the door at
the right quality, at the right cost and on time".[125]
She agreed that, while this was an important "strength",
the focus on the short-term was also its "weakness".[126]
Peter Templeton, Director and Chief Executive Officer of the Institute
for Manufacturing, described the type of support that manufacturers
needed to grow as follows:
For manufacturing firms to grow, they really
need to do three things in parallel. One is to execute the current
business model and continuously improve that business model. Secondly,
they need to have a clear vision of their chosen future state,
bearing in mind the changes in external context and drivers and
changes in technologies. Having selected their chosen future state,
they need to build the capabilities […] over time, which
requires investment. Where MAS is strong is in improving the current
capabilities within the current business model, such as around
production and so on. Where it has not focused, I would say, to
date is on helping firms to really understand what markets they
should be in, what product groups they should focus on and how
they compete, and then on helping those firms to identify a chosen
future and how they are going to get there.[127]
Similarly, Malcolm Evans, Chief Executive Officer
of Manufacturing Accelerator, told us that "MAS shuffles
a plant around and draws white and yellow lines on the floor"
and it was "nowhere near multi-skilled enough" to manage
the complexity involved in scaling up operations.[128]
47. The Minister described some of the criticisms
of the Manufacturing Advisory Service as "a bit unfair",[129]
and highlighted positive feedback from Manufacturing Advisory
Service clients:
97 per cent of those companies that use MAS say
that their advice was valuable, so that is a pretty impressive
response rate, so we know that those who use it value it, and
so think that it is good value for money and time invested.[130]
He further explained that ongoing work to integrate
Government support schemes aimed at manufacturers with those aimed
at growing businesses or supporting exports could help address
concerns regarding the Manufacturing Advisory Service's ability
to help manufacturer's scale up their operations.[131]
Regarding this integration, the Department stated that:
With MAS now part of the Business Growth Service,
manufacturers with the most potential will receive expert advice
on a broader range of key strategic issues, including access to
finance, innovation and leadership and management as well as the
current MAS offer. Referrals to UKTI, Innovate UK and other specialist
providers will also be improved. This will address concerns about
ensuring manufacturers get the right strategic and operational
advice to scale-up and grow, when they most need it.[132]
48. The Department cited the GrowthAccelerator as
a service which targeted "small and medium sized enterprises
that have the potential to achieve high and rapid growth".[133]
It explained that the GrowthAccelerator advised businesses
in "raising finance, commercialising innovation, leadership
and management, and strategy development and execution".[134]
While this support was not tailored to manufacturing companies,
the Department stated that GrowthAccelerator provided "the
expertise, insight and networks firms need to achieve sustainable
growth".[135]
49. We agree
with the Minister that reducing organisational barriers between
business support organisations such as the Manufacturing Advisory
Service, GrowthAccelerator and UKTI would help manufacturers access
a better quality advice offer. In the response to this report,
the Minster should set out the practical measures he is undertaking
to achieve this, alongside an explanation of how progress bringing
these two organisations together will be monitored. This merger
should be carried out in a manner that ensures continuity of service
to the businesses using UKTI and MAS.
ADVANCED MANUFACTURING SUPPLY CHAIN
INITIATIVE
50. The Advanced Manufacturing Supply Chain Initiative
(AMSCI) was set up "to improve the global competitiveness
of UK advanced manufacturing supply chains".[136]
It provides funding for equipment, research and development work
to improve manufacturing equipment or processes, and training
or skills development.[137]
51. We heard some concerns that this initiative was
not reaching small businesses in the way that it should. For example,
Julie Madigan, Manufacturing Institute, told us that the scheme
seemed "big-company-driven".[138]
When we put this to the Minister, he told us that 44 per cent
of the scheme's total £276 million funding had been allocated
to SMEs.[139] However,
he acknowledged that engaging effectively with small businesses
was "difficult" for Government schemes.[140]
He further told us that:
We are doing an evaluation, which we will publish.
The evaluation is specifically going to look into the impact on
supply chains and test whether we have met the goals that we set,
in terms of ensuring that the benefits cascade down the supply
chain.[141]
This evaluation is due to be published in March 2015.[142]
52. The Minister should report back to us with
the results of his evaluation of the Advanced Manufacturing Supply
Chain initiative when it is published in March 2015. This evaluation
should pay particular attention to the extent to which the programme
has supported SMEs. Lessons learned as a result of this process
should be fed into the design of forthcoming supply chain initiatives.
The Minister should write to us with an action plan when the review
is published.
83 Department for Business, Innovation and Skills (GSB 22)
para 6.1 Back
84
Department for Business, Innovation and Skills (GSB 22) para 6.2 Back
85
UK trade and Investment, Annual Report and Accounts 2013-14 (March
2014), p 4 Back
86
UK trade and Investment, Annual Report and Accounts 2013-14 (March
2014), p 8 Back
87
UK trade and Investment, Annual Report and Accounts 2013-14 (March
2014), p 31 Back
88
Department for Business, Innovation and Skills (GSB 22) para 6.18 Back
89
Q261 [Mr Moore] Back
90
PLASA (GSB 03) para 14 Back
91
Q258 [Dr Marshall] Back
92
Department for Business, Innovation & Skills, Foreign &
Commonwealth Office, UK Trade & Investment, UK Export Finance
and Lord Livingston, 'Increasing the UK's exports and attracting inward investment',
accessed 4 February 2014 Back
93
Department for Business, Innovation and Skills (GSB 22) para 6.7 Back
94
Q374 [Mr Warrington] Back
95
Q374 [Mr Warrington] Back
96
Q284 [Ms Batchelor] Back
97
Q316 Back
98
Q316 Back
99
Department for Business, Innovation and Skills (GSB 22) para 6.14 Back
100
In Q328 Nicola Bolton, the acting Managing Director of UKTI, defined
business wins, as "the amount of business [companies] win
as a result of working with UKTI" that would not have been
achieved without UKTI's support. Back
101
Department for Business, Innovation and Skills (GSB 22) para 6.14 Back
102
UK trade and Investment, Annual Report and Accounts 2013-14 (March
2014), p 88 Back
103
Federation of Small Businesses (GSB 18) para 7.3 Back
104
Department for Business, Innovation and Skills (GSB 22) para 7.1 Back
105
Department for Business, Innovation and Skills (GSB 22) para 7.1 Back
106
Department for Business, Innovation and Skills (GSB 22) para 7.1 Back
107
Department for Business, Innovation and Skills (GSB 22) para 7.1 Back
108
Q170 Back
109
Q172 Back
110
Department for Business, Innovation and Skills (GSB 22) para 7.9 Back
111
UK Export Finance, Support for SME Exporters (October 2013), p
11 Back
112
Department for Business, Innovation and Skills (GSB 22) para 7.9 Back
113
Lloyds Banking Group (GSB 25) para 6.2.1 Back
114
Engineering and Machinery Alliance (GSB 07) para 7(i) Back
115
Lloyds Banking Group (GSB 25) para 6.2.2 Back
116
Q339 Back
117
Government Office for Science, The Future of Manufacturing (October
2013) Back
118
Manufacturing: statistics and policy, Standard Note SN/EP/1942,
House of Commons Library, November 2014 Back
119
Government Office for Science, The Future of Manufacturing (October
2013), p 8 Back
120
Q291 Back
121
Manufacturing: statistics and policy, Standard Note SN/EP/1942,
House of Commons Library, November 2014 Back
122
Manufacturing: statistics and policy, Standard Note SN/EP/1942,
House of Commons Library, November 2014 Back
123
Department for Business, Innovation and Skills (GSB 36) extract Back
124
Business, Innovation and Skills Committee analysis of data provided
in Department for Business, Innovation and Skills (GSB 22) annex
B Back
125
Q296 [Dr Madigan] Back
126
Q296 [Dr Madigan] Back
127
Q296 [Mr Templeton] Back
128
Q294 Back
129
Q372 Back
130
Q372 Back
131
Q373 Back
132
Department for Business, Innovation and Skills (GSB 36) extract Back
133
Department for Business, Innovation and Skills (GSB 22) para 1.4 Back
134
Department for Business, Innovation and Skills (GSB 22) para 1.7 Back
135
Department for Business, Innovation and Skills (GSB 22) para 1.7 Back
136
Department for Business, Innovation & Skills and Deputy Prime
Minister's Office, 'Advanced manufacturing supply chain fund to create thousands of new jobs',
accessed 4 February 2014 Back
137
AMSCI, 'Advanced Manufacturing Supply Chain Initiative', accessed
4 February 2014 Back
138
Q306 [Dr Madigan] Back
139
Q369 Back
140
Q370 Back
141
Q370 Back
142
Department for Business, Innovation and Skills (GSB 36) extract Back
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