Roads to Success: SME Exports - Select Committee on Small and Medium Sized Enterprises Contents

CHAPTER 6: language and culture


6.1.  The Committee received mixed evidence about the importance of foreign language skills in developing trading relationships and whether the absence of language skills inhibited exporting. Some companies took the view that language differences were generally not an issue because of the universality of English, particularly in some sectors. Alderley plc, an SME involved in the oil and gas industry, said, for example, that although language skills were needed when exporting to Russia, "elsewhere, the use of English is so common in the oil and gas industry that language has not proved a barrier".[220] Another SME, Minden Systems Ltd, said that they had not found languages "a big problem".[221] Other SMEs, however, suggested the language skills could be critically important. Black Country Metals Ltd, an SME which trades metals, said: "if you are competing with another country for business and you don't speak that country's language and your competitor does, there is no doubt about it that the competitor will get the business".[222] We heard the same message during our visit to Germany, and it chimes with Professor Stephen Hagen's reference to the advantage of the "personal rapport" that develops when individuals speak the same language.[223] Mr Davenport of the FSB said that languages could cause difficulty even in Europe and that "there are definite sector problems there, where if you go to a trade meeting you have difficulty with communication".[224]

6.2.  Of the numerous surveys of SMEs that have been drawn to our attention, all indicate that language skills are an issue, albeit not, on the whole, regarded as a principal reason for not exporting. The UKTI found that between 10% and 18% of SMEs identified language and cultural issues as a barrier to exporting.[225] The BCC 2012 survey of 8,000 businesses (of all sizes) found that 21% of respondents agreed that language barriers were highly influential in deciding if, when and where to export, and 31% agreed they were somewhat influential.[226] Similarly the IOE 2012 International Trade Survey showed that 14% of companies identified languages as an issue preventing them from developing export markets. Whilst not the highest, these figures alone are cause for concern. What makes the picture even more disturbing is that, according to the BCC survey, "the perceived influence of language barriers on trading internationally varies significantly in line with the propensity to export: 61% of non-exporters "likely to consider" exporting in the future see language as a barrier to doing so", and "businesses that have less propensity to export are more likely to view language barriers as highly influential in any decision to enter global markets".[227] This would suggest that, if UKTI is to make inroads into the large number of SMEs not currently exporting, the task of dispelling any misleading perceptions associated with language differences and improving the ability of SMEs to deal with language and cultural differences should be regarded as a priority. We recommend accordingly.

6.3.  Even if language and cultural differences are not generally a principal disincentive to exporting, they are significant. Both the absence, and acquisition, of language skills have commercial and financial consequences. Professor Foreman-Peck analysed the language barrier as being "equivalent to a tax" and estimated that "the minimum possible gains from optimal investment in languages for Britain in 2005 was £9 billion".[228] In 2006, an EC Survey of exporting SMEs (the ELAN survey) reported that over 10% of SMEs declared they had lost a contract as a result of a lack of foreign languages, and nearly one in five SMEs reported cultural differences as a problem.[229] More recently, in 2011, the PIMLICO study looked at 40 SMEs across 27 EU Member States which had been selected for their significant trade growth as a result of their formulating and employing Language Management Strategies.[230] The study reported that three out of four experienced at least a 16% increase in sales turnover as a result of the strategy, with 43% increasing their turnover by over 25%.[231] The 2012 BCC survey found that up to 96% of respondents had no foreign language ability for the markets they served. Seventy-seven percent of companies surveyed "reckoned they had missed or lost business because of this", whereas exporters who proactively used language and cultural skills achieved on average 45% more sales.[232] The APPG on Modern Languages refer in their evidence to us to research by Cardiff University Business School which suggested that the "economy could be missing out on up to £21 billion a year in lost contracts because of lack of language skills in the workforce".[233]

English as the universal language of business?

6.4.  Whilst some witnesses argued that learning languages was not important because English was the universal language of business, others commented that they only did business with English-speaking countries. Professor Hagen suggested that smaller businesses in particular had an expectation that "they can use English wherever they go".[234] But, as the British Academy have said: "We can no longer assume that English is the global language par excellence: 75% of the world's population do not speak English as their first language".[235] According to the APPG on Modern Languages, "only 6% of the world's population are native English speakers".[236]

6.5.  Furthermore, the supremacy of English on the Internet is decreasing. In the past decade alone, Chinese online traffic has increased by 1,500%, Russian by 1,800% and Arabic rose by a staggering 2,500%; while English saw a modest increase of 300%.[237] We were also told that "over 70% of consumers require information in their native language in order to make an online purchase", and those who do not speak English well were six times less likely to buy online from an English only website.[238] Whilst online translation systems are undoubtedly useful they have obvious limitations, particularly where precise details are needed.[239]

6.6.  In addition, many studies note that although English is the main language of business, companies without access to multi-lingual staff who trade with countries which prefer to do business in their native tongues are at a disadvantage.[240] Spain, Russia and France are all identified within the Eurobarometer as countries where speaking the native language is important for trade.[241]

Language skills and language skills gaps in the UK

6.7.  The European Survey on Language Competences, carried out by the EC with a consortium including Cambridge Assessment, compared the modern foreign language skills, in reading, listening and writing, of 15-year-olds in 16 jurisdictions on the continent (14 countries) in 2011. It rated England as follows:

  • bottom in reading, writing and listening in the main foreign language taught (French for English pupils);
  • worst in reading in the second foreign language taught (German for English pupils);
  • 14th out of 16 in listening and writing in the second foreign language taught.[242]

6.8.  We asked Professor Hagen which languages would be of particular value to companies. He suggested Brazilian Portugese and Mandarin in the future, but currently it was German.[243] According to the BCC survey, 99% of respondents could not speak sufficient Chinese or Russian to conduct business in the importers' language, and 57% spoke no German at all.[244] UKTI suggested that language and cultural barriers were most widespread amongst companies trading with China and France.[245]

6.9.  Given our generally low level of language skills, we were encouraged by the Government's decision to include in their proposals for reform of the national curriculum, published on 7 February 2013, compulsory teaching of foreign languages at Key Stage 2 (ages 7 to 11) for schools in England.[246] The policy is based, according to the consultation document accompanying the proposals, on the Government's view that "proficiency in languages is vital to the future economic well-being of this country",[247] a view with which we concur. We welcome the Government's acknowledgment, in their proposals for the reform of the national curriculum, of the importance of learning foreign languages at early stage in the education system.

6.10.  The Government have decided that primary schools should be required to teach one of the following languages: French, German, Italian, Mandarin, Spanish, Latin or Ancient Greek, with an emphasis on "practical communication" or, for Latin and Ancient Greek, on providing "a linguistic foundation for learning modern languages".[248] We are aware that many of those responding to an earlier consultation of the proposals relating to foreign languages at Key Stage 2 either did not agree with a defined list of languages at all or did not agree with the seven languages proposed. Of the latter, some suggested that the list should include, at the very least, BRIC[249] country languages; and a small number of respondents (14%) commented specifically on the importance of selecting languages "from a global business perspective" and as a means of "improv[ing] the country's competitiveness".[250] The Government included Mandarin in the list of required languages because they regard it as "important economically";[251] and, arguably, the same is true of other BRIC languages. Whilst we draw this matter to the attention of the Government, we make no specific recommendations. We recognise that the debate is a complex and long-standing one and not one which this Committee is in a position to take further.

UKTI provision

6.11.  In answer to a parliamentary question in June 2012, Baroness Wilcox, (then) Parliamentary Under Secretary of State at BIS, described UKTI provision as follows:

"[UKTI] provide a subsidised service, available to SMEs, which helps them overcome language and cultural barriers in overseas markets. The service can provide a bespoke written report with in-depth advice and information on types of language learning and rates, and on recruiting students and foreign nationals to provide in-house language skills. The service also signposts companies to professional bodies such as the Chartered Institute of Linguists and the Association for Language Learning when they wish to select a provider for foreign language training."[252]

On the same occasion, Baroness Wilcox also acknowledged the importance of understanding a country's culture more generally.

6.12.  The UKTI Export Communications Review service involves companies receiving a day or half day of expert advice on how to cope with language problems in exporting.[253] The Government describe the service as "highly effective, consistently showing high benefits",[254] and Baroness Wilcox suggested that, if there were an apparent need for more provision, "very often" it was "just a case of making sure that [SMEs] realise that there are agencies that can provide their employees with the languages that they need".[255] The PIMILICO study was complimentary about the services provided by UKTI, although Professor Hagen, author of the study, thought that provision was too centralised.[256]

How SMEs can help themselves

6.13.  Translation services and language courses offer two routes to tackling the language issue. Both, however, incur what Professor Hagen described as "severe costs".[257] He suggested that SMEs should consider other approaches, for example, recruiting foreign students on placement, particularly those from foreign business schools.[258] It was, therefore, encouraging to hear from Professor Hagen that a recent study indicated that there "has been a massive increase in the number of native speakers being taken on by British companies to cope with language problems".[259]

6.14.  Given the services provided by UKTI, and following up the point made by Baroness Wilcox, SMEs and trade organisations representing SMEs are encouraged to explore the help that is at hand to assist them in overcoming the language barrier. Both the Government's commitment to promote a culture of foreign language learning from an early stage and the experience of many SMEs that developing language capacity is commercially advantageous will, we anticipate, bring about a significant improvement in the current perception of language as an obstacle to exporting.

6.15.  SMEs are unlikely to have the breadth of languages available to larger organisations. There needs to be a cultural shift in attitudes towards learning modern foreign languages. We welcome, therefore, the Government's proposal that foreign languages should be taught from Key Stage 2 upwards. More generally, we look to the Government to demonstrate to children and their parents the potential career benefits of foreign language skills.

6.16.  We recommend also that, as part their communication strategy with SMEs, UKTI should include the message to SMEs that there are significant commercial benefits to addressing the language issue and adverse consequences if it is ignored. As part of that message, UKTI should offer effective and realistic advice about how SMEs can address the language barrier (such as offering placements to foreign students and using online translation services).

6.17.  SMEs should be encouraged to develop Language Management Strategies to mitigate the effects of the language differences on their businesses. We recommend that UKTI should develop a short template Language Management Strategy which SMEs could modify according to the needs of their business and potential export markets.

Tapping into existing linguistic diversity

6.18.  Despite the poor statistics about language skills in the UK, the UK has a very high degree of linguistic diversity, including among young people, many of whose first languages are not often taught in schools. A 2011 survey found that 233 distinct languages were spoken in London.[260] Baroness Wilcox referred to the advantages of having "a multicultural society" when answering the parliamentary question mentioned in paragraph 6.11 above,[261] and the APPG on Modern Languages saw "London's linguistic diversity", in particular, as "an important under-promoted asset".[262] Professor Hagen commented similarly: "there is a greater abundance of native speakers around the London area who can be drawn into British companies which are not available elsewhere in the country".[263]

6.19.  When we raised the question with UKTI in July 2012, Mr Simon offered some welcome news about tapping into the UK's "under-promoted asset" more generally. He said that there was an initiative "just getting underway to look at diaspora communities in general", of which India and Pakistan were principal examples. He agreed, however, that more needed to be done: although the Government recognised the value of diasporas, "I think we are not quite there yet on establishing how that can be done in a systematic way".[264]

6.20.  We invite the Government, in their response to this report, to set out what mechanisms they intend to put in place in order to ensure that our cultural and linguistic diversity are put to better use in addressing the opportunities, for SMEs, associated with the different languages and cultures of potential trading partners.

220   Alderley plc. Back

221   Minden Systems Ltd. Back

222   Black Country Metals Ltd. Back

223   Q 352. Professor Hagen is the author of the PIMLICO study (see para 6.39) Back

224   Q 96. Back

225   The Government, slide for Q6. Back

226   BCC, Exporting is good for Britain and exporters need SKILLS 2012, p 3. Back

227   IbidBack

228   Professor James Foreman-Peck, Costing Babel: the Contribution of Language: Skills to Exporting and Productivity in the UK (2007). Back

229   ELAN: Effects on the European Economy of Shortages of Foreign Language Skills in Enterprise, CILT, and Interact International (2006). Back

230   Language Management Strategies are defined as "the planned adoption of a range of techniques to facilitate effective communication with clients and suppliers abroad", ibid. Back

231   EC, Report on language management strategies and best practice in European SMEs: the PIMLICO Project, Professor Stephen Hagen (April 2011). Back

232   APPG on Modern Languages. Back

233   IbidBack

234   Q 351. Back

235   British Academy Policy Centre, A Position Statement: Language matters more and more, para 6.4. Back

236   APPG on Modern Languages. Back

237   Internet World Stats: Back

238   APPG on Modern Languages, citing research from Common Sense Advisory. Back

239   Q 352. Back

240   The PIMLICO Project, op cit.  Back

241   EC (Public Opinion) website. Back

242   Department for Education website.  Back

243   Q 355. Back

244   BCC, Exporting is good for Britain and exporters need SKILLS (2012), p 3. Back

245   The Government, slide for Q 8. Back

246   DfE, The National Curriculum in England: framework document for consultation (February 2013), p 173. Back

247   DfE, Reform of the National Curriculum in England (February 2013). The proposals are out for public consultation, the deadline for which is 16 April 2013. Back

248   DfE, The National Curriculum in England: framework document for consultation (February 2013), p 173. Back

249   Brazil, Russia, India and China. Back

250   DfE, Consultation report: Foreign languages at Key Stage 2 (February 2013), pp 8-9. Back

251   Ibid, p 5. Back

252   28 June 2012, HL Debs, col 322. Back

253   The Government. See also Q356. Back

254   IbidBack

255   28 June 2012, HL Debs, col 322. Back

256   Q 356. Back

257   Q 351. Back

258   IbidBack

259   QQ 359-60. In 2006, 16% of companies surveyed had taken on native speakers. In 2012, of a survey conducted in southern England and south Wales, the figure was 43%. Back

260   Eversley et al, Language Capital: mapping the languages of London's schoolchildren, CILT (2011). Back

261   28 June 2012, HL Debs, col 322. Back

262   APPG on Modern Languages. Back

263   Q 360. Back

264   Q 48. Back

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