Businesses and SMEs

Baroness McGregor-Smith Excerpts

Thursday 6th July 2017 Lords Chamber

[Baroness McGregor-Smith (Con)]

My Lords, I am delighted to take part in today’s debate and thank my noble friend Lord Leigh of Hurley for initiating it. I really do believe that business plays a part in creating and spreading wealth and improving life chances. It certainly did that for me. I want to share some of my experiences of living in Britain since I was a child and explain what more business needs to do to improve life chances for everyone.

I came to the UK when I was two from Allahabad in northern India. My parents always believed that coming here would create a better future for me, and subsequently for my sisters. It has certainly done that, but it was not easy. It was not easy growing up as a child in Bayswater and White City, thinking that one day I could be successful. I recall it being a pretty hostile environment for many people like me. However, today, I want to talk about what made things different for me as I grew up—namely, when I began to work in the services sector.

Today, the services sector accounts for 75% of businesses in the UK, 79% of employment and 72% of turnover. I recall my parents always saying to me that what would open the doors for me, given my race and gender, was a qualification. Therefore, I chose to train at BDO as a chartered accountant, when I got in. What surprised me was how work gave me such a great focus and a huge amount of confidence and made me begin to believe in myself. Around two years after qualifying, I joined the outsourcing industry, which was very fast growing and exciting and accepted talent from people of every background. This industry has a mixed reputation in the UK and has faced many challenges, but we should not underestimate what it has done for so many people.

When I joined Mitie, which stands for “management incentive through investment equity”, in 2002, I was struck by its share ownership model, which gives people the opportunity to invest in their own business. It was the only public company that did this and is still the only public company that is allowed to do it. Every public company should look seriously at how it can spread share ownership for individuals. This was not for the elite; it was for painters, roofers, landscapers and cleaners. All of them got an opportunity to invest in share ownership in some way, shape or form. That is really significant, because it is important to make our young people today realise that they can be part of a business’s success.

Today we have all heard about the John Lewis model, and I absolutely applaud what it has done. As we know, it is the largest employee-only business in the UK and I would like to see many more of them. I am very struck by the words of its founder, John Spedan Lewis, who believed that partners who share knowledge, power and profit have better businesses. Employee engagement, productivity, brand reputation and retention of staff all improve under this model.

Having a passion for what you do all day is incredibly important, whichever business you work in, but I believe that all of us—especially those known as the privileged few—must give others the opportunities that we were once given. All businesses need a very strong social purpose and to give back to the communities in which they operate. That means not just giving money to charities but encouraging all their employees to do something. When I was a chief executive, I always took the view that that could be anything. Examples were raising money for charity, skills training, going into schools to talk about when you first got into work, mentoring apprenticeships, supporting those from disadvantaged communities and helping on environmental projects. The list goes on and on, and every company in the country should encourage its employees to do something.

When I first became a chief executive, I agreed to become a trustee of Business in the Community. All its members tackle a wide range of issues that are essential for building a fairer society and a more stable future, and I applaud BITC’s passion and approach. It believes, as I do, that responsible business is the best form of business. I recall leading a “Seeing is Believing” visit for Business in the Community. We took business leaders on a number of visits, including to an apprenticeship programme that my company was running, where we targeted very disadvantaged people and helped them into work. The confidence, excitement and loyalty of these young people was extraordinary and incredibly powerful to see. I urge everyone to go on visits that will show them the power of business when it does good things.

I also applaud the introduction this year of the social mobility employer index, which ranks businesses on how open they are to accessing talent from all backgrounds and supporting all individuals within communities. We now have to learn to take the structural bias out of business so that it can be seen as a real force for good. A lot more needs to be done, and I implore the Government to think about some of these things as they develop their industrial strategy.

All companies should build a social purpose alongside their business plans. There is no point in saying that you are a company that will make money. A lot more focus should be placed on how to support start-ups. There are many extraordinary examples of start-ups in the UK, and the Government should put a lot more effort into making sure that they are successful. All investors in businesses with listed stock should now insist that the stocks they invest in have a strong moral and social purpose. No fund manager in 14 years ever asked me about social responsibility. Banks need to increase and prioritise lending to organisations that have a strong social agenda.

Once and for all, the Government need to use their purchasing power to buy their goods and services from companies that have a strong social purpose. Let us not say that we cannot do it because of the bureaucracy—we can do it. Government money should also be given to supporting start-ups and new employee ownership models. It is now too difficult to set up an employee ownership business, as the tax rules and the bureaucracy are getting tougher. It needs to be the easiest thing that we can do.

With regard to education, we need to start speaking differently at business schools. They need to explain why the business models of the future will be those with a strong social purpose. Not all business schools do that today, but they need to. Our young people need to be encouraged to set up businesses of that nature.

Of course I am going to mention diversity. Where is it? I am talking about diversity in thinking and in debate. Every business should be thinking about that. If we are serious about increasing the life chances of all individuals, diversity has to be taken seriously. The top of business does not look diverse in race, gender or disability, and that must change. It is not enough any more to have aspirational targets; we need seriously to think differently about it.

The challenges of the 21st century are too big for government or the social sector to handle alone. I think we all agree that income inequality is now at a level that has not been seen before, and we have a young generation who expect more from everybody. My children are aged 18 and 20, and they do not remember a day when the UK did not talk about austerity—they were too young. We now know that that needs to change. They also do not think that business has done a particularly great job over the past decade. We have to think about the fact that they need the opportunities we were afforded.

The Brexit conversations have not helped. Business and government need to join up to make sure that Brexit is a success. There can be no more arguments. Where is the Brexit advisory committee that will sit alongside government? All big businesses should be implored to work with the Government and show them the good things that we can do. Instead, we all argue about what we cannot do. It is time to get in a room and agree what we can do. I am very interested to hear what the Minister has to say about the ability to have a business Brexit committee for the UK, to support all employees from all backgrounds and what they need for the future.

I am positive about business in the UK—it is hugely exciting. Last year, it was said we had 5.5 million businesses in the UK. Over 99% of these are SMEs, and they are extraordinary businesses. However, it is no longer enough to be a country that regulates. We have to be a country that has passion for and belief in business success and growth. That is what helps create extraordinary futures for our young people. It did it for me, it can do it for everybody.