Exports: Government Support

Lord Cope of Berkeley Excerpts

Thursday 29th January 2015 Lords Chamber

[Lord Cope of Berkeley (Con)]

My Lords, I, too, am grateful to my noble friend Lady Wheatcroft, both for this debate and for her speech.

Some colleagues and I worked hard a couple of years ago on the Select Committee on SMEs to look into the assistance that the Government were giving for SMEs to export. Of course, your Lordships’ House debated that report; indeed, it has done so a couple of times. It is a crude summary of our report to say that we were favourably impressed by the progress of UKTI but were more concerned about the financial assistance available. Since we did that work, there have been very positive signs of improvement in both aspects, largely along the lines that we hoped for.

It is always difficult to be precise about the scale of exports by SMEs or the number of companies involved, but we all know that we need SMEs to export more. That is indeed a large part of the efforts of UKTI. It does a very good job in that respect. But the problems of exporting for SMEs include difficulties of local knowledge of one’s potential market. This includes languages and customs, as well as knowing what goods they want to buy. In a recent survey, for example, the habit of late payment in many markets came out as one of the problems. We have discussed late payments in the UK in recent debates on the small business Bill, for instance, but of course no Act of Parliament can help with overseas markets where there are very long payment periods. The first thing is knowing where the opportunities lie for one’s particular business. The UKTI and, particularly these days, the overseas posts of the FCO, have much improved their work in identifying opportunities and introducing UK companies to potential customers. All companies, including SMEs, benefit from improved services available in that way.

As my noble friend Lord Lang said, a strong pound is a problem for exporters where price is an issue—as it so often is. We all know about the troubles of the euro. It is not only the rate of exchange that is the problem, it is also the uncertainty involved when making plans. That applies in other fields. The suddenness of the drop in oil prices made it a mixed blessing. Of course, we all like lower petrol and diesel prices, but if you are supplying the oil and gas industries—particularly in exploration and development—that is a problem.

As for uncertainty, I read that some prudent airlines bought large quantities of fuel forward before the oil price dropped, and now find themselves facing severe price competition from apparently less prudent airlines, which did not buy forward.

The UKTI and Ministers, from the Prime Minister downwards, have been working hard at trade missions and boosting our exports in all sorts of ways—particularly my noble friend who will reply to the debate. We have already been reminded of the PM’s visit to India. He took with him 100 companies, including 30 SMEs. Similarly, many went to China. China is a very important market, and UK exports there are at a record level and have more than doubled, I believe, since 2009, growing faster than France and Germany—although obviously they have done better than us in the past.

That reflects the emphasis that there has been on newly emerging markets, which is clearly very important to counteract the eurozone’s problems. When we were doing our work, there was much emphasis on the BRICs—Brazil, Russia, India and China. Russia is now on the—how should I put it?—“more difficult” list. On the other hand, to South Korea, for example, with a new trade agreement in 2013, exports are showing 82% growth. Perhaps we should talk not about BRICs but about BICSKs.

The next big trade deal is of course the Transatlantic Trade and Investment Partnership. Perhaps my noble friend can give us an update on progress on that.

Returning briefly to export finance, since we reported, I am glad to say that there has been a lot more progress from the Government’s point of view. I am told that we have doubled direct lending for small business exports to £3 billion. UK Export Finance—better known to some of us as the ECGD—has been able to expand its services, but it needs to grow faster. The banks are criticised but, as we pointed out, there are hundreds of banks in the UK, not just the handful of clearers whose names are well known. There are also other providers of finance to draw on. The current small business Bill is intended to make it easier for SMEs to draw on that.

My noble friend Lord Lang and the noble Lord, Lord Stoneham, spoke of the car industry. I find it interesting that British luxury cars, such as Rolls-Royce and Bentley, are selling fantastically well in China and the USA. Both of them are made here, despite their companies being German-owned. It is difficult to think of a better tribute to British engineering and design.

In all this talk about what the Government are doing, one good thing is that they are working with various other organisations which exist in the private sector. Let us not forget the work done by the chambers of commerce or by the sectoral organisations for specific industries or parts of the world, such as the task force on the creative industries, mentioned by my noble friend Lady Wheatcroft. Many businesses are more inclined to go to this sort of organisation than to expect help from government but they should not be. They are wrong to do that these days because UKTI and the FCO are much more focused on practical help than they used to be.

The Government’s new trade ambassadors are opening opportunities, too. They are all appointed from among people experienced in business and knowledgeable about the countries that they cover. Some of course are Members of your Lordships’ House and across parties, including my noble friend Lord Risby, who I hope is about to tell us about it. They seem to have excellent backing from the FCO and UKTI. All this helps SMEs to overcome the problems of lack of local knowledge and contacts, which feature so high on the list of factors which inhibit SME exports. The Government are working hard and imaginatively on building the UK’s export performance, but we need that. We have always lived by trade and we still do.