UK Industry: International Competitiveness

Lord Jenkin of Roding Excerpts

Thursday 5th July 2012 Lords Chamber

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[Lord Jenkin of Roding]

That this House takes note of the international competitiveness of UK industry, of its success in attracting inward investment and exporting to global markets, and of its role in strengthening the United Kingdom’s economy and in job creation.

[Lord Jenkin of Roding]

My Lords, we have had two recent debates in this House that I would like to mention, one introduced by the noble Lord, Lord Adonis, about youth unemployment on 14 June, and one introduced by my noble friend Lady Kramer on economic growth on 21 June. One key to solving both those problems is achieving the success of UK industry—by that I mean all industries—for the nation in earning its living, and that is what this debate is about.

I immediately welcome my noble friend Lord Green of Hurstpierpoint to the Dispatch Box. He has spent so much time abroad over recent months that we do not see him often enough in this House, so it is absolutely splendid that he should be here today. He has made a notable contribution to supporting both exports and inward investment and, if I may put it this way, banging the drum for Britain.

I should declare an interest in that I am an honorary president—I stress “honorary”—of the Energy Industries Council, which has an important role in representing over 600 companies in the supply chain of all energy supplies and in securing business round the world. If I may, I will draw on its experience a little later.

I start with a proposition with which I hope that the whole House can agree:

“There is a growing consensus across UK Government and business that growth in manufacturing and industry is vital for the UK’s sustainable economic recovery, and that technology and innovation will be key drivers of that growth”.

That will come through later in my speech and is as true for exports as for everything else. The proposition comes from a valuable report by the PA Consulting Group, which draws on a survey of over 100 business leaders from the UK’s fastest-growing technology and innovation centres. The report is very well worth reading. It has proposals for a constructive and realistic industrial policy, and I draw it to my noble friend’s attention. It is one of a whole raft of recent policy papers addressing the problem of how we are actually to achieve what that report sets out.

The UK is still one of the world’s major exporting countries. In its most recent inflation report, the Bank of England said that the deficit,

“alongside other factors such as low national saving, indicates a need for the UK economy to rebalance away from domestic demand towards net exports”.

Both parts of that are important. I have been exploring how we can better achieve this objective with a few of the major bodies that aim to help in this process. I mention first that admirable body, the British Chambers of Commerce. In a letter to me about the quarter 1 results for this year, it said:

“This quarter’s Index shows that export orders and sales have increased over the last three months. Trade documentation data for UK goods exports in Q1 2012 shows an almost eight percent increase”—

7.7%, put accurately—

“on the same quarter last year, demonstrating that growth in export goods continued”.

The chambers have of course gone on to identify a number of challenges. I have no doubt that other noble Lords will draw attention to these during the debate, but they draw particular attention to the problem of smaller companies seeking to export for the first time. Among those, they stress the very great importance of trade missions and trade shows, which really are an effective means for new exporters to get started. However, it seems that the use by smaller firms of the state-backed finance products from UK Export Finance, which should go hand in hand with that, is mainly due to low awareness on the part of small firms of what is available. These are specialised services and it seems sad if firms are not aware of what is on offer. I applaud my noble friend for his role in restoring funding for the trade shows programme to UKTI’s budget, but what more can the Government do to overcome this handicap of lack of awareness? If it really is a problem, it ought to be tackled.

The chambers of commerce also mentioned the importance of training people in the mysteries of international trade. It is hugely complex and one must remember that it is always its people who do the actual exporting. The BCC itself does quite a lot of training but too many firms simply do not understand the need for expertise in this area. In this connection I also met a remarkable lady, Mrs Lesley Batchelor, who is the director-general of the Institute of Export. She entirely supported that. Indeed, the institute’s primary purpose in life is its education programme: it runs a variety of courses on international trade. She made the point that too few companies undertake any internal training in exporting—so that, as she put it, any success becomes a matter of happenstance and not a matter of strategy. The institute’s philosophy can be summed up as, “professional qualifications bring competence, and competence engenders confidence”. That is at the heart of this. She went on to say that the UK has an almost psychological disadvantage. As she put it:

“Compared with, say, Italy or the Netherlands, international trade is less embedded in the psyche of many UK firms”.

I recognise that; many years ago, I used to work for the Distillers Company, which exported almost its entire production. However, it is not true of a lot of other companies. My noble friend may well recognise that. Lesley Batchelor mentioned another problem with which we are all familiar—that the media much prefer to report problems and failures rather than successes.

I will mention one success. So far this year 140 companies have won Queen’s Awards for enterprise in international trade. Have we read anything about that? It is there; it has happened; the firms themselves are, no doubt, very proud of it. One can add to that the question, “Why do so many people spend their time talking down manufacturing in this country?”. This does no service at all to industry; manufacturing is hugely important.

In my discussions in preparing for this debate I have heard a great many praises for UKTI, the United Kingdom Trade and Investment body, which operates under BIS. There is no doubt that it does a great deal of sterling work in running trade shows, running missions overseas and encouraging foreign direct investment into the UK. I shall cite one or two examples of this; that often helps to make the point. I come back to what I mentioned earlier, in declaring my interest in the Energy Industries Council. This body, which works very closely with UKTI, has offices in Dubai, Singapore, Beijing, Rio de Janeiro and Houston, Texas. Over the three years since 2009, with UKTI’s help, the EIC has managed the UK pavilion at 26 exhibitions, with 648 UK exhibitors. It has run 25 trade missions for 290 delegates. Between them these have produced millions of dollars of new business for the firms concerned.

Then again, one can look at its activities in overseas investment projects. There is a project known as the Sadara project in Saudi Arabia; it is a $20-billion world-scale chemicals complex. The EIC ran what it called a “share fair” event in this country, and was able to build valuable contacts between the firms that could supply products and services—not just products—for the contractors for the project. Again, it is confident that millions of dollars of business will be won.

We hear a lot about the need to break into developing markets. Here again, the EIC has a very good record. I will mention just two recent successes. They are small firms, and I am willing to bet that there is nobody in this House who has heard of either of them. I may be wrong, and I shall stand corrected. There is a small company called WMT Oil and Gas which has just been awarded a $500,000 contract to produce operations procedures for a deep-water offshore oil field in Brazil. It will be the first tension-leg well platform in Brazil, which will be connected to a floating production, storage and offloading vessel. The company produces its instructions in two languages—English and Portuguese. This is a huge success for that small firm.

Another company, which has been breaking into the Chinese market, is called SafeHouse Habitats Scotland Ltd. Again, it was the EIC that helped it to break into that market. The company produces products such as pressurised welding enclosures and hot-work management solutions. It identified opportunities in China such as offshore oil and gas exploration products, and the EIC helped SafeHouse Habitats to make the market breakthrough. The EIC formula clearly works. It is hugely successful, and I know that my noble friend is aware of that. Can it not be imitated in other sectors of the economy? It seems to be a way to get extra business.

I have extolled the virtues of UKTI but I have also heard criticism of it, and perhaps I should mention that. It is not always quick enough to respond to the accelerating changes in the global market. Here again I cite one example, although it may not be UKTI’s fault—I think it goes deeper than that. A few weeks ago my honourable friend George Freeman, MP for Mid Norfolk, who advises my right honourable friend David Willetts at BIS, spoke to a science and innovation conference in Boston, Massachusetts, where he described the UK’s life science strategy, an initiative that was launched with much publicity by the Prime Minister last year. As many noble Lords will remember, this attracted much applause from the specialist press and indeed has been warmly welcomed by many scientists and businesses that are likely to be involved. It is a very good example of this country backing a sector in which we have a world-leading position, which is what we should be doing.

My honourable friend found that his US audience was completely unaware of the strategy—they knew nothing about it at all—even though it includes a number of measures that are directly aimed at foreign direct investment. Perhaps that is not the fault of UKTI. There seems to have been precious little publicity for the initiative since the Prime Minister’s launch, and that is something that I heard echoed only last night at the Royal Society’s soirée. Who is leading the initiative? Where are the industrialists who are backing it? Why has there been so little publicity since the launch? The strategy has huge promise for the UK. It is an area of high technology where we excel. We have a proud record in that: I shall mention only the UK Biobank. Now, of course, we are espousing the ground-breaking policy of open access to scientific information and network access, and when my honourable friend started talking about that to his American audience, he saw them getting out their pencils and notebooks. That should have been done before. What we need on this issue is a series of international ambassadors to sell this important initiative abroad and across the world. It has a lot to offer this country and could bring billions of pounds of inward investment.

Contrary to the doom and gloom that is so readily purveyed by the media, we have a great deal to be proud of. Our role in international trade is widely welcomed. We have many manufacturing companies selling high-tech products and services around the world. We can attract top-quality companies to invest in this country. Of course we could do better and I made one or two suggestions as to how we might, but let us build on our undoubted successes in this area. I beg to move.

--- Later in debate ---

[Lord Jenkin of Roding]

My Lords, according to my calculations we have 14 minutes left before our three and a half hours run out. However, I will relieve noble Lords’ anxieties by reassuring them that I do not intend to speak for anything more than a minute or two. I know that the next debate is ready to start.

I will say three things. First, the Motion was drawn in deliberately wide terms in order to embrace not just the narrow definition of manufacturing or service industries but a whole range of industries. A number of noble Lords made maximum use of that. We heard a lot from around the country and across sectors about the importance of competitiveness. I particularly welcomed what was said, for instance, about competitiveness in our cultural exports, which are hugely important.

Secondly, I am most grateful to noble Lords who took part in the debate. I was not sure whether we would secure a long enough list, but we did. I hugely value—and my noble friend said that the Government value—the amount of expert evidence that has come from this House in a way in which we are justified in taking some pride. We have a range of expertise here that was on show in this debate.

Thirdly, I thank my noble friend the Minister, who demonstrated his mastery of the subject as a result of his own long experience, including his experience as a Minister, of dealing with the problems both of encouraging exports and of promoting foreign direct investment. He showed not only that he was master of his subject but that he had taken on board some of the genuine criticisms that were made about where the Government could do more to help industry and companies, particularly SMEs, make their contribution in this field. We look forward to seeing the letters that he has promised to send to all noble Lords. I thank him most warmly. As I said in my opening speech, we do not see enough of him here because he is so busy banging the drum overseas for Britain. I beg to move.

Motion agreed.