Exports: Government Support

Lord Livingston of Parkhead Excerpts

Thursday 29th January 2015 Lords Chamber

[The Minister of State, Department for Business, Innovation and Skills & Foreign and Commonwealth Office (Lord Livingston of Parkhead) (Con)]

My Lords, I am extremely grateful to my noble friend Lady Wheatcroft for initiating this important debate. It seems only a few years ago that we were both in the retail industry. She was then editor and part-owner of Retail Week and I was a mere finance director at Dixons group. We have aged not at all since then. I am also encouraged to hear so many positive interventions in support of UK exports.

As my noble friend Lady Wheatcroft said, this is a difficult time to try to grow our exports. In the UK, we have seen a strong economic recovery, reflecting a good long-term economic plan, but the economies of many of our closest trading partners who have followed different paths continue to struggle. As my noble friend Lord Lang commented, the strong pound has had an impact. Imports and exports of precious metals, diamonds and oil have led to a muted export performance.

My noble friends Lord Selsdon and Lord Sherbourne both raised the issue of the current account or balance of payments deficit. I should clarify that this is different from the balance of trade. We have seen a worsening of the current account deficit, reflecting greater investment in the UK in areas such as gilts. The UK has run a high trade deficit over a number of years and that is one of the reasons for it. As a Government, we are at the forefront of reducing that deficit and returning to surplus, which will, in turn, improve the current account.

The trade deficit element of the current account is a better story, although there is still more work to do. In past years, when the UK grew faster than its competitor countries, we sucked in imports and the trade deficit worsened. This year the deficit is running at about 2% of GDP. By contrast, under the previous Government, it ran at 2.5% of GDP. In the past three months, we have seen further improvement still. Last month’s numbers were the best for 17 months.

We should also not forget that the UK is the world’s sixth largest exporter. I can reassure the noble Lord, Lord Kirkwood, that manufacturing is hugely important and we are very proud of it. We are also proud that we are the second largest exporter of services in the world. I do not see these as alternatives; in fact, they support each other. We are also the second largest aerospace exporter in the world. Many noble Lords have mentioned our car industry, which is now the second largest in Europe, with the vast majority of what it produces being exported.

Despite problems in the eurozone, we are seeing strong growth in many new markets, with exports to China having doubled over the past four years. So we should not talk down our export capability, as some of our detractors do. When I go around the world promoting trade, I increasingly find that people have a positive image of British products and services. We are seen as innovative, cutting-edge and high-quality. We need to do much more; but we should do it by building on these strengths, not by ignoring them. I make no apology for our ambitious targets in doing so.

The Government have tried massively to enhance the support and advice available to UK companies to help them export. This is not a short-term role. UK Trade & Investment has increased the number of businesses we support each year from 27,000 in 2010 to 50,000 now—a near doubling in the support provided. For instance, we have substantially increased support to trade shows, events, missions and programmes. The noble Lord, Lord Stevenson, asked about this. The Tradeshow Access programme has increased by one-third since the previous Government. It is a bit lower this year than last, but last year was a record year. This is not just about helping companies to attend roadshows but about providing pavilions and assistance to make sure that those attendances are productive. This year alone we expect to help more than 50,000 companies at international events and trade shows, rising to 60,000 next year. We are working closely with trade associations to plan next year’s events well in advance.

We have also run a number of major festivals. We were heavily involved in the Liverpool International Festival for Business and I commend the city of Liverpool for its efforts in creating the largest single business festival in the world last year.

We also held the Commonwealth Games in Glasgow. We invited a number of Commonwealth countries and had two days of business events around it.

The NATO summit at Celtic Manor was also a wonderful event. It was not just a meeting of Prime Ministers and Defence Ministers but also an opportunity to show our defence industry exports.

This year, we will have a major exhibition of the UK’s creativity at the GREAT festival in Shanghai. We will also have an impressive presence at Milan Expo, which will highlight the UK food and drink sector and innovation in particular. I commend it to all noble Lords to try to attend that event.

We have also been targeting our efforts on the projects that are worth most to the UK. Our High Value Opportunities programme has delivered more than £20 billion of business for the UK over the past three years. It has won business for large companies and for small companies in their supply chain as well. Railways, healthcare and oil and gas are but three sectors where this has happened.

As my noble friend Lord Cope stated, smaller businesses need particular help. Last month the Government announced an additional £20 million of funding to help smaller companies become first-time exporters. Export advisers will give them access to a new incubator service, insight visits to markets and an expanded programme of trade fair and events support. For those small companies, online is often a good first step into new export markets. As part of our e-exporting initiative we have signed partnerships with major e-marketplaces from China to South America to Japan. We also provide specialist advice on how to set up websites for overseas markets and a databank of more than 400 international e-marketplaces. I believe this is a world first.

My noble friends Lady Hooper and Lord Sherbourne mentioned languages. We recognise that companies need help, to overcome not just language barriers but also cultural and localisation barriers, to succeed in their export efforts. We have supported more than 700 companies through our innovative service, including the e-commerce for international trade master classes, which take place throughout the UK. Our new language and cultural advisers are helping hundreds of companies. We are piloting a number of events and services that take advantage of the ability of the foreign students we have in the UK. We create temporary placements for graduates and postgraduates in companies to help with both language and cultural understanding. I was recently in Sheffield, launching such a scheme with Chinese students to help local companies.

Finance is an issue for businesses. I am grateful for the many positive comments that noble Lords have made. UK Export Finance has launched new products to meet the needs of smaller companies. It has recruited 24 new specialist export finance advisers to guide them through the increasingly difficult and complex world of export finance. Our progress has been recognised by the British Exporters Association. In 2010, it rated the UK for its product set at five out of 10. Last year, the rating was nine out of 10. Our export credit agency was voted as the best in the world last year—a really strong achievement.

Last year, UKEF supported 55% more companies than in the previous year and it is on target to do so again this year. I hope that with the changes introduced by the Small Business, Enterprise and Employment Bill we can look forward to a substantial increase in help for small companies.

The noble Lord, Lord Stevenson, asked particularly about the export refinancing facility. It was launched last year and its role is to support banks with long-term loans. It is a stand-by facility if there is a lack of liquidity in the market. Fortunately, a number of the efforts that this Government have made are supporting liquidity for long-term loans. So far it has not been called upon by the banks but it is absolutely in our locker.

There is also great potential among our medium-sized businesses. My noble friend Lord Shrewsbury raised this very issue. Only one in seven medium-sized businesses generates revenue outside the EU, whereas in Italy the figure is one in three and in Germany it is one in four, so we need to improve that. As I promised, I have written to every single MSB in the land to invite them to take up our offer of export support. They will get a named adviser and an export plan, and they will receive assistance to work in areas such as intellectual property and export finance. I am pleased to report that almost one-third of MSBs have taken up that offer, which is a pretty impressive achievement in less than a year.

My noble friend Lady Wheatcroft is correct in saying that this is not just about UKTI; there has to be a cross-government approach. We very much share that view. Together with the Treasury, for example, we are promoting UK financial services—which are very important for our export effort—with the newly created Financial Services Trade and Investment Board. Healthcare UK, together with the Department of Health, is another example of cross-government working. It has helped Britain to win overseas business worth more than £1 billion since 2013.

My noble friend Lord Leigh commented on our embassies. I echo the view that the support provided by embassies and the ambassadorial network has improved substantially. Many, many businesses comment on the positive support that they receive. A few months ago when I was in Japan, 50 British food and design companies were in the ambassador’s residence receiving support, and the event attracted 500 distributors in Japan. Similarly, when I was in France, we had French special forces at the ambassador’s residence buying equipment from small defence manufacturers from the UK. The FCO and the Department for International Development are two other departments that are working together. We are also developing a joint Africa framework, which will increase our presence in African markets. Indeed—this really goes to the question about the Commonwealth—UKTI has recently added resource to 13 of the fastest-growing economies in Africa, most of them Commonwealth countries.

I was in India just a couple of weeks ago and met Prime Minister Modi, among others. I went with 60 UK companies. I am sure that my noble friend Lord Bamford will be pleased to hear that many Indians think that JCB is an Indian company, so strong is its presence in India. That is great, because I feel much the same way about Tata—that it is a British company—and I welcome it here in the same way that JCB is welcomed in India.

I have said a lot about what the Government are doing, but clearly we do not work in isolation. The Government are working with major retail banks, professional services firms and trade associations to support the trade agenda. We have now established more than 20 overseas business networks with the chambers of commerce to complement UKTI’s international reach. If you are a small businessman going to Mexico City, Dubai, Bangalore or Warsaw, to name a few places, you will find a British business centre where you can set up, have meetings and get advice to help you with your export efforts.

The UK is a free trading nation. Many of my noble friends, including my noble friends Lord Lang and Lord Leigh, asked about progress with free trade agreements. Perhaps I may give a little bit of historical context. Korea was mentioned. Since the EU-Korea agreement came into force, our exports to Korea have more than doubled. We now have a trade surplus with South Korea of more than £2 billion. We did not have any trade surplus before that agreement. That highlights the success that free trade agreements can bring to a free trading nation such as the UK.

Last year, the EU concluded provisional agreements with Canada and Singapore, and we will be encouraging UK exporters to see these as an opportunity to take their products to new markets. The UK remains one of the strongest proponents of free trade both in and with the EU. We will be pressing continually for great progress to be made this year with TTIP—the agreement with the US, and indeed with Japan, as we must not forget. We are also supporting proposals to restart talks with India and to begin agreements with China. That is in addition to our work with the WTO and on international agreements such as TiSA and the trade in green goods. Free trade helps to bring down prices, so it is good for consumers, it helps small businesses—I highlight that TTIP will have a special small business chapter—and it is good for British jobs. I know that I have the backing of the majority in this House in my strong support for these agreements.

Perhaps I may pick up a few miscellaneous issues. My noble friend Lady Wheatcroft, among others, asked about the classification of exports. This is a challenge, particularly in the area of services. I think that the way in which we look at services is somewhat stuck in the past. Not only do services form the greatest part of our economy but many of the products that we sell come with services. Rolls-Royce was mentioned earlier. I believe that when it sells an aero engine, close to 50% of the value of the sale is a service. Yet the way that we report on services is stuck in the past. In fact, we are discussing with the ONS what we can do to improve the presentation of a number of these areas.

The noble Lord, Lord Hunt, and my noble friend Lord Kirkwood raised the issue of visas. To be clear, there is no limit on the number of visas available for students to come to the UK for proper courses. They are unlimited. Also, if those students take a graduate-level job, they can continue in the UK. However, I accept that there are perception issues, as is clear from comments in the papers. One of the discussions that I had with people from newspapers and so on when I went to India was about that very issue, and it has had an effect in India. However, overall it has not had an effect. First, students recognise that the UK has four of the top six universities in the world, the other two being in Boston, and, secondly, we are now getting record numbers of overseas students coming to the UK. Next year, we expect a new record in that number, and those students will get a very warm welcome.

Another issue raised was the EU. It is of course this Government’s policy to stay in a reformed Europe—a Europe that focuses on free trade, competitiveness and the single market. That is the Europe that we know UK manufacturers and exporters want to see. The noble Lord, Lord Hunt, also raised a question about Rolls-Royce. There is no change in the position; it is included in Rolls-Royce’s articles of association.

I also welcome overseas companies. We have talked previously about Jaguar Land Rover, which has been a rather better success under Tata than I recollect it being when it was owned by the British Government. Many British companies buy other companies abroad—for example, Rolls-Royce and AstraZeneca. The Astra in AstraZeneca is of course a Swedish company. Those sorts of companies, as well as long-term investment in areas such as R&D, are, I believe, very important.

My noble friend Lord Lang of Monkton made some excellent points about investment into the UK. Because of the right conditions that this Government have created, we are now the number one investment destination in Europe. We are increasing our lead over Germany and everyone else. An important part of that is helping the supply chain, which assists our companies in exporting. A number of months ago, the Prime Minister announced an important initiative, Reshore UK, to encourage companies to bring their manufacturing and other activities back to the UK. There is a one-stop shop within UKTI for doing just that.

A question was also raised about our progress in achieving the goal of £1 trillion of exports. Given the time, perhaps I may commend to noble Lords the 2020 Export Drive report, which I am pleased was mentioned by one or two speakers. This is a recent document in which we set out how we intend to make the next leap in our export performance. I thank my noble friend Lord Risby, in particular, for reading it, as well as for his wonderful work as a trade envoy. I share in the comments of the noble Lord, Lord Stevenson, about the work done by Members of this House as trade envoys. They are very much appreciated and very effective.

My noble friend Lady Hooper asked about Latin America. I cannot give her an update on the central America agreement but I can tell her that the Colombia BIT agreement was agreed a few months ago. We are making great strides in Latin America. I was in Mexico not so long ago with a major trade mission, and 2015 will be the year of the UK in Mexico and Mexico in the UK, which will include a state visit by the Mexican President. We have also recently established a British business centre in Mexico City. All those things will help and it will be an important market, particularly among the countries of the Pacific Alliance, which are embracing free trade and all the benefits it brings.

My noble friend Lord Sherbourne of Didsbury asked whether there is enough follow-through on trade missions. The answer is: we are doing better but could still do more. We will be looking to do just that. My noble friend Lord Trefgarne asked about DSO. I believe that the Defence and Security Organisation being in UKTI has been a major benefit. More importantly, defence companies tell me that, and a new head will be joining from the Home Office shortly. It is important to recognise that it is not just about selling aircraft, although that is important; it is about cybertechnology and security. We are working very closely with industry—I was at a reception for DSO just last week—and DSO’s performance has been extremely strong and the industry supports it very strongly.

To pick up on some of the later points, the noble Lord, Lord Stevenson of Balmacara, raised the question of the UKTI website. I echo the comments of my noble friend Lord Leigh and other noble Lords on the issue. It is very simple to contact your local ITA. Its job is to help to guide you through. I hope that all noble Lords will give that advice to many people.

The UK has great potential to build on its strength as an exporter. It needs a step change in effort, and we are delivering one. The challenges of the eurozone are not helping but we need to continue to be imaginative and ambitious. It needs to be not just a government effort but a UK-wide effort. I am grateful for the support of the whole House in this endeavour, and together we will be successful.