Exports: Government Support

Baroness Wheatcroft Excerpts

Thursday 29th January 2015 Lords Chamber

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[Baroness Wheatcroft]

That this House takes note of the Government’s support for British exports.

[Baroness Wheatcroft (Con)]

My Lords, I am delighted to be opening this debate on such an important subject. We all know that exporting is good for the country and I hope that we will all be able to agree that the Government are making great strides in getting their act together to help British companies boost their overseas sales. My noble friend Lord Livingston, who will reply to the debate, has had an impressive business career before joining this House and taking on the role of Minister of State for Trade and Investment. I know that he is working tirelessly to ensure that British businesses flourish in world markets.

I am sure that today we will hear a lot of statistics—I will be guilty of coming out with some myself—but I want to begin not with numbers but with a true story of what the Government can, and do, do to support British exporters. Stage One is a company which started life in Tockwith, near York. It is a company which can do extraordinary things. It made the amazing cauldron that was the centrepiece of the UK Olympics and produced some of the most exciting elements in the Sochi Olympics. This is obviously no shrinking violet in the business world. Nevertheless, it felt that it needed support in venturing overseas and is very pleased with the export services and the help that they have provided.

Stage One was invited to join the Creative Industries High Value Opportunity Task Force, a collection of the UK’s top 100 creative businesses. The Government believe that these companies can represent the creative businesses that are flourishing in this country and win big contracts overseas. Stage One’s performance director, Alan Ellis, says that in his business, and surely in any business:

“It is critical to get in front of the right people at the right time. And this is where UKTI really excels”.

Those are his words, not mine.

UKTI trade advisers introduced the company to opportunities in Hong Kong and Macao. It had not contemplated venturing that far afield. They helped the company plan visits and provided £3,000 to help with funding. A UKTI trade mission in February last year enabled the company to build on the contacts it made on its first visit. Membership of the task force has enabled the company to form alliances with businesses it had never met before. That enables them to go together to prospective clients and make an overall business proposition, which to big clients is much more impressive. Stage One now says:

“Working with UKTI is a key part of our strategy over the next five years”.

One story does not make an export boom, but Stage One’s experience is not unusual. Even the CBI, not renowned for lavishing praise on government schemes, voices enthusiasm for the way that the export promotion services are working.

The Government have been clear about their export ambitions. Shortly after he became Prime Minister, David Cameron boarded a flight to India to reignite that special relationship. In his 2012 Budget, the Chancellor of the Exchequer set out his aim that UK exports would hit £1 trillion by 2020. That was, indeed, a big ambition. No doubt we will hear one or two people say that it was perhaps too big an ambition and we are not likely to get there. I have not given up hope yet, and I do not suppose that the Chancellor has, but we should look at the economic background with which our exporters are grappling. While our Government are working to support business by strengthening the economy, who would have foreseen that other Governments might be rather less responsible, and that our major trading partner in the European Union would find itself in dire disarray? Many of us did fear exactly that, but it is still sad to see it come to pass. The plunging euro and the straitened circumstances of many European citizens mean that it is much harder for us, with our stronger pound, to sell our goods to them.

For several decades, we have relied too much on our relationship with our European neighbours and not ventured far enough afield. That was understandable given that the EU constituted the biggest marketplace in the world, but such reliance is dangerous, as we are now finding. We have to work harder to permeate deep into the emerging markets. Those who listened to the radio earlier this morning will have heard a Diageo spokesperson say just what scope there is in those emerging markets, with 1.43 billion members of the middle class likely to emerge over the next decade. Of course, Diageo hopes that they will all be alcoholics—sorry, I mean drinkers. We should have advantages in many of those markets and need to be careful to build on that rather than jeopardise it, an issue I will come back to.

Despite our great trading history, our failure to maximise our export potential has left us with a balance of trade deficit—that ominous trade gap. We like our German washing machines, our French cheeses and our cheap, throwaway textiles too much. The last full-year figures available for 2013 showed exports of £516 billion and imports of £550 billion. If we could bridge that trade gap, the benefit to the economy—and to all of us living here—would be remarkable. There is plenty of scope. Currently, under 3% of our exports go to China.

The problem is not new. By 2006, the current account deficit was more than 3% of GDP, putting us, in absolute terms, behind only two countries: the US and Spain. In 2000, the UK’s share of world exports of goods was 4.4%, but by 2009 it had fallen to 2.8%. Our share of services exports is much healthier but even that has taken a bit of a jolt after the financial crash. Clearly, we need to get better at exporting.

The good news is that the Government are on the case. In 2011, that dynamic duo, William Hague and my noble friend Lord Green of Hurstpierpoint, were in charge at the Foreign and Commonwealth Office and UKTI, and together they launched A Charter for Business. It was a tacit acknowledgement that, while the Foreign Office has many strong points, it had not perhaps always been the greatest supporter of British business overseas. I would not argue that the charter produced an overnight change, but there have been huge improvements in how the Foreign Office and UKTI now work together for the benefit of British business. With a Foreign Secretary, Philip Hammond, who used to run his own business and my noble friend Lord Livingston heading UKTI, those improvements continue.

There were hiccups in getting the two organisations aligned. They had, of course, overlapping objectives, but their objectives can never be entirely the same; the FCO has to bear security in mind. But in autumn 2013, the National Audit Office examined our help for exporters. While it voiced some qualms, it had to report that 78% of those it surveyed—users of export services—felt that the FCO and UKTI were working together better to help exporters than they had in the past. The current chief executive of UKTI, Dominic Jermey, is well placed to continue these improvements, having been our ambassador in the United Arab Emirates before taking up his post. In an early interview, he suggested that the challenge for the Government went beyond the FCO and UKTI and that every government department should feel that part of its brief was to help British exporters—for example, the Department of Health with pharmaceutical companies and the Department for Transport with transport infrastructure developers. He intimated that more could be done on that front. Perhaps my noble friend could comment on that point when he makes his speech.

There are still qualms about the number of different schemes available to help exporters. Head to the UKTI website and, if you did not have an enormous amount of time on your hands, it might be quite difficult to decide where to go first. It lists:

“Passport to Export Service … Gateway to Global Growth … Medium-Sized Business Programme … Trade show Access Programme … Sell online with the UKTI e-Exporting programme … Export Marketing Research Scheme … Export Communications Review … Overseas Market Introduction Service … Aid Funded Business … High Value Opportunities … Market Visit Support … Postgraduates for International Business”.

It is a little confusing, perhaps. There is an easy answer, and those who visit the website might find it:

“Talk To A UKTI Export Adviser”.

UKTI has gone out of its way to make sure that the middle-sized businesses that we need to thrive as exporters know about this. It has written directly to all those middle-sized companies that could do more on the export front. However, I suggest that not everybody knows that there is a UKTI export adviser ready and willing to help them. From what I have learnt from businesses, those who contact a UKTI export service adviser really do get help.

Perhaps they get some help to figure out exactly what we are exporting, because the statistics continue to puzzle me—I have voiced this qualm in this House previously. Her Majesty’s Revenue and Customs breaks down exports into a huge number of categories, but to a modern person looking at the list, it could be confusing. For instance, category 42 encompasses:

“Articles of leather; Saddlery and Harness; Travel goods, Handbags and similar containers; Articles of animal gut (other than silkworm gut)”.

I think that there are large differences between a bit of saddlery, let alone some gut, and the sort of handbags that fetch premium prices these days. I wonder whether our statistics are missing a trick in not breaking things down a bit more. That view is reinforced when I get to category 44:

“Wood and articles of wood; Wood charcoal”.

I think that David Linley would contend that there is a huge difference between the wooden objects that he sells and wood charcoal. Category 61 comprises:

“Articles of apparel and clothing accessories, knitted or crocheted”.

The fascination with crochet is something about HMRC that has long puzzled me and I remain somewhat confused. Then we get to category 96, which I feel will not help many exporters in working out where their market should be:

“Miscellaneous manufactured articles”.

I am sure that there is a big market for miscellaneous manufactured articles, but I would be hard pressed to tell you what it was. One of the keys to successful exporting is research and knowing your market. I just wonder whether we could be doing a bit more with our statistics to help those who are seeking to export. I wonder whether the Minister could address that.

Perhaps there is more, even now, that we could do in the way of incentives—I know that money is tight. The Food and Drink Federation, which represents one of our biggest export sectors, has looked at what rivals do and found that we come pretty low down the scale. For instance, there is help if you are French or German on a much more significant scale than we offer to attend trade shows. There are tax deductions for people who are working overseas for companies to promote business. There are lots of small financial incentives which might yield dividends which perhaps we could investigate doing a little more of.

Finally, I mentioned that I would come back to cultivating our old friends, particularly India—but China also comes into this category. I fear—and it is the rhetoric rather than fact—that we are disillusioning those countries because of our insistence on people coming to our universities and then going straight home. I know, as do your Lordships, that if such people achieve a job they can stay for two years, but that message has not got through to the Indian High Commission and to the people that it talks to. I fear that the same message is hitting China. We need to welcome people who could help our businesses to export.

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[Baroness Wheatcroft]

My Lords, I thank my noble friend for his reply. It was as thorough and thoughtful as I would have expected. I thank all noble Lords who have taken part in today’s debate, demonstrating and sharing such wide knowledge and experience. Because it has been such an upbeat and positive debate overall, I should like to end on a very positive note. When President Obama took tea with Prime Minister Modi he was wearing a quite extraordinary suit. The cloth was manufactured in this country and the suit was made by a London tailor.

Motion agreed.