British Exports

David Rutley Excerpts

Wednesday 8th February 2012 Westminster Hall

[David Rutley (Macclesfield) (Con)]

Good morning, Mr Turner. It is an honour and a pleasure to serve under your chairmanship. It is also an honour to have secured today’s debate. I am grateful to Mr Speaker for selecting the subject, because I think it will provide an important opportunity for hon. Members to discuss matters that are critical to our economy and growth agenda. I take the opportunity to congratulate the Under-Secretary of State for Business, Innovation and Skills, the hon. Member for North Norfolk (Norman Lamb), on his recent promotion. It is good to see him here, and we look forward to hearing from him and the shadow Minister. I want to express my gratitude to colleagues and friends for turning up at the debate today. There is huge enthusiasm and energy for the subject, and I am sure there will be some stimulating contributions.

I declare an interest up front. I am a member of the all-party group on China, and I will explain why that is relevant. In December, I was fortunate to go to China for the first time on the all-party group’s visit to Beijing, Shanghai and Chengdu. It would have been difficult not to be impressed by the incredible growth in that country. I was told that 45 airports had been built in the past five years. The subway system in Shanghai, which is bigger than London’s entire tube network, was built in 15 years. In the UK, we would just about have got round to having a conversation about the possibility in that time. There has been real growth. We also went to Chengdu, which I confess I had never heard of before the trip. It is a small, second-tier town with a population of a cool 14 million and staggering growth of 63% over the past three years.

Capitalism is very much alive in China, as is growth to boot. During the week of my visit my world view changed completely, and I came back with enthusiasm for the subject of this debate. That underlines the fact that now is the time for UK plc to go east—just as China is taking forward its “go west” strategy—to try to unlock the opportunities in the vast interior as it becomes exposed to wider economic development.

In terms of context, Britain has a rich history in international trade. It has often been led by daring entrepreneurs looking for new markets, but during the last half of the 20th century, British traders somehow lost their enthusiasm, their sense of adventure and their pioneering spirit for searching out new opportunities. The irony is that that was at a time when the world economy was becoming more of a global economy. Successive Governments and businesses started to look for safe options in Europe and north America, and that must change.

As far back as 1961, parliamentarians were expressing concern about those trends. In a debate, the Earl of Bessborough said—this may sound familiar to hon. Members:

“We live on an island, and the concept of exporting does not come easily to the people as a whole; nor does the man in the street recognise that we live or die by our international trade. To overcome this it has seemed to many of us that there must be support for a national crusade to excite the spirit, to revivify and stimulate every facet—I repeat, every facet—of the export drive.”—[Official Report, House of Lords, 22 March 1961; Vol. 229, c. 1155.]

They don’t make ’em like that any more. I love the word “revivify,” but unfortunately all that sounds a bit too familiar.

Not so long ago, we could boast a truly diverse international trade base. In 1910, our exports to India and China took up 11% of our traded goods. Today, that is 4%. Our challenge is to drive up much-needed exports, and to rediscover Britain’s trading talent.

[Mike Weatherley (Hove) (Con)]

I am sorry to intervene so early. I speak as someone who owned a manufacturing company that won two Queen’s Awards for Export in the 1990s, and which exported to 49 countries around the world. Does my hon. Friend agree that part of the problem for small and medium-sized enterprises is the equity gap between what the banks will lend—usually up to £100,000—and what venture capitalists will lend—over £5 million? The in-between gap is the problem.

[David Rutley]

My hon. Friend is right. There is an equity gap, and I will talk about SMEs, which are the main thrust of my speech. From his experience, he knows more about the problem than I do, and I welcome his intervention.

There are some encouraging signs. We have seen a steady fall in our trade deficit from 4% of gross domestic product in 2007 to about 1% in early 2011, and that is beginning to help to rebalance the economy towards international trade. A recent article in The Economist reported that there are also signs of success in the motor industry. It was estimated that in 2011 the UK manufactured 1.5 million vehicles, and we exported three quarters of those. That is an important statistic, and I understand that Tata is considering expansion of its Land Rover factory at Halewood, and that Nissan will be looking to increase its production and capacity in Sunderland. It also exports to many countries around the world.

There is export success not only with motor vehicles and automobiles, but with life sciences. AstraZeneca manufactures many leading-edge pharmaceuticals, and we are seeing real success in Macclesfield where its major manufacturing plant accounts for 2.2% of the UK’s exports, which is a huge contribution. The Government’s life sciences strategy was announced in December, and sets out an approach by which we can obtain extra focus on the sector. One aim in the strategy is to create new partnerships in translational medicines and biopharmaceuticals between the UK and China so that those partnerships can enhance trade, investment, and research and development that will help us to have greater export success in that area.

Many hon. Members here can talk about, and will probably want to boast about, the export success of companies in their constituencies, but before they do, I want to take the opportunity to do the same. When I was preparing for this debate and when I spoke to more businesses in the Macclesfield area in north-east Cheshire, it became clear that there are some real export success stories. Plastic Card Services manufactures an innovative, biodegradable credit card, and is seeing huge success in Scandinavian markets. Its exports to foreign countries have risen from nothing to 25% in just a year. Over the past 10 years, Ukash, which is a provider of online payment services and has received the Queen’s Award for Enterprise for international trade, has increased its trade to 50 countries. It has a completely different international focus from many of the SMEs that, as a parliamentarian, I work with in Macclesfield.

Although there are success stories, it is important to come back to the challenge that has been alluded to. It is to improve our export performance across the piece, but particularly among SMEs, which is where the challenge is most marked. A short look at the statistics shows that in the UK, only one in five—25%—of SMEs export and are involved in international trade, compared with the European average, which is 25%, and in Germany it is above 30%. We must make a step change. As I said, the problem has existed for a while, but the size of the prize is huge. If we increased the penetration of exports by our SMEs up to the European average, we would wipe out the trade deficit in one fell swoop.

[Chris White (Warwick and Leamington) (Con)]

I congratulate my hon. Friend on securing the debate. He referred to China. Does he agree that with the weakness of the eurozone market at the moment, UK Trade and Investment should try to focus more resources on emerging markets, such as south America and south-east Asia, so that our businesses, particularly manufacturers, have greater access to the fast-growing markets of the world?

[David Rutley]

My hon. Friend makes an important point. The good news is that UKTI has in recent months started to focus more efforts on emerging markets. I cannot speak about South America, but I know that more resource in terms of headcount is being pushed into markets in China and India, which I will mention later. It is good to see the Government responding to that good point.

[David Simpson (Upper Bann) (DUP)]

I congratulate the hon. Gentleman on securing the debate. In a recent statement, the Secretary of State for Business, Innovation and Skills said:

“Securing…long-term economic growth is the Government’s highest priority. Helping entrepreneurs export to new markets and get access to the finance they need are critical to making this a reality.”

Considering the Asian market is estimated to be worth about $42 trillion by 2030, does the hon. Gentleman agree that it is essential that small businesses get access to finance and that confidence is recreated in those small companies?

[David Rutley]

I thank the hon. Gentleman for that intervention. He raises a vital point—access to finance has come up again as a key dimension. The sad fact is, and I will mention this again later, that too many companies do not even want to export and are not aware of the opportunities, so there is a more fundamental problem. Hon. Members on both sides of the House have debated this problem for some time, but now is the time to get on and do something about it. We will talk about that and I am sure that the Minister will welcome further contributions from hon. Members.

How can we raise awareness and ambition, and the confidence that the hon. Member for Upper Bann (David Simpson) mentioned, to reap the rewards in eastern markets or, for that matter, South America? The Government and the business community—it is not just about the Government—can help SMEs to achieve their aims through three areas of focus: education, financing, which we have talked a bit about already, and, most importantly, access to new markets and customers.

On education, it is vital to get SMEs in touch with the best know-how on exports, and that will be one of the most important ways to help them to gain the confidence to want to export. UKTI has an important role to play, and its “passport to export” service gives a free capability assessment to businesses, which can help them to work out how they can be better prepared for the export work they want. However, I return to the point that only 20% of SMEs—one in five—are aware of the available services. It is a huge job just to make people aware that information is available.

One of the most important things that needs to happen is a lot more business-to-business mentoring to pass on experience from one company to another. I am pleased that the CBI’s pathfinder projects, which focus on mid-sized companies, are helping companies to build greater networks and opportunities. UKTI is building an export portal with Yell.com to connect first-time exporters with businesses that have experience in the area. I know, as I am sure other hon. Members do, that lots of local businesses want to pass on their experience to other businesses.

On Monday, I wrote an incredibly well-read article in The Daily Telegraph, which I am sure all Members have read several times over.

[Mr Iain Wright (Hartlepool) (Lab)]

Absolutely.

[David Rutley]

Thank you.

I have had great feedback from at least one constituent, but it was a good response and it is the quality, not the quantity that counts. A gentleman from Fibrevision, which creates dynamic measurement tools for textile yarns across many countries, particularly developing countries, got in touch with me to say that he would be retiring soon and wanted to spend time passing on his experience to others in the community, and I am going to tap into that. With Lord Green’s work, there are lots of opportunities now to hold export seminars in our constituencies, and I hope that many Members here will participate in such events. It is important to welcome the energy that Lord Green has brought to the task. He is doing a fantastic job as Minister for Trade and Investment, and has given a lot of focus to his task. He has been travelling tirelessly across the country to raise the profile of this work, and he deserves our support.

Transferring knowledge and educating people will go only so far; without the finance to back it, it will be much more difficult for British business to see the success that we want them to have. Let me cite a different example to show what they are up against—or perhaps where we could start heading. In 2010, Germany’s export credit agency supported SMEs in the German market by facilitating €23.7 billion in exports. In the same year, only a small proportion of the £2.9 billion of business that UK Export Finance underwrote went to SMEs. Furthermore, the CBI survey shows that SMEs and other businesses are simply not aware of the available finance. To address the situation, UK Export Finance will now send trade finance experts into UKTI’s regional facilities and the regional network to bring the expertise closer to business, which is good to see. No doubt, the Minister will want to respond to the concerns raised by hon. Members about finance, but it comes back to awareness and building confidence. It is not only about money being available.

It is good to see that the Government are also building bridges to bring the east to Britain. The Chancellor of the Exchequer’s recent announcement of greater co-operation between financial centres in London and Hong Kong will help the City to become a hub for the Chinese renminbi currency market. It will also give SMEs an advantage over the competition, because they will be able to forge stronger links with the new market on their doorstep and get a step closer to customers in China.

In filling the gap in export finance, we should look not only at what is happening with the Government, but at what the banks should do, because it is clear that they, along with professional advisers, have a vital role in encouraging confidence and building momentum in exports and international trade. A poll of small manufacturing businesses found that 51%—just over half—believed that banks were not helping to support their export ambitions. We see that lack of confidence in other areas, but no doubt confidence in banks on this issue needs to be improved. As the Federation for Small Business has highlighted, banks need to promote better, more tailored products to help SMEs in their export ambitions.

I also welcome the Government’s allocation of £45 million to promote exports in other markets. As I said earlier, it is important to get front-line staff working in the new export markets, because what has to happen after education and finance, is that we must roll out the red carpet for our SMEs—make them feel welcome in such markets and to have worthwhile trade visits, particularly in their first forays into foreign markets. Although large companies are well equipped to take on this task, it is pretty clear that smaller businesses lack the know-how, contacts and network to see success in these endeavours, and we must support them.

For too long, UKTI and other Government bodies have spent too much time doing desk-based research, instead of getting out, knocking on doors, finding opportunities and bringing packaged solutions to big infrastructure problems or other projects in those markets. It is great to see the Government working in that area.

[Lorely Burt (Solihull) (LD)]

I feel like I am in an exports master class, so I am enjoying everything that the hon. Gentleman says. I agree with him about the need for UKTI to get out from behind their desks and knock on some doors, but does he agree that the balance of UKTI’s recent work has been very much towards bringing in inward investment, perhaps at the expense of exporting and encouraging outward investment?

--- Later in debate ---

[David Rutley]

I thank the hon. Lady for her intervention. She makes a very important point. Of course we need inward investment. We have seen success in that area and we need to continue to see success, but now, the focus needs to be on exports and driving success in that area. I know that she has made important contributions in debates on the subject.

On my visit to China, it was good to see people realising the importance of exports. We met the British consuls from Shanghai and from Chongqing. They are getting out and starting to knock on doors. There has been too much focus on research and, for that matter, paid-for research. I am much more interested—I think that others would agree with me—in knocking on doors. Any of us who have been involved with business know that it is about building relationships. People do business with people, not with pieces of paper.

[Julian Smith (Skipton and Ripon) (Con)]

Does my hon. Friend agree that, to achieve his goal, UKTI needs an injection of private sector talent into the organisation? That would enable it to meet some of the targets that he has set.

[David Rutley]

I thank my hon. Friend for his intervention. That point is vital. It is true for many areas of Government interaction with businesses, but it is particularly true for the area that we are discussing today. There is a huge and staggering opportunity. I think that it has been calculated as being worth $43 trillion. Whatever the number is, it is pretty big. We have to redouble our efforts in that respect. We are certainly putting the headcount on the ground. There are 50 more people in China and 30 more in India, but my hon. Friend makes a good point about the balance of expertise there. Perhaps the Minister will also reply to that, because many of us who have had experience in the business world would suggest that it is time to get people with that experience involved.

Understanding the local cultures is also important. I have not spent a huge amount of time in China, but there are many Chinese-speaking individuals in the UK with business experience. My hon. Friend the Member for Bedford (Richard Fuller), for example, has spent a lot of time in Asia. That is the type of experience that we need to bring to bear to help us in this export drive.

[Laura Sandys (South Thanet) (Con)]

I congratulate my hon. Friend on obtaining the debate. There is something that I do not think we understand and that certainly Government have never used to maximum effect. There are 220 languages spoken by British people in this country. We constantly talk about the language issue, but we have people who may be the first, second or third generation from certain parts of the world and we do not use them effectively as the right cultural interface, the right linguistic interface or, more importantly, as the people who are respected by business people in those countries, as opposed to the people who do not speak those languages being sent out as heads of trade missions.

[David Rutley]

That is a vital point. I met a friend of mine who is a Chinese speaker and has an MBA. I do not think that she really understood the power that she has at the moment in helping to foster export opportunities and to build relationships. My hon. Friend makes an excellent point. I have to say that, as I think about this issue more and more, I increasingly wonder why our children are learning French at school. [Interruption.] This is not meant to be an opportunity to bash—[Interruption.] I think that the debate should be called to order, Mr Turner.

[David Mowat (Warrington South) (Con)]

I can assure my hon. Friend that I have read his article in The Daily Telegraph, as has at least one of my constituents, so that is half a dozen of us in Cheshire. The question that interests me and that I would like to ask him is this. We talk about France and Italy. Both France and Italy export more per head worldwide and to the BRIC countries—Brazil, Russia, India and China—than we do, and they are doing that at a time when our exchange rate has depreciated by about one quarter and the Italian exchange rate has apparently been pegged to the euro and therefore is too high. Is there not an opportunity—the Minister might also wish to respond to this—for us to think as a country about what the Italians do in this regard that we do not?

[David Rutley]

It is an important point that we should learn from our international competitors and look at their success. We have been too complacent. We think that historical ties should automatically bring business to us. Well, I think that we are waking up to the fact that that is not the case any more—as we see—and we should not rely on those historical links. I think that we are too lazy. I can just about speak English and have a conversational understanding of Danish. As I was about to explain when I was so rudely interrupted by my hon. Friends, it is vital that more of our children learn Chinese at school. That has to happen.

I shall finish my speech shortly so that many of the hon. Members present can speak, because I know that they are enthusiastic to do so. We also need big businesses to want to include SMEs in their trade delegations. This is not only about what Government can do. Big businesses have to wake up and bring their supply chain in when they go on trade delegations to China or India. Helping to increase the international attitude of SMEs is vital.

[Mr Russell Brown (Dumfries and Galloway) (Lab)]

Before the hon. Gentleman finishes, I want to draw his attention and that of other hon. Members to a specific issue. He has not mentioned the UK’s largest manufacturing sector—food and non-alcoholic drinks. It should be put on the record that, during the past six years, exports have grown year on year, that, in 2011, the figure for those exports hit £11 billion and that many SMEs are involved in that sector.

[David Rutley]

I thank the hon. Gentleman for bringing that to our attention. It is an important area. I can say with confidence that if my hon. Friend the Member for Penrith and The Border (Rory Stewart) is called to speak, he will be raising awareness of it as well, but I thank the hon. Gentleman for calling attention to it in the debate.

I know that there are huge and major trade initiatives that the Minister and Lord Green will be involved with in the year ahead and that will take up a huge amount of ministerial time. I am thinking of the India-EU trade summit, Russia’s World Trade Organisation accession and the Doha development agenda. All those things are very important. I trust that, in dealing with those issues, Ministers and officials will continue to focus on, and will give just as much focus to, the needs of SMEs. As today’s interventions show, that is a huge priority.

I believe that, in the end, Britain’s SMEs must go east, so that selling in Chengdu and Chennai is just as natural as selling in Cheshire. However, that cultural change will not happen overnight. The Government and the private sector must continue to build on the foundations that have been laid, so that SMEs make the full contribution that we believe they can make to our country’s growth agenda.

[Several hon. Members]

rose—