Trade, Exports, Innovation and Productivity

Geoffrey Clifton-Brown Excerpts

Wednesday 13th January 2016 Commons Chamber

[Stewart Hosie]

No. The decarbonisation of electricity production is sensible for many reasons, which may well include carbon capture and storage. On a number of occasions during the past five years, and very recently under this Government, we have seen the cancellation of a competition to develop an industrial-sized testbed to show the efficacy of a technology which would make us a world leader.

[Geoffrey Clifton-Brown (The Cotswolds) (Con)]

Will the hon. Gentleman give way?

[Stewart Hosie]

I will not give way at the moment, because I have been quite generous. I will make a little progress, and then I will be happy to do so.

I was talking about exports. Let us remember what the Chancellor said in his Budget speech in 2012. He acknowledged the UK’s falling share of world exports, but still said that

“we want to double our nation’s exports to £1 trillion this decade.”—[Official Report, 21 March 2012; Vol. 542, c. 797.]

Total export sales in 2013 were £521 billion, which was a reasonable start, but that fell to £513 billion in 2014. The numbers are moving in the wrong direction; yet the Chancellor and this Government still expect us to believe that exports could in effect double over this Parliament. The OBR’s most recent forecast suggests that they will miss that target by about £350 billion, so the target set is simply unachievable.

That is not an abstract political or obscure economic point. The jobs of real people depend on a thriving and growing manufacturing export market. The hopes and aspirations of people in Scotland and throughout the UK for a real rebalanced economy depend on the rhetoric and pipedreams of an out-of-touch Chancellor. However, that was not the start and end of the Chancellor and the Government’s rhetoric on exports. They described how they wanted to

“make the UK the best place in Europe to start…and grow a business; encourage investment and exports as a route to a more balanced economy”.

The Chancellor said:

“So this is our plan for growth. We want the words ‘Made in Britain’, ‘Created in Britain’, ‘Designed in Britain’ and ‘Invented in Britain’ to drive our nation forward—a Britain carried aloft by the march of the makers.”—[Official Report, 23 March 2011; Vol. 525, c. 966.]

They were powerful words, but, given the reality, no more than rather empty rhetoric.

[Geoffrey Clifton-Brown]

The SNP spokesman is right to point out the importance of exports, although the current account gap has been falling consistently during the past two years. Does he not agree, however, that the way to increase exports in the long run is through innovation, new technologies and investment? By being part of a larger United Kingdom, Scotland is likely to get greater quantities of all of those—through the Technology Strategy Board—than if it was on its own.

[Stewart Hosie]

I agree with the hon. Gentleman’s assessment that we need more innovation, exports, technology and investment, all of which I will come on to. The Government and I can have a debate about precisely what they are doing, but his assertion that being part of the UK will allow such things in bigger quantities is tenuous at best and probably not confirmed by the reality.

To return to the Chancellor’s “march of the makers” speech, if those words appeared far-fetched when he first said them, they appear rather shallow and empty in the light of the reality of what is going on. In that regard, during the last Parliament—this is linked to the intervention about investment—another Tory-led Government, in a press release about business investment, a balanced and sustainable economy and all the matters we are discussing, boasted about investment in the UK Green Investment Bank. We supported that institution. We believed that it would deliver support for innovation and growth in a new industry, and indeed it has done so. Incredibly, however, it has been systematically undermined by this Government, while many of the changes they have announced since are undermining the commitment to the green economy generally.

--- Later in debate ---

[Geoffrey Clifton-Brown (The Cotswolds) (Con)]

I am delighted to be called so early in this important debate. I was particularly keen to catch your eye, Madam Deputy Speaker, because we have so few debates on exports, but I believe that if we are to grow our economy sustainably, we must increase our exports.

Given the importance of this debate, it is a great pity that our politics produces such negativity from all the Opposition parties. That is in total contrast to the Minister for Small Business, Industry and Enterprise, my right hon. Friend the Member for Broxtowe (Anna Soubry), who is positive and outward looking and produces good policies that the Government have been pursuing, both in the last Parliament and this one. I am passionate about exports. With my hon. Friend the Member for Newark (Robert Jenrick), I have the honour to chair the all-party trade and investment group dealing with exports. I want to see this country exporting more.

I just want to champion some of the Government’s achievements, which, unlike the Opposition parties, help exporters considerably. They have committed to cutting £10 billion of red tape in order to back British business and put resources into more productive use—and that is on top of the £10 billion we cut in the last Parliament. We have cut corporation tax to 20%—one of the lowest rates in the G7—and have an aspiration to cut it further. We are boosting skills and productivity by improving the quality of apprenticeships in England and increasing their number by 3 million in this Parliament, on top of the 3 million in the last Parliament. As my right hon. Friend the Minister has said, we are investing, up to 2021, £6.9 billion in UK research infrastructure and, in particular, protecting the science budget of £4.9 billion per annum. All that will help innovative companies in this country, as will building stronger links with emerging markets, especially China and India. I was therefore delighted to see the leaders of those countries—the most populous nations in the world—visit this country in the last year. And what successful visits they were.

My right hon. Friend the Business Secretary, launching the Government’s productivity plan, “Fixing the foundations: Creating a more prosperous nation”, said:

“Britain is home to some of the world’s most innovative and dynamic businesses, staffed by incredibly talented, hardworking individuals…And higher productivity means higher incomes. When productivity rises, standards of living rise too. So today I’m proud to publish ‘Fixing the foundations’. It’s our plan for productivity, and our blueprint for creating a more prosperous nation.”

Hon. Members on both sides of the House have commented on productivity, and it is true that we lag behind some of our major competitors. Many economists have puzzled over this, but I think the reason is simple. In the list of achievements I gave just now, I omitted the fact, which must be hugely welcome to all Members, that a record number of people are in work thanks to our flexible labour laws. In this country, 32 million people are in work—more than ever before—and that number is rising. I believe that, because more people are employed, some companies might not have invested as much as they might have done in labour-saving capital equipment, as has happened on the continent, where their labour laws are much more difficult and therefore they have higher unemployment. Greece, for example, has 50% youth unemployment. It is no wonder those countries have such problems, yet here, I am grateful to say, youth unemployment is dropping. It is a terrific achievement for this country.

Let us look at where trade is going around the world. In 2014, the UK’s exports of goods and services totalled £513 billion and its imports totalled £548 billion. The EU accounted for 45% of exports and 53% of imports, meaning the balance of trade with the EU is against us. In other words, we are importing more than we are exporting. There is no reason, therefore, not to look elsewhere in the world to see where we can export more. I commend that approach to the Minister. It is against a background of UKTI’s policy of increasing trade by 2020 to £1 trillion and the number of companies exporting by 100,000. There is no reason why we could not do much more.

UKTI has been transformed in the last few years. I was delighted to take one of my successful medium-sized companies to see the trade Minister, the right hon. Lord Maude, the other day to examine how we might get UKTI to do even more to encourage medium-sized businesses. The one in my constituency employs 45 people, exports to 40 countries around the world, makes it products in China and exports them directly to Australia, without their ever touching this country, and yet it remits its profits to this country and pays UK corporation tax. That is precisely the sort of medium-sized company we ought to encourage to export more.

That company told me there was too much emphasis on people in UKTI and not enough on the tradeshow access programme. Trade shows are a particularly important part of manufacturing businesses’ exporting programme. We need to encourage, via greater incentives from UKTI, such companies to go to these tradeshows, particularly where they have a record of success. At the end of my speech, I will make five or six suggestions to the Minister on how to encourage exporting, but one of them is to extend TAP from three to four years. As this company pointed out, the first year is about exploration and the second is about getting to know the customers, and only in the third year, if it is lucky, does a company begin to make a profit. It therefore needs an extension from three to four years. It is in its third year and about to be cut off just as it is becoming profitable, so it would be useful if we could give it a bit of extra help.

[Jeremy Quin]

I am delighted that my hon. Friend saw my constituency predecessor, Lord Maude, recently. We have a number of manufacturing firms in Horsham. Does my hon. Friend agree that such firms are now getting a better service from the Foreign Office and from our ambassadors abroad to help British exports? That should be put on record and welcomed.

[Geoffrey Clifton-Brown]

I am sorry to say that I only partially agree with my hon. Friend. I am not going to name the embassy in question, but a representative of the company I have been describing went to one of the nearer embassies to this country and was distinctly unimpressed by the trade representatives there. He described them as spotty youths who were just out of university. He felt that we needed people in our embassies and in UKTI who have a good track record in the private sector, and that we should incentivise such people. If they have had a good record in the private sector, it is likely that they would be successful in UKTI in helping companies to export.

There are approximately 1 million small and medium-sized companies in this country. UKTI helped 48,000 companies to export last year, but I suggest to the Minister that there is still much to be done. Far too many companies still do not understand what it means to export and do not understand the advantages of exporting. The figures are well known. Once a company has exported for the first time, its productivity goes up by 7%. So not only will its profits go up—one hopes that it will do profitable export business—but its productivity will go up as well because that activity sharpens the whole operation through dealing with an extra dimension. We could do much more, in collaboration with UKTI, with UK Export Finance and with the local enterprise partnerships. We should make them all come together much more closely.

Another suggestion I have for the Minister is that Innovation UK and UKTI could get much closer together so that some of our best seed-generated companies, including high-tech companies, could be encouraged to export right at the beginning of their existence rather than waiting until they are established. They should be encouraged to think about exporting as one of the first things they do.

[George Kerevan]

I concur with the hon. Gentleman about the importance of UKTI. Unfortunately, in the autumn statement, the Chancellor slashed UKTI’s budget. So outraged was the organisation that its chief executive resigned. Clearly, this Government are not helping UKTI to help exports.

[Geoffrey Clifton-Brown]

I think we all have to encourage UKTI to operate within the financial climate that exists. I have to say that I would put the money into UKTI in order to expand exports, but I would make sure that it was operating as well as it possibly could. Another suggestion that I have for the Minister is that UKTI should be benchmarked against the best export agencies in the world to see how it is doing. We should never be complacent in this life, and benchmarking is one way of getting that information.

Despite what the company in my constituency said when we went to see Lord Maude, I think that what my hon. Friend the Member for Horsham (Jeremy Quin) has just said is right. Our ambassadors are some of the best trained in the world, and we have one of the most comprehensive networks of embassies. After all, it was the Conservatives, in this Parliament and the last one, who started opening embassies where the previous Government had closed them. We have the network, but in some places we need to sharpen up the expertise. However, we have a good foundation on which to build.

We have the British brand and the British language and we exercise our soft power through the BBC World Service and the British Council. We are very well established in many of the major markets in Brazil, Russia, India and China—the BRIC markets—and in other smaller markets where we need to concentrate our efforts. We need to concentrate on the high-growth markets, as opposed to on Europe, which has lower growth. I am delighted that our exports to China are growing in such big quantities, albeit from a very low base. UKTI is putting significant resources into China, and it is paying dividends. The visit by China’s Premier, Xi Jinping, last year will only help to cement those efforts.

I do not want to make too long a speech, but I want to outline some things that we could do to help companies to export. I have some specific ideas for fiscal incentives to give to small and medium-sized businesses. We could give them fiscal help with export-related activity. That could be a better way of alerting many companies to the possibilities. Companies are very astute about ways of saving tax, and we need to find the best ways of encouraging all small and medium-sized businesses to export. It would also be helpful to inform them that finding out more about their potential export markets need not involve huge costs.

A further suggestion, which I have already mentioned, is that we should extend the TAP programme from three to four years where success has already been demonstrated. If a company cannot achieve success within three years, it is unlikely to do so, but if it has already demonstrated success, as that company in my constituency has done—[Interruption.] I wish that my right hon. Friend the Minister on the Front Bench would listen. Please! If the Government extended the TAP programme from three to four years where success had been demonstrated, it would be helpful.

My third suggestion is that we should buddy a successful exporting SME with one that is exporting for the first time. That would be really helpful, because there is a real fear of the unknown for a small company with only a few employees. It has to deal with the VAT, the national insurance, the marketing and the manufacturing, and that can be quite frightening for a small company. It can be quite off-putting. Buddying such a company with one that is in the same market—although not one that is directly competing—would be helpful.

[Mr Adrian Bailey (West Bromwich West) (Lab/Co-op)]

In regard to the plea that the hon. Gentleman made a few moments ago, if he cannot get his own Minister to listen to him, what hope do we have of doing so?

[Geoffrey Clifton-Brown]

I think I will ignore that intervention. I could have come up with something a little better myself.

My fourth suggestion is to give local enterprise partnerships a stronger exporting role. I believe that we in Gloucestershire run one of the better LEPs, but it is still not sufficiently focused on exporting. It has nine divisions, and every one of them should be utterly focused on exporting. I would also propose a much stronger connection between UKTI and Innovate UK, as I have mentioned. Innovate UK is developing the technology forward strategy and helping companies to expand their ideas. It often helps them to incubate ideas from the best universities. This is an area in which the greatest companies can grow from little acorns, and we should encourage export activity there.

I would also reinvigorate UKTI by encouraging it to employ more people from the private sector, particularly those with a record of exporting in their own company. Those people should be properly paid and incentivised; otherwise, the private sector will always continue to employ the very best people. We have made good progress in the last Parliament and in this one, but there is much more to be done. Our all-party parliamentary group on trade and investment will help the Government whenever possible by putting people in touch with UKTI and with their LEPs. As we go round the world, every Member of Parliament should be alert to the possibilities of export markets and to which companies in their constituency might be able to export to those markets. We should then put the companies in touch with those possibilities. In that way, we could all become trade and export ambassadors, which would help the exporting effort of this country considerably.