UK Trade and Investment

Julian Smith Excerpts

Thursday 15th March 2012 Westminster Hall

[Laura Sandys (South Thanet) (Con)]

I am extremely honoured to be speaking under your chairmanship, Mr Amess. From one seaside town Member to another, I should say that we ought to be on the beach rather than in here. However, some things are far more important for us and our constituents. I thank the Backbench Business Committee for giving us—myself and my friend the hon. Member for Brent North (Barry Gardiner)—the opportunity for this debate.

Although this place has paid little attention to UK Trade and Investment, the Government have put significant focus on the organisation. They announced an extra £45 million of funding in the autumn statement and they have recruited one of the most influential businessmen to be Minister for Trade and Investment. We have a Cabinet Committee that is focused on growth and that has a key input from UKTI. Even this week, we can point to results in which UKTI has been instrumental: Lockheed Martin, Nissan and Jaguar Land Rover investments and reinvestments in the UK. We can point to some very positive things that have materialised from the attention and focus that UKTI has put on our inward investment and trade initiatives.

UKTI has also created a key platform for some additional areas such as the global green growth initiative. I am very excited and keen that we promote that further. UKTI has forged and developed unilateral free trade agreements and last year launched the charter for business. There has also been a focus on high-value opportunities. The three areas of investment announced this week are part of that range of high-value opportunities that we need to secure for our long-term future.

I also hear from large businesses about how welcome Lord Green’s leadership is and about his commitment to the role. However, I am concerned to see the speculation that he might get pinched by the Bank of England. I hope that our Ministers in the Department for Business, Innovation and Skills are securing him—locking him in the office and pinning him down on his chair.

Although things are going well for UKTI, we cannot forget that we are not operating in normal times. As every clichéd politician has said, “We’re all in this together.” However, certain departments are more involved in the job of getting us out of this mess than others. There is probably no more important department involved in that than UKTI. I am therefore very pleased we are having this debate today.

For certain personal and constituency reasons, I am particularly interested in UKTI, not least because, a year ago, Pfizer—one of my largest employers—decided to withdraw many of its staff. It is therefore absolutely crucial for me and my constituency to understand more about how UKTI functions, and what it does to develop and attract inward investment.

On a personal level, I have worked for what was called the Department of Trade and Industry in its inward investment unit. I have also worked in many countries, from countries in the Caucasus to Peru and Argentina. I have seen for myself how people engage when it comes to inward investment and how trade missions work—or, as has frequently been the case, do not work. It is important that we in the House have an opportunity to debate something that has such an impact on our constituencies. Many of us have had experiences of inward investment and trade in our lives before we came into Parliament.

So if everything is going so well, why do we need this debate? Success is not enough if it is only expressed in our own terms. Unlike other departments, UKTI is operating in an aggressive, competitive environment and, in many ways, is not trading in isolation from others. A key national priority for any country—whether it is democratic or not—is domestic prosperity. That means that trade and inward investment for every country, particularly emerging countries, is becoming a very big priority.

If we really believe that, we must believe that, for example, a job from Samsung that goes to Hamburg is a job that has potentially been lost from the UK. If I have to declare this, I will: I happen to be half French—[Interruption.] It is something that I have to bear. I have therefore seen how the French operate globally in both the trade and the inward investment sector. All I can say is that our competitors certainly know how to finish the race sometimes before us.

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

Will my hon. Friend give way?

[Laura Sandys]

On the French aspect? I have apologised.

[Julian Smith]

Will my hon. Friend give some specific examples of how the French have managed to seal the deal?

[Laura Sandys]

Some examples are a bit difficult to repeat in public. On a serious note, the French have always had a very clear focus. Since the second world war, both their diplomats and their whole political structure have been focused on understanding economic diplomacy.

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[Laura Sandys]

I welcome my hon. Friend’s intervention. As yet I am not too sure what an LEP is. I think that they are evolving and creating their own personalities. An interesting thing is that they do not fall into the same category as the RDAs, which were similar in every different region. My area is part of a large LEP, comprising Essex, Kent and east Sussex. In many ways, that creates a different sort of LEP than smaller ones. LEPs are evolving.

I am not concerned about the future of how LEPs operate. We have 18 months to two years of interregnum, in which we need to get our inward investment pitch out. We must put forward the best that we have to offer. The rest of the world is crawling all over business opportunities while we are waiting for structures. I do not have time for structures, particularly in my area, where, as I have said, Pfizer has decided to downsize quite dramatically. Life science jobs based in Sandwich are walking away every day, because the marketplace is an international one. The jobs are not fixed in Sandwich; they are leaving and going to Shanghai, and they are being recruited for around the world. Waiting for structures to be in place is not going to be good enough for some areas where we need to move fast and be nimble and commercial.

Are we sure that we have the right sort of people working in the area? The people are extremely bright, and I have met some of the most intelligent and committed people working at UKTI. However, we need to think about whether they are commercial people. I know that including PA Consulting is an extremely important part of involving the private sector. I put my hands up to say that I used to run a consultancy, and I worry that sometimes consultancies are not the private sector; they become an extension of a client, although it is still important to have that input. We need to be clear who has international experience working at the sharp end.

Perhaps my greatest surprise came when I was talking to someone about the issue in one of our Departments. They said, “We are spending a lot of money on languages. It is fantastic, Laura. We are going out there and ensuring that all our diplomats speak all these wonderful languages in all these emerging economies.” I looked a bit aghast, and they were a little disheartened that I was not excited about that. I said, “Do you know that 220 languages are already spoken in this country? Do you know that we have the opportunity to recruit people whose cousin, uncle, aunt or existing business partner already works and lives in these countries?” With absolutely no disrespect to anyone with a classics degree from Oxford or Cambridge, someone whose grandfather comes from Punjab is possibly a better person to build our relationships and business contacts with those particular countries, in those communities, than someone who is learning Punjabi for the first time.

One of the exciting things about this country is that we are the Commonwealth in minutiae—we are a reflection of our past, which gives us a huge asset for our future. We need to look again at the sort of people whom we are presenting as the face of Britain, and also at who can be effective. I throw a challenge to UKTI: if it recruits a selection of such people to be our face in the emerging markets and says, “Take 100 small businesses with each of you, try to nurture them and help them to have trade relations in particular areas, support them in the first year, ensure that they are not entering into contracts with someone who is a little sharp in the area or who will not deliver, and nurture them through the first year of export or joint partnership”, we will get a much bigger increase in exports and enter into global relationships with small and medium-sized businesses. We have a unique asset, but I am just not sure that we are using it.

[Julian Smith]

Does my hon. Friend agree that as well as the international face of UKTI, we potentially need to look at the skills that we are presenting to the domestic customer base of UKTI? What types of skill and commercial experience does she feel are required to seek out export-hungry companies throughout Britain?

[Laura Sandys]

I welcome my hon. Friend’s intervention. I have started two small businesses, both in the middle of recessions. We do not have enough people who have a business focus.

I was quite surprised that 1,000 people work in UKTI in different regions of the United Kingdom, and there may be great value in that. I would like to see a lot more of them in our constituencies, perhaps using the opportunities that Members of Parliament can offer, so that they can understand a particular constituency.

We need a much stronger commercial focus. Small businesses have one language; in a strange way, it is almost a universal language. It can travel even if people do not speak the same language. It is more important to have that business language when people talk to someone else than it is necessarily to have location or certain areas of expertise. We need more commercial people.

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[Barry Gardiner (Brent North) (Lab)]

The hon. Member for The Cotswolds (Geoffrey Clifton-Brown) is absolutely right; there has been no debate on UKTI—not only in this Parliament but in the entire previous Parliament. It is indicative that the hon. Member for South Thanet (Laura Sandys) and I, who have both run businesses, have initiated this debate.

[Julian Smith]

Can the hon. Gentleman explain to me, as a new MP, why, in the whole period of the previous Parliament, trade and export seemed to get so little coverage and interest from Ministers or Government Back Benchers?

[Barry Gardiner]

I could, but I would rather refer the hon. Gentleman to the pamphlet that I wrote on the matter following the general election. I fear that if I were to begin on the point now, it might take up more time than we have available.

If the UK is to emerge from its current economic stagnation, it must do so by trade. The opportunities from trade and investment lie not only in our own abilities but in the accurate assessment of the economic opportunities in, and performance of, other countries. We have seen a definite shift in economic power. With the rise of India, China and Brazil, there is a new global dynamic, so there are now new global opportunities. We have seen the eurozone’s problems, as it struggles to pull itself out of recession. In the past 15 years, the United States has adjusted to refocusing its attention more towards the Pacific than the Atlantic. In those circumstances, we have seen the benefits of Indian companies, such as Tata Global, investing in British companies such as Tetley. We have seen the benefits of British companies, such as BAE, expanding overseas and, in doing so, boosting our economy.

It is imperative that we have the skills and institutions that can facilitate such investments. We need an organisation that can identify opportunity overseas and channel UK companies in a co-ordinated supply chain to meet it; one that can source overseas investors and persuade them that UK companies are the perfect fit for their investment to yield above-sector returns for them and for new jobs and growth in the UK. That organisation should be UKTI. The redoubtable hon. Member for South Thanet has illustrated that UKTI is, in its current state, not yet that organisation. It lags behind other countries’ organisations in promoting investment abroad and at home.

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

I am delighted to serve under your chairmanship, Mr Amess. I congratulate my hon. Friend the Member for South Thanet (Laura Sandys) on securing the debate. The fact that we have had a debate on trade with India and today’s debate on UKTI—two debates in two years—shows the interest of the coalition Government, and particularly of Conservative Members, in trade.

I also congratulate my hon. Friend the Minister on being here. He and I had Front-Bench roles in opposition, and I regret to say that I am going to shine a light in a few dark places he might not wish me to, but here goes. High levels of exports and foreign direct investment have always been an indicator of the health of an economy. It is vital to promote exports and foreign direct investment. We know from the very recent past that we cannot rely on consumption fuelled by debt, or on Government spending funded by debt, to drive growth. As I said in one of my first speeches after the general election, it is only through exports and FDI that effective growth will come into the country. That is how important they are to the economy. As a result of our history, we boast strong economic and cultural links across the globe. We should capitalise more on the fact that English is the universal language of business.

The effectiveness of the work of UKTI is vital to our economic recovery. A company in my constituency called Renishaw plc, chaired by the excellent David McMurtry, is doing incredibly well. Its revenues for the past six months, ending 31 December 2011, were up by a record 11% —that is £1.47 million—and as a result it is now employing 16,050 staff, with 130 vacancies, including 25 apprenticeships and 30 graduate positions. That is the real importance of exports: the growth of the economy, but also employment prospects—graduate and work placement prospects, which are so vital for youngsters leaving education.

Exports are also important for the companies themselves. It is estimated that between 1996 and 2004—the Minister will know this, because I have used these figures many times—the productivity of firms that export went up by 34%, but that of firms that did not export went down 7% to 8%. Exporting firms tend to have higher productivity. It is estimated that less than a quarter of the 10,000 medium-sized firms in the UK export, and most of them receive help from UKTI. However, the Government have recognised the fact that we must help more companies, and, as my hon. Friend the Member for South Thanet said, in his autumn statement the Chancellor granted UKTI an extra £45 million, to meet the target for the number of small firms exporting, and bring it to more than 50,000. We will need to work hard to achieve that target.

I pay tribute to the Gloucestershire chamber of commerce. I was contacted on Tuesday, by Suzanne Hall-Gibbins, the chief executive, who asked me to pass on in the debate how important she felt the role of chambers of commerce could be, in exporting. I hope that the Minister will say a little more about chambers of trade and of commerce. Along with the local enterprise partnerships, they have a supremely important role, because they can identify a lot of opportunities.

[Julian Smith]

Does my hon. Friend agree that one opportunity for British Chambers of Commerce would be for them to produce some of the market reports currently produced by UKTI? I think that the BCC believe they can do them quite a lot more cheaply.

[Geoffrey Clifton-Brown]

My hon. Friend is right, and, as my hon. Friend the Minister will know, we had that debate often in opposition. We could make more of the knowledge, on the ground, of chambers of trade and of commerce, as well as organisations throughout Europe. We could use them more—that is what they are there for.

I want to take up the point made by the hon. Member for Brent North (Barry Gardiner), who is unfortunately not in his place at the moment. In 2010 50% of our exports went to EU member states, and a further 16% went to the USA. The problem with that is that it is estimated that those markets will decline by 30%. On the other hand, by 2030 the BRIC—Brazil, Russia, India and China—countries will have increased by 41% their share of global GDP. In other words we are exporting to the wrong people. We are exporting to the countries it is easy to export to; but we are not encouraging our companies to export to the real high-growth markets. If we carry on as we are, we shall sink further downhill.

The markets in question are not always necessarily difficult to export to. The Minister may know that I recently visited Morocco, as did our trade ambassador Lord Marland. There is huge opportunity there, not only for trade with Morocco itself, but to use it as a hub for exporting into west Africa. We have all been looking east, towards Asia, but some west African countries’ growth is higher than that of Asian countries. Mr Tarab, the excellent CEO of the main phosphate company, which has 60% of the world’s reserves, is an Anglophile and joint chairman of the joint chamber of trade. He said to me that we should use Morocco as a hub to get into west Africa. In particular, our banks should use the opportunities that they have through shareholdings in Morocco to get into some banks in west Africa. West African countries such as Ivory Coast, Senegal, Nigeria, Angola and Ghana have had huge growth rates in the past few years, as a result of their oil and gas reserves and discoveries. We are missing a trick. They are friends, ancient trading partners, and many are members of the Commonwealth. We need to consider that market closely.

The previous Government’s policies on exports and attracting inward investment were incoherent, which prevented UKTI from implementing a rational strategy. One simple reason for that incoherence was a revolving door for trade Ministers, and another one for trade priorities for UKTI. I suggest gently to the Minister that he should set some priorities for UKTI, stick with them and ensure that we achieve them.

UK businesses that export reap significant benefits, but many are reluctant to start exporting, because they do not know where to begin, or they are unaware of the benefits. That is where UKTI comes in, but because it lacks a coherent strategy, as I have mentioned, it has not reached out to small companies well enough. I still think there is a mismatch between what UKTI does around the world, or in London, and what happens on the ground. Ninety per cent. of the companies in this country are small ones, and 4.5 million companies employ fewer than four people; if 1 million of them took on an extra person it would almost solve youth unemployment overnight, so that is a very important area. UKTI, through our embassy network around the world, could be more proactive in identifying the opportunities in those countries and relaying them back to London. Then, through our databases on our websites, we could relay the opportunities to the businesses.

Things tend to happen the other way around. What UKTI does is reactive. It tends to rely on a company approaching it and asking whether there is a market in Nigeria for the valve that it makes, which supports the oil industry. That opportunity should be identified by UKTI long before that happens, and passed back to the relevant companies. That is a change of thinking, and UKTI needs to think about it.

We need to think what incentives we can give to small companies to export. However small a company is, exports should be discussed at every board meeting. It might not want to do anything about them, but they should be on the agenda. We could encourage small firms more with corporation tax breaks. Perhaps we should even skew the national loan guarantee scheme towards companies that export. The Government need to do more to encourage small businesses.

We have not talked enough in the debate about inward investment. Too often we are delighted when big firms come to this country. Then we leave them to fend for themselves. An example is the £1.5 billion development by DP World at the London Gateway port, with investors from the United Arab Emirates. There have been huge planning problems. We should be monitoring and nursing those big investments, with someone senior from UKTI saying, “You have got a planning problem; this is who you need to go and talk to.” We need to get a reputation in this country for really caring, not just about firms bringing their investment to the country but about looking after them afterwards. That brings me on to infrastructure and the prospect of allowing it to fall behind.

Critics of High Speed 2 and Crossrail are wrong: we need the best infrastructure in the world. People need to be able to get about; we need to be up there on a world scale—certainly as good as any of our European competitors.

We need to deploy our UKTI people in the right places. Returning to my visit to Morocco, I found that we had four based in Casablanca, which is fine because that is where most trade is done, but we did not have a single UKTI representative in Rabat, although it is the centre of Government in Morocco, where all the Ministers are. The hon. Member for Brent North (Barry Gardiner) is right, business happens by networking, and we should be asking our UKTI people to network around the world. If they are to seek out the opportunities that I mentioned earlier, they need to network with the right people.

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

I am not sure that I have a speech; this will just be a bit of verbal. I would like to add to some of the comments that colleagues have made. I start by paying tribute to my hon. Friend the Minister of State. Many Government Members wish that he was more than a Minister of State. He has a wide portfolio, of which UKTI is just a part. I want to put it on the record that his energy and effort in this area, as well as on deregulation and in other parts of the business agenda, are noted and appreciated.

From last year’s trade White Paper to the work that UKTI has been doing and my right hon. Friend the Prime Minister’s trip to America, as well as his trips to India, Brazil and China, a great deal of work has been done. I disagree totally with the head of the Business, Innovation and Skills Committee, the hon. Member for West Bromwich West (Mr Bailey). The current Government have put trade on the front foot and are investing heavily in it from the highest level. One of the biggest indicators, and perhaps the Minister will confirm that my understanding is correct, is that every Minister who goes abroad now has a ledger on how much trade is being done between Britain and the overseas country. That is a great improvement and allows a focus on trade during every ministerial visit. However, the comments that I make today will focus on UKTI.

I represent a north Yorkshire seat, where the UKTI offer has been very good. There is a very good gentleman sitting in Leeds called Mark Robson. I pay tribute to him and his team. The tie-ups that that part of UKTI has with industry groups in health care and other areas seem to be extremely good. That combination of utilising outside bodies with UKTI employees works well.

However, when I was reading the corporate plan for UKTI, I was shocked to see no mention of people and a people strategy—a human resources strategy. I have been a Member of Parliament for two years, having come from an international business, and I believe that there is a crisis in Whitehall because of the lack of commercial experience. We will see that increasingly across a number of areas, but UKTI is at the forefront of the crisis.

My first question to the Minister is this. Will he give the House his views on UKTI’s HR strategy? What can he do to impress on people the need for an HR strategy? In the short term, where will the 100 or 120 trade advisers who are being recruited come from? What are their backgrounds? How is that recruitment taking place? How much are we paying them? Are we paying them enough? We need to pay a good market rate to get private sector expertise. How do we bring in private sector talent?

That leads me to the question of culture, which hon. Members have discussed. Having read the strategy document and spoken to delegations from UKTI senior management when they visited the House, my biggest concern is the lack of a sales culture in UKTI. We have talked about how we could monitor UKTI better, with better metrics, the National Audit Office and so on, but I am not sure whether things need to be that sophisticated. The things I am interested in that were not in the annual report are simple. How many trade visits were made in, for example, China by UKTI executives? How many corporate plans in Brazilian states and provinces are being tracked? How many hits has the UKTI website had? It is simple stuff, but we need to look at the data in UKTI literature and put some pressure on. There is no net assessment of how many new inward investment projects, businesses and employment opportunities there are versus what goes out. All the talk is about what comes in, with no assessment of what the net numbers are, so my second question is this. How do we improve the sales culture of UKTI?

The issue of sales leads me to communication. The initiative of using Ministers seems to be working really well. It got a bit of stick in the press last year, but I understand that most FTSE 100 companies now have a senior Minister as a relationship manager. However, I am not sure whether the complaints from the retail and financial service sectors have been addressed, because they were missed out of the pilot exercise. I am keen to hear whether those two vital sectors have now been included.

Let us consider how we can expand the pilot scheme to include more companies. The focus on mid-sector companies that was announced last December by Mr Baird looks positive, and I am sure that it will bear a great deal of fruit. As co-chair of the all-party parliamentary group on micro businesses, I believe that we need to communicate better with the smallest companies in our economy. I agree that there is a role for MPs, but it worries me that that should be the only route into such companies. We have another route that we do not use and that is through the Treasury and HMRC. All the bits of paper that companies get from the Government about tax, pay-as-you-earn and other such matters could be used. Advertisements could be printed on the back, sign-posting people to the work of UKTI. I will continue to ask the Chancellor to open up HMRC.

Finally, we need some honesty from UKTI about what it is doing and where the gaps are. A number of my hon. Friends had a meeting with the Chinese ambassador recently, and he said that when he was running a province in China, he was surprised that he never saw a representative from Britain at the local trade fair; there was always one from Germany and sometimes one from France. In China, there are more than 30 provinces. As I understand it, we cover only a fraction of them, and it would be helpful if we, as parliamentarians, could understand where the gaps are so that we could raise questions with Government, such as, “Do we need further investment? How can we get private sector involvement to fund more work?” The annual report did not go into that, so I encourage UKTI to be brutally honest with us.

I urge the excellent Minister of State to press on UKTI my concerns relating to communication, people, culture and brutal honesty.

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[Mr Wright]

The hon. Gentleman makes a fair point. UKTI needs to look closely at where those high growth opportunities will be and ensure that, because of possible historical links, we exploit those opportunities first. I tabled a written question about how we are to double trade and what targets are in place. As my hon. Friend the Member for Brent North said—perhaps the Minister will comment on this—there are no stated bilateral trade targets for Egypt, South Korea, Bangladesh, Indonesia or the Philippines. The Minister said that UKTI provides a degree of service for UK companies seeking to do business, but that is not good enough. We need to be much more focused and determined to ensure that British firms can sell their goods and services in the areas that are going to grow the global economy in the next half century. We need a framework in place to allow that to happen.

I became interested in the course of the debate about where UKTI, with finite resources, should be concentrating those resources. The hon. Member for South Thanet and others mentioned the need to focus on small firms and make sure that we get in at the beginning to ensure that we can benefit and help to shape and mould their ambitions for exporting opportunities as they grow. I keep mentioning the CBI, because its report is excellent. The CBI states that UKTI could perhaps be more effective if it focused on mid-sized companies with real potential for high growth. They may already be exporting, but they require assistance to break into new markets.

I am interested in what the Minister has to say about what we need to do to identify, embrace and nurture medium-sized enterprises—those companies with a turnover of about £10 million to £100 million, with up to 500 employees, and, as I said, real potential for high growth.

[Julian Smith]

I had a micro-enterprise that traded here and had a subsidiary in Singapore. We delivered within two years hundreds of thousands of pounds of tax revenue back to the UK. Please do not underestimate the power of the 4.5 million micro-enterprises to deliver tax revenue as part of the export drive that the Government are undertaking.

[Mr Wright]

I certainly bow to the hon. Gentleman’s superior experience, but my point is that, with finite and reducing resources, it is absolutely essential—I will come on to this—that today’s debate is about the effectiveness of UKTI. Where do we get the biggest bang for the taxpayers’ buck? Is it from small enterprises or more medium-sized enterprises that have got opportunities for export and growth? Where will we get the best return for the British taxpayer and hence future prosperity and growth?

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[Mr Wright]

I certainly saw reports about Sir Richard Branson being at the event along with George Clooney. My point is this: when the Prime Minister, the leader of our Government, goes out on state visits, what is he doing to win trade for Britain? What is he going to come back with? It is important that he takes a delegation of business leaders and wins awards and contracts for Britain.

[Julian Smith]

This Prime Minister has done more on UK trade trips than any other Prime Minister in recent history. He has been to Brazil, China and India, and the Foreign Secretary has been on a trade mission to Australia. This Government’s track record on the matter is exemplary.

[Mr Wright]

I understand the hon. Gentleman’s point. I know that there was a high-level and high-profile delegation to India just after the Prime Minister assumed office, but one-offs and PR stunts are not going to win business for Britain. The effort needs be sustained, co-ordinated and done at the highest possible level over a long time.

I am excited about the opportunities that British companies—dynamic, innovative and competitive as they are—have in the competitive, 21st-century global economy. We will miss a trick if we do not have a sense of urgency and determination in ensuring that we grow our businesses in the export markets. I hope the Minister will have a greater sense of urgency and determination to ensure that British goods and services are sold around the world, thereby providing us with greater wealth and prosperity.