Business: International Competitiveness

Lord Stoneham of Droxford Excerpts

Thursday 16th January 2014 Grand Committee

[Lord Stoneham of Droxford (LD)]

My Lords, we know that the prime purpose and focus of the coalition has been to rebalance the nation’s finances, but frankly there is no point to austerity if we cannot now achieve growth.

In April 1990, I took on a new responsibility running a newspaper business—a very cyclical business. The English economy was just tipping into the property recession at that time. Within six months, the profits of that company halved. In the subsequent six months, 50% of the rest disappeared. It is an experience seared in my mind. It took more than five years before we rebuilt that business. Once your market goes, you concentrate on cost-cutting to remain viable. You push back on marketing and investment. It takes time for consumers and suppliers to regain their confidence. Then it takes time for the business to have the confidence to invest and retrain and recruit staff to take advantage of the pick-up, and build on its competitive advantages.

One of the problems at the moment is that although we have rising confidence, with increasing orders for business, the preconditions for sustained upturn are not yet in place. We know that consumption is fragile, and what we do not want is another boom-bust based on credit. We need the sustainable growth which builds on our competitive advantages in business, to compete better as a trading nation. The noble Lord, Lord Green, mentioned the vulnerability of our current trading account in international trade. This is where the Government have to concentrate on improving the underlying business environment, through their industrial strategy. They have to adopt a strategic approach to championing key sectors in the UK, where their competitive advantage gives them possibilities of advances and future opportunities for growth in international markets. It represents a once-in-a-generation opportunity to use the pressures of the recession, and business desperate to recover, to achieve the changes we need.

I am very optimistic. We have seen in the past year the success of the Olympics—the construction firms and the supply chain companies which are benefiting from the reputations gained in that very successful enterprise. It is a remarkable case study that our motor industry has been transformed in the last 20 years, building—announced only this week—1.5 million cars last year, and set for 2 million by 2017. In the next two months, our creative industries, through our film makers—the British producer of “12 Years a Slave” and the technical specialists on “Gravity”—are almost certainly going to be honoured as world beaters. There are 1.7 million jobs in that sector, which is 5.2% of our economy—also announced this week. It is beyond belief, and I cannot quite understand it, that this is not one of the key sectors in the Government’s industrial strategy. I question sometimes those slightly misplaced criticisms of media studies courses in our universities—but I pass on.

I mention also the company in which my son works, easyJet. Founded in 1995 by a Cypriot businessman, it is now the biggest airline in the UK. It has more than doubled its revenues during the recession. We certainly have the experience and the managerial talent to take us forward.

I commend the CBI’s publication, Raising the Bar, which illustrates in its business environment scorecard what we need to do to raise our game and to be more successful. It measures how we are doing against our principal competitors of Germany, France, the US and Japan. We are ahead now on corporate tax competitiveness. We have a strong competitive advantage in our science renewal facilities, but we have major catching up to do in education and skills, R&D expenditure as a percentage of GDP, overall infrastructure quality and especially ease of access to loans. On regulation, we do not score well, but nor do France, Germany, the USA and Japan.

What do we need to do? We need to build on what we are best at. Clearly, partnerships need developing between government, business and university research establishments—the new £1 billion advance propulsion centre to develop new propulsion technologies in the motor industry is one example of this. Of course, we need to reform regulation, particularly in Europe, but we do not need to undermine business confidence by sacrificing all the benefits of the open markets of Europe.

We need to focus on technical training and might well have to accept some sacrifice in our university education. We are leaders in some of the elite sectors of education, but we are underachievers in the less successful parts of education, where we need to increase the resources and the commitment given to technical education. Finally, we need to examine our supply chains. Only 36% of UK vehicles are sourced from domestic business, and there are opportunities for our suppliers to fill those gaps.

The momentum of the industrial strategy needs to be maintained. A political consensus is required to support it through the next Parliament and to ensure long-term investment. I hope that the industrial strategy council will hold government and business to account to ensure that real economic growth shows the benefits for the wider nation.