UK Trade and Investment

Neil Carmichael Excerpts

Thursday 15th March 2012 Westminster Hall

[Neil Carmichael (Stroud) (Con)]

It is an honour and a pleasure to speak in a debate chaired by you, Mr Amess. It is also fantastic to speak in a debate secured by my hon. Friend the Member for South Thanet (Laura Sandys). The subject is critical, as every hon. Member has said and as we will all underline in our speeches.

My hon. Friend the Member for Enfield North (Nick de Bois) is half French. For the record, my family is heading in that direction, as my wife is French, which makes my children half French. I know that the French are incredibly determined, persistent and thorough, which probably accounts for their successes in trade. His experience and mine are obviously useful in such matters. Having said that, I will move on to the key points.

I worked with UKTI in my former life, before being elected as the Member of Parliament for Stroud. I was interested in Poland, which at that point was growing well. I knew that there were great opportunities, because I had taken the time to study economic data and seen that there were areas of growth. That was more than 10 years ago. When I enlisted UKTI to help me, I found the organisation extraordinarily helpful in many ways, including in making contacts and links with firms already in Poland, decision makers and politicians—even members of the Law and Justice party, which was quite an experience. My experience with UKTI was encouraging, but it could have been better, and I will explain one or two reasons why.

I learned two important things during my time looking at Poland. The first was that, despite the fact that Britain went to the rescue of the Poles in 1939 and had good relationships with the Poles culturally and historically, we were not first in terms of investment in Poland. We were not second, third or fourth; we were fifth. Germany had the No. 1 slot, for obvious reasons; France had the No. 2 slot; Italy had the No. 3 slot; the United States had the No. 4 slot. We rolled in at No. 5.

We must do a lot better. We should think not just about the countries with which we have been friendly in the past; it is tomorrow that matters. Although I am fully in favour of developing links with countries in the Commonwealth and beyond, we cannot just make assumptions about the behaviours of those countries; we must be sophisticated, robust and determined in developing the right kinds of opportunity.

The second thing that I noticed in Poland was that the first four countries had identified sectors and did them extraordinarily well. The French identified the hotel sector. One cannot go to a hotel in any part of Poland that is not owned or run by the French. They identified the sector and developed it thoroughly. The Germans did likewise in the automotive sector, the Italians in pharmaceuticals and the Americans in computers.

[Laura Sandys]

One reason why France and particularly Germany have a strong sectoral focus is that their trade associations have a different function and are a lot more proactive than ours. In many ways, they form a sales and marketing operation for the sector and are front runners, helping medium-sized companies that might not be able to spend the time or effort to go to those countries by representing them, almost like agents. It is a potentially interesting model.

[Neil Carmichael]

My hon. Friend is exactly right. Not only do they identify and develop sectors, they have a structure to develop relationships that are thorough and long-lasting. That is the first point that I make to the Minister.

We have all celebrated Lord Green, so let us have another go. I think that he is an excellent Minister of Trade. I welcomed his appointment, and I have heard him speak on several occasions. I last heard him speak on China. He delivered a powerful analysis of where China was going, where the markets were and the development of sectors and so forth. That is the attitude that we want within and throughout UKTI. We must understand properly the countries that we are considering in terms of the economic data, the analysis and the prospects that lie therein. The approach exemplified by Lord Green when I heard him speak on China—I have heard him speak on other subjects, but China is a good example—is the kind that we want to see much more of in UKTI.

That leads me to another point, which I made in a different context in this very room last week. It involves the importance of supply chains, which we sometimes underestimate. A lot of the products that we make in Britain are parts of products that are then developed somewhere else and sold on. In my constituency, for example, we make fuel injectors for large diesel engines. We do not make the engines; they are made in Germany, and they become parts of vehicles that are made elsewhere. That is a lengthy supply chain and a valuable one. That is what we must understand in the context of developing trade links. We must be much more interested in developing links, not just between Britain and another country, but within Britain. I am referring to the firms that should be developing the right links elsewhere. That requires more knowledge. It requires a better understanding of the landscape of opportunities. UKTI needs to get a grip on the question of supply chains, and I urge it to do exactly that.

My hon. Friend the Member for The Cotswolds (Geoffrey Clifton-Brown) mentioned Renishaw, and he was absolutely right. Renishaw is also in my constituency. It is a great firm. It is eager to develop markets and has recently done so successfully, because of the quality of its product, its knowledge of the market that it is going into and its sheer determination to get the engineering right. That is another thing that the Germans tend to do. We need to ensure that all our companies have that determination to achieve excellence, and that excellence needs to be promoted. Again, it seems to me that UKTI needs to develop the right kind of relationships for that to happen. It needs to do so in the right place and through the right channels.

In Gloucestershire and in my constituency in particular, we have had some striking successes with UKTI, so I do not want to be over-critical. For example, Green Fuels— a company that I visited before the general election—has developed businesses in Nevada and Mexico. Both those developments took place with the assistance of UKTI, which is great news.

Another firm from my constituency, Tudor Rose International, has obviously been using UKTI successfully. It has stated:

“As an Export Market Management Company we are delighted with the help and assistance UKTI are giving us in developing new and emerging markets.”

It goes on to develop that theme. The interesting point about that quote is that it refers to “new and emerging markets”. We must be ready to look at the new opportunities, define exactly what they are and stick to them.

Brazil is a very good example. Anyone with an understanding of agriculture would have known that, sooner or later, that country would really start growing in that sector. Some companies—for example, Fiat and New Holland; agricultural machinery firms—observed what was happening and now dominate the manufacture of large agricultural equipment there. That is good, but it is something that perhaps we should have been thinking about ourselves.

My constituency, oddly enough, has many firms that are exporting to the oil and gas industry in an emerging market in an emerging country—Brazil. They are doing surprisingly well. I shall just underline the fact. ARC, for example, is producing products that are desperately needed and of a high quality. It understands the market well and has appreciated that it is a market that will develop. In my view, UKTI needs to produce some analysis that can be easily seen—it must not be hidden behind a locked door until someone comes along with a key to prise it open—to give firms a feel of where the opportunities are and where expansion and development can take place.

I shall conclude by ramming home the point that we need more analysis of the opportunities, and it needs to be much more sophisticated and alert to new and emerging markets. That is the first point. Secondly, UKTI needs to be more transparent, a bit more open and a bit more user-friendly. That was my experience when I was looking at things in Poland, and I still detect it from time to time when I am talking to firms that are using UKTI today. Last but not least is a powerful point that my hon. Friend the Member for Witham (Priti Patel) made about developing links. However, UKTI must be thorough. One trip with a bit of glitz will not do. We need something bigger and more sustained. It must be broader and deeper—more meaningful. That is how our competitors have stolen a march on us. It is what we must start doing, and now is a good time to start.

--- Later in debate ---

[Mr Iain Wright (Hartlepool) (Lab)]

Mr Amess, what a pleasure it is to serve under your chairmanship today, and may I also wish you a very happy 60th birthday in 11 days’ time?

[Neil Carmichael]

That is impossible.

[Mr Wright]

It is impossible that Mr Amess is 60.

I must however add a sour note, Mr Amess, that is directed at your good self. I attended business questions in the main Chamber today and I heard you say to the Leader of the House that Southend is the best seaside resort in the country, if not the world. I have to correct you and say that Hartlepool and Seaton Carew is actually the best seaside resort anywhere in the country.

This has been a great debate, and an important and interesting one. I congratulate the hon. Member for South Thanet (Laura Sandys) and my hon. Friend the Member for Brent North (Barry Gardiner) on securing such a significant and timely debate.

In many respects, I am very optimistic about Britain’s prospects in the next half-century. We have innovative, dynamic, competitive companies in sectors from which the world wants to buy goods and services, and in which we are world class. We have a tradition of open, fair and global trading, which we need to exploit a lot more, and the world economy will double by the year 2050. The rate of growth throughout the world in the next decade will be about 4% to 5%––much higher than in the last 30 years. We need to exploit that to Britain’s competitive advantage as much as possible.

I mentioned this point in a previous debate, but it is worth repeating; indeed, the hon. Member for South Thanet referred to it earlier: there is a ferociously competitive global economy out there. British firms must be as nimble as possible, but my additional point is that there is a premium for coming first in the 21st-century economy, and we need to ensure that Britain and British companies go first into the new and emerging markets.

Let me quote from the CBI’s excellent report, “Winning overseas”, which says:

“We are not alone in seeking growth through exports – other advanced economies are facing similar constraints and are looking to boost their export performance. We cannot spend another decade simply playing catch-up: we need to be bigger and bolder in our ambitions.”

The report concludes by stating, very starkly:

“We are not being ambitious enough with our choice of markets and our decline in goods exports is unsustainable if we want to lead an export-orientated economic recovery.”

Exporting is incredibly important to the British economy, and not just in the simplistic and obvious sense that it generates revenue for our country, allowing us to pay our way in the world. All the evidence suggests that firms that export and that attract inward investment stimulate better research and development, productivity, innovation and hence competitiveness. The efficiency of our wider economy improves through exposure to new ideas and different ways of doing business. A paper from the Department for Business, Innovation and Skills itself, entitled “International Trade and Investment - the Economic Rationale for Government Support”, states:

“export support is a highly cost effective means of generating additional business R&D, enabling firms to increase internal resources available for such investment, as a by-product of successfully helping them to gain access to new markets.”

It is clear that public money invested in export expansion and support reaps huge dividends for the businesses of this country, and it also improves the ongoing competitiveness and prosperity of our country. The CBI—I quote it again—states quite directly the challenge to us in this House as policy makers:

“Be clear about what the UK is trying to achieve and where its strengths lie in order to help UK business in the global marketplace. The UK must develop a strong brand that our exporters can leverage to their own advantage.”

I think that we would all agree with regard to that.

I am optimistic about the growing alignment between areas of UK competitive advantage and demand from emerging markets in the next decade or so. We have the rise of the global middle class, with about 1.8 billion middle-class people in the world. In the next few years, that is estimated to grow by 5 billion, so we are going to have a huge increase in people with more disposable income wanting to buy British goods and services. That will provide enormous opportunities for the UK in some of our real strengths: premium brand automotives, financial services, IT, pharmaceuticals, chemicals, creative industries and higher education.

I am optimistic, but we face challenges. It has been mentioned that we often have cultural and structural barriers to companies expanding their exports, or even starting to export in the first place. In terms of our cultural barriers, too many of our firms simply do not export. The key task of UKTI is to break down those cultural barriers as much as possible and identify the companies that could make a real success in exporting.

We export to a limited field of slow or no-growth countries. That point has been made by the hon. Member for The Cotswolds (Geoffrey Clifton-Brown) and others. Some 65% to 70% of our exports go to the United States and the European Union. We need to ensure that the strategic focus of UKTI switches to high growth and emerging economies. The hon. Member for Enfield North (Nick de Bois) was firm about making sure that we were at the forefront of N11 economies—the next 11 high growth economies.

There is a cultural barrier. How on earth does a firm in Hartlepool or elsewhere, with no culture or experience in exporting whatever, get into the business of exploiting foreign opportunities? As the CBI states, getting a swimmer to attempt a different stroke is much easier than getting them into the pool in the first place. Firms happen to chance upon exporting opportunities, rather than making a determined effort. We heard about the micro-brewery that the hon. Member for South Thanet mentioned. It is right that the Government have an objective to double trade by 2015 with Brazil, China, Colombia, Egypt, India, Indonesia, Malaysia, Mexico, Qatar, Russia, Saudi Arabia, Singapore, South Africa, South Korea, Taiwan, Thailand, Turkey, the UAE and Vietnam. As the CBI says:

“It is clear that the UK needs to re-orientate its trade towards high-growth markets in order to boost its performance.”

Those countries are where the high growth, emerging opportunities will arise.