UK Trade & Investment

Nick de Bois Excerpts

Tuesday 19th March 2013 Westminster Hall

[Nick de Bois (Enfield North) (Con)]

It is a pleasure to serve under your chairmanship on this fine early morning, Mr Hollobone. I know that hon. Members are rested and have slept well after a long night, so I am sure that the quality of their contributions will not be affected.

I am grateful to the Speaker for selecting today’s debate, which comes at a most pertinent moment. Few would disagree that the Foreign and Commonwealth Office, through its embassies, should be championing Britain and creating a stable, open, global environment in which Britain can succeed. Fewer still would disagree that foreign policy should support jobs, growth and prosperity. Indeed, the greatest threat to our country is actually economic in nature. That is why we are having this debate, which I hope will have a common sense of urgency and purpose. It is only the second debate on trade and investment in the past 12 months, the previous one being called by my hon. Friend the Member for Shrewsbury and Atcham (Daniel Kawczynski). I will try not to be too partisan, but it is extremely disappointing that the official Opposition are again not well represented on something that, frankly, is crucial to our country’s future.

[James Duddridge (Rochford and Southend East) (Con)]

I know that it is an early morning, but my hon. Friend says that the official Opposition are not “well represented.” Will he cast his eye around and do a quick headcount of Labour Back Benchers who have bothered to turn up?

[Nick de Bois]

My hon. Friend is right to force me to highlight that the shadow Minister, the hon. Member for Wrexham (Ian Lucas), is here unsupported by any Labour Back Benchers.

It is a pleasure to welcome the right hon. Member for Belfast North (Mr Dodds) and the hon. Member for East Londonderry (Mr Campbell) to the debate.

I cannot resist commenting that I am surprised that our coalition partners are not yet here. Perhaps it was the late night and we shall see them later. Let us be generous.

[Daniel Kawczynski (Shrewsbury and Atcham) (Con)]

Does my hon. Friend agree that small and medium-sized enterprises in the many constituencies represented by Labour Members will clearly be disappointed that their Members of Parliament have not turned up to this debate to find out how such companies can work with UK Trade & Investment to help them to export?

[Nick de Bois]

I am grateful for my hon. Friend’s well-timed intervention. The fact is that trade and investment affects every single constituency. It is the one thing that unites us and the one thing that serves all our constituents, wherever they may work or whatever they may do, because without trade and without business we have no taxes, no hospitals and no infrastructure. Frankly, it is at the heart of our jobs, growth and prosperity.

As a nation, we import some $640 billion—I used dollars deliberately and hon. Members will see why as I refer to other figures—but we export approximately $480 billion only. This is a timely debate. The UK’s share of global exports has declined sharply over the past decade from just over 5% in 2000 to a fraction over 4% in 2010—a 20% drop. We should not pretend that this country is alone in seeing such a drop, but some of our near neighbours have fared much better. Germany, to which I will be making further references during my contribution, managed to grow its share of global exports. Are UK companies slow to react to opportunities? Are there inherent uncompetitive disadvantages? Perhaps more pertinently, have we been tapping into the wrong markets? I will suggest later that that has been the case. Have we failed to reach the high-growth markets as a result, perhaps, of over-dependence on our European neighbours and the US? If one looks beneath the figures, one wonders whether there is a mismatch between the goods and services we currently sell and those demanded by high-growth economies. After all, we are not supplying high-capital goods to the booming markets in the BRIC countries for machinery, tools and equipment. Whatever the diagnosis, the treatment is the same. We have no choice but to increase exports and inward investment.

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

Does my hon. Friend agree that there are some bright spots in our export market? In China, for example, our exports were up 19.5% from 2011 to 2012, and UK services exports were four places up in our market importance compared with the previous year, so our exports to China are doing well.

[Nick de Bois]

My hon. Friend anticipates some comments I will make shortly. Even within that good news story, it is worth remembering that the success of our services exports perhaps masks an underlying problem in our not being successful in selling our capital goods to emerging BRIC countries. He is absolutely right, however, and since 2009 the volume of exports to the rest of the EU has probably risen by some 5%, but exports to the rest of the world have increased by 30%. The trend is definitely the right one. There are encouraging signs, and we should be quick to recognise that and to endorse such efforts.

We are coming together this morning as a constructively critical friend to the work of UKTI and the FCO. Since entering Parliament, I have found an admirable determination in Ministers and officials to deliver on the often quoted target for exports of £1 trillion by 2020. I have no doubt that this is the first Government to put trade and inward investment at the heart of government and, in particular, to make them a cornerstone of the wider economic resurgence of the UK. I count myself lucky, because there are Government Members present today—I welcome such a strong showing—who have witnessed the work of the Government after a career in business and are therefore qualified to fulfil the role of constructive friend. On that note, I remind the House that I spent 25 years in business, actively supporting SMEs and large corporations in their efforts to trade abroad, which involved working in the exhibition and events industry, which in turn involved working with trade associations and UKTI’s predecessor, British Trade International. I remind the House that my wife runs the company that I was involved with, which still works with some trade associations, so I can put on the record both my experience and a declaration of interest.

Today, I want to deal with both the strategic and tactical aspects of UKTI-FCO work, and I am grateful for the support of the CBI, the Federation of Small Businesses and other organisations, not least SMEs and trade associations from whom I have gleaned advice. Let us start with a premise. One in every four SMEs in Europe is an exporter, but the figure in Britain is currently one in five. What is holding back a nation of entrepreneurs that has an enviable track record in trading and a history of unique historical ties with Commonwealth countries, and that is now host to large diasporas from many parts of the world? Many of our competitor countries would envy such a pedigree as a platform for exporting, so what is allowing our neighbours to outperform us?

As my hon. Friend the Member for The Cotswolds (Geoffrey Clifton-Brown) said, there are some success stories, which should not be overlooked. Our service sector is buoyant, and that has hidden some of the goods sector’s decline, although we have excelled in pharmaceuticals and chemicals. Sadly, however, manufacturing as a whole has declined.

Even when we are doing well in pharmaceuticals and chemicals, our rate of growth still compares unfavourably with that of Germany, because we have not sold to high-growth economies. However—I speak as a former owner-manager of an SME—where SMEs have the right goods and services for high-growth economies, the reluctance to export is a combination of risk management assessment, operating outside the comfort zone and, of course, fear of failure. That is often fuelled by what seem daunting and in some cases very real barriers to export, but also by a fair share of myths, without necessarily recognising the hidden and transparent benefits of export markets.

[Andrew Bingham (High Peak) (Con)]

I thank my hon. Friend for securing this important debate. Does he agree that the fears and concerns that he highlights among SMEs are more prevalent with micro-businesses, which, despite their smallness, have a lot to offer and have great potential up and down the land?

[Nick de Bois]

My hon. Friend is absolutely right that micro-businesses will be more inclined to stay in their comfort sector. When they are successful and they grow, it is hard for them to shed the fear of the unknown and of recognising the extra management time that would go into breaking down the barriers to export. Success as a micro-company often brings with it concerns about entering the export market. However, the answer is staring us in the face: engaging with those that have succeeded and letting them drive those that are inclined to go—or thinking of going—into the export market.

Recently, I went to an exhibition where I spent the day with SMEs exporting to the Gulf—I hasten to add that I went at my own and not the taxpayers’ expense, en route to a delegation. I was hosted by UKTI for the day, and I spent the whole day with SMEs. A number of things came out that I thought were very encouraging, but let me focus on one issue.

When I asked SMEs how they broke down the barriers, why they were successful and what they were achieving, they all had innovative ideas, as we expect from SMEs in this country. They had all used the support of UKTI and the FCO, which, in the Gulf region, is exceptional. However, they all wanted more British companies to be there with the British pavilion, supporting a British presence in the region, because it was as much in their interests to have that greater commercial and intellectual capital in a region in which they were operating. When I asked, “Would you attend forums and speak to contemporaries that are either thinking of, or may not even have considered, going into export markets?”, “Would you come and tell them about your experiences?”, and “Would you help them learn the lessons that you have learnt?”, every single company—these were small to medium-sized enterprises—was willing to do so.

My challenge is that perhaps UKTI should now seek to leverage the good will of the work that SMEs have been doing, where they have been successful, to reach new potential exporters. Why? Despite the success of UKTI, we are still not reaching enough people. I suspect that my hon. Friend the Member for Shrewsbury and Atcham will touch on that point when he talks about how UKTI’s work must expand—I do not wish to anticipate him unfairly, but I have read his report, and he has done some excellent work on the future of UKTI. Therefore, with the companies that want to leverage more activity in a region, it is a win-win, no-cost option for UKTI and the FCO to capitalise on those who are successful in order to breed more success.

During the few parliamentary delegations that I have attended, I have always met local embassies, and local UKTI representatives and staff. Every time I visit, I ask the staff a simple question: “What are the top three UK companies doing business in this region?” I confess that the answer is often mixed. Some do not know, some waffle, while others are extremely well briefed. The picture is mixed, but what all have in common is that although the large exporters may be identified and known to them, very few of the SME companies, which might even be in the same supply chain as the well known prime contractors, are known. That worries me. At delegation level, led by senior Ministers, I cannot recall how often SMEs were included in the teams accompanying Prime Ministers or Foreign Secretaries.

My specific interest is with the “M” in SMEs. Medium-sized businesses will be crucial to driving export growth, because it is not realistic to presume that our export goals can be achieved by securing large, single-group contracts. The critical mass achievable by the vast swathe of medium-sized companies will lead growth and I suggest that UKTI overseas representation is spread more evenly across the company base to reflect that fact.

[Geoffrey Clifton-Brown]

I promise my hon. Friend that this is my last intervention, because I am really grateful to him for securing the debate. He will be well aware that only 23% of our small and medium-sized companies currently export. Does he not agree that the excellent £1 trillion target that he has mentioned will only be met if we have a large increase in the number of medium-sized companies in particular, but also small companies, that export?

[Nick de Bois]

My hon. Friend is absolutely right. If only one message is taken away today, it should be that across Government, across UKTI, and across parliamentarians, we have to make, as some in the Chamber have, excellent efforts to engage with medium-sized companies, and that is the only way that we will hit our goal, because of the critical mass, size and number of SMEs. However, let me be positive. My hon. Friend said “only 23%”—well, 23% can multiply that much quicker. The 23% that are active can reach out to those that are not active. It will not be politicians in suits telling people how to export; it will be the businessmen who have got dirty, been down there and done it, and can sell their expertise and encourage others. That would be my key message.

To achieve the critical mass in relation to the SMEs and particularly the medium-sized enterprises, we should start to engage more. I recommend that UKTI and the FCO have more trade delegations where medium-sized enterprises are engaged with, not only as an SME delegation, but as part of larger delegations. They can be integrated into the supply chains of prime contractors, and we can look at the supply chains of the high-growth economies and what they need. We should ensure that we give the political clout that we commit to larger groups.

I still remember, with absolute frustration, a meeting of the all-party group on trade and investment—of which I am lucky enough to be vice-chair, and which is chaired by my hon. Friend the Member for Stourbridge (Margot James)—where I was told of a large hospital construction programme in Saudi Arabia. UKTI had gone out and sought suppliers to the hospital industry for equipment—diagnostic equipment. It was going to take suppliers out—it invited them to go—and the prospectus said that a Minister would be leading it to open the political doors and provide the clout it needed. There was a modest charge, in my opinion, to do it, and then at the last minute, the Minister was not available. How disappointing that was for those SMEs—not because they wanted to rub shoulders with the Minister, however attractive that may be, but because that Minister would have opened doors and allowed them to make the contacts that they needed. We must ensure that we deliver on our promise and spread that political clout beyond the larger groups.

I want to talk now about where we focus our efforts. To reflect the new commercial emphasis, the Government have rightly increased investment in personnel and resources. The debate has been about how we secure business from the so-called emerging—emerged, I think—economies and most notably the so-called BRIC economies. That is understandable and it is reflected in increased investment. We have put, I believe, 50 more staff into China and another 30 into India. There are also more staff in Brazil, Turkey and Mexico. However, those pesky Germans —perhaps that is an inappropriate thing to say with a Foreign Office Minister present; I take full responsibility for that. Those very assiduous Germans have already resourced up to 30% more staff, with a total of 1,700. France is already expanding its efforts into Chile and Argentina.

There is no doubt that the potential growth for UK plc in the BRIC countries will, if developed, provide a much-needed boost to our balance of payments, jobs and prosperity. They are the immediate attraction when it comes to helping us to meet our challenges. It is interesting that in those economies there will now be a shift to a different market. As the infrastructure there changes and consumer demand increases—consumer spending is set to increase by about 12% per annum—we desperately need to be there. Although we are playing catch-up now, I remain optimistic that, particularly with the increase in consumer spending and infrastructure developments, British companies will be able to capitalise on the changes. My concern is that while we are focusing on the battle in those economies to fuel our immediate needs, we are possibly in danger of losing the next war.

Hon. Members may know that the CBI commissioned research that showed the poor penetration of the UK into what are described as the next generation of emerging economies, compared with the efforts of some of our competitors. For the N11—next 11 economies so identified—we will have to do the groundwork now to avoid playing catch-up in the future. That will ensure that we are strategically and politically aligned in such a way that British companies can capitalise on the increased spending by those economies. I argue that it is important for business and policy makers to identify those markets that will provide opportunities to exploit our comparative advantages in the future, so that we can capitalise on the growth dynamism in those regions.

If we plan now, the FCO and UKTI will generate greater diversification of our overall export presence across a series of high-growth markets, rather than our being over-dependent, as we have been in the past, on Europe and the US and potentially on the BRICs. We would not run a business on any other model, so why should we run a country in that way? We need to be ready to exploit the new markets now, even though the payback may come in 10 or even 15 years.

Let us take a snapshot of the next emerging economies. In relation to Bangladesh, which has been identified as one of the growth economies, we import seven times more than we export. We do not feature in the import statistics to Bangladesh, despite the major historical links between the two countries and, if I may say so, our international aid programme. In relation to Turkey, which is set to grow at a rate of about 8% a year and be the fastest-growing economy outside Europe, the UK has only a 1.2% share of the market. Those pesky Germans and, incidentally, the pesky Spanish and the pesky Italians are outperforming us to a great extent.

We have recognised that—I give credit to the FCO and UKTI—but again we are in danger of playing catch-up. We have talked about BRIC. Believe it or not, we now have MIST—Mexico, Indonesia, South Korea and Turkey. Overall, those economies have more than doubled in size in the past decade. That is a warning sign for us. My recommendation and challenge to UKTI and the FCO is to look to run an N11 strategy in parallel with the emerging economies. We should entertain a presence in those countries at both strategic and tactical level to foster and engage with the influencers to ensure that we are positioned to capitalise on the emergence of those economies over the next 10 to 15 years. Let us avoid being a spectator and instead lead the team on to the pitch. That would be to the benefit of future generations.

Would that take more money? Of course it might take some more money, but I would ask for some slightly out-of-the-box thinking and suggest that UKTI go further in making partnerships with professional bodies and trade associations that could help to share the load. After all, that is also in the interests of the companies that are their members. I thought that there were early signs of that. I ask the Minister whether the announcement in February 2012 of a strategic agreement between UKTI and the Council of British Chambers of Commerce in Europe was a taste of things to come—an example of where Government can partner with trade associations and bodies that are experts in their field and, much like the Germans, use those bodies to provide support services and strategic planning in export markets. The House will be interested to know that the network of German chambers of commerce is already established in 80 countries, providing precisely those services. Can the Minister update us on how the strategic agreement reached last year is progressing?

UKTI rightly claims that it gains a £22 return on every £1 of taxpayer funding spent. With that rate of return, it is not unreasonable that although more funds have been allocated, we should consider whether to increase the allocation. Frankly, if someone had offered me those returns in business, I would have seized them, thank you very much.

I shall make just two final points to give other hon. Members a chance to speak. When I was at the exhibition event in the Gulf states, exhibitors said to me, “Look, we can’t compete with the costs in China and India, but we can compete on added value.” That becomes very important. They said, “What we want the Government to do is not to tell us how to run our businesses, but to sell the strategic value, the top-brand message, of what Britain is good at, which will support what we do.” They said, “When you think of Germany, you think of engineering, technology, the motor industry—BMW. That reinforces the idea of quality and advanced engineering, and German companies trade on the back of that image.” Drawing on my previous days in communications, I would say that the message is that in UKTI and the FCO we should be defining brand UK and reflecting that brand. We should remember that the brand supports everything we do, and everything we do supports the brand. Let us give businesses the platform from which they can have an added-value dimension.

Our trade envoys—I am delighted that the trade envoy to Azerbaijan, my hon. Friend the Member for Wealden (Charles Hendry), is present—have a crucial role, and not just in pushing that same message and opening the doors to trade delegations. I believe that they could help to support our efforts to drive new exporters to market. MPs have a role to play. My hon. Friend the Member for Witham (Priti Patel) led her own delegation to the Indian subcontinent. That was absolutely the right thing to do. We all have our part to play. I do not stand here saying that it is up to UKTI, the FCO and business to get on with it. We have our role to play, and that is important.

Finally, on a practical level, can we please see more focus on the ground? Access—getting into and out of markets—is crucial. I think that UKTI and the embassies in particular can do more than just advise. Sometimes they will need to get their hands dirty. Sometimes they will need to lobby and make the case as to why customs is a barrier in some countries and we need to overcome that. Sometimes they will need to take on the challenges of corruption if that is necessary to help to break down the barriers where we have markets.

I want us to take the initiative locally so that we can help our companies to do business on as level a playing field as is reasonably possible. Specifically, for the defence industry, and even beyond, UKTI and the FCO should look at simplifying the export licence application process, which many, including a company in my constituency engaged in large sales overseas, find slow and cumbersome.

In conclusion: much done, much to do. The FCO and UKTI have the full support of the House, but we need to make a realistic assessment of our strategic challenges and ensure that we are delivering the tactical support to meet them, so that my children and grandchildren will have the chance of a wealthy, prosperous life in the future.

[Several hon. Members]

rose—