UK Trade and Investment

Debate between Nick de Bois and Barry Gardiner

Thursday 15th March 2012 Westminster Hall

[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.

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

Before the hon. Gentleman advances his idea of what UKTI can do—I agree with everything that he has said so far—should a critical part be not just about where the opportunities are now and in the short-term future? The UKTI must be able to play a strategic role, with the Government, for the so-called N11 countries. We must seize the opportunity to be the first to the field with infrastructure, airline routes and so on.

[Barry Gardiner]

The hon. Gentleman makes an absolutely perfect point. I am very happy to acknowledge it and support exactly what he says. UKTI should not simply be looking at the present, and it should not simply be looking at the short to medium term. It should have a strategic overview of where the UK’s trade and investment interests lie into the foreseeable future—that is absolutely right.

--- Later in debate ---

[Barry Gardiner]

I am delighted that I was able to provoke the Minister’s intervention, because that is exactly the fighting talk that I wanted to hear. The hon. Member for South Thanet started by talking about your both being on the beaches, Mr Amess, and clearly the Minister is still fighting on them, so that is good.

This is a time when the UK should be taking every advantage afforded it to it. The difficulties created by recession and the crisis in the eurozone are considerable. That is why we need to expand our horizons, seeking new and innovative ways to attract investment and finding opportunities abroad. UKTI and British industry, generally, possess some remarkable advantages, many of which have been mentioned by the hon. Lady in her opening remarks. We enjoy significant cultural, historic and economic ties with many countries currently experiencing economic growth. London is the world’s financial capital, and we have a long and proud history of manufacturing.

With the right attitude, focus and know-how, UKTI can provide a firm footing for Britain to re-establish economic growth. As it stands, however, it is failing. The UK has lost market share in trade and investment. According to the Office for National Statistics, foreign companies invested £32 billion in the UK in 2010—a decrease of £16 billion from 2009. More significantly, because some people may challenge that on the basis of the recession, that was the lowest value since 2004. In 2010, outward foreign direct investment by UK companies decreased to £23 billion—the lowest FDI outflow in 16 years.

One might claim that recent events in the eurozone and the United States have impacted on such figures, but the statistics for the so-called BRICs are just as unimpressive. The United States remains the biggest recipient of outward UK investment. India, whose economic growth has topped 7% almost annually for the past 10 years, is down in 18th place, while China, the world’s largest economy, is 24th. Between now and 2030, GDP in the BRIC countries as a proportion of world GDP will increase by 40%, yet more than 65% of UK trade is done in north America and Europe. Indeed, British involvement with emerging economies has been waning. The UK dropped from seventh to fourth in the list of India’s largest export markets, but went down to 22nd place for imports from number three and now accounts for just 1% of all imports into India. We are the sixth largest manufacturing economy in the world, yet we represent just 1% of India’s imports. If that is not cause for shame and alarm, it should be.

[Nick de Bois]

There is a lesson in this and a stark warning. As with many other countries, there is a large diaspora from India in this country. We have a history unique to that part of the world and we share many common languages and traditions, yet we seem—perhaps there is a role for parliamentarians from all parties, as well as Ministers—to be failing to build long-term relationships. Does the hon. Gentleman agree that, in that way, we may be able to play a small part?

[Barry Gardiner]

The hon. Gentleman is right. Indeed, for precisely those reasons, I set up the all-party parliamentary group on UK-India trade and investment a number of years ago, to take advantage of the constituency links that he and the hon. Member for South Thanet have mentioned. We must capitalise on these things. They are the stuff of which business is made. Business is made not simply by good products and good marketing, but by people and contacts and by people who are able to go out and get business and do the deal. Someone might have the best product in the world, but if they do not have such a relationship, things will not happen. That is the hallmark of successful business.

In my constituency, more than 130 languages are spoken in our schools, and in one school, in a class of 29 children, 21 different first languages are spoken. Coming from such a constituency, I echo the sentiments expressed by the hon. Member for Enfield North (Nick de Bois). It is upon the experience, contacts and family connections of my constituents and, I presume, his that we must build a much stronger trade relationship.

This question must be asked of UKTI: why are emerging markets not at the forefront of British investment now? It should be UKTI’s role to facilitate investment abroad. The statistics reflect UK companies investing where it is easy, not where they can maximise return and not with an eye to future market share. That has a knock-on impact for British trade generally. The UK’s share of global exports has fallen from 5.3% in 2000 to 4.1% in 2010—a long-term trend of decline, I agree, since the 1950s. In the same decade, however, German exports grew from 8.9% to 9.3%. Meanwhile, our goods exports have grown by only 1% per annum, compared with 3% in the US and 5% in Germany.

A report conducted by Ernst and Young for the CBI noted:

“UK outflows are concentrated on the EU and the US, with negligible investment going to high-growth economies.”

The failure properly to engage with emerging markets is, however, not limited to the BRICs. There are no stated bilateral trade targets for Egypt or South Korea, despite both countries being designated as high-growth markets in UKTI’s current five-year strategy. There are also no stated bilateral trade targets for Bangladesh, Indonesia or the Philippines.

Although it is, of course, unfair to blame all those things on UKTI, they serve to underline the organisation’s inefficiencies. UKTI has masked its weaknesses through a lack of accountability. The figures provided in its own reports show little consistency, and there is a great deal of obfuscation regarding the allocation of resources and staff. There is also little or no clear delineation of duties or responsibilities between UKTI, the Foreign Office, the Department for Business, Innovation and Skills and the Treasury. The result is an overlap in what the various Departments do and, I assume, a duplication of effort. That lack of organisational clarity gives way to inefficiencies and a failure properly to undertake functions.

The evidence from business—I stress that it comes from business—is that UKTI is not an unuseful organisation, but it could do much more. In a survey conducted by the National Audit Office, 30% of respondents mentioned receiving some benefit from UKTI, but 40% indicated they had received no benefit at all. In a survey of exporters conducted by the CBI, only 12.8% of respondents described UKTI as excellent, while the verdict of 15.4% of respondents was that it was unsuitable or poor, and many organisations, of course, did not respond at all.

UKTI claims that for every pound invested in it, £22 is returned to the British economy—I am not indulging in flights of fantasy—but in UKTI’s own survey of British exporters working through UKTI, 46% of respondents indicated they would have achieved the same outcome without using UKTI. Let us not come out with silly statistics showing that for every pound that goes into UKTI, £22 comes back to the British economy, when UKTI’s own survey tells us that most people think they would have achieved exactly the same result without using UKTI. We have to be honest with ourselves if we are to make a proper analysis of the organisation and put those defects rights.

There is a dearth of credible financial and structural information available on UKTI. The National Audit Office stated that UKTI cannot measure its effectiveness or account for its expenditures because of a lack of accurate information. Our own National Audit office is saying that. The Government allocated an additional £45 million to UKTI in 2011, and it is most concerning that we are pouring money into a body that, according to the National Audit Office, has no oversight or accountability.

Evidence from within British industries has highlighted the failure of UKTI’s approach. Eight of UKTI’s 10 board members have no background in business, thus undermining the organisation’s ability effectively to identify investment opportunities and support inward and outward investors. Again, I refer to Ernst and Young’s CBI report, which states:

“more could be done to link UKTI and embassy staff to the plethora of trade associations operating in local markets.”