Trade, Exports, Innovation and Productivity

Debate between David Rutley and Iain Wright

Wednesday 13th January 2016 Commons Chamber

[Mr Wright]

That is incredibly important. Firms make investment decisions not just because of the UK domestic market, but because they see the UK as a springboard into the largest consumer marketplace—500 million consumers—on earth. Japanese firms such as Nissan and Hitachi are not just here for the domestic market; they are here because we are a springboard into the whole European market. We risk that at our peril.

Trade performance is a good barometer of economic health at both the macro and micro levels. At a macro level, a buoyant trade performance contributes to economic growth and helps to provide a surplus on the country’s current account. As the hon. Member for Dundee East (Stewart Hosie) mentioned, the motion cites a

“trade deficit in goods of £123 billion in 2014”.

However, in that year, the current account deficit widened to 5.1% of national income, which was its largest in post-war history. For much of the past 30 or 40 years, the trade deficit has been offset by investment income from overseas. However, and most ominously, net primary income derived from assets abroad has fallen from 3.3% of GDP to 0.1% in 2014. The Minister should outline the Government’s view about that because they have been quiet about this crucial economic issue.

At a micro level, exporting is positive, especially for firms, and it is good for the wider economy and society, too. Evidence suggests that an exporting business tends to be successful, sustainable and socially aware. Such a company tends to employ more workers and to offer better wages than an equivalent non-exporting company. Companies that export have been shown to be more productive and to invest more in research and development. There is a strong link between exporting and innovation. More often than not, a business with a desire to export overseas has the discipline, ambition and entrepreneurial flourish to develop new products and services that will better serve new export markets. Such companies will be sensitive and responsive to customer wishes, which is always the hallmark of a successful business. There can be a virtuous circle for exporting businesses whereby they become exposed to new demands, fresh ideas and increased competition, which in turn makes them more productive and outward looking, and better disposed towards thinking about new products and improved profitability.

On average, according to the British Chambers of Commerce, businesses that export grow 20% more than those that do not. We need to encourage such activity much more because far too few excellent British firms providing great goods and services that could be offered throughout the world export. Only one in five British firms do so, whereas the average figure for the EU is one in four.

The motion refers to the UK’s “poor export performance”, but with the greatest respect to the Scottish National party, I would go further. I think that our trade performance over the past 30 years or so has been dire and woeful. It has declined markedly over that period with no genuine prospect of improvement. The UK accounted for one in 10 of the world’s exports in 1950, but now the figure is less than 3%. Of course, with the development of emerging economies, it was inevitable that there would be a relative decline in the market share of UK goods and services, but not at the rate that we have unfortunately experienced. Given the forecast that world trade will expand by $250 trillion by 2050, there should be a co-ordinated effort—in the House, across the country and in government—to ensure that we capture as much as possible of the growth in the world economy for British firms.

[David Rutley]

The hon. Gentleman is making important points in his impassioned speech. He is right that there is a challenge for more business to step up to the plate and move into exporting, but does he agree that the situation shows that we need a real cultural change involving not only the Government, but businesses examining what they have done in previous years and moving further forward?

[Mr Wright]

The hon. Gentleman has a fantastic track record of talking about trade and investment, and how we ensure that we boost our sales of exports throughout the world. I will deal with his important point about what we can do in a moment.

In November 2015, the UK’s trade gap was £3.2 billion, while the trade deficit in goods was £10.6 billion. In 2014, UK goods exports fell by 4.1%, which represented the lowest growth rate since the recession in 2009. We were the only G7 economy to experience a negative growth in exports, although it is not all doom and gloom because the north-east still has the only consistent trade surplus in goods. However, as the hon. Member for Dundee East said, there is precious little evidence of a “march of the makers” with modern manufacturing at the heart of a rebalanced economy and providing export-led growth. That is reinforced by yesterday’s Office for National Statistics publication showing that the UK manufacturing sector is now back in recession. I fear that we are sleepwalking back to the long-standing British model, which has been prevalent over the past 40 years or so, of debt-fuelled customer consumption based on an assumption of ever-rising house prices. That did not work in the past—it never has—and it cannot be a model for sustainable and competitive economic growth.

As we have heard several times during the debate, the Government have set a target of £1 trillion of exports by 2020. I genuinely want them to achieve that because it would be good for firms and the country, and would bring about economic growth and broadening prosperity for everyone. However, it is now more or less a given that the Government will fall spectacularly short of their target. Few expect it to be achieved, including the Secretary of State when he gave evidence to the Select Committee. The Office for Budget Responsibility’s “Economic and fiscal outlook” that was published at the same time as the autumn statement forecast the cash value of exports in 2020 to be £647 billion, which is 23% lower than its March 2012 forecast and 35% lower than the Government’s ambition. It is not acceptable for the House, the Government or the country simply to shrug our shoulders and say, “Do you know what? It was a tough target and it’s unachievable, but at least we had a go.” We must be more ambitious than that, but the evidence suggests that the Government have not even had a go. A strong export performance matters, which was why the BIS Committee launched an inquiry into exports and the role of UK Trade & Investment.

I think that I speak for all members of the Committee, several of whom are in the Chamber, when I say that we all want the £1 trillion target to be achieved, but given the enormous shortfall that is forecast, we need a vigorous focus on changing course and embarking on policies that will bring about an improved performance, yet I have not seen the Government demonstrating that there will be such a step change. Will the Minister outline what is being done differently to ensure that we get as close to the £1 trillion target as possible? What active steps are the Government taking to ensure that 100,000 more companies are exporting by 2020?

To respond to the intervention made by the hon. Member for Macclesfield (David Rutley), while the Government do not control this, they can put in place a framework and facilitate the environment. We need to think about what firms are doing. They might have a good domestic market in which they feel comfortable, but how do we ensure that they can put their toe in the water of exports? Businesses will be concerned about whether they know the regulations and laws of a particular country and if they will get paid, so they might think that exporting is too much hassle and that they will stick to the domestic market. However, we need to encourage them to export, and that brings me on to the role of UKTI.

Deregulation Bill

Debate between David Rutley and Iain Wright

Monday 3rd February 2014 Commons Chamber

[Mr Wright]

That is helpful.

I thought the hon. Member for Macclesfield (David Rutley) made a great speech, which was quite literally Churchillian in its approach. Let us not forget that the second Churchill Government produced the Mines and Quarries Act 1954, because Churchill recognised the importance of improved regulation and health and safety in things such as welfare and employment, especially for women and young people. In terms of domestic legislation, the Churchill Administration of 1951 to ’55 were very progressive.

The hon. Gentleman talked about first-time entrepreneurs and first-time exporters. He talked about realising dreams and achieving objectives. I have to agree with him: that is exactly what we want to see. However, there is nothing in this Bill that allows that to happen. Not one jot of what he mentioned in his rhetoric would be allowed under this Bill.

[David Rutley]

Has the hon. Gentleman not taken any notice at all of the debate about clause 1? There are plenty of businesses that would like overburdensome health and safety regulation removed from them, as is clear from the Federation of Small Businesses and the British Chambers of Commerce.

[Mr Wright]

I will come to the precise benefits for business in a moment, but I want first to refer to the hon. Member for Witham (Priti Patel), whom I cannot see in her place at the moment. She used her knowledge from the Joint Committee and her experience in business. I have to disagree with a lot of what she said. I respect her experience in business, but she says that Government just have to get out of the way of business. I do not think that is necessarily the case in a modern, innovative economy. What we need is a Government who will work with business on a long-term vision and an industrial strategy that will enable us to pay our way in the world.

I agree with everything that the hon. Lady said about business start-ups and the need to enhance our competitiveness, but there is nothing in the Bill—no single clause or schedule—that would facilitate start-ups: if only there were such provisions. One of the things that worry us most is the fact that the United Kingdom is slipping down in the world rankings for start-ups. According to figures from the OECD, it has fallen from 18th in the world last year to 28th this year. When it comes to obtaining electricity for a business, our ranking has slipped from 64th to 74th. Surely we should be doing something about that. The Bill could have helped us to do so, but unfortunately it does not.

Several Members mentioned the Bill’s impact on business. One could be forgiven for thinking that it would facilitate an enormous start-up of entrepreneurial activity, but its provisions are so insubstantial and so insignificant to British business that they are almost meaningless. As was pointed out by my hon. Friend the Member for Newcastle upon Tyne Central (Chi Onwurah) in her excellent opening speech, the statement of impact for the draft Bill estimated that it would save businesses £10 million over 10 years: £1 million a year.

UK Trade and Investment

Debate between David Rutley and Iain Wright

Thursday 15th March 2012 Westminster Hall

[Mr Wright]

I agree. A lot of the work will be done by civil servants, but politicians and leaders of Government are very important. The CBI report states that improvements have been made with regards to political lobbying, but that we have seen the cancellation of trade delegations at very short notice. In contrast, it mentions France, where around 200 high-level trade missions that are focused on 20 primarily high-growth countries are co-ordinated annually with senior politicians. They are well publicised in advance. As a result, in November 2010, a visit to China led by President Sarkozy secured €15 billion in new deals for France.

I think the Prime Minister is still in America. I have noticed that a lot of the talk has been about Afghanistan, Iraq, extradition and basketball—quite rightly, given the circumstances of the past few days. Trade should also have been an important topic. I had a look at the No. 10 website this morning, where the Prime Minister said:

“Barack and I have agreed to prioritise work ahead of the G8 on liberalising transatlantic trade and investment flows.”

However, did the Prime Minister take our business leaders to the White House in his visit to America? Have we won any new deals in the world’s largest economy as a result of what the Prime Minister has done this week? I certainly think he should have done. If he has not, I would respectfully suggest that he has missed a trick, and it shows the culture that needs to be altered in Whitehall.

[David Rutley (Macclesfield) (Con)]

The hon. Gentleman may have missed press reports last night that said that there was a banquet at the White House in which Sir Richard Branson and other British business leaders were in attendance. That dimension has, to a large extent, been covered.

[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.

British Exports

Debate between David Rutley and Iain Wright

Wednesday 8th February 2012 Westminster Hall

[David Rutley]

I thank the hon. Gentleman for that intervention. He raises a vital point—access to finance has come up again as a key dimension. The sad fact is, and I will mention this again later, that too many companies do not even want to export and are not aware of the opportunities, so there is a more fundamental problem. Hon. Members on both sides of the House have debated this problem for some time, but now is the time to get on and do something about it. We will talk about that and I am sure that the Minister will welcome further contributions from hon. Members.

How can we raise awareness and ambition, and the confidence that the hon. Member for Upper Bann (David Simpson) mentioned, to reap the rewards in eastern markets or, for that matter, South America? The Government and the business community—it is not just about the Government—can help SMEs to achieve their aims through three areas of focus: education, financing, which we have talked a bit about already, and, most importantly, access to new markets and customers.

On education, it is vital to get SMEs in touch with the best know-how on exports, and that will be one of the most important ways to help them to gain the confidence to want to export. UKTI has an important role to play, and its “passport to export” service gives a free capability assessment to businesses, which can help them to work out how they can be better prepared for the export work they want. However, I return to the point that only 20% of SMEs—one in five—are aware of the available services. It is a huge job just to make people aware that information is available.

One of the most important things that needs to happen is a lot more business-to-business mentoring to pass on experience from one company to another. I am pleased that the CBI’s pathfinder projects, which focus on mid-sized companies, are helping companies to build greater networks and opportunities. UKTI is building an export portal with Yell.com to connect first-time exporters with businesses that have experience in the area. I know, as I am sure other hon. Members do, that lots of local businesses want to pass on their experience to other businesses.

On Monday, I wrote an incredibly well-read article in The Daily Telegraph, which I am sure all Members have read several times over.

[Mr Iain Wright (Hartlepool) (Lab)]

Absolutely.

[David Rutley]

Thank you.

I have had great feedback from at least one constituent, but it was a good response and it is the quality, not the quantity that counts. A gentleman from Fibrevision, which creates dynamic measurement tools for textile yarns across many countries, particularly developing countries, got in touch with me to say that he would be retiring soon and wanted to spend time passing on his experience to others in the community, and I am going to tap into that. With Lord Green’s work, there are lots of opportunities now to hold export seminars in our constituencies, and I hope that many Members here will participate in such events. It is important to welcome the energy that Lord Green has brought to the task. He is doing a fantastic job as Minister for Trade and Investment, and has given a lot of focus to his task. He has been travelling tirelessly across the country to raise the profile of this work, and he deserves our support.

Transferring knowledge and educating people will go only so far; without the finance to back it, it will be much more difficult for British business to see the success that we want them to have. Let me cite a different example to show what they are up against—or perhaps where we could start heading. In 2010, Germany’s export credit agency supported SMEs in the German market by facilitating €23.7 billion in exports. In the same year, only a small proportion of the £2.9 billion of business that UK Export Finance underwrote went to SMEs. Furthermore, the CBI survey shows that SMEs and other businesses are simply not aware of the available finance. To address the situation, UK Export Finance will now send trade finance experts into UKTI’s regional facilities and the regional network to bring the expertise closer to business, which is good to see. No doubt, the Minister will want to respond to the concerns raised by hon. Members about finance, but it comes back to awareness and building confidence. It is not only about money being available.

It is good to see that the Government are also building bridges to bring the east to Britain. The Chancellor of the Exchequer’s recent announcement of greater co-operation between financial centres in London and Hong Kong will help the City to become a hub for the Chinese renminbi currency market. It will also give SMEs an advantage over the competition, because they will be able to forge stronger links with the new market on their doorstep and get a step closer to customers in China.

In filling the gap in export finance, we should look not only at what is happening with the Government, but at what the banks should do, because it is clear that they, along with professional advisers, have a vital role in encouraging confidence and building momentum in exports and international trade. A poll of small manufacturing businesses found that 51%—just over half—believed that banks were not helping to support their export ambitions. We see that lack of confidence in other areas, but no doubt confidence in banks on this issue needs to be improved. As the Federation for Small Business has highlighted, banks need to promote better, more tailored products to help SMEs in their export ambitions.

I also welcome the Government’s allocation of £45 million to promote exports in other markets. As I said earlier, it is important to get front-line staff working in the new export markets, because what has to happen after education and finance, is that we must roll out the red carpet for our SMEs—make them feel welcome in such markets and to have worthwhile trade visits, particularly in their first forays into foreign markets. Although large companies are well equipped to take on this task, it is pretty clear that smaller businesses lack the know-how, contacts and network to see success in these endeavours, and we must support them.

For too long, UKTI and other Government bodies have spent too much time doing desk-based research, instead of getting out, knocking on doors, finding opportunities and bringing packaged solutions to big infrastructure problems or other projects in those markets. It is great to see the Government working in that area.