Exports: Government Support

Lord Stoneham of Droxford Excerpts

Thursday 29th January 2015 Lords Chamber

[Lord Stoneham of Droxford (LD)]

My Lords, I am very pleased to speak in this debate, initiated by my friend and colleague, the noble Baroness, Lady Wheatcroft. She has initiated several debates on business subjects in the past couple of years while we have been in the House together, and I have been pleased to speak in a number of them.

The coalition Government are committed to rebalancing the economy. The aim is threefold: it is about reducing the deficit; ending our dependence on short-term, consumer-led growth based on excessive household credit; and, fundamentally, it is about strengthening our role as a trading nation and widening and diversifying our export base.

We have a lot to do. Looking back over the past decade, we see a situation in which import growth has outstripped export growth, so net trade has acted as a drag on UK growth. UK share of world goods and services has actually been declining. We have been underperforming in emerging markets and 50% of our trade is still based in the EU, which has been stagnant for most of the past five years. This perhaps emphasises why we have such a strong interest in getting that economy moving again alongside the British economy’s movement.

The coalition has provided continuity in its industrial strategy. I was impressed when we had a debate on the industrial strategy a few months ago, by the agreement across all parties on the work that Vince Cable has been doing, based on the foundations left by his predecessors in the Labour Government. He has led a ministerial team that has largely been in place for five years. I pay particular tribute to David Willetts, who did so much in the university sector and on our skills-based economy. We have had a focus of support for exporters through improvements in the Foreign Office and UK Trade & Investment. Although I agree fundamentally that the leadership, intelligence and support that they give is essential, we must also realise that we are talking about only 2,000 people in those organisations who are specialising in this work. They cannot possibly do the scale of work that we need to improve our exports and our trade.

The coalition has also concentrated on providing extra finance and credit guarantees for exporters. We have the British Business Bank starting up and we are trying to make the UK a really good place to do business, through a competitive tax regime, protection for patents, improving infrastructure and skills, and encouraging inward investment—all things that a Government must do. I believe that there has been a strong partnership between industry and the public sector as well, which has helped improve relationships and improve work on the industrial strategy. However, to get successful export-based strategies we have to build fundamentally on solid competitive advantage and it takes time to show results.

In my career, I have been involved in transforming companies. In my view, one could improve the figures in one to two years, but to get genuine transformation took five to seven years as a minimum and to do this across an economy, as we have to do in our export sector, will take 10 to 20 years. We can learn the lessons of some of our success stories. The noble Lord, Lord Lang, talked about the automobile industry. I worked on the fringes of that sector in the 1970s and I would not have touched it with a barge-pole as a career in management. It was a complete nightmare. However, we went through the 1980s and 1990s and it has been transformed, largely because of foreign investment, through Nissan, Toyota and Honda, with foreign management techniques, and now with Range Rover and Jaguar, under foreign ownership, agreed, but building on the skills of the Midlands economy.

To sustain that competitive advantage has required huge investment in R&D and skills as technologies in that sector are being transformed. Fortunately, we also have the entrepreneurial base of the Formula 1 competitors, all based in this country, as an example to spur us on. The combination of university knowledge, the catapult centres and inherent engineering skills, combining manufacturing with knowledge of computerised systems, which is the future of motor technology, are all important now for the future of that industry. A major part of that recovery has been based on the fact that we are a member of the European Union.

Moving on to the aerospace manufacturing sector, in 1995 20% of passenger aircraft were made by European manufacturers. The rest were made in the USA. Today 50% are made in Europe, principally by Airbus, and we have 10,000 direct employees of Airbus in the UK, with 100,000 employed by suppliers. That has happened because we have concentrated on a high-skilled, high value-added, huge R&D, with government financing and support to make that happen through the Airbus company and the suppliers in the UK that are part of that very successful operation.

What do the Government have to do to help exports? They might just start on import substitution because if we can improve the supply content in some of those manufacturing and services sectors that are already successful in the export sector, we will reduce our import content. There is a big initiative in the car industry where, until recently, 60% to 70% of the components came from abroad. We have to improve on that.

We could do more in public procurement and we are beginning to get on to that. It takes time but we have seen the problem we had earlier in the Government with the rolling stock in the railway industry and the missed opportunity to improve domestic manufacture. We are now beginning to get on top of that.

We must also give huge encouragement to R&D. I mentioned earlier that where we have been successful is where we have concentrated on competitive advantage. We have to exploit that, particularly in the knowledge economy. R&D as a percentage of GDP in this country is half that of the USA, Germany or France. R&D is too concentrated in too few sectors. Six out of 33 business sectors provide the majority of our R&D in this country; 25% of that is in pharmaceuticals and 50% is done by foreign-owned companies. The best performers—and this is the secret to it—are pharmaceuticals, aerospace and automobile manufacture. Interestingly, these are the places where we are most successful in exports. A very prominent scientist told me recently that R&D expenditure in Volkswagen was more than the whole UK science budget. That probably is the underlying reason that it is so successful in that market.

We have to maintain an international trading outlook. We have to have stability in our exchange rate. We have advantages of geography and language but sometimes we are too complacent. We must resist the island mentality in our economy. Future membership of the EU is tremendously important. By all means, let us seek reform but we must end the uncertainty and retain a firm commitment to our place in Europe in the years ahead.

Trade Balance

Lord Stoneham of Droxford Excerpts

Thursday 11th December 2014 Lords Chamber

[Baroness Armstrong of Hill Top (Lab)]

My Lords—

[Lord Stoneham of Droxford (LD)]

My Lords—

[The Lord Privy Seal (Baroness Stowell of Beeston) (Con)]

My Lords, it is the turn of the Labour Benches and then it will be right if we come back over to the Liberal Democrats.

[Lord Livingston of Parkhead]

The north-east, indeed, is one of our manufacturing powerhouses and is part of the UK that actually has a trade surplus with the rest of the world. The Nissan factory is producing more cars than the whole of Italy. I recognise that a number of exporters wish to remain in the EU but I also recognise that they wish to remain in a reformed EU—and that is what we on this side of the House are fighting for.

[Lord Stoneham of Droxford]

At the start of this Government, only 30% of components in our successful car manufacturing sector were sourced in the UK. Can the Minister tell us how the Government’s industrial strategy has been seeking to improve this performance?

[Lord Livingston of Parkhead]

The Government’s industrial strategy brings together academia, the Government and also businesses in producing a long-term commitment to the next generation of technologies and industries. I know that the motor vehicle industry in particular welcomes this. I mentioned earlier the Reshore UK proposal. These things together are helping significantly, both with companies coming back to the UK and, for instance, companies such as Gestamp, a Spanish company that recently announced a significant investment in the UK.

Queen’s Speech

Lord Stoneham of Droxford Excerpts

Tuesday 10th June 2014 Lords Chamber

[Lord Stoneham of Droxford (LD)]

My Lords, in 2010 the Governor of the Bank of England warned the negotiators of the coalition Government that anybody who was going to be in government for the next five years was likely not to be in government for another generation. Anybody coming into government in that situation knew it was very serious. I am too modest to predict now what this will mean for my party, but at least I can take comfort from my noble friend Lord Ashcroft’s poll today, which shows the Conservatives and Labour neck and neck, fighting for 60% of the electorate. That suggests that the governor’s prediction was too pessimistic and that, in reality, hope springs eternal for everyone.

It is easy to forget just how severe the problems were in 2010. I think that some of the solutions for the future put forward by the preceding speaker should be put in the context of the crisis in business confidence and the shattered financial economy that we found in 2010. The coalition has provided—and provided at the time—much needed stability and certainty. It is important that we recognise that it has retained its determination to get the deficit under control. It has also provided a fixed-term Parliament, which means that we have five years to do the job. It is worth recalling how things were at a similar stage four years ago. We spent most of the last year of the preceding Parliament trying to anticipate when the general election would come. Now, if we did not have a fixed-term Parliament, we would undoubtedly be trying to predict whether the election would be in the autumn or next May. At least we now have the certainty of knowing that we will not have an election until a year’s time, which is good for the economy.

We have also had continuity in ministerial appointments. I note that the Business Secretary has now served for the second longest time in that position since the war. He has just beaten the three years and 11 months of Patricia Hewitt but has yet to beat the record of Peter Thorneycroft, the longest-serving DTI Minister in the 1950s, who served for five years and three months. In 13 years, Labour had eight appointees. In the previous Conservative Government of 18 years, there were 11 appointees, averaging 1.6 years for each appointment to the equivalent Business Secretary position. At least longer, more stable appointments and better experience provide for consistency, determination and the time to bring about real achievements in office.

Today, I cannot talk about the whole range of matters covered by the debate. I should like to talk about this Government’s radical proposals for pensions under the leadership of my honourable friend Steve Webb, the Minister for Pensions. However, in the short time available to me, I want to concentrate on the business area. When we look back on the coalition, there have been two real achievements in that area. The first has been predominantly in apprenticeships, of which we have created 1.6 million. We built on the foundations left by the Labour Government and have doubled the number of apprenticeships being created each year throughout the coalition Government. Certainly, we hope that by the end of this Government we will have created more than 2 million apprenticeships. These have been linked to a renewed interest in the whole area of technical education to perhaps counter- balance an overemphasis in the recent past on academic success and investing in universities.

The second area where there has been great achievement is jobs and the role played by business in creating jobs. Back in 2010, everybody thought that unemployment was going to go through the roof. That is what the Governor of the Bank of England almost certainly expected as the economy restructured and public spending had to be cut. After four years, we are now seeing the lowest level of unemployment since 2009 at 6.8%, or 2.2 million, plus a reduction in youth unemployment. It has to be said—I say this to the opposition Benches—that all recessions are painful: unemployment hits disproportionately the less skilled, the more vulnerable and the poor in the labour market. If the predictions had been forthcoming in actuality, I am sure that there would have been a threat to social cohesion in this country. What we have done in the employment field has at least relieved some of the pressures on the poorest in society, who would have suffered if the real ravages of the recession had taken hold.

One of the outstanding contributors to jobs growth has been the role of small businesses, and I will say something in a moment about how they are going to be very important to the ongoing recovery of the economy. However, although there are encouraging signs that good economic growth will come, in the final year of this coalition we have to ensure that it becomes sustainable growth which lasts and that it does not just lead to an overheated economy and a return to the renowned stop-go situation.

Two indicators need to pick up in the economy. The first is business investment and the second is labour productivity, which has performed poorly. Since 2007 it does not compare well with our competitors: the USA, France and Germany. There are signs of a pick-up in business investment and certainly surveys have shown that bigger companies are now beginning to use their cash reserves to invest as confidence returns.

The Government have put in place a number of welcome schemes to counter the reluctance of banks to lend to small businesses, which I hope will now play a crucial role in stepping up our capacity to innovate and develop new markets, and will support growth in the economy. There are encouraging signs in pharmaceuticals, aerospace and the motor industry, but we have to recognise that although manufacturing has to play a major part in recovery, it is not sufficiently broadly based in this economy now as it is in Germany. Therefore, we have to look for other areas to provide growth and jobs.

There are good opportunities still to strengthen links between universities and small businesses and to build on their research innovation and scientific developments. For a nation that is the second biggest exporter of services in the world—behind the USA—there remains huge potential for export growth. Services exports are still restricted by national regulation and competition imperfections. Stepping up our initiatives on trade liberalisation, not least in the European Union, will open up huge opportunities for service companies.

There are three further important considerations for growth. We must not be satisfied with just making improvements in our education system. We are not just in the business of catching up, which we are trying hard to do; we need to strengthen our technical education and battle hard to do better so that we are ahead of other countries in improving competitive advantage. We have to be vigilant on the supply side of business and we also need a stable outlook for the economy and consistent government policy towards business which strengthens confidence and encourages investment in facilities, jobs and apprenticeships in the UK. That will be the task for the coalition Government in the coming year.

Exports

Lord Stoneham of Droxford Excerpts

Wednesday 8th January 2014 Lords Chamber

[Lord Livingston of Parkhead]

That is an excellent point. I commend the ambassadorial network; I have seen its work both as a Minister and as an exporter. Its enthusiasm and positivity to assist the UK in increasing exports is to be commended. In fact, the work of the FCO and its focus on our export efforts has been excellent. We will continue to work very closely; of course, as a Minister I am part of FCO as well as being part of BIS, and that reflects the important role that the Foreign Office has in exports.

[Lord Stoneham of Droxford (LD)]

The Government have set out a system of trade ambassadors to promote exports in particular countries, involving a number of Members of this House. Has an assessment been made of the effectiveness of this system and initiative, and what plans are there for its future expansion?

[Lord Livingston of Parkhead]

Trade envoys have been established to assist in countries to which government Ministers do not make regular visits. I commend the various Members of the House who act as trade envoys and thank them for their hard work. We are reviewing the success of the trade envoy programme, and how we could perhaps expand it slightly into new areas. When it works well, it is certainly helpful. We combine enthusiasm, expertise and knowledge in particular countries to assist us in increasing our overall exports and relationships with those countries.