"We must shine a bright light into the dark corners of capitalism". The words of Michael Foot in Labour’s ill-fated 1983 manifesto? Perhaps another opportunist opposition leader looking to curry electoral favour? Far from it. These are words that fell from the lips of the Government’s supposed champion of business in his showpiece speech of the year - the Secretary of State for Business, Innovation and Skills, Vince Cable.
The economy is growing. A further 0.7% of growth in Q4 of 2012. Construction is booming, services are flourishing and even long-sluggish manufacturing is awaking from hibernation.
Yet all is not well for British business. Speaking in late 2013 the Chief Executive of Rio Tinto Jan de Plessis referred to an acute lack of public trust in business amongst the UK population. Whereas the majority of other countries have seen trust in business soar once more in the wake of the 2008 crash, in Britain it has stalled.
What’s gone wrong? Britain by instinct and history is a trading nation. Without sufficient national resources, surrounded by water, we had no choice but to look outward. Once a symbol of national potency and pride, business is now talked down, our politicians inward-looking.
As Conservatives we know that this status quo cannot continue.
Yes mistakes happen. LIBOR in the city, BP in Louisiana, no part of our economy is perfect. Business must play its part in helping heal the divide with politicians. It must heed the calls for transparency and openness – especially in those sectors where public money is involved. It should treat staff fairly; pay the tax that is due; and support the communities in which it works. In short, businesses large and small need to embed a sense of corporate responsibility into everything they do.
But there is a line between calling for responsible business and lapsing into rhetoric which is anti-business. Politicians of all sides need to guard against crossing it. And we all need to start talking up our businesses again and bring government, the people and business closer, together putting our collective shoulder to the wheel of growth.
Here I argue for three simple steps to make Britain a proud and outward looking nation of traders once more.
First, abolish the Department for Business, Innovation and Skills in favour of a new Ministry for Exports and Productivity. Second, ditch the slice and dice rhetoric of the political class which seeks to drive a wedge between the SME and the Plc, manufacturing and services, and use tax incentives to promote British business as a whole. Finally, a wholesale transformation our education system so it provides the conveyor-belt of well-rounded individuals our businesses call for and not droves of identikit professional exam passers.
There’s no 'Trade' in 'Business, Innovation and Skills'
Despite a fair wind of currency devaluation, the much sought boom in exports hasn’t happened. Where once the UK looked outward we now look inward. In fact, Britain’s net trade in goods shows we are going backwards not forwards under the current government, up from a deficit of $13.51 billion in 2011 to $15.14 billion in 2012. We lag far behind the average EU OECD deficit of $6.23 billion, which is at least moving in the right direction. Whilst services tell a more positive story (more of that below), there is no escaping that we lag in the doldrums globally.
The reason? A bloated Department of Business Innovation and Skills, a super-department which doesn’t place trade at its centre and lacks clear direction. The number of civil servants in BIS who subscribe to the belief that “I have a clear understanding of the Department’s objectives” is 5% lower than the Whitehall average.
The Department has a core administration and programme budget of £7.4 billion. Whilst over £5.7 billion goes to the Higher Education Funding Council England, £4.5 billion to the Skills Funding Agency and £3.6 billion to the seven research councils, UK Trade and Investment’s funding is minimal by comparison. Yes businesses thrive on high skilled graduates and innovation but more effort must be put into flying the flag of our success stories overseas.
Under-investment is hitting UKTI’s performance. Only 19% of UKTI’s clients are new exporters whilst UKTI’s own research shows that those firms it does assist “often found it difficult to identify tangible (especially financial) impacts related to the support they received.”
To build a sustained recovery and abolish the legacy of boom and bust, exports must go hand-in-hand with higher productivity. In 2012, the output of UK workers per hour was 24% below Germany and France and 29% below the US. Britain’s productivity puzzle needs greater ministerial focus.
We need to tear up the Department for Business Innovation and Skills and replace it with a ruthlessly international trade-focussed Ministry for Exports and Productivity so that we can thrive in the global race of the 21st century.
British business is best when it works together
Politicians too often look to slice and dice the private sector into factions, and then pit those factions against one another. The plucky SME versus the hegemonic FTSE 100 company. The hardy and honest manufacturer against the feckless city slicker. British businesses is better when it works together, not fighting for scraps at the table of government favour.
True, SMEs add essential balance to our economy. Yes they account for over 99% of all British businesses. But they only account for 59% of private sector employment and 48% of private sector turnover. Whilst SMEs are heralded by the Prime Minister as the “lifeblood of the economy” big business is lost in the winds of government rhetoric. We back SMEs because we want them to become large companies. Ceasing to support them once they do so defies logic. What’s more, SMEs need the balance sheets and experience of large providers to support growth and fund innovation.
Equally, nobody is arguing that we don’t want a new wave of manufacturing, building on our proud industrial heritage. But the plethora of announcements to support what is ultimately just 10% of economic output is disproportionate. By comparison, apart from a low-key presence in the Government’s Industrial Strategy, the services sector, which makes up 78% of GDP and operates at a trade surplus globally, is frequently forgotten.
Why are we singling out the smaller segments of our economy for special treatment and implicitly (or sometimes explicitly) criticising the biggest parts? We need policies that unite not divide the private sector, encouraging it to work as a cohesive whole, not competing with one-another domestically but fighting arm-in-arm to beat the competition overseas. Tax breaks for big businesses that nurture and support SMEs or use UK manufacturers would be a huge step in the right direction.
Employers need people not robots
All businesses have faced it. As an employer, I’ve experienced it. A bushy-tailed candidate is due to arrive for interview, backed by a glowing CV boasting high grades. Yet upon arrival something is clearly wrong. Poor eye-contact, a lack of people skills, and no commercial awareness. Businesses are only as good as their people, yet if we want our economy to be a Ferrari we cannot expect to run it on diesel.
Surveys consistently highlight considerable concern amongst employers about so-called ‘employability skills.’ 61% are dissatisfied with school-leavers self-management, 69% are dissatisfied with their business and customer awareness skills. For graduates the figures are lower but still alarming. Inadequate work experience, with which 37% are dissatisfied, is a particular concern here.
Government needs to heed the call of business. 81% of employers value such employability skills above degree subject when considering candidates. A Conservative Government should radically shift our education system away from over-examination and teaching to the test and towards creating whole and well-rounded human beings.
Conservative action has propelled our economy from sick man of Europe to fastest growing in the EU. Corporation Tax cuts and 800 regulations already abolished through the Red Tape Challenge are pro-business policies are significant steps in the right direction. Yet we as Conservatives must aspire to do more. This article makes three simple recommendations:
- The Department for Business, Innovation and Skills is not fit for purpose. Its lacks direction and under-resources exports, despite how essential they are to building a sustained recovery. Let’s abolish BIS and start again, creating a new Ministry for Exports and Productivity, to ensure a laser-like focus on these two issues.
- Government as a whole currently seeks to divide businesses between small and large, services and manufacturing, creating turf wars between respective camps. Let’s reject the rhetoric of division and focus on supporting the private sector as a coherent whole, through innovative and creative tax breaks to get the large service provider and small manufacturers and service providers acting in unison, carrying the flag for UK plc overseas, sending ripples of growth throughout our economy.
- Businesses need good people but currently our education system produces good exam-passers. Let’s think again and prioritise producing well-rounded people who flourish in the world of work and not just in the classroom.
Let's rededicate ourselves to restoring public trust and stop talking down big business. Let’s take bold, simple and clear action and not govern by splitting the difference. We have always been the pro-business party. Let’s start acting like it.