Skip to main content

Export Services

Volume 76: debated on Monday 1 April 1985

The text on this page has been created from Hansard archive content, it may contain typographical errors.

Motion made, and Question proposed, That this House do now adjourn.— [Mr. Durant.]

12.26 am

I do not think that anybody would put his hand on his heart and say that in 1979 our economy was in a financially sound position. We had inflation going through double figures and rising, a public sector borrowing requirement which was unacceptably high as a percentage of our gross national product, a record number of hours being lost through strikes, a luddite approach to new technology and increasing levels of imports. Indeed, our whole approach to work and produotivity earned us the reputation among our foreign competitors of having the British disease.

Now, six years on, we have a sound economic base, and for that we must give full credit to the Government for creating an environment in which people are now accustomed to working for their living. Our inflation rate is well into single figures.

However, we still have immense problems, the major one being unemployment. Whatever reasons may be advanced for our level of unemployment — the demographic profile, the reduction in demand for the products of the traditional industries, the advance of new technologies, and so on — the Government have a responsibility and duty to tackle that problem.

The economic base on which we can now build is sound, unlike the base that existed in 1979. Among the choices that we now have to increase our economic activity, apart from doing nothing, are to put money into the infrastructure; to increase demand in Britain, with the risk, of course, of increasing imports; to bring about import substitution; or to encourage exports.

I do not believe in doing nothing. The Lord helps those who help themselves, and I believe that the most effective steps that we could take to improve the nation's economic activity would be to help exports, which is the main topic of this debate. Such help would be appropriate because we are a trading nation.

I refer in particular to support for our exporters, because the multiplying effect that could come from such assistance would be more effective in giving value for money by generating necessary economic activity in the United Kingdom. Any increased export help would produce some additionality — though I accept the difficulty in quantifying the value of that additionality—and would reduce the nation's social cost of unemployment.

I should like to deal with the whole range of export supports, but in the time available I can make only a few broad points and then refer specifically to certain areas of the aid and trade provisions and the role of the British Overseas Trade Board.

On the broad points, I should at the outset record the value of the strength of the interlocking operation that we have between the Foreign Office and the Department of Trade and Industry.

British exporters have mentioned the improvements that have come about over the past five years, and Foreign Office figures show the response that has been generated. There were about 43,000 market inquiries in 1980, and in 1983 there were 64,000. Visitors to overseas posts amounted to 66,000 in 1979 and in 1983 they had risen to 77,000. There has been a switch of emphasis in the role of staff within our overseas missions with about 30 per cent. of the staff now being engaged on commercial work. Work in the commercial sector is now a part of standard Foreign Office training.

The Foreign Office carries out an in-depth review every four years. It is a blockbuster review. The British Overseas Trade Board evaluates its resources every year. I ask my right hon. Friend to take steps to get the Foreign Office to carry out a mini commercial evaluation each year to reflect especially market changes. The changes that are taking place in countries around the Pacific basin are developing at an enormous rate. There is always the tendency to say, "We won't do anything until the review is agreed and out of the way." I think that we can respond slightly quicker than that.

I should also like to see more activity and resources being put into the countries that can pay the bills. We should take a leaf out of our competitors' books. France and Germany, for example, are concentrating their overseas missions in the countries that are able to pay for the services that they receive.

On the second point I would like to make, it is important that we get the best value out of our aid programme. That is the approach of every major contributor to overseas aid. I believe that British companies are concerned to know whether we are making the best use of the expenditure that is voted for the aid programme. Other major aid donors, such as France, Japan and Germany, give a far smaller proportion of their total aid programme to multilateral agencies. They prefer to keep the bulk available for their own Governments' use.

Multilateral organisations play an invaluable role, but why should multilateral contributions represent a higher percentage of our total aid programme in terms of GDP than those of other countries? Moreover, the multilateral funded projects are let on an internationally competitive basis. The British companies that win would have won irrespective of the size of our contribution. We can probably all produce tables to prove that point.

I also would like to ask why we give such a high proportion of our bilateral aid in the form of 100 per cent. grants. According to the 1983 aid commitment, France had more than $1 billion in the form of soft loans, Germany had about $900 million and Japan had $2·4 billion. The United Kingdom had only about $180 million in forms other than 100 per cent. grants. That means that other countries are prepared to offer lower subsidies in their aid. That in turn means that, for a given amount of subsidy, they can capture more business. I put it to my right hon. Friend that it might be more sensible to have more aid in the form of aid and trade provisions where a grant of about 20 to 30 per cent. is linked to export credit support and so generate perhaps four times the business that might come from 100 per cent. grants.

I believe that, for the first time for many years, last year's budget was spent completely. I do not know whether that occurred because there was more flexibility in the sectors or in the time scales or because the projects and exports policy ratio was allowed to exceed the three times factor. Whatever it was, it is welcome.

Any comment on aid and trade inevitably draws with it the Byatt report, which is concerned with the Government having to pay benefit now and collect later. The report raises doubts about whether benefits will outweigh costs and about the value of additionality. Although the Byatt report is correct in asking questions about whether value for money is obtained, it tends to gloss over the fact that Britain is a trading nation. We obtain 33 per cent. of our GNP from exports and we do not live in a vacuum. We have to compete and sell in international markets if we are to survive. I am worried about the fact that previous areas of traditional excellence are under threat. Sectors in the electro-technical industry provide a typical example. In 1966 they had a positive trade balance in their favour of 37·8 per cent.; in 1983, that trade balance had dropped to 10·4 per cent. We cannot afford to lose such a percentage of the market share implicit in those figures.

I hope that the different rate of subsidy through "consensus" is closer to market rates today and will give better value for money. I believe that that has happened since the Byatt report appeared. Nevertheless, I should repeat what was said in the report on 15 March 1984 by the Comptroller and Auditor General about the Export Credits Guarantee Department. The report stated:
"The National Economic Development Office seriously questioned many of the key assumptions underlying the Byatt study findings."
We would do well to continue to question those assumptions, because, whatever else we do, we are tied to the international market scene. The cost of staying in and matching our competitors' support — unfair as it might be sometimes — will be considerably less than opting out and trying to get back into those markets later. I hope that active investigation will take place into the value of increasing the aid and trade provision.

I should like to refer to the proposed changes to the British Overseas Trade Board's funding of overseas trade fairs and its effect on small and medium-sized companies. I mention that point because of my long-standing interest in small businesses and the fact that I am a vice-chairman of the Small Business Bureau and have been actively involved with small business ever since I became a Member of Parliament. Using the BOTB's definition of a small company as one that employs 200 or fewer employees, in 1983, 7,348 companies participated in overseas fairs. More than 5,000 of them were small businesses.

Working on the maxim that if one does not show one does not sell, I am worried that if we allow our support to the overseas trade fairs to erode the smaller companies will lose out. The larger companies have resources and can afford to go to the fairs; the small companies cannot. I appreciate the fact that more emphasis is to be given to putting the newcomers, rather than the regulars, on to the overseas trade fair scene. I suggest that that should be a separate argument and not one to reduce support for the regular companies which participate in overseas trade fairs. I am concerned about the proposal to reduce the travel rebate, giving it only to first-timers. It takes a considerable time to become established in overseas markets. It is not achieved by calling at the door for the first time. I understand that in one industry sector which normally takes part in six fairs a year, one fair has been lost and another is under threat. I hope that my right hon. Friend will consider that.

I started the Adjournment debate by mentioning improvements in support given to exporters over the past five years. I hope that my comments and requests for further support will be regarded as constructive, and not as criticism. I trust that they will be examined for their viability in boosting United Kingdom exporters and employment.

12.40 am

I am grateful to my hon. Friend the Member for Hertfordshire, South-West (Mr. Page) for raising this important topic. I congratulate him on putting his finger on so many important points of great interest to British business and exporters.

My hon. Friend's interest in small firms is well known. I hope to show him that what we are doing will help small firms and that we are interested in trying to enable small firms to export profitably. I agreed with a great deal of what my hon. Friend said about the importance of a sound economic base, the great improvements that have taken place over the past few years and the importance of trying to help exporters at present.

I am grateful for my hon. Friend's well-deserved tribute to the work of the commercial staff of the Foreign and Commonwealth Office and I shall ensure that his remarks are drawn to the attention of my right hon. and learned Friend the Foreign Secretary. I strongly agree with them.

I hope that I shall be able to deal with most of the points that my hon. Friend mentioned. The activities of ECGD, the aid programme, a wide range of visits overseas by Ministers and our trade policy work, aimed at keeping an open trading system, all help our export trade effort, as are the export promotion services under the guidance of the business men on the British Overseas Trade Board. The aim is to help smaller and medium-sized companies with the regulatory, technical and commercial difficulties of getting into new markets. We work with firms to grasp opportunities and enter markets that can and do pay for the goods that they receive. When the firms are established their sales should pay for the full costs. There is help for big firms as well, in particular in countries where relations with the Government are crucial, and we try to help with securing major project business. My hon. Friend referred to the aid and trade provision, and I shall return to that subject later.

I agreed with what my hon. Friend said about how we must ensure that we make the best use of the money and manpower paid for by the taxpayer in achieving our objectives.

We must obtain good value for money from the BOTB's budget. Next year that will be a net cash amount of £27·7 million. Those services are focused on newcomers to markets and smaller firms. From the surveys and questionnaires that have been sent out, it is clear that the export services are helping small firms. Up to three quarters of the users have fewer than 200 employees, and the measures designed to concentrate the help more clearly on newcomers to markets will help concentrate efforts on small firms even more. A number of things have happened in recent years which have helped in that—for example, the lower limits on the terms of the market entry guarantee scheme to help small firms, and the provision of £100 worth of free advice to small firms on the technical requirements of overseas markets. I could give other examples if time permitted.

My right hon. Friend determines the overall budget for all those activities as part of the normal public expenditure process, and he has to take into account the overall priorities within his Department. Everybody could do with a bit more, not least the BOTB, but a bit more for everybody is not consistent with the proper control of public expenditure.

The detailed allocation of resources is under the guidance of the BOTB. It issued a consultation paper, and there were a great many replies which in general supported the emphasis on newcomers and smaller firms. The board has been very sympathetic to those points. It has modified its original proposals for providing travel grants for missions and those manning stands at overseas trade fairs to spread them over a long period and to give the opportunity for some more experienced exporters to take part, as was suggested in so many of the comments that have been received.

We are also trying very hard to find new firms with the capability to export and which can be helped. The regional offices were set a target last year of making 4,000 new contacts on the export side; in fact, they came up with 6,000. My hon. Friend may have seen the advertisements for the £150 introductory offer for firms which have not used BOTB services before. That alone brought in 500 new firms in the last few months of 1984. We did an analysis of a sample of those new customers in one of the regional offices, and it showed a high proportion of small firms, 98 per cent. with fewer than 200 employees, 89 per cent. with fewer than 50, and two-thirds with 10 or fewer employees. So it is very much targeted to helping small firms.

My hon. Friend rightly mentioned the importance of the aid and trade provision, which is a key element frequently in securing projects for British companies in developing countries. I note his views about the balance between the bilateral and the multilateral aid programme. That again is a matter primarily for my right hon. Friend the Minister for Overseas Development, but I note my hon. Friend's view. Since its introduction in 1977, ATP support of about £350 million has secured 95 projects with a United Kingdom content of £1,500 million — a dam in Malaysia, an undersea cable in Indonesia, a coal mine in Egypt, a power station in India, the upgrading of an airport in Sri Lanka. They are some examples of orders won for British companies. When we win orders such as those, frequently only 20 per cent. of the value stays with the major contractor. About two thirds of the value might go to a wide range of smaller firms scattered round the country.

The £1,500 million of orders that I have mentioned will have led to many thousands of man years of work for a wide range of British companies. They will lead also to follow-on business in a variety of ways, either through repeat projects in the same developing countries or because of the shop window effect leading to similar projects in other countries.

If one wins a project, and a firm secures or maintains a presence in a developing country, that firm will be far better placed to win a range of future projects. Those benefits are, in the jargon, additional. Without ATP, the projects would have gone to other aid offers, typically from the French or Japanese, but indeed almost from any developed country, such is the growing intensity of international competition.

ATP was introduced to match the practices of others, and more and more countries have introduced similar measures. There is growing concern internationally about the potential trade distortions which arise from the increasing use of those measures, and it is certainly not in Britain's interests for trade to be determined by the amount of public finance countries are willing to provide for capital projects in developing countries. Within the OECD my right hon. Friend the Chancellor of the Exchequer and I are pressing, with strong American support, for steps to control and reduce such distortions. But while those distortions exist my right hon. Friend the Secretary of State for Trade and Industry and I are not prepared to disarm unilaterally to the disadvantage of British companies. I welcome my hon. Friend's robust support in this matter, which heartens us in our task. I note his views on the Byatt report and I echo what he says about the effects of the consensus and better value for money as time goes on. I note his references to the NEDO report.

It is, or course, crucial that ATP should be operated as effectively as possible. It is particularly necessary to cut down bureaucracy, because inevitably a number of Departments are involved. We have taken some important steps towards streamlining those procedures. New delegated authorities to ODA mean less frequent consultations with the Treasury, although the Treasury has an important role in this matter. It is certainly my aim that no British company should lose a project because Whitehall has been dragging its feet. My hon. Friend is right to draw attention to the importance of ATP, and I shall ensure that his points are carefully studied.

Let me put in perspective what my hon. Friend has been saying. He said that we are a trading country. Last year we saw some significant achievements by British firms in exporting. The volume of our exports in 1984 went up by approximately 7½ per cent., and that is not — I repeat, not — mainly oil. Leaving out erratic items, our manufacturing exports, for example, increased by 10 per cent. over the previous year. That healthy upward trend is continuing with the trade figures for February that came out last week. Leaving out the erratic items, the past three months compared with the same three months a year ago showed that our exports of manufactured goods are up 12 per cent. That is much higher than the volume increase in similar terms for imports, which was about half that figure. That is a highly important factor in the overall growth of output in this country. My hon. Friend is right about that. Today we saw further evidence that that momentum is continuing from the Confederation of British Industry survey, which stated that the balance of firms reporting that export orders were above normal was the highest since 1977.

Those figures are very good. However, one does not want only figures. Perhaps one wants to look at the actual cases occasionally. For example, when I look at some of the 250 applications for the Export Award for Smaller Businesses, I find them extraordinary in what they manage to achieve and the way that they are scattered all round the country. For example, a company making split key rings with 19 employees has doubled its exports for the past two years. A firm of 10 employees making church furnishings raised its exports from £5,000 in 1983 to nearly £500,000 in 1984. I could go on giving other examples.

The common theme is a strong spirit of enterprise, the will to get on and overcome the difficulties and a great deal of professionalism in running companies and getting into exports. Such small companies have problems in finding the right markets, investigating them and then getting a foothold in them. That is where the export services can and, I believe, do help. A small amount invested in helping those firms brings a flow of extra exports over the years. That is good both for the firms and for the United Kingdom. It helps firms spread the risk between different markets and exposes them to new ideas in product development and marketing from the international competition, which in turn helps to improve performance at home. Also, those exports bring new demand into the country, and that means more jobs for the firms themselves and the towns and villages where they are based.

My hon. Friend has done the House a service tonight in allowing me to outline to the House our priorities in this area and our commitment to export promotion. Of course, no programme can be exempt from rigorous public expenditure scrutiny and restraint, but I believe that the measures that the Government are taking will be effective in producing more exports and more jobs, particularly for smaller firms.

My hon. Friend raised several detailed points about the BOTB's proposals, which it announced this afternoon, for the detailed allocation of its budget. I shall make sure that the board carefully considers what my hon. Friend has said.

One of the reasons why there is a lower budget share for fairs, which particularly concerned my hon. Friend, is that the income from the charges for that service has been increased, particularly from those firms that have been going regularly for some time and are established in the market. There will be some cutback in the number of events supported in the next two years, but I hope that the higher percentage discount for first-timers in particular will make better use of resources and be helpful to small firms trying to break into a market for the first time. It is for the BOTB and the business men who run it to make proposals for the detailed allocation of money. That is a sensible way of running a programme that is designed primarily to be of use to British business.

Our export services do a good job. The figures for 1985 are encouraging. My hon. Friend raised several extremely valuable points, including the one about the Foreign and Commonwealth Office review. We are in constant touch with the Foreign Office on staffing. We make changes in between its four-year reviews — for example, we recently strengthened the New York office.

I am grateful to my hon. Friend for raising this important debate, which will be of considerable use to us.

Question put and agreed to.

Adjourned accordingly at five minutes to One o'clock.