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UNCORRECTED TRANSCRIPT OF ORAL EVIDENCE
To be published as HC 82-ii
House of COMMONS
TAKEN BEFORE the
Business, Innovation and Skills Committee
Trade and Investment: Brazil
Tuesday 3 July 2012
Lord Green of Hurstpierpoint and Nick Baird
Evidence heard in Public Questions 130 - 214
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Taken before the Business, Innovation and Skills Committee
on Tuesday 3 July 2012
Mr Adrian Bailey (Chair)
Mr Brian Binley
Mr David Ward
Examination of Witnesses
Witnesses: Lord Green of Hurstpierpoint, Minister of State for Trade and Investment, Department for Business, Innovation and Skills, and Nick Baird, Chief Executive Officer, UK Trade & Investment, gave evidence.
Q130 Chair: Good morning. Thank you for agreeing to speak to the Committee today. As you know, we had a recent Committee visit to Brazil, out of which arose a whole range of issues that we wish to discuss with you. We are slightly early, but we might as well crack on. Could I explain and apologise that there will be a certain sort of passage in and out of Members today? There are a number of other Committee meetings on today that Members have to participate in. I know that there are some at meetings at this moment that will be turning out as soon as their duties on that Committee are over and they are permitted to do so. For voice transcription purposes, would you introduce yourselves?
Lord Green of Hurstpierpoint: I am Stephen Green. I am Minister of State for Trade and Investment.
Nick Baird: I am Nick Baird, Chief Executive of UKTI.
Q131 Chair: To start with a very general question: a year or so ago we had the strategy set out in a Plan for Growth, and this obviously highlighted Brazil. Exactly what are your plans for Brazil and how do you think they are progressing?
Lord Green of Hurstpierpoint: Firstly, Brazil is one of the top four priority countries in the UKTI strategy, alongside China, India and, interestingly, Turkey, rather than Russia. We start from a position where British investment in Brazil has been climbing up quite nicely, particularly led by the opportunities in the offshore drilling sector, of course, with BG being a very prominent investor now in Brazil, but where the trade position is weak. We sit behind France and Italy, as well as Germany, and have lost some market share, albeit slightly less than France, but I do not take a great deal of comfort in that.
I think that, as is the case with Latin America more generally, we are coming off the back of a long period of relative neglect of Latin America by Britain in general, and by the British business community in particular. I think it is now beginning to turn; I think you are seeing a rising level of interest amongst British businesses, and that is reflected in the workload of UKTI in Brazil, and here in respect of Brazil. There are some significant particular opportunities arising in the sports area off the back of the Olympics here-both the World Cup and the Olympics are in Brazil over the next four years-in the offshore oil industry, obviously; and in ports, shipbuilding-marine is probably the best way of describing it. Those four areas are areas of very considerable investment by the Brazilian authorities over the next few years, which I think provides opportunities.
More generally this is a large growing, increasingly sophisticated economy with an appetite for all kinds of goods and services, and we have got a job to ensure that we showcase Britain across a wide range of areas of competence, including things like fashion and the creative industries, as well as the traditional strengths in services, architecture, financial services, and other professional services, and particularly our advanced manufacturing-in things like aerospace, defence-and the specific programmes that I have already mentioned that have to do with sports.
There is a lot that we can do, but we are coming off a relatively weak level of engagement. Even now I would say there are things that we need to attend to. For example, the institutional structure is still relatively light. If I compare it with India, China and Turkey, although we have a CEO forum convened and chaired, it has not met yet. There is not a British Brazilian business council. Essentially the JETCO is the only formal structure that exists, and that is relatively light compared with others.
What I am saying in short is that we are on the case, but it is a work in progress and we have a lot to do to pay adequate attention to what is clearly going to be one of the top performing countries over the next generation.
Q132 Mr Binley: I had the good fortune to go to Brazil three years ago, and there is no doubt that Britain’s profile, in terms of good/bad, like/do not like, has changed dramatically in the last 100 years in South America. I wonder whether the resurgence through Kirchner of the Falkland thing has had any effect in terms of profile and mindset.
Lord Green of Hurstpierpoint: I am not conscious of it having any material impact on business relationships with Brazil. It does, of course, have an impact on business relationships with Argentina, but I am not conscious of it having affected Brazil. When I was last there, which was with the DPM last year, the warmth of the welcome was very striking, and that warmth was both at Government level and at the level of BNDES, for example, and the business community more generally.
I do not think there is any question of a difficulty in getting the door open. To the contrary, they went out of their way to stress how much they wanted to build the relationship. This is clearly a discussion focused on trade and commerce, and not more generally, but I have no reason to suggest it is limited to trade and commerce, or trade and investment. They want to build the relationship partly because of their perennial feeling that they do not want to have all of their eggs in the basket of a relationship with their big northern neighbour, and partly because they are increasingly concerned about China’s engagement. The strength of their desire to have a stronger relationship with Europe in general, and Britain in particular, is very obvious.
Q133 Chair: I understand that there is an objective to double our exports by 2015. I am slightly surprised that in your opening remarks you did not refer to that. Was that an indication that you are not too confident of reaching it?
Lord Green of Hurstpierpoint: No, I am sorry; it was an omission on my part. I hope we will achieve it; we will work hard at it, and so far we are on track.
Q134 Chair: That is good to hear. You quite rightly highlighted one or two areas where there were potentially big opportunities. There is potentially a problem that, in effect, if we had one big hit in a particular area, we could reach our target but mask underachievement in other sectors. Do you think perhaps you might have an approach that is a bit more sectorspecific rather just an overall one?
Lord Green of Hurstpierpoint: I have never seen those targets as anything other than a benchmark, and I certainly would not take hitting that target by dint of doing one or two big things as meaning that we can rest comfortably. I think this has to be a much broader engagement. Setting individual trade targets by sector I have not thought of doing, and I do not want to get too mechanical about it either. I do not think we should rest until we overtake the French and the Italians; I do not see why we should be satisfied with a market share that is lower than theirs. Our market share will be lower than Germany’s, given Germany’s particular economic profile and the sheer scale of its capital goods business. But I do not see why we should settle for being behind the French and Italians. Perhaps what I am saying in response to your question is that we should at least see ourselves as aiming to overtake those two.
Q135 Chair: I understand there are no publicly available reports on trade between Brazil and other major EU countries, but as you have just indicated in a number of remarks, it is pretty obvious that Germany is well established and we are lagging behind other European countries. Given the fact that Germany, pre-eminently among European countries, has established a presence there, have you considered looking at what the Germans have done to establish that presence and what we could learn from it?
Lord Green of Hurstpierpoint: Yes. It is part of a wider issue, because it is not only true in Brazil, of course; it is true of most places that Germany has a larger market share than we do. A couple of observations: firstly, about the nature of their economy, and secondly, about the way they do things. The nature of their economy is that they have a much larger manufacturing base than we do, or any other developed country does. They are the outlier. The percentage of manufacturing in their economy is something in the order of the low 20s, and ours is 10%. France is 11%, from memory. They are the outlier.
Within that they have a very strong competence in two particular things: one is cars, and the other is capital goods. An emerging market like Brazil, when it imports from developed economies, is going to have a strong propensity to look for capital goods imports in particular. They have a competitive advantage that is inbuilt in the structure of their economy. We cannot meaningfully say we are going to go out and replicate that. We can take a little bit of comfort from the thought that, as developing countries progress, more and more they shift away from massive capital goods imports towards a broader-based import appetite, and into areas that play more to British strengths, particularly things like the creative industries.
Insofar as the way they go about it is concerned, they have this structure whereby all companies by law have to be a member of their Handelskammer, and so their chambers of commerce around the country are well financed, well structured, and they are linked very closely into their overseas chambers of commerce. My understanding is, and I do not know if this is true everywhere, that they have, for example, intranet between the various chambers of commerce and the overseas links, whereby a company making an enquiry about a particular country can immediately get it routed through to the overseas chamber of commerce, and so forth.
It is a source of current concern to me that we are not as strongly in a position to provide that kind of support as they are. I do not think anybody would believe that it would fit this country’s way of doing things to make it compulsory for businesses to belong to their chamber. I do think that somewhere between our status quo and what they have is something we should work our way towards, and this is a very current topic for me. Brazil is an example of this, but it is a much more general issue.
Q136 Chair: That is interesting. Some of the evidence that we got from our visit was that, in effect, it was possible for a British company to have a substantial presence in Brazil, but the number of actual financial benefits that would be repatriated to this country might be more limited by the tax structures, local investment priorities, and commitment to investing in local companies or using the local suppliers there. Doubling exports is one thing; are we looking at doubling the tax revenues and possible repatriation of profits to this country as well? Is the, if you like, British dividend from exporting to Brazil a factor in determining policy, and are you looking to ensure that we maximise benefits in that area as well?
Lord Green of Hurstpierpoint: Chairman, yes. I think there is an issue here; we do not have a double taxation agreement with Brazil, and I have asked that we look into what the issues are surrounding that. Not all European countries do, but Spain and Portugal in particular do have DTAs, and that is something I have asked that we look into.
Chair: We will be going into that in a little more detail later.
Q137 Mr Ward: A little more detail on some specific areas of trade, and the first one is to do with infrastructure, so the role UKTI is playing in the support of particular areas, and obviously there are potentially massive opportunities in the infrastructure improvements that are required there. What is UKTI doing in terms of supporting Brazilian infrastructure development?
Lord Green of Hurstpierpoint: We are focusing on those four major areas of opportunities I mentioned. If I may, I will get Nick to join in with some specifics in a minute. The high-level point is it is clearly the case that for the World Cup-and it looks like it may be true for the Olympics, though this is not a done deal-all the major contracts have gone to Brazilians. This is not a level playing field, and we should not be naïve about that, but there are opportunities in the supply chain. There are some quite interesting examples where relatively smaller British companies have got contracts in respect of the World Cup and the Olympics, and, indeed, the masterplanning contract for the Olympics has gone to a British company.
In the offshore area, this is a huge opportunity over a long period of time, where BG are the lead foreign investor and where there are significant opportunities borne of the obvious fact that in the North Sea we have accumulated some world-leading expertise in deep-sea drilling. Indeed, when I was at the Offshore Technology Conference in Houston a couple of months back, very clearly there was a Brazilian presence there and they were very anxious to engage with British firms, who were also present in great numbers there.
UK Export Finance, aka ECGD, have put in place a £1 billion buyer credit line under the umbrella of which it will become easier for British companies to represent that they can not only provide the services but get them properly covered in terms of the financing. There has been one recent quite sizeable drawdown against that £1 billion of some £170 million for rental of an offshore drilling piece of technology. There is quite a lot underway, but Nick, do you want to add anything?
Nick Baird: In terms of specifics in those four big priority infrastructure support areas, there is Petrobras’ procurement around both their exploration and infrastructure development activity. We reckon that has accessible value to UK companies of around £12 billion. The Rio Olympic Games has around £1 billion of accessible value to the UK. In terms of the World Cup-obviously the football World Cup comes earlier-there is now around £0.5 billion accessible to the UK. We also have a big project around ports and maritime more broadly.
As the Minister said, it is going to be Brazilian contractors who get the biggest major contracts, but in a sense that also suits UK companies, since broadly speaking our big constructors do not build stuff overseas; we are better as architects, design engineers, project managers, engineering support services, and so on. In all those areas we have great strengths, and we are already demonstrating that in terms of what we are achieving in those particular projects.
We have very big wins already for Rolls-Royce around supporting the power generation required for Petrobras, and for a number of companies, as you know, around the Rio Olympics, including small companies. Particularly around the sports infrastructure activity, we are using to full effect that we brought the Olympics project here in on time and under budget as a major selling platform, and there is a whole range of activities around that we are taking forward-events, missions, and so on, that will be going forward.
One particular area they are very interested in, and we will be sending a delegation to Brazil towards the end of the year, is around safety and security for major infrastructure of a sporting nature. Our companies that have done good work on the Olympics here will be going to Brazil to present on that.
Q138 Chair: On that, you quite rightly point out that here we have delivered the Olympics on time and, indeed, under budget, which in the context of major sporting infrastructure development worldwide is quite an achievement. We did have some evidence that Brazil in the past struggled to do that. You have highlighted quite rightly the areas where we could give them support, and indeed are likely to be procured to do so. What I really want to check is: are we keeping a weather eye open to highlight potential opportunities for British business should they run into trouble?
Nick Baird: Absolutely, and that is why I think we probably even underestimate the available value to us around the world. In World Cup preparations, because that is closer, there are already signs that in particular areas they are behind schedule, and our ability to project manage things, provide expertise in particular areas, which can be done very quickly, will be very much in demand on that. Around the launch of our GREAT campaign in Rio, which Prince Harry led for us and which was fantastically successful, that was one of the areas that we covered.
We have had the Governor of Rio here in the UK as well, and there is absolute awareness around the major decision-makers there of the Olympic message, and of the fact that not only up front do they need to be engaging with our companies but, as it were, if they get into difficulty they should look to us very quickly to help them out of it.
Q139 Paul Blomfield: I have a brief question in response to your answer there, Nick, in terms of our long-term approach to Brazil. You describe opportunities for us now. Reflecting on discussions we were having while we were there in terms of their absolute focus on knowledge transfer and up-skilling domestically, where does that leave us in 15-20 years’ time? Aren’t they going to be occupying exactly that territory that you are now describing as there for us? How do you see the long-term relationship with Brazil?
Lord Green of Hurstpierpoint: I think it is a feature of the world at large; it is not just in the case of Brazil that, as time goes by, their investment in their own educational base and the skills of a sophisticated economy will lead to an ability to compete across a wider and wider range of sectors. What that means for the British is that over time we have to continue to be flexible to ensure that our economy and its competencies are evolving on a competitive basis. At no point in time can you say, "This is our competitive advantage, and that is the one thing that is going to drive all the business we do for the next 25 years." You are already seeing it, not normally in Brazil but in China and India; China is now as large an exporter of services as we are. Continued flexibility is the only theme that we have to keep at the front of all of our minds.
Nick Baird: It is worth mentioning that education is one of our big priorities in Brazil as well, and one element of that is the big programme the Brazilian Government has to send students overseas, and we have 10,000 of those students.
Paul Blomfield: I was going to ask some questions about that a little later.
Chair: Yes, we have had the Home Office Minister in front of us on that.
Q140 Mr Binley: I have been on this Committee seven years. You may think that is not very good progress in this place, but never mind; it has been interesting. In all that time whenever we have talked to UKTI we have heard an awful lot about opportunity, we have heard an awful lot about promotion, but we have seen very little about real monitoring of real top-line turnover. We were promised two years ago that UKTI would be doing much more in that respect. Let us cut to the chase: tell me what you are doing to ensure that we are monitoring actual gain, actual sales-real money-in terms of the work of UKTI.
Lord Green of Hurstpierpoint: We do, both in Brazil and elsewhere, have quite a structured and independently executed process of evaluating UKTI services by consulting with its clients, the PIMS process.
Q141 Mr Binley: Just let me interrupt-we have questioned that on many occasions, and we have questioned its efficacy quite frankly. Now tell me how you have improved it.
Lord Green of Hurstpierpoint: First of all, I think the concept of having independent monitoring is unquestioned. I have been talking about this recently with Nick; I think there is reason to believe it is overly complex at the moment. We are asking in fact too many questions or different versions of questions. There probably is scope to make sure it is simpler and therefore has a better reflection of the headline themes. Insofar as Brazil is concerned, it is worth noting that the level of enquiry has gone up very significantly in the last three years. There has been something like a 300% increase.
It looks to me as though the satisfaction rate is not as high as the UKTI average, which itself is not as high as it should be. I conclude from that that we have some work to do, but nevertheless the volume of enquiries has been growing very rapidly. It would be too simplistic to relate what UKTI does to simply looking at export performance, although that is, at the end of the day, what we care about: exports and inward investment. In the case of Brazil there is very little inward investment, which is not entirely surprising given the stage of Brazilian economic development.
The export performance is going reasonably well, but I think it would be too simplistic and too complacent to attribute all of that to UKTI’s efforts for sure. It is a job of continuous quality monitoring, and quality upgrading, and we are not in the perfect state.
Q142 Mr Binley: Could you send us some information on that, so that we get a real feel of your real effectiveness? It is always very difficult with UKTI, and there are always some very clever people sitting where you are who will tell us that it is all wonderful-all the work they are doing is excellent.
Lord Green of Hurstpierpoint: Well, I am not telling you that.
Q143 Mr Binley: I did not say you were, Sir; I said we have had some very clever people telling us that. Send us what you think can give us a real handle on changing opportunity and, indeed, even quoting real sales.
Lord Green of Hurstpierpoint: Yes. I am very happy to send a note. If I may, let us do our work on this PIMS process, and get it to wherever we think it should be rather than where it is now, because I do think there are some issues with it now. We will work on that and send you something.
Q144 Mr Ward: Two other areas: the first is to do with infrastructure, and the second one is to do with support. We became obviously very much aware of the local content requirements, and the purpose behind that is to build Brazil’s own capacity for exporting. What opportunities are we taking to support Brazil in developing its own exporting? I know they are very keen, for instance, on overseas UK businesses exporting from Brazil.
Nick Baird: I agree it is an extremely important part of the whole broader activity in engaging with Brazil that we work with the grain of their own interests for themselves. We engage quite closely with our opposite numbers in Brazil, called Apex. We exchange best practice in terms of how we support exporters. We are looking with them to work in third markets as well. We believe they can help us in some of the Lusophone African countries, for example, Angola, where we are working quite closely with them. We can help them in other markets across the world where we have particular connections and are seeking to do that.
Around the broader issue, and it relates, again, to the broader training issue, we very much encourage companies, when they are engaging in Brazil, to bring training and skills development as part of their offer. British Gas, as you know, is now the biggest foreign investor in Brazil, and a key element of what they are bringing is training in the area of oil engineers.
Q145 Mr Ward: That links with the last question, which was to do with training. You have already mentioned safety and security, and project management, so these are skills that we are seeking for that. Are there any other areas in which we have a training offer that is helping the Brazilian companies to grow?
Lord Green of Hurstpierpoint: The most obvious one is this Science Without Borders offer. It was agreed at head of government level that we would take 10,000 Brazilian students on Master’s programmes.
Chair: We are just about to open a line of questions on that. Have you finished David?
Mr Ward: I am happy with that; it leads into the next section.
Q146 Paul Blomfield: Perhaps as a preliminary, just echoing from our experience the points that you were making, Lord Green, about the desire for strong relations to be built with Europe, and with the UK in particular, we heard that the key to that was relationship building, and that sort of cultural and personal relationship-building is critical to success. Building on Nick’s point about educational opportunities, there is this whole area of encouraging more Brazilian students to come to the UK, recognising that many of our successful economic relations with other parts of the world have been built on those people who are now business leaders and political leaders in other countries having studied in the UK and developed a warmth and affection for the country. What we were also hearing in Brazil is that we are, as a country, sending out the wrong message in terms of whether we want international students in the UK. I recognise that the Science Without Borders programme, which is an extraordinarily ambitious programme on the Brazilian part, is one that we have got some slice of, although perhaps 10,000 out of 100,000 students is not sufficiently proportionate to the strength of the UK university offer. I wondered what feelings you had about whether we were getting the right message to Brazil about the opportunities for their students to come here. As the Chair said earlier, we had the Immigration Minister in last week discussing this issue in general terms. There does seem to be a growing feeling across business and Government that we need to be looking at this area again. What do you think?
Lord Green of Hurstpierpoint: There is substance and image: there is no doubt that in a number of countries of the world there is a risk of our leaving the impression that we are not open for business in education, and we need to work as hard as we can to overcome that risk. That is, of course, in the context of a new immigration policy, which everybody is familiar with, but that immigration policy does allow for students-subject to an English language test-to come here without limit, and we need to be making it clear that this is a very open market. In fact in the case of China, the number of students has gone up, not down.
It is something we need to watch very carefully. We do not want to convey the impression that we do not want students, because I share the implications of what you were saying: this is not only an export earner in its own right, but it is also a long-term relationship building contract, if that is the right word, which will pay us dividends that are hard to measure, but over many, many years to come. It is profoundly important that we ensure that the offer of British education, particularly higher education, is available and that there are no limits in terms of immigration, subject to an English language competence test.
So far as the Science Without Borders programme is concerned, to be absolutely honest I am not aware of whether they have put arrangements in place for the whole 100,000; 10,000 is a good number, and I am very pleased with that. David Willetts is going to go there in the autumn to further the dialogue and ensure that we do invest, at ministerial level, enough time to build these relationships. As an aside, I was in Mexico with the PM a couple of weeks back. The Mexicans send only 3,500 students to the UK, and one of the things we were able to say to President Calderón and others while there was, "Why don’t you look at what the Brazilians are doing? We would be very pleased to work with you to create a similar opportunity in Mexico."
I guess the point is that this is an offering that plays to an obvious strength of the British-the quality of our higher education, the English language-and we need to ensure that we send the right signals about being willing to do this business.
Q147 Paul Blomfield: The opportunities are enormous, aren’t they? My constituency has Sheffield’s two great universities, and we have something like 2,000 to 2,500 Chinese students between the two universities; we have nine Brazilians, eight at one and one at the other. There is huge scope there, but I take from what you are saying, Lord Green, that you feel that we are on the back foot-that the visa changes that have been made have sent out the wrong message, and we now need to make up ground.
Lord Green of Hurstpierpoint: We do need to ensure that we project the right basic messages and image of being open for business. We cannot be complacent about that; this is a competitive market. Even if we say to ourselves we teach in English, which is one source of the competitive strength in this particular market, so do the US, Canada, Australia, and increasingly on the Continent courses are being offered in English. German universities are offering whole English language courses; French colleges are doing the same thing. We cannot be complacent about this.
Q148 Paul Blomfield: Nick, you used to work in the Home Office. Do you share that view?
Nick Baird: It is certainly the case that in this context we have to have a really strong positive narrative about getting students here. The other point I would add is that, of course, these days bringing students here is a hugely important part of the higher education offer, but there are other means of accessing foreign students: for example, campuses overseas, where Britain is quite strong in a number of countries, but not yet in Brazil; for example, virtual learning, where there are some phenomenal things being developed. Some of the things the Open University are thinking about doing globally now reach far, far more people than we can do by bringing students into the UK. The offer can be quite comprehensive, and it is really important that universities and higher education institutions develop in that way globally to take what is a massive opportunity, as well as bringing students here.
Q149 Paul Blomfield: You probably agree that the two go hand in hand.
Lord Green of Hurstpierpoint: Yes.
Q150 Paul Blomfield: You are clearly right, Lord Green, that there has been an increase in Chinese students, but a massive fall in the Indian market. In the context of getting the right message across internationally, and given the strategic importance of Brazil, do you think we need to perhaps make a special effort in relation to getting the message right, and the offer right, for Brazil?
Lord Green of Hurstpierpoint: Yes I do, and David Willetts is very seized of this as well; hence, as I say, he is planning a visit in September.
Q151 Paul Blomfield: I am sure that you are also right that David Willetts shares that concern. What things do you think in practical terms we now need to do to get off the back foot on to the front foot and change the offer?
Lord Green of Hurstpierpoint: I am not sure that I would necessarily accept the proposition that we are on the back foot, but we undoubtedly need to be proactive in marketing what we do offer. The offer is very clearly there, and Nick has very rightly underscored the importance of other ways of delivering educational services, but I agree with both of you that you need the broad base-you need education physically present in this country, plus virtual support.
We need to be ensuring that there is a regular dialogue with educational authorities in Brazil to ensure they understand that, and of course regular dialogue with universities in the UK, and others in this country, to ensure that they understand the opportunities and the priority. Brazil, by any standards, is a high-priority country, and unlike India and China we do not have, as you have said, a strong existing critical mass of Brazilian students in this country, although we are better placed than we are with Mexico, which is the other important Latin American market.
We need to invest ministerial time, senior official time, in a continued dialogue with them. It comes back to the point that I made earlier-that we are light on structures for the dialogue between the UK and Brazil.
Q152 Paul Blomfield: Do you think that we need to revisit the student visa changes that were made in terms of rebranding and repositioning our message? We did, for example, in relation to Science Without Borders, hear that our competitor countries in the international university marketplace, seeing the opportunity this provided, said, "We will change our rules, because we want some of this action," whereas we were more boxed in.
Lord Green of Hurstpierpoint: We need to be continuously watchful of what we have as a competitive offering on the world stage. We should not flagellate ourselves too much, because we are still the second largest provider of offshore educational services in the world after America. It is not as if we are starting from a low base in this, but we do need to ensure we nurture its competitiveness. As I have just mentioned, we need to be aware that it is not only other English language countries that we compete with. Over the next 10 years we will find increasingly that the likes of the Germans will be offering English language-based training, and of course they have enormous strengths in applied sciences and technology.
Q153 Mr Ward: Does the increase in the number of overseas students count towards your target of doubling trade with Brazil? Do you feel there is a tension between your seeking to achieve that target, and the Minister within the Home Office, who has a target of reducing the number of immigrants coming to this country, of which the biggest chunk is students?
Lord Green of Hurstpierpoint: The Government’s overall target, as you all know, is to reduce the overall net immigration numbers. For students, there is no limit on their ability to come, subject to an English language test.
Q154 Paul Blomfield: Just on the point that you made, Lord Green, clearly we are in a fantastically strong position with the recognition internationally of the quality of our university offer, but the concern that we felt as a Committee is that, although numbers are still going up a little, we are losing market share in what is a hugely growing international market in higher education. Perhaps moving to a slightly different area, which is English language teaching, which you have talked about, and the competition that we face, not only from English-speaking countries, that is an area that has also been closed down in terms of the message that we are sending out and the rules we have been introducing-the testing regime under the new visa structure. That is not only important in its own right but often those are feeder courses to UK higher education. What do you think we could do to capture more of that market?
Lord Green of Hurstpierpoint: First of all, you are right; we are losing market share on a global scale. So is everyone, I suspect, including the Americans-although I do not know that for a fact-and the Australians, because it is becoming a broader market. The teaching of English, which is a different point from English language-based teaching, is an important competence. The British Council has an important role to play in the overall offering, and in support of both educational export objectives, because of the emphasis we have placed on some form of English language competency as a qualification for a student visa, and, again, because of the "soft power" that British-based English language teaching gives this country over the longer term.
We need to work closely with the British Council in a whole variety of emerging markets-that would go for Brazil as it does for lots of others-such that the work programme of the British Council is aligned with and consistent with what we seek to achieve in Trade & Investment over the longer term, although they have their independent responsibilities and objectives.
Nick Baird: We work extremely closely with the British Council in this and other areas, of course. As you know, what the British Council are now doing internationally, which I think is particularly effective, is less direct English language teaching and more training of trainers to have a multiplying effect. I saw that particularly when I was Ambassador in Turkey, where they had a hugely effective programme; they effectively have been invited to completely rationalise the teaching of English across the Turkish education system. To be able to have that sort of strategic-level impact is important; it is a growth industry and crucial to feed in other things.
Lord Green of Hurstpierpoint: My sense is that there has been a view that the British Council is so independent of Government, and so separate, that it does its own thing without any close coordination or concern on either side for the consistency of what the British Council does with what we are trying to do on the Trade & Investment front, or more generally in the projection of the British image around the world. I believe that has now changed. There is now a close dialogue with UKTI; I do not think that was always the case, but it is there now. I meet regularly with the chairman and the CEO of the British Council.
When I was in Mexico with the PM, I opened their new offices in Mexico City. I visited their offices in Thailand a few months back, where they are, as Nick has explained, developing a training of teachers programme, because it is obvious that is the way you have to go if you want to reach out to very large numbers of people. The market is there; there is recognition of the value of British English as a base for education. There is recognition that people want that and not necessarily only to be reliant on the main source of supply of English language, which is, of course, America, one way and another. We do need to work at this, and cannot afford to be complacent about it at all.
Q155 Paul Blomfield: It is encouraging to hear what you are saying about working with the British Council. Taking up your earlier point about the need to understand the opportunities, I think the UUK did play a very important role in winning those 10,000 students in the Science Without Boarders programme. When we were in São Paolo we were talking to the British Council around that programme, and there was certainly misunderstanding about the way in which additional language requirements-the need for Brazilian students to up their language skills before participating in UK higher education-could fit within the visa regime. The offer initially was kind of scaled down to fit a 12-month window, and there was not an understanding that it was possible to add the three-month additional language requirement to that period. How does that sort of miscommunication break down, because the British Council in that context was a key line of understanding between us and the Brazilians?
Lord Green of Hurstpierpoint: It sounds like we have some work to do in Brazil
Q156 Paul Blomfield: If I could just move on to a different subject, in terms of the way the UK business approaches the Brazilian market, we picked up that the former Brazilian UK Ambassador, Barbosa, said, "In a very open and competitive market, UK business companies lack aggressiveness." What do you think? Is that right?
Lord Green of Hurstpierpoint: I have heard him make the comment. I have found, in many of the countries that I have been to in the 18 months I have been doing this job, that people say two things in succeeding sentences. Firstly, how welcome the Brits are; I have not had a single place where you have had to beat the door down to get a hearing. They also respect Britain. They respect Brand Britain is the way of putting it. They respect the quality of services that we bring, and the integrity of the business approach. They like the creativity of a lot of British design, etc.
Then in the next breath they say, "It is a pity we do not see more British businesses; we see so many Americans, Germans, French, Italians, Koreans, Chinese." You do hear this. In country after country-and it is true of Brazil-you find that if you look at the investment rankings, we rank very high. If you look at the trade rankings, we are not in the top 10. There is an opportunity in the way in which Britain presents itself around the world. I think I would like to look at it as the glass is half full. This means there is an opportunity; we are very welcome.
I take from that one thing: the importance of investment, outward foreign direct investment, is very important in this economy. A considerable amount of that is concentrated in certain sectors. Oil and gas is one obvious one, Brazil being an obvious example of that, but it will not do alone, and we need to encourage more British businesses to get out and look. That is an important part of the work of UKTI, which is why there is a focus on increasing the budget for trade fair attendance-which we have had in place for a year or so, and we have pushed the budget up this year, and will continue to do so next, assuming the money is there-and leading trade missions. Work is also being done in this country to encourage SMEs to look at the opportunities and to ensure the networks of support for them here in this country are as high quality as possible. That work is profoundly important to overcoming that sense that the British may be slightly less adventurous in some sense than some of our competitors.
Q157 Paul Blomfield: It sounds like you are putting the tools in place, but how do you get the cultural shift for UK businesses to take advantage of it?
Lord Green of Hurstpierpoint: I do not think there is a magic wand you can wave. Repetition, repetition, repetition is essential at every level. I talk myself hoarse going round this country holding sessions with not only SMEs themselves but their supporters and networks: banks, lawyers, accountants, chambers, trade associations.
My constant theme is that we have a collective challenge in this. The Government has got to get UKTI as well honed and focused as possible. We have to make sure UKEF has the products and services that are relevant to SMEs. We need to make sure the Foreign Office is well attuned to its commercial diplomacy and prosperity agenda responsibilities. I believe we are making good progress under all three of those headings, but ultimately that is necessary, not sufficient.
It does bring me back to something the Chairman was asking about earlier, and I think is important, which is the structure of support in this country for SMEs. We have to encourage more SMEs to get into foreign markets, and we have to encourage them to spread their wings, those that have crossed the Channel to look further afield for all the obvious reasons: that is where the fast growth is. We have some ground to make up it appears, compared with our European competitors.
Q158 Chair: You mentioned trade associations earlier: there does seem to be an uneven level of consistency amongst the competencies of trade associations. What do you think could be done with them to help British business have a more consistent level of support?
Lord Green of Hurstpierpoint: I have attached a lot of importance to strengthening the dialogue with the CBI and the British Chambers of Commerce in particular, and both of them are very willing participants in that dialogue. For example, John Cridland, the Director General of the CBI, and I led a joint mission to Turkey three months ago, which was deliberately focused on British mid-sized companies. They handpicked the delegation, with UKTI support, and we are working on a similar venture to Russia later this year. I have had conversations with John Longworth about doing similar things with the British Chambers of Commerce.
The BCC is looking at an event in the autumn with UK chambers to focus on an export week. These are the kinds of answers, Chairman, to your question; there is no single magic wand. I do not believe that we can go down the German route of passing an Act of Parliament compelling British companies to belong to a chamber; it does not feel like this country. Nevertheless, we have to slog away at getting more and more of these networks around the country clearly engaged in the export challenge, particularly focused on SMEs.
I was with a group of SMEs from the South East at a lunch recently; there were some 15 to 20 there. They were all exporters, and very young companies-very imaginative, vibrant exporting companies doing very well. I asked them how many were members of their local chamber, and the answer was three out of the 15 to 20. This tells you that we do not have this matched up in this country as well as the Germans do, and as well as we could do. There is a lot of work to do, but if you ask me what single measure is going to get us from A to B, I do not think there is a single measure. This is going to take quite a lot of work and it is a big part of my focus. You are right, Chairman, let us be honest: the quality is very variable.
Q159 Paul Blomfield: Just one final question, which is on a similar theme. The BNDES told us that there is more scope for UK business to set out a strategic vision for how it can work with Brazilian firms to mutual benefit, particularly in the services sector. How could you go about helping to achieve that objective?
Lord Green of Hurstpierpoint: The important next step is the CEO forum, which has not yet met. The intent was that it would have its inaugural meeting when either President Dilma came here or the PM goes there, and I still hope that will mean we can do this in the not too distant future.
Q160 Paul Blomfield: I was going to ask you later on exactly why it has not met.
Lord Green of Hurstpierpoint: That is the reason.
Q161 Paul Blomfield: That is the only reason?
Lord Green of Hurstpierpoint: There was an intent that the inaugural meeting be synchronised with one or other head of government making a statement to the other. It has taken longer than it should have, to be clear. What is the case is that the membership of that is a very high level group of people. Once that gets going, as has been the case in Turkey and India and elsewhere, it will then set up work streams. It is within that context that business ought to be pursuing agendas of the kind you have mentioned. If the view of that business community around that table were to be that an important priority is a worked-out, detailed services strategy, for example, then you would set up a work stream within the context of that forum to do that, which is what we have done in Turkey and elsewhere, with I think reasonable success.
Q162 Paul Blomfield: Given the importance you place on the forum, are you frustrated that it has not been possible to coordinate diaries, given the strategic importance of Brazil?
Lord Green of Hurstpierpoint: I alluded earlier to the fact that we are light on structured engagement with Brazil. I like to believe that we will have sorted this problem before year end.
Q163 Chair: Thanks. Can I just go on to procurement? It was mentioned earlier. We have feedback from a British company out there that, in effect, dealing with the private sector was not too bad, but dealing with the public sector-and we have to recognise a lot of the potential export market is with public sector contracts-was very much more difficult. Do you think that is a cultural or institutionalised problem, or that it is there, in effect, to try to put foreign companies at a disadvantage?
Lord Green of Hurstpierpoint: It definitely puts foreign companies at a disadvantage, and it is explicitly designed to promote local industry. All of the head contracts for the World Cup have gone to Brazilian companies. A series of measures have been passed in recent years, from the Plano Maior of August last year to other arrangements that have been put in place, that set up explicit or non-tariff barriers. It is a reality of the present Brazilian scene.
You can see one of the reasons why they have moved in that direction, which is the strength of the Real; they are worried about the strength of the Real, and if you look at the exchange rate, the Real has kind of gone up against the dollar pretty consistently in the last three or four years, and that gives them a source of concern. It is there objectively.
Q164 Chair: I was going to ask you if there was a way of working with the Brazilian Government to make life simpler, but I suppose if the whole objective of the way they do it is to reinforce the position of their own industry, that makes that almost irrelevant. Is there any scope there, do you think, Sir?
Lord Green of Hurstpierpoint: Clearly it is the responsibility of the British Ambassador and the Embassy to go on hammering away at the case for more liberal trade. We, the British, for many decades have been strong proponents of open markets. We would have wished to do a Doha Development Agenda Round last year. We would have wished it to be possible to make substantive progress with an FTA with Mercosur. Doha we know about, and, frankly, the position on the Mercosur FTA is not looking good at the moment.
Nevertheless, we should never give up, and it is part of Alan Charlton’s job to be hammering away at this issue, and to be addressing specific market access issues on behalf of British businesses. I am afraid that, Chairman, you are right; this is not just a matter of bureaucratic complexity and ineptitude. No, this is partly deliberate policy.
Nick Baird: On the issue of major public sector procurements, it is pretty clear that the Brazilian companies will get most of those, so we need to box clever in our context. One of the things that we are seeking to do is to introduce British supply chain companies to main Brazilian contractors, to make their offer, as it were, to their Government more competitive, because the supply chain or the consultancy support they have makes them better than their Brazilian competitors. That has produced quite a lot of very good concrete outcomes, which we can brief you on.
Q165 Chair: We talked about British visa rules; Brazilian ones cause problems I believe. I am told that they require re-application every three months, which can cause problems for British businessmen abroad. Is there any prospect of persuading the Brazilian Government to be more flexible with that?
Lord Green of Hurstpierpoint: I do not know specifically. We should look into it, clearly. Any visa discussion always becomes a reciprocal one, of course, which will not make the conversation easy for us. Again, on a continuing basis it is the job of the Embassy to work on behalf of British interests. Let me undertake to look into that.
Q166 Chair: Are the same visa restrictions applied to other European countries?
Lord Green of Hurstpierpoint: I do not know. I would have to look into that.
Q167 Chair: I think it would be helpful to know that.
Lord Green of Hurstpierpoint: Let me look into that and I will get you an answer, if I may.
Q168 Mr Ward: When we were there we were shown a publication called Doing Business in Brazil, in which it states, "UKTI does not usually advise companies new to international trade to start with Brazil." Now, when you look at the opportunities there, and we understand the complexities-we have certainly heard a number of examples of how difficult it was to trade-is that really a good message? If my local business in my constituency goes along and picks this booklet up, it would just go somewhere else.
Lord Green of Hurstpierpoint: I think we all understand why there is an element of truth in it. I think we should look at whether it is a wise thing to say in a brochure.
Q169 Chair: I was going to say, in view of the difficulties that we are having to get SMEs in particular to export, it is not the most inspirational opening line.
Lord Green of Hurstpierpoint: No, it is not. I think we should look at that and fix it. It does not sound like that has been through the most proactive communications approach.
Q170 Chair: Yes, thanks. Can I just go on to another question? Again, it is back to the procurement issue: the local content rules. It is evident in many cases that the best thing to do is for a British company to establish a presence within the country, which, in itself, can present a real challenge to that company and a whole range of risks. Within, if you like, the spirit of the local content rules, which we recognise that all of the Brazilian companies are going to uphold, is there a way of establishing a dialogue with the Government to, if you like, find ways of mitigating the risks that are there for British companies if they go down this route?
Lord Green of Hurstpierpoint: I think the answer must be yes. It will be a dialogue that we ought to expect the Embassy to be conducting on behalf of the Government. It is almost certainly going to be one of the principal concerns that will come out of the work of the UK CEO forum, once that gets going. UKTI should provide active support for that. As to how much dialogue is going on currently, I suspect nothing very structured, but it is a fair challenge, and we should seek to do what we can do in this, recognising that this is not, as I said earlier, just bureaucratic complexity on their part; this is deliberate.
Q171 Rebecca Harris: We heard that the double taxation agreement with Brazil is probably unlikely to be forthcoming until they are themselves a significant overseas investor and it becomes in their interests to talk about it. UKTI had a target of 20 major foreign direct investment opportunities from Brazil. Do you think that, if that target is achieved, it would enable discussions on the double taxation treaty to accelerate?
Lord Green of Hurstpierpoint: It is a very interesting point. The more investment we get here, the more there is a lobby on their side for progressing this. So far the amount of Brazilian investment in this country is relatively minimal. They barely register on the scale. At one level it is not surprising; you do not expect an emerging market to be a big exporter of capital. On the other hand, there are other emerging markets that are significant investors in this country, and there are some big Brazilian companies. We have some work to do to encourage more investment in this country, and it is an interesting point that the more success we have in that, the more we build up a lobby on their side for a double taxation agreement.
I should say that this issue has come up quite recently in official discussions in Whitehall about whether we should bring the priority of a DTA with Brazil up the rankings and get to work on it. But I do not want to mislead: there are no current discussions with the Brazilians on a double taxation agreement.
Q172 Rebecca Harris: Just as an aside, do we think that the target of these 20 major investments is going to be met by UKTI?
Nick Baird: 20 major investments will be challenging currently, for all the reasons that the Minister says; the Brazilian economy currently is structured in such a way that it makes it quite difficult relative to other countries for Brazilian companies to establish more overseas, and culture is a factor. In terms of simply the number of inward investment projects we are achieving our targets, but if you make them major investments then I think that is quite challenging.
Q173 Rebecca Harris: It became quite clear to us that the taxation rates for repatriating Brazilian revenues were quite a significant barrier to entry. I wondered if that was being reconsidered and looked at.
Lord Green of Hurstpierpoint: This is part of the double taxation agreement issue.
Q174 Rebecca Harris: Mr Gornsztejn of the Brazilian Development Bank told the Committee a few weeks ago that no one from UKTI had been to speak to him about foreign direct investment. We thought that might be quite surprising, given that BNDES has colossal investment assets. He is sitting here; their principal overseas branch is based on London. It seems a bit of a missed opportunity that no one has been to have a chat with him about it.
Lord Green of Hurstpierpoint: It is. We should put that right.
Q175 Rebecca Harris: Has it just not been on the radar-just not been considered?
Lord Green of Hurstpierpoint: It should have been.
Nick Baird: No, it should have been. As you rightly describe, when you look at it against a whole range of other inward-investment priorities, people inevitably feel that this is more of a slow burn-a long-term success likelihood. But it is crucially important for wider reasons.
Q176 Rebecca Harris: Given that he seemed surprised by it, it looks like there is a definite opportunity there.
Lord Green of Hurstpierpoint: Of course. We should do.
Q177 Chair: Given the Government thrust to get foreign direct investment here and ally that to the potential that it offers for change in the Brazilian double taxation regime, I would have thought it a fairly high priority.
Lord Green of Hurstpierpoint: I think we will have to take that point away. It is clear you are right.
Q178 Julie Elliott: During our visit we heard a lot about the importance of having a local presence to develop businesses and the possibilities of businesses clustering together to support each other in those very early stages. Could UKTI assist in providing some kind of shell or cluster offices, or something of that nature, to help support businesses get started and pool the operational expenses of getting into Brazil?
Lord Green of Hurstpierpoint: We have done this in a number of countries, and most certainly there has been a rollout of this-a kind of launch pad-where basically you are making offices available for a period of time. We have got some of them open, and Brazil is an obvious one to look at. We have six consular presences around the county, and the Ambassador is looking at the possibility of appointing honorary consuls in some other centres in Brazil, who would have a commercial focus. This is something we are looking at in Brazil and Turkey; we do it in the US. Both of those are measures that we are actively looking at for Brazil and will help support SMEs who do go there but need that derisking, both in a financial sense but importantly, of course, also in an operational sense of getting going.
Chair: Nick, you looked as if you were about to add to that. Did you wish to?
Nick Baird: I would simply say where we are proposing to add honorary consuls. After the six cities mentioned where we already have consuls, we are proposing to add honorary consuls in Curitiba, Manaus, Vitória, Fortaleza and Salvador, which are all major cities where we assess there are big British business opportunities.
Q179 Chair: Can I just go on to a broader issue: language and culture? Repeatedly we were advised that the lack of Portuguese-speaking British people, but British businessmen in particular, was a problem, and that British business, whereas it may be commercially quite flexible, is often not culturally flexible. I saw an interesting example; Lord Green, you were at the same event as I was in the Black Country when I had a local businessman extolling the virtues of exporting, and telling other businessmen, "Don’t worry about language; English is the business language." That particular view-I would stress that it did not come from you or the Department-does not sit very comfortably with the sort of experience that the Committee has abroad. What do you think can be done to raise the level of cultural understanding, and also the speaking of Portuguese in this country? Do you think there is potential of working with the significant expatriate community that we have here from Brazil?
Lord Green of Hurstpierpoint: I remember the event, and I remember that comment being made. It is partly true and partly not true. I doubt if there are any more American businesspeople doing business in Brazil who speak Portuguese than there are Brits-or Germans, come to that. I used to, in my previous incarnation, have a Portuguese colleague, and I asked him, how does Portuguese-Portuguese play in Brazil, and he described it to me as being roughly the equivalent of an Etonian turning up in Texas, i.e. you can recognise the language, but you can certainly tell they come from somewhere else.
Foreign language teaching has been in decline in this country, and I personally regret that. I think it is a problem for us in terms of commercial competitive advantage. Even if English is the business language of the world, it still clearly helps, even if it is only a question of a few courtesies. You do not have to be able to conduct the whole contract discussion in their language, but just the ordinary courtesies help with cultural relationship building. I think we face a challenge, not only about Portuguese but about Mandarin and, very importantly, about Spanish, of course. Spanish is the second most widely spoken business language in the world after English, and one of the complexities of Latin America is that it is not all Spanish; there is Brazil that speaks Portuguese.
Chairman, I think your notion of using the diaspora here in some structured way is an interesting one, which I would like to take away. It is part of a wider theme; I think we have underexploited diaspora communities, whether it is India, Bangladesh, Pakistan, Nigeria, and Brazil has a big diaspora community here. I would like to take that thought away and see whether there is anything we can build on, not only from a language point of view but that of business connectivity. We have to do some homework to understand what the diaspora consist of, but I am happy to undertake to do that.
As far as schools are concerned, it is my view that foreign language is important. What does he know of English who only English knows? There is a really quite general importance of being able to have some competence in some foreign language to equip a young person for the 21st Century.
Q180 Chair: The London Chamber of Commerce and Industry has suggested that we go back to having a "national languages for export" campaign, which was previously run by the UKTI. Have you any views on that?
Nick Baird: It is certainly the case, as the Minister says, that having within businesses good language skills is definitely commercially important. What we focus on currently is ensuring that businesses have access to very good translation services, and that we signpost and support them through our own teams across the world, who are obviously generally locally employed and by definition speak the language. It is a very interesting idea that we would return some form of campaign around this, and I am very happy to look at that.
Q181 Paul Blomfield: On a different theme, the work of UKTI, we heard many very positive things, particularly from some of the big players in the Brazilian market. By contrast, the Federation of Small Businesses told us that there was a very low level of awareness of your services, and an even lower level of take-up. You are nodding, Nick, and clearly recognise that is an issue, but what are you doing to address that?
Nick Baird: The statistic that I heard that I was least proud of when I became Chief Executive was that, of those companies that do not use UKTI, only 37% even know that it exists, as it were. There has to be a massive campaign to increase that. The core of this is around the National Export Challenge campaign, which the Prime Minister launched last November. Rather than simply-although we did this as well-trying to reach as many customers directly as we can, we use multipliers, who themselves have large SME client bases, to spread that message for us.
It is very much our intention and my hope that, for example, in the big banks, every business relationship manager across the country will know about UKTI services, and when they are engaging with SME customers, irrespective of whether it happens to be a conversation about export, they are aware of that and, if they believe those companies are exportready, they are putting those messages out. Through that multiplier effect we will reach many more companies than we can possibly do directly ourselves.
The other thing I think is really important is the channels by which we do that. Up until now we have had a weak digital offer, and we are substantially improving our digital offer. I have just employed a new marketing director from the private sector, who comes from Cisco, who is obviously very expert in that area. That is a particular area that we will be looking at, both in terms of spreading the message about our business but also talking to businesses about online exporting because, again, that is an area that is underexploited by British companies, and it is less risky in many cases.
Q182 Paul Blomfield: How are you going to measure the success of those measures?
Nick Baird: Sandra Rogers, my new Marketing Director, is putting in place measures that will precisely measure how many companies are aware of our services, how many companies then use our services, and we will obviously act on the basis of that to continue to improve that campaign.
Lord Green of Hurstpierpoint: We are publicly committed to doubling UKTI’s client base by 2015 from 25,000 to 50,000. If we do not achieve that, we will know that we have failed. That recognition number that you quoted from the FSB is easy enough to measure and, frankly, if we are not moving up the scale there, given the measures we have put in place over the last year or so, I would be dismayed and something would be wrong.
Q183 Paul Blomfield: On a slightly different theme, in terms of how you assess where you deploy your resources, one of the conversations we had on a number of occasions with your people in Brazil was about how you focus on those companies that are going to be of most net benefit to the UK economy. For example, we heard of one company where you did a lot of work-I think it was a shoe manufacturer-and you helped them relocate their business to Brazil and they became an exporter to the UK. That clearly is not of much benefit to the UK economy. We had a great morning floor walking with your team there, but there did not seem to be any processes in place to evaluate where help was targeted to maximum benefit. Is that fair?
Nick Baird: No, I do not think it is. I think it is fair historically; I do not think it is fair going forward. To give you one example, we are leading a big campaign around getting more mid-sized businesses to export, and those who do export to export more. That is based on economic analysis, both by us and the CBI, that helping businesses in that cohort is particularly effective in terms of growth. It is a cohort where, in terms of international comparisons, we perform particularly badly. We compare our mid-sized companies with German Mittelstand companies: they are well behind in terms of international activity, and these are companies that, broadly speaking, are well developed, quite mature and could be doing a lot more in the international market. We have a big focus on those.
Q184 Paul Blomfield: That is sectoral, but very specifically in terms of business propositions, quite understandably the Brazilians are encouraging knowledge transfer, local content and all of those issues, but to the point where for some UK companies they might be making a strategic decision that, quite rightly, in the interests of their company, if not the UK economy, significant relocation to Brazil is the right way forward. Does it necessarily make sense for UKTI to be supporting them in that process?
Lord Green of Hurstpierpoint: I would not have thought that was a very high priority, no. There is a wider point that is important to underscore: it is our job to support British outward investment. It is part of the long-term strength of a commercial relationship between another country and Britain to know that British investment there is taking place on a profitable basis, and there will be inevitably times when this will take the form of investing in things that could theoretically be done in this country.
It is not to say every single time that this happens we should be spending taxpayers’ money on supporting somebody outsourcing, but, for example, Rolls-Royce relatively recently opened a whole new production facility in Singapore. I do not regard that as some sort of British failure. I think it is an inevitable part of the process of a large company that has a global remit ensuring that it has its operations and its competencies distributed in a meaningful way. In my view, we should support that kind of thing, and over the long term, if they have got it right, the effect on the dividend stream will show itself up in the current account, if not in the trade account.
To take a completely different sort of example, Tesco have invested successfully in a number of countries. They will not thereby have much direct effect on British exports, although one of the things we have been talking to Tesco about is whether we can meaningfully help them to engage with British suppliers of produce. I would not want this discussion to be interpreted as saying we somehow should not be supporting outward investment, because that would be a big mistake.
Q185 Paul Blomfield: That is not what I was suggesting, but is there a case for some sort of triaging support to concentrate on those companies that might be giving most benefit to domestic tax revenue?
Lord Green of Hurstpierpoint: Other things being equal, yes, we should not be focusing on a limited company who is only interested in off-shoring and establishing something there simply to reduce their cost base or whatever. It does not sound like a high priority for UKTI.
Q186 Paul Blomfield: Is that the way, in fact, UKTI staff on the ground are operating? We did not get that impression.
Nick Baird: It certainly is. What I would say is it is not always obvious when you first engage with a company what they are then going to do with the advice that you give them. I do not know the individual case, but I imagine that the shoe company, when we first engaged with them, was looking at exporting shoes to Brazil. The fact is that they then moved on to a different model-these things happen. I would certainly second the Minister’s point that investing overseas is not necessarily a bad thing for the UK, because of repatriation of profits.
Lord Green of Hurstpierpoint: If I may put it positively: it is a good thing.
Q187 Paul Blomfield: Yes, and I was not contesting that for one moment. One other issue in relation to SMEs: the FSB and the British Chambers of Commerce have argued that the current charging regime is a disincentive to small businesses, and that perhaps we ought to move to a system of payment by results-they pay after their interaction with UKTI has led to a successful business development. Is that feasible?
Nick Baird: There are a number of things that we want to do with charging going forward. We think we should continue to charge, partly because it is a good way of ensuring that you filter down to people who are serious about engaging with you, as it were. If we did not charge, there is a risk that we would get too many companies who never really intended to take it forward.
What we certainly intend to do is move to a situation where we do not charge for the introductory process, as it were. That is already the case in the UK. Our introductory services, Passport to Export, Gateway to Global Growth, delivered by our teams in the UK are not charged for. What we found overseas is that people doing the OMIS reports tend to charge, in some cases, for the first cup of coffee, etc., but that must not be the case. The first discussion with the company, where both sides assess whether they can actually make use of this activity, will not be charged for.
In terms of paying by results, we have looked at that as a possibility, but frankly you would create an administrative nightmare for yourself if you tried to achieve a process of payment by results. How would you assess whether the result was really produced by the UKTI intervention, etc? What motivation would a company have to say, "It was the UKTI report that helped us," as opposed to something that we had done separately. It would be difficult to achieve a system like that, but we are very conscious of the issue, particularly currently for small companies. It is an addition to the cost of exporting for them, so we are constantly looking at ways in which we can make that less of a burden.
Q188 Chair: Can I just develop this point slightly? At a previous session we had John Coleman from the British Chambers of Commerce, and he made the point that he thought British businesses would be prepared to, if you like, pay on the basis of business won as a result of UKTI support. Do you think that reflects your feeling about export companies, and secondly, could you work out a model by which that could be done that might be acceptable to business and provide a very useful income stream for UKTI?
Nick Baird: As you say, it is theoretically possible to have a model of that kind, and I am sure that many businesses would indeed pay for a payment-by-results approach, but if you begin to think about how you would structure it, it is genuinely very complex.
Chair: Yes, I understand that.
Nick Baird: It is genuinely very complex to work out where you would start. Let us say a company got a £10 million contract, and the UKTI intervention was a market research report on the demand for the product in that market. Would that be a genuine contribution to them getting that contract, or would it not? How would you make those forms of assessment? It is really, really difficult. My worry is that if we went down that direction we would bog ourselves down in a huge amount of process, when I want my teams out there helping businesses.
Q189 Chair: I understand all that. However, since the comment was made by the British Chambers of Commerce, it might not be a bad idea to ask them to explore it further.
Nick Baird: Yes, and we work extremely closely with the British Chambers of Commerce and the Federation of Small Businesses, so we are very well aware of their views in this area.
Lord Green of Hurstpierpoint: We should commit to talking this through with the BCC and seeing if the conclusion that Nick has just stated is one that resonates with them when they think about the detail or just possibly there is a model where you can do it some of the time. I do not know. I certainly share Nick’s view that we should avoid administrative complexity. Clearly this is taxpayers’ money; this is publicly accountable, and therefore the risk of very detailed documentation and decisions becoming an administrative complexity is something we should be very careful about.
Q190 Chair: I quite understand and recognise the complexity, and, shall we say, I am on UKTI’s side. I am looking for a way in which they may provide more resources for UKTI.
Lord Green of Hurstpierpoint: Yes, please.
Q191 Paul Blomfield: Just one very straightforward final question from me: we had a meeting with investors in São Paulo, who told us about roadshows they were bringing to the UK. Is there any progress with that? Is it possible to expand that sort of initiative beyond the relatively limited scope of that particular one, which is only going to London, Newcastle and Manchester? Where are we with that and what opportunities are there in the future?
Nick Baird: I strongly agree that doing more in the roadshow area is crucial. I would say almost the most important thing for us to do is get the horse to water, and relatively speaking getting it to drink is easier. Getting the message out much more widely across this country, both about the services we have and the opportunities in particular markets, is critical. We are doing a great deal more of this ourselves, and we can certainly give you a paper on across the world how many roadshows we are doing, and so on and so forth.
The really important thing as well is using multipliers, so it is not always roadshows by us. We will have much more effect if we are working with banks to do their roadshows, working with large consultancy companies to do their roadshows, working with the promotional organisation, as we do with Mexico, for example, where we were two weeks ago, to do their activity in the UK, so that this is multiplied and we have far more organisations doing this. The British Chambers of Commerce, which we mentioned earlier, are now increasing in this space and want to do more, and we will be running an export week in September. The work we do with MPs, talking to businesses in their constituencies, is a really important part of this. It is critical we get that message out about all the key markets in the UK.
Lord Green of Hurstpierpoint: We can use Ambassadors, when they are here on leave or for consultations, by getting them to add a few days so that we can take them round the country and talk to groups of businesses about what it is really like on the ground in the country they represent.
Q192 Chair: Just on that last point, I was slightly mystified by the location of the roadshows: London, Newcastle and Manchester. Fine-I am not mystified why they are going there-but what I cannot understand is the omission of Birmingham at least, as Britain’s second city.
Lord Green of Hurstpierpoint: I do not know why that was not included. I cannot think of any good reason why that would not have been included.
Paul Blomfield: And Sheffield as Britain’s fourth city.
Chair: I was not going to steal your thunder, Paul.
Lord Green of Hurstpierpoint: Or Leeds and Sheffield, and Glasgow and Edinburgh, dare one add?
Q193 Chair: While in no way wishing to detract from the locations that have been chosen, I find this a curious omission.
Lord Green of Hurstpierpoint: I cannot think of any reason for it.
Q194 Mr Ward: One of the first things we looked at as a Committee two years ago was the newly forming LEPs, and we looked at what functions were to be at what level. There was an argument that, at various trade fairs, the RDAs were bumping into each other and sometimes competing against each other, so this was to be lifted up. What is the role now of LEPs in working with UKTI on exports?
Lord Green of Hurstpierpoint: The role of LEPs is essential. They seem to me to be bedding down around the country, beginning to get into their stride. We have MoUs with all of the LEPs, except for the London area. Yesterday I was in Carlisle and met the chairman of the Cumbrian LEP. I think that they have an important role to play as connectors. I would require that every UKTI regional director knows the chairs of the LEPs in the region they cover well, and interacts with them regularly. I think in some cases, and this goes back to an earlier conversation, there is work to be done to ensure that LEPs and chambers coordinate closely, and they are a key part of the multiplier network that we were talking about. Those that I have met are gung ho to do this. It is not as if one is having to break the door down.
Q195 Mr Ward: Have we lost anything through the demise of the RDAs?
Lord Green of Hurstpierpoint: It was before my time, so I do not have any direct experience of how they were working. The general perception is that they had become very cumbersome and bureaucratic. What I like about the LEP concept is that it is a small group of people that brings together business folk, local authorities, and in many cases the relevant university; and they seem to be very focused on what they need to do for their business communities. The absence of a lot of bureaucracy around them should make them very effective in their regions. They will be more effective to the extent that they, chairs of chambers of commerce, in particular those groupings, work very closely together, as well as, of course, local accountancies, local bank operations, local law firms. These are all the kinds of groupings that have networks of SME contacts, and working together they need to play that role.
We discussed earlier the issue about the chambers. We said, and I think it is true, that they are very mixed in quality. If I look at the outstanding ones, for example, in the North East this is an area where this works very well: we have got the interaction of a LEP, the chamber of commerce and UKTI where we want it to be. Is that true everywhere? No, not yet.
Q196 Mr Ward: The other question was to do with the additional funding that has been received by UKTI; I believe it was £45 million. What have you done with the money?
Nick Baird: One key part of it is around the new mid-sized business programme, which I mentioned earlier; £10 million is for that. Over three years we will help 1,500 more mid-sized business companies either begin to export or export more, and that will be a very intensive process. It will be effectively having a virtual export manager. These will be extra individuals we will employ in our regional teams who will work very closely with those businesses, because we believe that will have a particular impact.
The remaining £35 million is allocated to a number of smaller programmes, as it were. It is partly to increase the budget for our trade fairs. It is partly to increase the number of introductory services we do within the regions. It is partly to partner with chambers, trade associations-the best chambers, the best trade associations-who themselves have innovative ideas to support exporters, and we will put money in alongside that.
Q197 Mr Ward: In terms of the increasing number of businesses that will be involved, how will this be done? Is this outreach work? Are these people sitting in an office waiting for businesses to come to them, or are they going to businesses?
Nick Baird: It is absolutely critical. We have rearranged the way we do our regional contracts with our teams to incentivise teams to go out and achieve more clients. Getting out and reaching more clients is fundamental to what they have to do. As I have said before, that is not simply doing it directly but being clever about the use of intermediaries who themselves have large SME client bases. We have to achieve a doubling of our client base from 25,000 companies to 50,000 companies, and I am confident we will do that. But we will certainly not do it without being both proactive in terms of going out to get more companies, and being clever about multipliers. The other area that we have not been good at in the past but are now introducing firmly into the culture is getting referrals from companies who have had a successful experience of UKTI on to others.
If I could pick up the LEP point, one of the things we have found particularly useful with LEPs, and it was the case on the Turkey trade mission, is that if you bring a businessman from a LEP on a trade mission, they automatically see themselves going back from that country and proselytising to other small businesses in their region. That is one specific way in which LEPs have helped us on exports.
Q198 Mr Ward: In pure practical terms, if you have a business on an industrial state in BD3 in Bradford, how will it know about this? Will it receive mailshots? Will there be local roadshows? Will it be through the chamber if they happen to be a member of a chamber? How will they know?
Nick Baird: All of those things in different ways. We have good data on companies region by region associated with our individual regions. We know who exports and who does not, and we have a very good idea from our data as to those who could be exporting but are not yet exporting. We will obviously focus very heavily on those. We will do it through digital means; we will do it through the intermediaries that we will use; we will do it through direct calls from our teams; we will do it through chambers; we will do it through roadshows, and inviting people.
Lord Green of Hurstpierpoint: There are two things to add to that: one, you should expect a UKTI regional rep to be out of the office most of the time, going around their parish, and their trade advisers similarly; some of the trade advisers are part time, some are fuller time, but they should be out and about. There is a lot of detailed work that underpins these networks; we have talked a number of times this morning about the importance of the various networks that support SMEs. As one example of the kind of detailed work that has gone on, I have here the export guide, which was produced by UKTI with some external support, which we have made available on a white label basis. There are now 99 different organisations that have taken this, and they will then brand it for themselves. They are all sorts of companies: there are 15 accountants, four banks, 21 chambers, LEPs and EDAs, 28 consultants and service providers, 19 law firms, 12 trade associations, and so forth. This is detailed guidance on what to do, and clearly has all the points of contact for UKTI.
This is the sort of work that underpins strengthening these networks, which I believe to be, in the medium and longer term, crucial to our overall success in this. I have said it before, and it is so important it is worth saying again: if we can find a way of getting a much more seamless cohesive offering of support to SMEs to get engaged internationally, whereby UKTI plays its part and UKEF plays its part, and others like chambers as well as accountants, lawyers, bankers, and LEPs are all cohesively involved, that will be our approximation to the German structure. I believe that if we want a real step function change in the export propensity of this country over the next 10 years, that is what we need to achieve.
Q199 Mr Ward: You mentioned the Germans; I was going to say it, because we got a distinct impression that we were very Britishy-amateurish in much that we do. With Germany being the obvious example of a more professional and systematic approach to it, are we moving some way towards that?
Lord Green of Hurstpierpoint: That is what I am seeking to achieve. It is variable. It is not fair to say it is all amateurish. Some of it is not; some of it is outstanding-some of it is world class. I mentioned the North East; I think the way they do it there is superb. It is a very mixed situation, and some of it could have been reasonably described as not particularly outward looking, or dynamic, or professional.
Q200 Julie Elliott: It is nice to hear you praising my region. On export credit, the British Exporters Association believe that export finance procedures should be simplified, for instance, by changing the current 30-page-long application form, which does sound a bit over the top. They also told us that there is a lack of direct funding product, that take up could be better, the awareness could be improved, and that banks still have the ear of UK Export Finance too much. Have you considered their views and, if you have, what are your thoughts on the issue?
Lord Green of Hurstpierpoint: Yes, is the first answer, as I always would seek to do. UKEF is undergoing quite a fundamental transformation. We have got the new product range now, and nothing I have seen in the last 12 months suggests to me that there is anything wrong with the product definitions or pricing approach. We are always looking for evidence to make sure we have it right, but I have not found anything that suggests that the product range is not right.
The take-up has been dismayingly little. There is a little bit more momentum now, but it is simply not what I would have expected when we started out on this journey in March or April of last year. They clearly suffer from a lack of awareness challenge, just as UKTI do. What we have begun to do in that regard is to recruit and put in the UKTI regions reps of UKEF, sitting in the UKTI offices. There are now three in place; none have been there for more than a few weeks, so it is too early to tell whether that is going to make a difference, but I shall be watching the impact of those very carefully, and they are under an instruction to get reps into all of the regions. I wanted to have it done by the summer. I think realistically now it will be the end of the year. So far as documentation is concerned, they are committed to looking at their documentation and seeing if they can, indeed, simplify it in the way that BExA have called for.
The banks-what can I say? There is clearly an issue of product awareness in the banks in some cases-not in all cases. In some cases, at the local commercial banking level, there is not enough awareness of trade finance requirements or of what UK Export Finance can offer. That is changing, because a lot of work has been done on that, both by UKEF at their end and by the heads of commercial banking at the banks’ ends. I have held regular sessions with heads of commercial banking, CEOs, on this topic, which is part of a broader issue about investing properly in the business banking competence in the country, and then specifically in the international trade component of that. There is enough evidence that there is not the expertise broadly spread enough through the banks, so there is definitely an issue there.
We have tasked our UKTI folk on the ground to be at least the warning bell in the sense that, if there is something going wrong-if a conversation is not taking place that should, or it is not getting enough quality into the conversation-they should feel free to escalate that and let us know. I have always said that whenever I go on trips I always ask every business I visit: "How does financing work for you?" Sometimes it is perfectly all right; sometimes they do not borrow; sometimes you get the kind of blast that I am sure you all get. I always say, "Drop me an email with the chapter and verse, and I promise to look into it. I am not the banker; I cannot overturn their decision, but I will look into it." In view of my previous incarnation, I have a little bit of experience in this.
To be fair, sometimes they follow up on that. They do not often; I am surprised by the number of times, having had my ear bent, I say, "Well, please drop me an email," and nothing comes through. But there is no doubt that there is an issue with business banking in this country, and there is no doubt that within that there is an issue about international trade finance competence spread through the regions. Now: what is happening? In the case of one bank there is a programme that is being rolled out countrywide whereby all of their commercial banking representatives locally go through a training programme with UKTI on UKTI’s and UKEF’s services. Other initiatives like that are in place with a number of banks. There is plenty of work going on to fix this problem, but it is an issue, and it is important that we address this issue.
Q201 Julie Elliott: It is not just about knowledge, though, is it? They need to start and actually lend money to businesses.
Lord Green of Hurstpierpoint: There is a more general problem there about lending issues, but by definition in cases where we are talking about UK Export Finance offering a guarantee, the whole point is that it de-risks the decision on the bank’s part and reduces the amount of capital they have to hold against it under the Basel III rules. It ought not to be about a fundamental unwillingness to lend, and it is often not about that; it is often about a not sufficiently sophisticated approach to trade finance matters.
Q202 Julie Elliott: The UK Export Finance annual report has received some fairly negative feedback in terms of the year-on-year reduction in business, alleged lack of agility, and poor customer diversity. Evidently there has been much improvement since our last Report, but do you agree that there is still a problem there? It talks about the annual report showing a reduction in business from £2.9 billion in 2010-11 to £2.3 billion this year.
Lord Green of Hurstpierpoint: I would need to look into that. If that is what the numbers show, they must be right. It is very clear, as I have just said, they have some way to go in getting their services known to SMEs. I ought not to comment on that, but looking backwards, most of their business has been rather large, lumpy transactions to do with the defence and aerospace industries. We need to see over time a growth in their smaller, as it were, retail business with small companies in things like performance bonds, working capital finance and foreign exchange cover. Frankly, currently that would barely register in their report; the amounts are in the tens of millions.
Q203 Chair: Before I go on to Rebecca Harris, can I just develop this point here? Earlier you spoke in response to Julie’s question about a lack of understanding at certain levels within the banking sector. Given the complexity of some of the products and the generally recognised inertia in some of our SMEs to export anyway, do you think there is a real problem in terms of raising awareness of the sheer potential of the products that are on offer to SMEs? It would seem there are barriers in communication that need to be addressed if we are to go on to fulfil the potential that is there.
Lord Green of Hurstpierpoint: Yes, Chairman, I do think there is a real problem, or a real challenge. There is not enough awareness. As I mentioned, putting these reps in the regional offices of UKTI is intended to address that challenge. They have been holding enormous numbers of seminars and they have always turned up at UKTI roadshows, particularly on the SME export challenge, so that UKEF has made their pitch. But it is clear that we are starting from well behind where we need to be, and I think it is important to long-term success.
Q204 Chair: If the banks are not even aware of them, then the chances of somebody running an SME being aware of them are greatly limited.
Lord Green of Hurstpierpoint: There is no excuse for the banks not being aware of them.
Q205 Rebecca Harris: In the FSB’s evidence to us, they said that the regional rollout of trade finance advisers was going very slowly; only two out of nine advisers had been appointed. Could you comment on what might be holding up that progress?
Lord Green of Hurstpierpoint: Yes-finding the right people. There is no point in putting somebody into that job who does not have the relevant experience, and it simply has gone more slowly than I would have wanted. As I think I mentioned, I would have wanted them all in place by the half year. We have not succeeded in that. We need to focus on getting them all in place by the end of the year, but it is important to get the right people. One of the recent appointments, by way of illustration of what I mean, is a retired banker who is in his early 60s and decided he rather likes the thought of doing something instead of playing golf, but he has all the relevant experience and is happy to do this for some time-I do not know how long. We have to keep working at this; it has gone more slowly than I would have wanted.
Q206 Rebecca Harris: I would have thought there would be quite a few people of that background who might be available, and perhaps even some more coming up soon.
Lord Green of Hurstpierpoint: We do need quality in the job.
Q207 Rebecca Harris: In our 2011 Report we commented on the considerable extent to which support is given to the aerospace sector. In your annual report it shows this has increased, from 61% in 2010-11 to 79% last year. Do you think that is going in the wrong direction in terms of the support for aerospace?
Lord Green of Hurstpierpoint: That it has increased?
Q208 Rebecca Harris: Yes.
Lord Green of Hurstpierpoint: Why would it be a problem if it is going up?
Q209 Rebecca Harris: Firstly, is it definitely what you need to be supporting rather than, as a proportion of what you are doing, increasing support for other sectors, smaller industries, SMEs?
Lord Green of Hurstpierpoint: In that sense, yes it is. It is as if we should think of UKEF as effectively having two major lines of business. On the one hand you have got the big-ticket long-term insurance of aerospace and defence-type activity, and on the other you have got more of a retail volume business, which is supporting more and more SMEs into the international market. We are barely off the starting blocks in the second, but to be very clear, the support for the aerospace industry by UKEF is critical.
Q210 Rebecca Harris: To follow on from that, in your report you have very little detail of the overall impact of export finance on the economy, which I would have thought would be quite an important thing to be commenting on, whereas the report does seem to have quite a lot of detailed stuff about emissions and waste. I appreciate it would be hard to quantify, but that would seem to me a rather important bit of information and feedback that the report should be focusing on.
Lord Green of Hurstpierpoint: Noted, and I think we should make further comments on that in future reports. It is 0.5% of UK exports in recent years versus 0.3% in 2008. What that tells you is this is not a huge factor in exports. It needs to become more so. One bit of context is half of our exports go to the EU, where UKEF cannot play a role; you cannot use UKEF to provide guaranteed support for exports in the EU under EU rules, except, interestingly, for Greece. Half the market would never be covered by them, so that means instead of the half percent of the available market it is 1%, but that is still marginal.
Q211 Rebecca Harris: Our eyes were wide when we heard that Petrobras in Brazil had received more than £1 billion of export credit guarantees. We also heard that China had granted an even greater amount. We appreciate you have to compete, but from our point of view we are looking at this and we are thinking, "Why, with such a rock solid prospect as Petrobras, is that trade not being underwritten by British banks?"
Lord Green of Hurstpierpoint: That is a line of buyer credit put in place for Petrobras under which British companies, when they win contracts as part of the supply chain for Petrobras, are covered. What is important, under its large-ticket businesses, is that we negotiate more of those buyer credit arrangements, because they are a great financial umbrella for high-value opportunities. There is one other in place with Saudi Arabia for a power plant. There are a total of 10 of those significant lines of credit that I would like to get in place around the world, because they provide the umbrella under which you can then encourage more smaller British businesses to get in, knowing that the credit risk is covered by a line of credit.
Q212 Rebecca Harris: So it is supporting smaller entrepreneurs?
Lord Green of Hurstpierpoint: Yes, it absolutely is.
Q213 Chair: Just before I come to my final question, could I emphasise that in terms of the relative percentage of support given to aerospace and other industries, we do not necessarily feel that the level of support given to aerospace should drop but that the level of support to others should increase. Brazil is a developing economy; it is trying to develop its manufacturing base. Obviously it is very concerned about competition and the challenge to it. There may be an increasing tendency for it to become even more protectionist than it has been in the past. How do you think potential exporters should get round that and perhaps devise processes and approaches that will reassure both the Brazilian Government and Brazilian businesses that they can survive in spite of working with and sometimes against British exporters?
Lord Green of Hurstpierpoint: In many cases, the right strategy for a business is to form a partnership with a Brazilian business. I think that is the most obvious general point I would make. Secondly, I think it is important to do your homework on where the opportunities are and, in doing that homework, take account of the various policy frameworks the Brazilians have in place, which discourage some activities more than they discourage other activities. Thirdly, use the services of UKTI/the British Embassy to help in getting that homework done.
Brazil is not an easy market. I do not think it was wise to start off with that point in that brochure, as we were discussing earlier, but it is a truth that we have to recognise. I do not want to respond to that thought by saying, "And therefore we are going to discourage British SMEs from getting involved in Brazil"; that is not the case, and particularly with those high-value opportunities, there is a framework there within which we can meaningfully engage. I think the sports opportunities are there; I think the offshore one is very considerable, because it so obviously plays to a strength we have and a major national imperative of theirs. There are other sectors we have not talked much about: fashion and the creative industries. There is a burgeoning middle class there with a very big appetite for all of the kinds of things you see in a shopping mall in this country.
Q214 Chair: 20 new millionaires a day we were told. Burberry are doing very well.
Lord Green of Hurstpierpoint: Indeed; the economy in São Paolo is bigger than that of Belgium, and skewed income distribution means there are a lot of people with a lot of spending power there. Therefore, the fashion industry and the creative industries more generally are also significant opportunities.
Chair: Thank you. That is very helpful. We will be putting that together in our Report with appropriate recommendations. I think you may well have got a flavour of one or two of them from the line of our questioning. That is very helpful indeed, and we look forward to seeing how this develops and may well want to interview you at some time in the future to see how much progress we are making. Thank you very much.
Lord Green of Hurstpierpoint: Thank you.
Nick Baird: Thank you.