BEST IN CLASS SIX STEPS TO DELIVER WORLD-BEATING EXPORT SUPPORT DECEMBER 2015
2 Best in class: Six steps to deliver world-beating export support FOREWORD The UK s export performance has been the chink in the armour of our economic recovery, with export volumes flat since 2011 and net trade often negatively impacting GDP. While the CBI has welcomed the government s ambitious targets to double UK exports to 1 trillion by 2020 and get 100,000 more businesses exporting, the CBI forecasts that the UK will fall over 300 billion short of this target at current rates of progress. This lack of progress has put the performance of UK Trade & Investment (UKTI) the UK s trade and investment promotion agency in the spotlight with reform and budget cuts likely in the wake of the Comprehensive Spending Review (CSR) and Autumn Statement. Furthermore, Trade Minister Francis Maude has called for a whole of government approach to supporting exporters, leaving many to ask: what does this mean for UKTI? CBI members are clear that ultimately it is business that does business. But they also believe that government can play a critical role in supporting their international ambitions, by creating a business environment in the UK that makes it easier to access global markets and through the provision of practical support to businesses to help them get into and get on in international markets. With this in mind, the CBI has looked at a range of examples of how export support is provided internationally, across Europe, Asia and the US to find out what we can learn from the competition. Building on our report Business priorities for growing UK exports published ahead of the UK General Election in May, this report identifies six steps that the new government should take as it restructures the way it delivers export support to business. Taken together, we believe these steps will help to make UK government support for exporters best in class.
Best in class: Six steps to deliver world-beating export support 3 EXECUTIVE SUMMARY 1. Create a single online platform for accessing government export support A recent CBI survey found that 28% of medium-sized businesses (MSBs) in the UK had difficulty in identifying opportunities overseas. This isn t helped by the fact that businesses currently have to visit a range of government websites to access the support that s on offer. This can be confusing, timeconsuming and can ultimately put off smaller companies looking at export markets for the first time. Putting this information in one place online and making it accessible on smartphones will make it easier for companies to take these first steps. Innovative examples of how this has been done in the Netherlands and Sweden show what can be achieved. 2. Introduce two new export finance products to unleash the export potential of the UK s Medium-Sized Businesses (MSBs) One fifth of UK MSBs say that a lack of export finance represents a barrier to their growth. UK Export Finance (UKEF), the government export credit agency, has a critical role to play in supporting this group of companies, particularly in frontier and emerging markets where the private market is less likely to provide financing. Introducing a Tender to Contract (TCC) insurance product and allocating a portion of the existing direct lending facility to fund working capital for general pre-shipment expenditure would help reduce the barriers to export for MSBs. Looking further ahead, the German whole turnover policy light financing scheme and Trade Facilitation Scheme in Singapore should be considered as the UK government further develops offering for these companies in light of the recent changes to UKEF s remit. 3. Improve the commercial awareness of UKTI staff by developing more innovative relationships with businesses CBI members have welcomed the appointment of a new CEO of UKTI and Managing Director, Trade who have spent considerable time working for international companies. This reflects an increasing focus in UKTI in recent years on harnessing the expertise of the private sector, with a range of private partners involved in the delivery of UKTI contracts in the UK and overseas. Despite this, many CBI members still believe that more can be done to improve the commercial awareness of UKTI staff through the development of more innovative partnerships with the private sector. The examples from Sweden, where there is strong record of government recruiting from the private sector, to France and Italy, where innovative human resources partnerships have been established, could be instructive as government considers its approach. 4. Protect the sharp end of business support overseas when making departmental savings While it is ultimately business that does business, CBI members think that government has a crucial role to play in supporting businesses that export and invest in international markets. Our overseas network of embassies, which provide political and economic advice to companies about what it is like to do business in different countries; lobby for regulatory changes to improve the business environment; invest in capacity building to support the development of a vibrant private sector; and champion the contribution
4 Best in class: Six steps to deliver world-beating export support British companies make to economic development, are highly valued. As government looks to make savings in departmental budgets, business wants this sharp end of business support to be protected, with savings focused on streamlining support in Whitehall. The Swedish four box grid approach to analysing the attractiveness of international markets, based on an assessment of a range of metrics such as GDP growth, political risk and ease of doing business, should be considered as a way to think about how limited resources are allocated. 5. Examine the US regional model before devolving export support at home There is growing debate about the division of responsibilities between local and national government in providing export support to companies. Currently UKTI delivers export support through a regional network of advisers throughout the UK and in the devolved nations, which is supplemented in Scotland and Northern Ireland by separate agencies, Scottish Development International (SDI) and Invest Northern Ireland (Invest NI). Other local players such as chambers of commerce also provide export support. This patchwork quilt of support for business has developed over time, and has created considerable duplication of responsibilities and complexity. The government is rightly considering how to join up this support more effectively and what the right balance is between national and local delivery. The division of federal, state and city responsibilities in the US is well-established, and should be considered as government moves forward with its plans for regional devolution. The key learning from the US experience is that putting regional differences aside to cooperate and agree a clear division of responsibilities is essential to making business support effective. 6. Create a National Exports Commission to provide independent advice on long-term export strategy The CBI welcomed the Chancellor s decision in 2012 to announce ambitious national targets for growing UK exports. This was important because it demonstrated commitment to long-term thinking about addressing an area where the UK economy had been performing weakly for some time. However, rather than focussing on the sense of ambition, much of the public debate has been about how the targets were developed and whether the government is going to succeed in delivering them. Because improving our export performance is so important to our economic prosperity, it is critical that political point-scoring doesn t interfere with taking the right decisions as a country to meet our export ambitions. To remove these decisions from the political arena, we recommend that a National Exports Commission is created to bring business, economists, politicians, and other stakeholders together to provide independent advice to government on appropriate long-term targets and policy for increasing exports.
Best in class: Six steps to deliver world-beating export support 5 1. CREATE A SINGLE ONLINE PLATFORM FOR ACCESSING GOVERNMENT EXPORT SUPPORT For many businesses thinking of exporting for the first time, the internet is often the first port of call for information about opportunities overseas and available support. Currently government websites provide a platform for a range of useful information. The UKTI website, for example, includes country guides, trade show listings, details of overseas projects that UK companies can bid for and contact details of local UKTI advisers that businesses can contact across the UK. Similarly, the UK Export Finance (UKEF) and Foreign & Commonwealth Office (FCO) websites provide vital information about government export financing support and Overseas Business Risk in different markets around the world. Other organisations, such as the British Chambers of Commerce (BCC), also provide similar services through their Export Britain website as part of a contract in place with the government. CBI members including many first-time exporters are often not aware of the range of online support available and, when they are, find it difficult to navigate because it is spread across a range of websites. An enhanced digital offering, with a One Stop Shop platform to access available support, would go a long way to solving this problem and would embody the whole of government approach that the government is implementing. For many businesses thinking of exporting for the first time, the internet is often the first port of call. The following examples of innovative digital engagement with exporters in the Netherlands and Singapore could be considered as part of this new approach: CASE STUDY - Telling the Singapore trade story: GlobalisingSG app The GlobalisingSG app is a mobile app that tells Singapore s remarkable trade and internationalisation story, including an overview of key initiatives launched by International Enterprise (IE) Singapore the government agency responsible for driving Singapore s exports. It includes interviews with Singaporean government leaders, company executives who have successfully taken their businesses overseas and links to other useful information sources for companies looking to expand in to international markets. The GlobalisingSG app for Android is designed for Samsung Galaxy S3, S4, Note 2 and Note 3. CASE STUDY - Offering an online sign post: NL Exporteert Earlier this year, the Netherlands Ministry of Foreign Affairs introduced an export app designed to help starting and experienced entrepreneurs do business abroad. The app acts as an online sign post for Dutch companies interested in export markets, offering contact information for embassies and overseas business networks; in-depth market reports; calendars of international events; and details of all funding and export programmes offered by the government and other partners. The app so far has been downloaded 100,000 times and is available on the App Store and Google Play.
6 Best in class: Six steps to deliver world-beating export support 2. INTRODUCE TWO NEW EXPORT FINANCE PRODUCTS TO UNLEASH THE EXPORT POTENTIAL OF THE UK S MEDIUM-SIZED BUSINESSES (MSBS) Getting the right trade finance plays a vital role in helping companies overcome challenges such as longer lead in times for deals; higher information barriers to new markets and the need to transact in foreign currencies. This can be a particular difficulty for Medium-Sized Businesses (MSBs) where 14% report a general lack of expertise and knowledge of exporting, and often don t have experts in-house to provide advice on accessing trade finance. We have welcomed the range of measures government has introduced so far to improve its offer to MSB exporters, such as UKTI s MSB programme, the First Time Exporters (FTE) initiative launched by UKTI in May, and UK Export Finance s (UKEF) decision to undertake a review this Autumn of its product offering to this part of the market. To plug the coverage gap for trade finance among MSBs, we would like the government to: Allocate a portion of UKEF s Direct Lending Facility to fund working capital for general pre-shipment expenditure of smaller businesses Introduce a Tender to Contract Cover (TCC) insurance product for small and medium sized businesses. During our visits to Germany and Singapore we also saw some innovative examples of additional support for this group of companies, detailed below. Whilst these programmes may not fit like-for-like into a UK context currently, they are worth considering as government broadens its offer to MSBs, particularly those exporting to frontier and emerging markets. CASE STUDY - Providing accessible and tailored SME export finance support: Germany s Whole turnover policy light Export Guarantees of the Federal Republic of Germany ( Hermes Cover ), Germany s export credit agency, offers an export insurance product called whole turnover policy light. The product is designed to protect German exporters, especially SMEs, against non-payment of foreign trade receivables with credit terms of up to four months. Such a whole turnover policy isn t offered in the UK to exporters, with government focussing more on single transactions. Though initially designed for SMEs, the policy is now available to every German exporter that generates coverable export income. Applications can be processed online and there is normally no handling fee. Crucially, there is no minimum amount that can be insured, so the policy can be adapted for any size of business. Over 75% of applications annually still come from SMEs. CBI members believe that further innovation in these relationships between UKTI and business will be key to improving levels of commercial awareness.
Best in class: Six steps to deliver world-beating export support 7 CASE STUDY - Guaranteeing trade with high-growth emerging markets in Asia: Trade Facilitation Scheme (TFS) International Enterprise (IE) Singapore, the government agency responsible for driving Singapore s exports, partnered with the Asian Development Bank (ADB) and Swiss Re Corporate Solutions to launch the TFS, which focuses on addressing market gaps in trade financing for Singaporean companies in emerging markets. As IE Singapore s first programme addressing the non-payment risks by overseas issuing banks through credit guarantees issued by multilateral development banks like the ADB, the TFS helps facilitate Singapore exporters receipt of payments for transactions with buyers based in emerging markets. It is expected that the TFS can support additional exports of US$1 billion per year throughout emerging markets in Asia and benefit about 250 Singapore companies annually in the commodities, agriculture, information technology, construction, and automotive sectors.
8 Best in class: Six steps to deliver world-beating export support 3. IMPROVE THE COMMERCIAL AWARENESS OF UKTI STAFF BY DEVELOPING MORE INNOVATIVE RELATIONSHIPS WITH BUSINESSES CBI members believe that UKTI has come a long way in recent years in developing stronger working relationships with its customers the UK s leading international businesses. However, over the course of numerous UK regional export roundtables the CBI has held with members across the country over the past 12 months, many businesses have continued to report that the levels of commercial awareness among the UKTI staff they interact with in the UK could be improved. Business recognises that UKTI is leading from the top in addressing this, with the welcome appointment of a new CEO and Managing Director for Trade with considerable private sector experience. Our members have also welcomed initiatives such as the establishment of the Strategic Relationship Management (SRM) Unit to ensure ministerial face-time for the UK s leading companies and the development of strategic partnerships with a number of companies to deliver services on UKTI s behalf, such as the partnership announced with Santander earlier this year to deliver export services to SMEs. Long-standing arrangement to place senior UKTI staff and new ambassadors with companies before taking up overseas postings are also valued. CBI members believe that further innovation in these relationships between UKTI and business will be key to improving levels of commercial awareness. The following examples from Sweden, where Business Sweden has a strong track record of recruiting from the private sector, and in France and Italy where innovative human resources partnerships have been established between business and government to foster cross-fertilisation of knowledge, skills and expertise, are instructive. CBI members believe that further innovation in these relationships between UKTI and business will be key to improving levels of commercial awareness. CASE STUDY - Plugging the skills gap among exporters: The VIE International Internship Programme This scheme was established in 2000 by the French government to be an international human resources solution. The aim is to be a resource for businesses with international professional assignments in areas including sales, technical support, engineering, marketing, finance, etc which last between 6 and 24 months suitable for young candidates aged between 18 and 28. By being part of this scheme candidates enjoy preferential status which gives French employers complete exemptions from all social security contributions in France. For further simplification, Business France, the national economic development agency, looks after all administrative, legal and employment law aspects on behalf of the companies. There is a small management fee for these services, far below the market rate. So far, 6800 businesses, the majority of which are SMEs, are certified by the VIE International Internship Program with 8600 Interns currently placed with a business overseas, and a network of 50,000 young people who have completed an international internship in the last 15 years.
Best in class: Six steps to deliver world-beating export support 9 CASE STUDY - Transferring knowledge to the exporter: Temporary Export Manager (TEM) scheme Recognising that many Italian SMEs did not have sufficient resources to internationalise, the Italian Ministry of Economic Development came up with the Temporary Export Manager (TEM) scheme where companies can apply for a 10,000 euro voucher which gives them access to a temporary export manager or export specialist, who offers strategic advice on a part-time basis over a six month period. This has been a hugely popular scheme with over four companies applying for every voucher available. The Italian government has an approved list of export managers that companies can choose from to advise them. The scheme is restricted to SMEs and to those with fewer than 500 employees. Due to the success of the scheme, the budget has been recently increased from 10 to 17.8 million euros in order to support more businesses. Over the past 12 months, many businesses have continued to report a lack of commercial awareness among the UKTI staff they interact with in the UK. CASE STUDY - Working with a private sector mind-set: Business Sweden Business Sweden, the country s economic development agency, was founded on January 1, 2013, by a merger of the Swedish Trade Council and Invest Sweden. Business Sweden is owned by the Swedish government and industry, represented by the Ministry for Foreign Affairs and the Swedish Foreign Trade Association. Due to this history, the agency has roots in both the public and private sector. The agency is structured like a management consultancy firm with associate and consultant positions available and recruits mainly from the private sector rather than the civil service. Many of its staff come straight from top management consultancy firms and business schools and have a strong understanding of how businesses work. The agency also has a trainee scheme for called the Talent Accelerator, which offers the chance for new graduates to attain business development consulting skills through project work, training sessions and top management exposure. The trainee program lasts for one year and trainees will spend time in two different countries with the agencies international consulting teams. After the year, trainees can be kept on as either entry-level associates or promoted to consultants.
10 Best in class: Six steps to deliver world-beating export support 4. PROTECT THE SHARP END OF BUSINESS SUPPORT OVERSEAS WHEN MAKING DEPARTMENTAL SAVINGS In recent years the government overseas support network has been supplemented by the creation of the International UK Business Network (formerly the Overseas Business Network Initiative or OBNI ) which brings together British chambers of commerce and business groups in 41 overseas markets to deliver a range of services on behalf of UKTI, including market entry advice, local connections and in some cases the provision of office space to UK SMEs looking to enter markets for the first time through export or investment. Feedback from our members on the success of this initiative so far has been that, while in some places services delivered are highly valued particularly in China and India where the China-Britain Business Council (CBBC) and UK-India Business Council (UKIBC) are well established the quality of service in other markets varies considerably. While the logic of contracting out the delivery of these services to partners is understood, CBI members would encourage UKTI to look beyond the chamber and business group network and consider other private partners, such as the UK s leading professional service firms as it further develops this initiative. Following the Comprehensive Spending Review (CSR) and Autumn Statement, business recognises that all government departments will be required to make difficult decisions about how they spend their money. CBI members from first-time exporters through to established international companies have consistently reported that the advice and support our overseas network of Ambassadors and UKTI staff provide is highly valued, particularly in markets where the caché of having a representative of the British government supporting your business can make all the difference to arranging meetings or winning a contract. It is vital that this sharp end of support for British companies is maintained as savings are found. The example of Sweden s four box grid approach to identifying priority markets for Swedish business could be instructive as government considers how to allocate limited resources. It is vital that this sharp end of support for British companies is maintained as savings are found. CASE STUDY - The Swedish Four Box Grid Business Sweden, the country s economic development agency, has 55 offices in 50 markets around the world. The agency uses a complex data-driven approach to analyse the attractiveness of international markets for Swedish business. Metrics include GDP growth, demand for Swedish goods and services, ease of doing business, demographic projections and political risk. This results in markets being plotted on a four box grid according to their attractiveness, which in turn guides the agency s resourcing decisions.
Best in class: Six steps to deliver world-beating export support 11 5. EXAMINE THE US REGIONAL MODEL BEFORE DEVOLVING EXPORT SUPPORT AT HOME With regional devolution high on the government s agenda, it is critical that international experience of devolving export support to cities and regions is considered before making decisions about the right balance between national, regional and city competencies. The example below of the state of Georgia in the US demonstrates how regional export support can work in practice. Our key finding in this case is that the success of the Georgia experience is grounded on putting regional differences aside and fostering close collaboration and knowledge-sharing between the various agencies involved in delivering support to business. This ranges from cross-referral of clients to working together on joint initiatives, such as Atlanta s metropolitan export plan. It is critical that international experience of devolving export support to cities and regions is considered before making decisions about the right balance between national, regional and city competencies. CASE STUDY - Providing comprehensive and localised support to businesses: Export support in Georgia The primary state-level economic development agency is the Georgia Department of Economic Development (DGED) which has an international trade division designed to support Georgia companies with the vital know-how, in-country contacts and international opportunities needed to export. They also leverage the state s international representatives, often contracted from the private sector, located in 11 strategic markets, who provide consulting services to businesses free of charge. This agency works closely with other organisations at the city-level, including the Office of the Mayor of Atlanta, the Atlanta Export Assistance Center and the Metro Atlanta Chamber. The Office of the Mayor s international team coordinate export promotion activities with all of these organisations, helping to attract overseas buyers to the city and state, as well as organising trade missions to key markets. The Atlanta Export Assistance Center, a branch of the federal US Commercial Service agency, provides companies with the detailed information they need on export financing solutions, overseas duties and tariffs, as well as helping exporting companies with business matchmaking. Finally, the Metro Atlanta Chamber, the chamber of commerce for the city, focusses on assisting firms with the nuts and bolts of exporting from advice on export documents such as Certificates of Origin and Certificates of Free Sale. The Chamber has also, in collaboration with the Mayor s Office and other partners developed a data-driven Metropolitan Export Plan which looks at how to leverage the industrial clusters within the city to boost overall export performance.
12 Best in class: Six steps to deliver world-beating export support 6. CREATE A NATIONAL EXPORTS COMMISSION TO PROVIDE INDEPENDENT ADVICE ON LONG-TERM EXPORT STRATEGY The CBI welcomed the Chancellor s decision in 2012 to announce ambitious targets for growing UK exports by 2020. However, rather than focussing on the level of ambition, much of the public debate has been about how the targets were developed, whether they are realistic and if they are going to be achieved. Growing UK exports is critical to our economic prosperity and should be a shared objective across political parties. It is critical that our national ambitions are not compromised by political point-scoring. For this reason, we recommend that an independent National Exports Commission is established to make recommendations to government on an annual basis about appropriate long-term targets for growing UK exports and the policy decisions required from government to deliver them. In practice, the Commission could work in a similar way to the Low Pay Commission or newly-created Independent Infrastructure Commission, receiving annual submissions from stakeholders before making recommendations to the Exports Implementation Taskforce, which brings together government ministers from a range of government departments to ensure a joined-up approach to delivering export success. The Commission should involve cross-party representation, leading economists, and most importantly business leaders from across the spectrum of first-time exporters, high growth Medium-Sized Businesses and established multinationals. Growing UK exports is critical to our economic prosperity and should be a shared objective across political parties. It is critical that our national ambitions are not compromised by political point-scoring.
Best in class: Six steps to deliver world-beating export support 13 CONCLUSION As government recalibrates its export support in the context of spending cuts, it is critical that business remains engaged. These six steps set an agenda for government to consider as it reviews the role of UKTI as part of its whole of government approach for boosting exports. While business will always be responsible for doing business, there is an important role for government to play in boosting exports. This report has described a number of areas where government support is already highly valued, but can be further enhanced by learning from the experience of some of our international competitors. In every country we visited, the businesses and governments we talked to reiterated that UK export support was already seen as very good. We believe that following these six steps can make it best in class. These six steps set an agenda for government to consider as it reviews the role of UKTI as part of its whole of government approach for boosting exports.
For further information on this report, or for a copy in large text format contact: Ben Shaps Senior policy adviser International, CBI T: +44 (0)20 7395 8245 E: ben.shaps@cbi.org.uk Ben Cooper Policy analyst International, CBI T: +86 10 8525 3100 E: ben.cooper@cbi.org.uk December 2015 Copyright CBI 2015 The content may not be copied, distributed, reported or dealt with in whole or in part without prior consent of the CBI. Product code: 11168 www.cbi.org.uk