Business Voice December 2014/January 2015
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Transcript of Business Voice December 2014/January 2015
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December/ January
2015
Business voice | the cBi magazine
GrowthambitionsA healthy UK economy depends on the success of its medium-sized businesses, says Lloyds Banking Group’s António Horta-Osório
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Business voice | the cBi magazine
December/January 2015
10 infographic:
forging stronger supply chains
With industrial strategy at the top of the political agenda, the CBI’s Pulling Together report highlights ways to boost the UK’s supply chains.
We’ should not underestimate the potential of
the UK’s medium-sized businesses, says the
Lloyds Banking Group boss and co-host of
the CBI’s inaugural MSB Summit.
20 interview:
AntónioHorta-Osório
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4 CridlAnd’s nOtebOOk:An election year inevitably brings further uncertainty. Businesses must work with politicians more than ever and encourage bold policy solutions to the UK’s challenges.
36 internAtiOnAl:While Republican success in the US mid-term elections revealed voters’ frustration, its impact on business is uncertain.
42 member news:In this issue: Banks Group; First Utility; HL Plastics; Lion Trackhire; Potter Logistics; Ryder Architecture; and SLR Consulting.
44 member CliniC: Entering a new market can be daunting. But Phil Couchman, chief executive of DHL Express UK & Ireland, says the technology and support available is making it easier than ever.
47 Cbi diAry:In this issue: the Great Business Debate on flexible working; the latest CBI/URS Infrastructure survey.
regulars
38 MeMber profile:
extremis teCHnOlOgyThe global success of an innovative post-disaster shelter is driving growth for the small Suffolk-based business. But its CEO says hurdles to accessing initial funding must be addressed.
26 feature:
new Age tHinkingThe ageing population poses many challenges, but it also offers opportunities for business to benefit from new markets and more experienced employees.
12 event focus:
AnnuAl COnferenCe urges grOwtH fOr All This year’s event focused on the UK’s future in Europe, the economic recovery and the importance of sharing increased prosperity.
32 building britain:
AHeAd Of tHe CurveThe Circuit of Wales is set to bring the excitement of MotoGP to the Heads of the Valleys, as well as investment, employment and a higher international profile.
6 guest coluMnist:
Andy HAldAneWhile strong employment demand has boosted wages for the highly skilled, lower-skilled employees have been left behind. It’s a tale of two workers.
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Thechoices
aheadAs we enter an election year,
businesses must work with politicians more than ever to tackle
the uncertainties and encourage bold policy solutions to the UK’s
challenges – and the evolving debate around devolution
should not shake the pillars of our success.
Our recovery has firmly taken root but significant challenges have loomed large
“”4 Business voice | august/septemBer 2014
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A steady 2014 The UK has continued its journey
back to growth this year. The CBI’s
updated economic forecast is for
3 per cent GDP growth in 2014 and
2.5 per cent next year, underlining
the fact that our recovery has firmly
taken root. Significant challenges
have loomed large throughout the
year and remain, with a challenging
global outlook – especially in the
eurozone – and political uncertainty
at home moving up risk registers.
As we move into an election year
which inevitably brings further
uncertainty, it’s more important than
ever that, as businesses, we work
with politicians on the challenges
facing the UK and how best to
overcome them.
Building a better off Britain At our annual conference in
November we heard from all three
major political party leaders, business
leaders from across all sections of
the economy and – a first for a CBI
platform – the Archbishop of York. A
personal highlight for me was sharing
the stage at one point with R2D2
from the Star Wars films – hopefully
our other speakers didn’t mind being
upstaged by a movie star!
Sir Mike Rake set out the stark
choice faced by the UK between
openness and isolation on key
issues like markets, the EU and
immigration. His message to all
politicians ahead of the election was
to create the right conditions for
businesses to grow, create jobs and
boost living standards for all people
in the UK.
The issue of how to go about
raising living standards was the
subject of a flagship piece of
work launched by the CBI at the
conference: the Better off Britain
report. As household budgets
have been squeezed since
2008, addressing wage levels
and identifying solutions to fix
underlying imbalances in our
economy have become the subject
of intense public debate.
Our report sets out some bold
policy solutions: short-term help
for the hardest pressed, a focus
on competitiveness and skills,
improving our school system to
address disadvantage, and helping
people build up financial resilience.
A business-like autumn statement Measures targeted towards raising
UK investment were central to our
submission to the chancellor in
advance of his autumn statement
on 3 December.
With little fiscal room for
manoeuvre business wanted the
Treasury to focus on infrastructure
investment, innovation and tackling
barriers to enterprise, as well as
continued efforts to balance the
books. The autumn statement laid
bare the scale of the fiscal challenge
facing the next government of
whichever political colour.
What was announced by the
chancellor on stamp duty and
business rates has offered help
to firms and families across the
country. Similarly we welcomed
the roads investment strategy and
I was particularly glad to see CBI’s
calls heeded for a tunnel under
Stonehenge to improve the A303. As
with all government projects the real
work starts now – getting this from
the drawing board to delivery.
Pillars of strengthIn the last edition I updated you
on the outcome of the Scottish
referendum. As the debate over
further devolution continues, I gave
a speech in Cardiff earlier this month
setting out the need for devolution
to support, not shake, the UK’s
economic pillars.
Our common business tax regime,
a single energy market and a thriving
financial services sector – these are,
and must remain, the hallmarks of
the UK’s economic brand.
So as the devolution debate
evolves business is clear that any
new powers or funding for our
devolved administrations must
complement not cut across our
overriding and unified aim of creating
jobs, encouraging growth and inward
investment across the UK.
I wish you all a happy Christmas and
a prosperous new year.
“Our business tax regime, a single energy market and a thriving financial services sector must remain the hallmarks of the UK’s economic brand”
Business voice | DecemBer/January 2015 5
CridlAnd’s nOtebOOk
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The Bank of England has
had a long and strong
relationship with the
CBI. Its Monetary Policy
Committee (MPC) listens carefully
to what the organisation, and its
members, say about the UK economy.
One message that comes across
loud and clear is that the UK
economy is growing. Growth in the
UK is running at an annual rate of
over 3 per cent, above its historical
trend and at the top of G7 league
table. An extra 700,000 jobs have
been created in the UK in the past
year alone, with the unemployment
rate falling to around 6 per cent. And
both inflation and interest rates are at
historically exceptionally low levels.
Yet this recovery has been far
from “normal”. The productivity
of UK businesses is pretty much
unchanged since the crisis started.
This would put it around 13 per cent
below its pre-crisis trend, its worst
run in living memory. And inflation-
adjusted wages are 8 per cent lower
than in 2007, also its worst run in
living memory.
This leaves a macro-economic
puzzle. Is the UK experiencing a
fairly conventional recovery, if
perhaps slower than usual? Or
instead a more protracted period
of sub-par growth? Answers are
important for companies planning
investment and setting wages and
prices, for households planning
spending, not to forget central banks
setting interest rates.
Yet it could just be the answer is
both. Certainly, recent developments
in the labour market are consistent
with that interpretation – we have “a
tale of two workers”.
Uneven distributionSince at least the 1980s, a
number of countries have seen a
“hollowing out” of their labour
markets, with employment growth
strongest among the highest and
lowest-skilled workers, but falling
among the mid-skilled. This is
usually attributed to technological
displacement of mid-skilled jobs due
to automation and digitisation.
A tale of two workersThe UK’s economy is giving mixed messages. While GDP and employment levels are up, productivity and wage growth paint a more negative picture. And there are polarising forces at work in the labour market.
Words: Andy Haldane, chief economist, Bank of England
“In principle, strong demand should have buoyed real wages at either end of the skill distribution. In practice, this has not happened”
“”
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In principle, strong demand should
have buoyed real wages at either
end of the skill distribution, leaving
the overall distribution relatively
unchanged. In practice, this has not
happened. Real wages among the top
10 per cent of earners rose faster pre-
crisis than among the bottom 20 per
cent. And although real wages have
fallen across the distribution, the
gap between the top 10 per cent and
bottom 20 per cent remains larger
today than it was in the late 1990s.
These polarising forces in the
labour market are also evident
across industries. The dispersion
of real wages across industries has
become more pronounced since
the crisis. In some sectors (energy,
retail trade and repairs, other service
activities) wages are growing faster
than before the crisis. In many others
(agriculture, parts of manufacturing,
arts and entertainment), they are still
falling in real terms.
So why has strong employment
demand boosted real wages for
the highly skilled, but not among
the lower skilled? The most likely
explanation is that rising demand for
lower-skilled workers has been more
than offset by the rise in the supply
of labour for these services. Several
factors are likely to have been at play.
First, displaced mid-skilled
workers may have sought jobs for
which they are overqualified in order
to stay in employment, a trend the
crisis is likely to have reinforced.
These mid-skilled workers are, in
other words, underemployed. That
may have contributed to the UK’s
poor productivity performance.
Second, participation rates within
the labour force have increased
significantly, especially among
women and older age cohorts.
This reflects a range of factors
including the abolition of the default
retirement age, concerns about
pension and saving income and
changes to the benefits regime.
Third, levels of immigration have
increased significantly over the past
20 years, boosting labour supply.
There is an active debate on its
effects, but it is possible that this
may have had different impacts
across the wage distribution.
Polarising patternsAt a headline level, these polarising
patterns are also clear in aggregate
wage data. According to contacts
of the Bank’s agents and surveys,
including those of CBI members,
staff shortages are rising in highly
skilled professions, with annual rates
of wage inflation of 3-4 per cent. But
at an economy-wide level, average
weekly earnings are growing at just
over 1 per cent.
So we have an upper peak of the
labour market which is thriving in
both employment and wage terms;
a mid-tier which is languishing in
both employment and real wage
terms; and for the lower skilled,
employment is up at the cost of
lower real wages for the group as
a whole.
Where next? Inflation has fallen
to well below the 2 per cent
inflation target, easing pressures
on household budgets. And there
are some early signs of regular pay
picking up to growth rates above the
inflation rate. After five years flat or
falling, the MPC’s central view is that
this will continue, with real wages
rising henceforth. Indeed, the MPC
needs that to happen if inflation is to
return to target.
Yet it is too early to tell whether
this burst of real-wage sunshine will
come to pass. The MPC has been
forecasting brighter weather for
the past five years, without much
meteorological success. This time
may be different. But if past patterns
were to be repeated, with a growing
but diverging labour market,
intermittent sunshine and showers
remain a risk.
Either way, the MPC’s message to
companies is that changes in Bank
rate, whenever these come, will
probably be gradual, and the Bank
rate itself is likely to remain below
average historical levels for some time
to come. This is not a weather forecast,
and it is certainly not a promise, but it
hopefully helps companies prepare,
come rain or shine.
“Displaced mid-skilled workers may have sought jobs for which they are overqualified in order to stay in employment”
“”
Business voice | DecemBer/January 2015 7
guest COlumn: Andy Haldane
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£30bnThe potential prize over the next 10 years if the UK had a focused
strategy to boost innovation- and service-driven supply
chains. It could create up to 500,000 jobs.
fOrging strOnger suPPly CHAins
There is consensus across the political parties about the importance of industrial strategy, but more work needs to be done to boost the UK’s supply chains. The
CBI’s Pulling Together report highlights some of these challenges.
8 Business voice | DecemBer/January 2015
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£
The UK needs to be better at commercialisation
Just over
using graphene – a substance discovered in the UK – had been
registered in this country by 2013.
The UK science budget provides
for research, but Innovate UK
receives less than a tenth of that amount.
£4.6bn
The seven Catapult centres receive
of core funding; Germany’s 67
Fraunhofer institutes receive x10 that amount.
£50m
50 patents
In the US and China, they had registered almost
patents apiece.
2,000
infOgrAPHiC: Supply chains
Business voice | DecemBer/January 2015 9
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££
£
£
UK firms need to invest moreInvestment intentions among manufacturers are at a 17-year high
The UK needs to get even better at attracting investment
Headline corporation tax rate may help make the UK more attractive BUT the country ranks only 28th for “starting a business” in the World Bank’s Ease of Doing Business report.
BUT
As the significance of automation grows, the UK has proportionately invested in x5 fewer industrial robots than Germany, x4 fewer than Italy and half as many as France.
R&D expenditure in the UK is only
of GDP.
1.7%
France’s outstrips that by
40%
AND
10 Business voice | DecemBer/January 2015
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Opener: Forging strong supply chains
The foundation industries the UK relies on are under pressure.
The UK needs to be better at commercialisation
UK firms need to invest more…
£
££
£
£
They are responsible for
jobs, contribute £24.6bn to the economy and account for
of purchases by manufacturers of motor vehicles.
500,000+
29%
33%
BUT
The foundation industries the UK relies on are under pressure
The skills crisis needs to be addressedMore than
employers in the manufacturing, engineering, hi-tech, IT and science
sectors are reporting shortage in STEM graduates and technicians.
Only
university students studied engineering or technology
subjects to 2010.
Then
chose to go into a unrelated job.
1 in 5 1 in 20 1 in 3YET AND
In its Pulling Together report, the CBI calls for a commitment to increasing overall government spending on R&D in the next parliament, and makes a range of recommendations on skills, procurement, materials, investment and the overall business environment.http://www.cbi.org.uk/media/3576042/cbi_supply_chain_report.pdf
higher than the EU15 average in 2013
Industrial energy prices in the UK were over
infOgrAPHiC: Supply chains
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Sharing in the recoveryWith the leaders of all three main political parties taking to the stage, this year’s CBI’s Annual Conference focused on the UK’s economic recovery and how to ensure we all benefit from increased prosperity.
12 Business voice | DecemBer/January 2015
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“Underpinning many of
the major political
debates of our time is
the fundamental question about
Britain’s role in the world in the face
of globalisation and increased
competition.”
With these words, CBI president
Sir Mike Rake encapsulated what
was to follow at the CBI’s Annual
Conference, held on 10 November in
London, as political leaders aimed
to woo business support for next
year’s general election, and
business leaders spoke about the
importance of talent and trade.
Rake said the UK faced a choice
between “shutting ourselves off
from the world” or “embracing the
openness which has always been
the foundation of Britain’s success”.
He argued the UK’s membership of
a reformed EU was “overwhelmingly
in our national interest”.
And, on the immigration debate,
he turned to his own business
experience as chairman of BT. “We
estimate that 15-20 per cent of the
frontline staff who work for BT’s
main contractors come from outside
Britain and Ireland,” he said.
“Without the availability of this
labour much of Britain would still be
waiting for superfast broadband.”
Moving on to issues of improving
skills and living standards within the
UK, he also introduced the CBI’s
latest report, Better off Britain (see
box, page 17) and its new campaign
“The Great Business Debate”.
“Business understands its
responsibility to society,” he said.
“It is in our interest to have healthy
and well-paid consumers and
employees.”
“British business will always choose openness for the UK”
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event focus: CBI Annual Conference 2014
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E urope remained the central
issue for the politicians in the
room. David Cameron argued
his case for reform in a Europe that
“isn’t working properly for us at the
moment,” he said. “I want to make sure
we belong to a Europe that is about a
common market and cooperation and
not about an ever-closer union.”
And in response to audience concern
about the damage the uncertainty of a
referendum could do to the economy,
Cameron asked: “If there has been
uncertainty, why is it that there has
been such an extraordinary period of
investment into our country?”
Neither Nick Clegg nor Ed Miliband
disagreed with the need for reform, but
Clegg argued: “In this highly
globalised, mobile world economy,
there is simply no future for you, for
our country, if we turn our backs on the
world and try and pull up the
drawbridge. We are nothing if we are
not an open, vibrant economy.”
He said that was fundamentally more
important than the “twists and turns”
of various directives or individual
“spats” in Brussels.
Miliband said even flirting with an EU
exit was “a betrayal of our national
interest” and “a clear and present
danger to businesses” that would “risk
billions of pounds in lost profits, risk
millions of jobs and would make Britain
weaker, not stronger, in the world”.
It was left to Fredrik Reinfeldt
(pictured right), former prime minister
of Sweden and leader of the Moderate
Party, to give an international
perspective on the UK’s stance, and
how to restore the eurozone’s
competitive advantage.
On the latter, he emphasised the
“There is simply no future for our country if we turn our backs on the world”
The Political Debate
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importance of completing the single
market for both services and digital.
But his advice for increased
competitiveness boiled down to three
elements: good order to public
finances; structures to handle financial
crises (which don’t rely on support
from taxpayers); and trade.
While he felt the UK’s attitude towards
trade was similar to that of Sweden’s,
he was clear that immigration had been
helpful for his country. He added that he
wanted Britain to stay in the EU, but
“not at any price”.
Conservative leader David Cameron
focused, as last year, on his five-
point plan for a stronger economy:
cutting the cost of government;
making the country more business-
friendly; getting Britain back to work;
investing in infrastructure; and
rebalancing the economy. On each
of his five points he said: “The job is
not yet complete.”
He highlighted that there were
400,000 more businesses in Britain
today than when he become prime
minister and 2 million more private-
sector jobs (five times as many as
have been lost in the public sector).
He said he wanted to improve on the
2 million apprentices trained over
the course of this parliament, with
a target of 3 million for the next. He
also announced a £15m investment
in roads, and said that HS3 was an
“extremely powerful vision” to create
a northern powerhouse.
Labour leader Ed Miliband argued
that the Europe issue was being used
as an excuse for the UK’s problems –
the challenges posed by globalisation
and pressure on jobs and living
standards. His plan for making “this
country work again for everyday
working people”, he said, included
maintaining a competitive tax
regime, investing in infrastructure,
devolving more economic power
to build on the Local Enterprise
Partnerships, banking reform and a
“revolution in vocational education
and apprenticeships”.
He also reiterated proposals for
raising the minimum wage and tax
incentives to help companies meet
living wage requirements.
“I want to be clear this is about
big reform, not big spending,” he
said, promising credible change,
a pro-business agenda and that
he would work with business “to
ensure our economic recovery
works for everyone”.
Liberal Democrat leader Nick Clegg
also spoke about the importance
of infrastructure and sound public
finances, arguing once the “black
hole” of the deficit had been filled, he
wanted government to borrow only for
productive infrastructure investment.
But he warned those who wanted
a return to single-party government
to “be careful what you wish for”. He
argued that the Liberal Democrat
role was to keep government
anchored to the centre ground, to
stop the Conservatives severing ties
with Europe, or Labour from not
balancing the books.
“Sound public finances; an open,
trading Britain that stands tall in our
European backyard; an unrelenting
focus on infrastructure to help move
the nation from rescue to renewal.
These are the building blocks of a
strong and prosperous economy,
filled with opportunity and success –
and we are going to do everything in
our power to defend them,” he said.
Business voice | DecemBer/January 2015 15
event focus: CBI Annual Conference 2014
“(An EU exit would) risk billions of pounds in lost profits, risk millions of jobs and would make Britain weaker, not stronger, in the world”
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T he Archbishop of York John
Sentamu kicked off a session
focused on raising living
standards by calling for all businesses
to pay the living wage. He said it was
a “flaw of the free market economies
that there are no mechanisms to
reduce the disparities between the
haves and the have-nots”, and that
ongoing economic uncertainties meant
there was now the impetus to find a
system, based on fairness and equity,
that worked for the common good.
To the argument that not all
businesses can afford to pay the living
wage, he said that 53 per cent of
SMEs already were – and recognising
the benefits of doing so. He said
government should help reduce the
costs of doing business and simplify
the tax system to encourage more to,
but called on the business brains in
the room to help come up with the
solution. “Income inequality is the
giant we must slay together,” he urged.
Adnams chief executive Andy Wood
explained that his business took the
call it couldn’t afford to introduce the
living wage in one year. Instead it
opted to do it in two, and found the
funds by distributing its executive
bonus pool.
But Mitie chief executive Ruby
McGregor-Smith argued businesses
were not incentivised to act – either
by the tax system, or government
procurement teams only interested in
price. Adding that mindsets needed
to change, she said businesses were
good at telling employees what they
have done wrong, rather than raising
aspirations by encouraging what they
were doing right.
This widened the conversation to
social mobility and the fact that the UK
has the lowest rates of social mobility
in the OECD. “Improving that starts in
the classroom,” said Damon Buffini,
“There are no mechanisms to reduce disparities between the haves and the have-nots”
The great business debate
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From left to right: Mitie's Ruby McGregor-Smith, Social Business Trust's Damon Buffini; the CBI's Katja Hall; the Archbishop of York John Sentamu; and Adnam's Andy Wood.
founding partner of Permira and
chairman of the Social Business Trust.
He argued this wasn’t just about
going into schools to improve the
aspirations of the young either. He said
that his sister, who left school at 16,
now had an impressive career thanks
to a supportive employer who helped
her return to education later on in life.
“If businesses ignore the people at
the bottom of their organisation, they
are missing out on talent,” agreed
Wood. Adnams has a board director
who was once a cleaner, and its head
distiller – now winning awards for
making the “best gin” and the “best
vodka” in the world – was once an
engineering apprentice, he said. Wood
also added that businesses had a
responsibility to share best practice with
smaller firms in their supply chains.
Better Off BritainBusiness wants to help build a more
prosperous Britain where everyone
has the chance to get on in life.
The CBI’s Better off Britain report
is a blueprint for improving living
standards in the UK.
Its recommendations for business
include improving flexible working
practices; working with education
establishments to create “learn-
while-you-earn” routes up the ladder
and incentivising line managers to
make staff development a priority;
increasing commitment to schools
and work experience; and playing a
stronger role in helping employees
save for a rainy day.
It also makes several requests to
government, including: reducing
National Insurance contributions
for employees; extending statutory
maternity pay and childcare
provision to support children in
their first four years; simplifying
the support for SMEs to improve
take-up and enhance productivity
potential; and a new government
strategy for adult retraining.
Read the reporthttp://news.cbi.org.uk/reports/
better-off-britain/
“Businesses are the gatekeepers
of opportunity,” said Sentamu, again
urging companies to get involved in
the schools and communities in which
they work.
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the opportunities for exporting British
talent and for promoting the UK as a
tourist destination.
“The UK film industry is a thriving
part of a thriving sector, delivering
jobs, exports, a platform to promote
Britain abroad – and a large flow of
inward investment and revenue to the
Exchequer,” he said. “We mustn’t let
this success be put at risk.”
However, he expected a skills
shortage to hit the industry in the next
18 months, and although Pinewood
was administering some “self-help” in
the form of apprenticeship schemes
and a partnership with the Open
University, he urged government to
do more to back schemes that provide
practical business skills.
And, as a reminder of the prize, he
shared the stage with Star Wars robot,
R2D2, which was built in the UK 30
The focus on trade
“Under the stardust, Pinewood is a world-class manufacturing business”
T he afternoon of the conference
was once again devoted to the
importance of encouraging
exports, and it was introduced with
an overview of the UK’s world-leading
film industry from Ivan Dunleavy, chief
executive of Pinewood Shepperton
(pictured above).
Highlighting that other sectors
can replicate its success, Dunleavy
said: “Brush away the stardust, and
Pinewood is a British, world-class
manufacturing business.”
But it’s also one that has “stayed
sharp and competitive”, keeping up
with technological developments and
taking advantage of clustering (Dunleavy
pointed to the ecosystem of many
related, small businesses situated in and
around Pinewood’s studios).
With nine cinemas opening every
day across China, he also highlighted
years ago. Although it has spent much
of its time abroad, R2D2 returned to film
the latest instalment of the film series,
Episode 7, at Pinewood last year. The
eighth is now booked in. “We’re winning
back business we used to have here in
the UK,” said Dunleavy.
Small business successesBut it’s not just big businesses making
a difference to the UK economy
through their exports. In a series of
short interviews, Fever-Tree, Extremis
Technology, Pentland Brands, Miller
International and Hotel Chocolat
shared the ways they have found
success overseas.
Within 10 years, premium mixer firm
Fever-Tree is making 70 per cent of
its sales outside the UK, although all
products are made in Shepton Mallet
for the purposes of quality control.
Pentland Brands, which owns Speedo
and Berghaus, on the other hand, took
16 years to reverse its ratio of domestic
to international sales from 80:20, and
it has chosen to split manufacturing
(which is now done in Asia) from its
creativity and innovation teams (which
continue to reside in the UK).
Extremis Technology (see Member
Profile) and Hotel Chocolat have had
their sights set on international markets
from the off. Hotel Chocolat founder
Angus Thirlwell said it was important to
choose a brand name that would work
anywhere, for example. Engineering
firm Miller International, on the other
hand, decided to export to make itself
“recession proof” in the 1980s.
The message from each of their
executives on the stage was that
it takes guts and determination to
succeed; it was important to access
available support, from the likes of UK
Trade and Investment, as well as the
necessary finance; and businesses
have to follow the opportunities as and
when they are presented.
These points were echoed by Alistair
Cox, CEO of recruiter Hays, as he
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made the reasons for international
expansion simple. “It’s because there
are opportunities are going begging or
because it protects, and de-risks, your
business at home,” he said.
Steve Varley, chairman and
managing partner, UK & Ireland, at
EY, gave some insight into where
the new markets might come from,
as he highlighted £300bn worth of
opportunities in fintech, infrastructure
and reshoring.
And although he seemed less
than certain that the UK could reach
the ambitious export target set by
government, trade minister Lord
Livingston spoke of strengthening
UK brand, thanks to the Olympics,
the Great Britain branding campaign
and the UK’s improving economic
performance.
“People want branded quality; Britain
has plenty of that to give,” said CBI
Jacqui Miller of Miller International
“We’re winning back business we used to have here in the UK”
THE TEMPERATURE IN THE ROOM
director-general John Cridland – who
ended the conference on the positive
note that while uncertainties remained
for businesses to navigate, he was
confident in their ability to do so.
Alistair Cox, CEO of Hays “This was the most positive economic background to a CBI Annual Conference
in around seven years and the mood of the day
seemed to reflect this. I was heartened to see that skills featured heavily on the agenda as it’s vital that business and government ensure the UK has access to world class talent in order to build a world class economy.”
Guy Grainger, UK CEO, JLL “Business can help ensure that more of UK society takes a share in economic growth by widening the talent pool from which we recruit and forging more links with schools. From a business perspective nobody wants to miss out on potential new talent simply because they are not aware of the
benefits of a career in property, finance or professional services.”
Karl Nolson, managing director and head of debt, Barclays Corporate Banking “If UK business
galvanises even a small amount of the energy,
enthusiasm and optimism we saw in this room, and we put our collective shoulder behind the ‘Better off Britain’ initiatives, then 2015/2016 should be a real needle mover for growth in our economy, workforce skills and exports.”
Phil Keoghan, CEO, Ricoh UK “The conference crystallised which drivers will take the UK economy forward. However change can only come about if everyone, from the top down, leads by
example. From our perspective, this is particularly true of areas such as employee productivity and apprenticeships.”
Graham Copland, offset campaign support director, BAE Systems “This was a very useful conference. I was particularly interested by the way the debate moved beyond pure business, into topics of social concern.”
Steve Varley, chairman & managing partner, UK & Ireland, EY “I took away two key messages from
the prime minister’s speech. The first is how
confident he feels in the UK economy; the second, his reinvigorated commitment to infrastructure. We believe the UK is in a great position to provide growth and jobs.”
Thank you to our sponsorsThe CBI Annual Conference would not be
possible without the generous support of
our strategic partners EY and Hays. We
would also like to thank our corporate part-
ners Barclays, BAE Systems, Jones Lang
LaSalle and Ricoh, and our networking
partner, the Open University.
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HArnessingPOtentiAlThe UK’s “forgotten army” of medium-sized businesses has the full support of Lloyds Banking Group, but its chief executive argues that many of them need to be more ambitious.
Words: Pip Brooking | Photography: Bloomberg
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We should not underestimate the potential of medium-sized businesses for the UK economy in the years ahead.“”
“A healthy economy
needs healthy
banks,” says Lloyds
Banking Group’s
António Horta-Osório. But that also
works the other way around – and
the chief executive of the UK’s
largest bank believes that medium-
sized businesses (MSBs) have a
significant role to play in delivering a
sustainable recovery.
“They may not individually have
the same brand recognition that
many larger businesses enjoy. But
they do punch above their weight
when it comes to the contribution
they are making to UK GDP and
employment,” he explains. “We
should not underestimate the
potential of medium-sized businesses
to make an even more significant
contribution to the UK economy in
the years ahead.”
Speaking as co-host of the CBI’s
first MSB Summit, he adds that the
event is a “small demonstration of
the bank’s commitment to help
businesses succeed”.
He is also quick to recognise that it
will take actions, rather than words,
to help the banks regain the trust of
their customers and stakeholders.
Some of the measures Lloyds has
taken are those you’d expect from a
bank part-owned by the taxpayer – it
was the first to access the
government’s Funding for Lending
scheme, for example. But Horta-
Osório adds that Lloyds has used it
more than any other bank, and is
also approving more than 90 per
cent of loan applications from
medium-sized businesses (which it
classes as those with revenues of
between £25m and £750m).
In fact, he says, Lloyds has
increased its net lending to MSBs by
8 per cent this year in a market that is
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The solution for the UK’s MSBs will be unique to the UK“”
shrinking by 4 per cent. At the same
time, it has increased the number of
MSBs it has a relationship with by 5
per cent. Horta-Osório promises an
additional £3bn in net lending to
MSBs over the coming three years.
“I hope that goes a long way to help
the UK prosper,” he says.
And in response to the challenge
that businesses of this size are still
not getting the support they need, he
pledges: “I can promise that we are
committed to hearing every case.”
Lloyds Bank has a charter for MSBs
(as well as a SME charter that will be
renewed in the new year) built on its
relationship-led approach, its pledge
to make 95 per cent of credit
decisions locally and a switcher
promise to make it “quick, easy and
economic” to change banks. Its
growth in customers has, no doubt,
been helped by larger teams in
regions including the South Midlands
and Hertfordshire, and investment in
new business teams in London and
around the country.
Horta-Osório also emphasises the
bank’s exclusive UK focus. It has
rowed back from its international
operations, selling off its Spanish
retail and international private
banking operations last year, for
example, as the chief executive has
set his stall on making the banking
group stronger, simpler, “low cost
and low risk”.
And by focusing on UK retail and
commercial banking, he says it’s
easier to understand what customers
want and need. For all the
international comparisons,
particularly with Germany’s support
of its Mittelstand, he argues that “the
solution to harnessing the maximum
potential of the UK’s medium-sized
businesses will be unique to the UK
and take account of the particular
characteristics of our economy”.
Playing its partBut the banking group has also made
more unusual moves in support of
smaller British businesses. In
October, it unveiled a £50m private
equity fund to support small and
medium-sized housebuilders, which
Horta-Osório hopes will add vitality
to the sector and help drive the
development of financial skills and
ambition within it – as well as doing
something to address the current
housing shortage.
Lloyds Bank is also sponsoring the
Advanced Manufacturing Training
Centre at the Manufacturing
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We are committed to providing manufacturing businesses with access to finance and competitive rates of funding
“”
Technology Centre, Coventry, to the
tune of £1m a year. The centre is set
to open in 2015, with more than 250
engineering apprenticeships and
trainees graduating each year,
accredited by the Institution of
Mechanical Engineers.
“By training the next generation of
engineers in the UK, the Lloyds Bank
Advanced Manufacturing Training
Centre will help address the skills gap
– which is one of the main barriers to
growth that the sector currently
faces,” says Horta-Osório.
And continuing his focus on the
manufacturing sector – one he sees
as crucial to rebalancing the UK’s
economy – he explains that the bank
has also worked with the University
of Warwick Manufacturing Group to
train 200 relationship managers, so it
can better serve the sector.
“We are committed to providing
manufacturing businesses with
access to finance and competitive
rates of funding,” he adds. In the first
nine months of 2014, Lloyds lent over
£925m to the sector – putting it on
track to achieve its target of lending
£1bn a year, for this year and the
next three.
But rebalancing will also require
businesses to be more outward-
looking and ambitious in seeking new
export markets, Horta-Osório adds.
And in August, Lloyds Bank research
found that 58 per cent of mid-sized
firms weren’t exporting, and 7 per
cent planned to do so within the next
five years – although three-quarters
of them said they knew the benefits.
Instead, more cautiously, they chose
to focus on cutting costs and
increasing productivity at home.
Digital efficiencyBut there, Lloyds has something in
common with many of its business
customers. Just over a month ago,
Horta-Osório announced a new
strategy for the bank, which will
involve closing a net total of 150
branches, investing £1.6bn in digital
services and increased automation
and driving efficiency across its
services.
“We must continue to shape our
offering around customer needs –
and not the other way around,” he
explains. “Customers’ increasing
adoption of technological change is
only going to increase the demands
they place on their bank.”
And for MSBs in particular, they’ll
have access to a new, tailored
internet banking offering in 2015,
which Andrew Connors, head of
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We must continue to shape our offering around customer needs – and not the other way around.
“”
mid-sized business at Lloyds Bank
says will “help them become more
efficient and make it easier for them
to transact globally”. He expects
greater use of digital channels, as
well as increased functionality.
Already mobile is Lloyds Bank’s
fastest growing channel. Its
business banking mobile app, for
example, gives businesses the
ability to control their money on the
move. And the frequency of contact
with the customers that use it is far
higher than those that don’t.
The company is certainly
throwing its weight behind the
digital shift. Lloyds Banking Group
was a founding partner of the UK’s
Digital Skills Alliance, Go ON UK,
and, more recently, has been
appointed to drive a government
initiative to increase the digital
capability of SMEs and charities
across the UK. The bank’s own
research has shown that as many of
1.7 million organisations in the UK
have a very low level of skills in this
area, with only half having a
website and nearly a third stating
that the internet wasn’t relevant to
their business or charity. Of those
that did have a website, only one in
five allowed payments or donations
via their site.
It also explains Lloyds Bank’s
workshop session at the MSB
Summit: “Seizing the digital
opportunity”, led by Sean Gilchrist,
managing director, global digital
channels, Lloyds Bank Commercial
Banking. He was clear about the
challenges that face Lloyds shifting
to new ways of working, but that it
was willing to learn, adapt and
enhance what it offered as it went
along. “Digital has to start from the
top in any business,” he said.
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MSB Summit
Despite the economy, 51 per cent of MSBs managed to post growth of 10 per cent or more each year for the past three years – and more than 80 per cent are confident of growth in their businesses over the next five years. That’s according to CBI research launched to coincide with the MSB Summit.
Yet, three years on from the CBI’s Future Champions report, CBI director-general John Cridland argued that the “forgotten army” was still not getting the focus and support they need to really realise their potential.
He called for wider finance options to include a private placement market for MSBs, a larger late-stage venture capital market and reform of capital gains tax to incentivise long-term equity investments. He also argued that MSBs and “scale-up Britain” should be given much more attention in their own right than the start-up focus emphasised by the term SME.
Minister of State for business and enterprise Matthew Hancock agreed with the difference: “People talk about small businesses being the lifeblood of the economy. I say that they are. And if they are then medium-sized businesses are its beating heart.”
Referring to the British Business Bank, procurement reforms, the Red Tape Challenge and support through UK Trade & Investment (UKTI) and UK Export Finance, he assured the members of the audience that MSBs were part of the government’s long-term plan to create a strong, sustainable and balanced economy.
The rest of the summit was designed to offer useful insight for growing businesses. There were workshops from each of the event partners (Lloyds Bank, BDO, Grant Thornton and Standard and Poor’s) on digital, access to finance, exports and long-term business planning. Rita Clifton, chair of Populus, highlighted the importance of brand building – and having ambition in doing so. A panel session, including The Alchemists’ CEO Lucy Armstrong, Buddi CEO Sara Murray and Mike Wright, professor of entrepreneurship at Imperial College, discussed why it’s good to take risks and to fail. And Daisy Group CEO Matthew Riley spoke of his experience in growing the communications company.
His advice was straightforward as he emphasised the need to understand the market you operate in; plan for growth, while keeping it flexible; finding the right people and developing them; and getting the best advisers, suitable for each stage of the journey.
“MSBs generate a
third of private
sector turnover
in the UK and
access to finance
continues to be a
challenge. A lively
debate showed that traditional debt
still seems to dominate the balance
sheets of MSBs. The need for a real
relationship with the bank provider was
seen as key. Alternative sources are
slowly seeping into the marketplace but
the take up of Regional Growth Fund or
UKEF financial support needs to improve
to drive local output and export growth.”
Kevin Cook, partner, BDO
“It was clear that
the mid-market
companies
attending the
event were very
focused on how to
move their businesses
forward and address the challenges of
achieving growth. This showed through
at Standard & Poor’s session on long-
term planning, as there was a high level
of engagement from the audience and
a willingness to openly discuss real-life
issues they are currently facing.”
Roberto Rivero, vice president, head of
market development, Standard & Poor’s
“MSBs are the key
agents of growth
in the UK, so we
were delighted to
bring government,
advisers and
experienced
internationalised MSBs together to
share insights on success overseas. Key
takeaways included having the right
partners; using all your networks; getting
help wherever you can, including UKTI
and UKEF; real face-time beats Facetime;
and language need not be a barrier.”
Simon Bevan, partner,
Grant Thornton UK
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The ageing population poses clear challenges for the health and social care sectors. But it also demands radical action and innovation from business.
New age thinkingBy Pip Brooking
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“1 00 is the new 70,”
said former Swedish
prime minister
Fredrik Reinfeldt at
this year’s CBI’s Annual Conference.
One out of every three children
born in the UK today will become
centenarians. The number of those
aged over 85 is expected to double
by 2030. And by 2050 there will only
be two people in work for every
pensioner, compared with four today.
Often the ageing population is
portrayed as a threat to the UK and
an increasing burden on the state,
which is still reeling from austerity
measures. But it also brings plenty of
opportunities for businesses willing
to adapt and innovate, including
access to a wider skills pool as well
as new markets.
The skills shortage tops many
businesses’ agendas and the UK
already has an older workforce than
it did pre-recession. That’s not just
because of the age discrimination
legislation or about delaying
pensions liabilities, says Sarah
Harper, director of the Oxford
Institute of Population Ageing.
“Employers look at the older
workforce as more experienced,
especially when the skills shortage
is being felt,” she says.
And that skills problem is only
likely to get worse. Lord Filkin,
chairman of the Centre for Ageing
Better, points to the disparity
between the 13.5 million job
vacancies expected over the next 10
years and the fact that only 7 million
young people will be entering the
labour market in that time.
“Businesses are going to need more
older workers and therefore they need
to think about how they change their
attitudes and their practices to employ
older people,” he says.
“We have institutionalised this
idea that fit, healthy, active men
and women in their 50s could leave
the labour market and [taxpayers]
would support them for 30 years,”
Harper agrees. “Many people could
work well into their early 70s in a
knowledge economy.”
Valuable resourceRos Altmann, the government’s
business champion for older workers,
emphasises the urgency. She warns
of long-term economic decline if
organisations fail to change their
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mindsets. “Make a plan now,” she
says. “Don’t let the demographics
overtake you.”
As part of that plan, Altmann talks
of the “three ‘r’s”: retain, retrain and
recruit. Letting employees walk out
the door for no other reason than
age, taking their skills with them, is a
“waste of resources”, she says.
Flexible working – which can benefit
all employees – or moving workers
into a more suitable role might be all
it takes to keep them on. But too
many businesses train only their
young employees, when many of
their older counterparts would
benefit, she says.
She adds that too many people
aged 50-plus, who have lost their
job through redundancy or ill
health, find it hard to re-enter
the workplace, when businesses
should be better at recognising their
experience and talent.
Harper points to research that
suggests those aged between 40 and
60 tend to take fewer days off sick
than their younger colleagues. She
also argues that the UK lags behind
other countries in its support of older
workers, and that work-life balance
tends to focus around supporting
those with young children, not those
aged 50 or 60 who may have frail,
dependent parents.
Although there are firms in the
UK that employ good practice in
this area (Harper names BT as an
example), in the US, it is far more
common to find gerontologists in
personnel departments who can
help find relevant services and
eldercare facilities, particularly when
employees relocate.
Altmann argues that age should
be a part of the diversity agenda,
and that a revolution is needed in
terms of attitudes to and among older
workers – similar to that experienced
by working mothers over the past
30 years. She’s setting up a business
taskforce on ageing in the hope of
driving the necessary change.
A ready marketAccording to Filkin from the Centre
for Ageing Better, there’s another
good reason to employ older
workers: they’ll have a greater
understanding of older customers.
Bank of America Merrill Lynch
estimates that the over-50s account
for 50 per cent of total UK consumer
spending. That’s likely to grow:
according to Eurostat, spending
among the over-60s has risen 50 per
cent faster than among the under-30s
in the past two decades.
Globally, the opportunities are
even more significant, given that
Euromonitor predicts the spending
power of the “baby boomer”
generation will surpass £9trn by 2020.
With more people wanting to
enjoy an “extended middle age”,
and living better for longer, there’s
a ready market that businesses
should be exploring more for their
products and services, says Filkin.
And when people want to sustain
their independence for as long as
possible, there is also plenty of
potential for innovation.
John Myatt, strategic development
director at Serco Health, adds that it
is in the best interests of businesses
to step up and engage with older
people, building better relationships
with the communities in which they
operate.
Serco is signed up to Public Health
England and Alzheimer’s Society’s
“Dementia Friends” initiative, training
staff to understand more about the
condition which affects 850,000
people and the small things they can
do to help sufferers they meet.
In February, Argos, Homebase,
Marks and Spencer, Lloyds
Pharmacy and Lloyds Banking Group
committed to create more than
190,000 Dementia Friends in shops
and banks across the UK. A study by
the Alzheimer’s Society found that
one in four people with dementia
have given up shopping since being
diagnosed, even though the majority
feel that this is the most common
activity that enables them to feel part
of their community.
At the time, M&S retail director
“Many people could work well into their early 70s”
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Sacha Berendji said: “We want
our stores to be friendly, safe
environments for customers with
dementia. That’s why we will be
empowering all 60,000 of our store
colleagues to become Dementia
Friends over the course of the year.”
And there is a clear business case
for helping older people in other
ways too. Although it’s likely to
change in the future, according to the
Office of National Statistics, three in
10 people aged over 65 have never
used the internet – and that rises
to seven in 10 for those over 75. In
response to this challenge, Barclays
has set up “Digital Eagles”, a free
service aimed at helping customers
keep up to date with technology and
get the most out of online. It has
6,000 Digital Eagles in its branches
throughout the country, with some
visiting care homes.
Thinking differentlyBut the biggest test of all is how to
reform public services as demand
on pensions, health and social care
rises – and here too businesses need
to play their part. “The scale of the
challenge of our ageing population
is unprecedented and historic,” says
David Sparks, chair of the Local
Government Association.
The organisation’s own
calculations, based on demographics
and the government’s financial
projections, suggest a funding gap
by 2020 “that would result in local
councils doing little more than
caring for old people and looking
after children”.
It’s a similar story with the Five
Year Forward View from NHS
England, which argues that the
service faces a £30bn shortfall by
the end of the decade thanks to, as
Myatt puts it, the almost inevitable
continuation of the 66 year trend of
healthcare inflation caused by new
treatments and changing demands.
“The urgency is being felt,” says
Sparks. “It’s directly analogous to a
major company within a sector that is
“The scale of the challenge is unprecedented and historic”
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under threat having to adapt to new
markets, and there is a paramount
need to listen to customers.”
There is growing consensus –
as heard at the CBI’s latest Public
Services Network event – around
the need to include the public in
honest discussions about the future
provision of services, the cost of
them and the difficult decisions
that need to be made. But Sparks is
confident that councils up and down
the country have an appetite for
new solutions and new methods of
delivery, and that they’re more open-
minded on procurement than ever
before. To make that possible, he also
emphasised the need for innovation
and the importance of partnership
with the private sector.
But Myatt warns that there is “no
convenient solution”. Serco is working
with the Health Service Journal on
the Commission on Hospital Care
for Frail Older People. Its report,
published in November, recognised
that improving out-of-hospital care
can improve care for older people
but dismisses as “magical thinking”
the idea that merging health and
social care budgets will automatically
reduce the long-term need for acute
hospital beds.
Myatt is concerned that politicians
of all parties are too quick to offer the
public what might appear an enticing
service without providing adequate
funding in their plans.
Within a hospital environment,
Serco is trying to do things
differently. For example, it is
equipping support workers with
listening and observation skills to
complement the work of clinical staff
and designing new facilities with
the needs of older people in mind
to improve their experience and
enhance their recovery.
Joining the dots There’s also a strengthening view,
voiced by Filkin, that more needs
to be done to encourage people to
shift their behaviours to avoid “self-
inflicted health problems” caused
by smoking and eating. He adds that
the solutions must include how town
planners, transport operators and
housing providers are adapting to the
rise in elderly users.
On the latter, for example, he
says there is still too little suitable
accommodation to keep older
residents independent for longer and,
without it, they have no choice but
to remain in expensive hospital beds
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or in houses that would suit larger
families better.
This is something Neil Euesden,
managing director at housing services
provider Pinnacle PSG is trying to
tackle. “Housing is at the heart of the
community, and it forms the centre of
health and wellbeing,” he says.
His company is involved in a PFI
initiative with John Laing and Wates
Living Space to provide extra care
housing schemes to those aged
50-plus who want to retain their
independence, but need some care
and support in order to do so. Some
of the homes are designed for those
with dementia, others for wheelchair
access, but they also include “hubs”
for communal facilities, while staff
work closely with local health
partners including district nursing
and community care teams to
provide a holistic and streamlined
approach to care provision.
For Euesden, it goes back to
tackling loneliness by involving
elderly residents in the communities
where they live and keeping them
active. But he emphasises the
importance of using health budgets
earlier to prevent more expensive
health problems down the line.
“Technology also has a huge role to
play in making their lives easier,”
Euesden adds. Here he chimes with the
CBI’s latest report, Our Future Public
Services, which calls on government to
digitise more health services, including
appointment booking for all GPs,
e-prescriptions for smartphones and
online GP consultations where
appropriate, by 2020.
Yet at the PSN event, MP Stella
Creasy implored both those in the
public sector and businesses to be
even more radical in their thinking.
Meanwhile CBI deputy director-
general Katja Hall warned that
“tinkering around the edges of public
service reform” would not meet
these new challenges.
The only long-term solution is for
people and organisations to start
thinking differently about ageing –
and innovate as if their long lives
depended on it.
Our Future Public ServicesThe CBI’s latest report issues an
urgent call to action in response to
three challenges:
• Public services need to get
ahead of the game in meeting
the needs of an ageing
population, while we start to
live within our means;
• Publicservicesneedtofit
around people’s lives and match
their changing expectations;
• Peopleneedtobeconfident
that ongoing change is the right
thing to do and support it.
It urges the next government to
build a consensus on what our
future public services look like
and implement a plan to make the
vision a reality.
Read the report
http://www.cbi.org.uk/ media/3589619/cbi_public_ services_reform_report.pdf
Listen to the latest PSN podcast, featuring Neil
Euesden and Stella Creasy
http://www.cbi.org.uk/business-
issues/public-services/public-
services-network/podcasts/
For more information on the PSN, visit: www.cbi.org.uk/psn
feAture: Ageing UK
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The new Circuit of Wales has secured a five-year contract to host the British round of the MotoGP, even before building work has begun. The
team behind the £315m project, on the edge of the Brecon Beacons, is hoping it will clear the last planning hurdle in time for it to stage its first
event in 2016 – as well as drive regeneration in the wider area.
Ahead of the
cUrvE
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90%The proportion of the estimated 3,000 construction jobs at the site that
the Heads of the Valleys Development Company has pledged will go to
local people.
6,000The full-time jobs that could be on offer, including
apprenticeships, in sectors ranging from security and
catering to retail and hotels.
150mThe number of households
worldwide that events at the Circuit
of Wales will be broadcast to –
providing an international platform
to promote Wales to a potential 300
million people.
£50mThe potential boost to the UK
economy each year over the
next 10 years, thanks to the
economic growth and employment
opportunities that could be provided
by the motorsports venue.
750,000The estimated number of people
who will visit the track, in Blaenau
Gwent, South Wales, each year.
Business voice | DecemBer/January 2015 33
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2024The circuit could host the British
round of the FIM MotoGP World
Championship until 2024 after
agreeing a five-year contract, with
the option for a five-year extension,
with the commercial rights holders
Dorna Sports. Donington Park has
agreed to host the first race under
the contract in 2015.
830 acresThe size of the development site,
which will also house an indoor
dirt track (the first in the UK),
an international kart circuit and
driver training facilities, as well as
leisure and cultural amenities. An
automotive park will be established
to target the growth of low-carbon
industries and events.
5.325kmThe distance of the track, designed
to host international events
including the MotoGP, World
Superbikes, World Motocross and
World Touring Car.
50 yearsThe Circuit of Wales is the most
significant capital investment
programme in automotive
infrastructure in the UK since
the 1960s.
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25 yearsThe Circuit of Wales has signed a long-term, £10m partnership deal with Chinese solar
energy provider Hanergy. The circuit wants to be a low-carbon facility, while Hanergy wants
to highlight that China is prepared to invest in regeneration in the UK. It will showcase its
innovative thin-film solar modules in a solar park, which will also form part of the roofs and
sides of the venue’s buildings where appropriate.
Business voice | DecemBer/January 2015 35
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A body blow
Republican success in the US mid-term elections signalled voters’ frustration with President Obama, but it’s less certain what the results mean for business.
By Sarah Knaus
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On 4 November the US went to the polls to vote in the mid-term elections. Held in the
years between presidential elections, mid-terms are typically overlooked by American voters. However, this year’s election proved to be dramatic.
Voters overwhelmingly supported the Republican Party in one of their biggest wins in recent history. Across the board, Republicans trounced the Democrats in the Senate, House of Representatives and gubernatorial races.
Republicans now hold 53 of the 100 seats in the Senate, a net increase of eight seats. One Senate race – in Louisiana – is yet to be decided and will go to a run-off election in December. On the House side, Republicans widened their majority to at least 244 seats, up from 233. Republicans also won 24 of the 36 governor’s seats up for grabs this year, including several in traditionally Democrat-strong states such as Massachusetts, Illinois and Maryland.
So what does this all mean for business and policy makers? In truth, it is difficult to say. After their win Republicans insisted that they would take advantage of their majority in Congress to show the American public that their party can break
the deadlock in Washington. Over the past few weeks, the leadership has listed priorities that include the approval of the Keystone XL pipeline, comprehensive tax reform, the conclusion of free trade agreements and the overhaul of Obamacare.
But the Republican “wave”, as the result has been called, is hardly a mandate. Although many on the right are calling this a conservative directive from voters, the general consensus is that the public voted against incumbents and voiced their frustration with President Obama’s leadership because they are sick of Washington’s gridlock, not because they support Republican ideals. This is apparent because a number of states which President Obama and the Democrats easily won in 2008 and 2012 voted Republican in the mid-terms.
There is also a question of who actually voted. Mid-terms traditionally attract an abysmal turn-out, and this year was no different. Although there were some exceptions, Democrats in particular were unable to mobilise their all-important base: youth, minority and female voters.
On Capitol Hill, Republicans will find their legislative ambitions controlled by the small majority in the Senate. Although they outnumber Democrats, they didn’t reach the 60
votes required to break filibusters and they are well below the 67 needed to override presidential vetoes. This means that Republicans will need to reach across the aisle to work with Democrats in order to achieve anything substantive.
President Obama also presents a significant obstacle for Republicans. By using executive action to get around Congressional deadlock or obstruction – as Obama has proposed to do with immigration reform – the president has made a bold statement that he will find ways to achieve his policy goals, with or without the support of Congress. Over the next two years the president is likely to move boldly to ensure a sound legacy. Potentially this could come in areas where he agrees with Republicans though, such as trade.
Finally, just when the American public thought that campaigning would take a back seat to legislating, attention shifted the morning after the elections to the 2016 presidential campaign. With less than two years to go, both sides are gearing up for an intense fight.
Sarah Knaus is manager, policy
and government affairs at the CBI’s
Washington office.
“Republicans will need to reach across the aisle to work withDemocrats in order to achieve anything substantive”
internAtiOnAl: US mid-terms
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By Pip Brooking
An initial concept for a portable post-disaster shelter is now the foundation of a company worth £1.5m, with ambitions for further growth. But securing finance has been a challenge.
BuilDing Blocks
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In 2012, Extremis Technology
was an idea, an invention –
not a company. Now, after
two rounds of funding it’s
valued at £1.5m, with its sights
set on becoming a £40m business
within the next five years. How?
By choosing the right partners,
attracting the relevant funding and,
of course, having a product that’s
clever and unique.
In fact Extremis has three related
products, all from the same IP. Two
– the Hush1 and the Hush2 – are
robust, portable shelters, designed
to be repairable and recyclable, for
those displaced by environmental
disasters or war. They can be
constructed from flatpacks into
homes in less than two hours –
and the walls of the Hush2 can be
quickly reconfigured to withstand
hurricanes (the name of the product
has its origin in “hurricane shelter”).
The third – the Push (or push-up
shelter) – is a more commercial
product, which helps make Extremis
a more viable business. These can be
used as temporary accommodation
for workers, for example.
And even before the Lowestoft-
based company’s first order is
complete, Extremis is continuing
to focus on research and
development, looking at ways to
add on cooking facilities, water
purification and waste disposal
technologies, among others.
The speed of growth has been
something of a surprise for the
company’s chief executive Julia
Glenn, who joined the company
from a job in the city in 2012. But
it’s been helped along by the fact
the humanitarian aid market is
“incredibly welcoming”. “It’s not
the easiest market to sell to because
of the decision-making process
involved, but there’s a lot of good
will,” she says.
That was proved by a visit from
chancellor George Osborne early
on. Now, she adds, “there are
new opportunities presented to us
almost on a daily basis”.
Funding struggleBut finding the finance to support
growth has been a different story.
“Raising money is incredibly
difficult. There are always fashions
linked to the general stock market
and you can see a craze for apps
“There are new opportunities almost on a daily basis”“”
Business voice | DecemBer/January 2015 39
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and technology start-ups,” Glenn
explains. “But when you have a
really solid product, based on UK
engineering, pretty much 100 per
cent in the export market, [access
to finance] is something that needs
to be improved.”
Extremis was jump-started by a
Smart Award from the Technology
Strategy Board, and it has since
secured funds from the Low Carbon
Innovation Fund and the EU.
But Glenn is critical of the fact
that it’s too onerous to access the
public funds set up to help small
businesses. “You need to have
three members of staff working on
it for a month,” she says – and that’s
a resource that this business (and
others like it) doesn’t have.
But the public funds that Extremis
Technology has won have also
attracted a small number of private
investors and Glenn applauds their
loyalty. “Those investors have
strapped themselves in for the
ride,” she says.
Extremis has also called on the
support of UK Trade & Investment
(UKTI) and the Manufacturing
Advisory Service – which is
helping to identify the best place
to manufacture the product, and
advising on a possible licensing
model overseas, so that the units
can be built closer to deployment.
Progress through partnershipsReaching out and working with
others has been central to getting
the company up and running,
says Glenn. She talks of attitudes
at a recent trade and export
course where many of the other
participants said business “is just
about who you can make the most
money from”. But her belief is that
you make progress by building
relationships. “And that’s certainly
what we’ve tried to do.”
Extremis has a joint project
agreement with ShelterBox, for
example, which helps with product
testing. The two companies are also
complementary when it comes to
disaster response, with ShelterBox
offering an immediate humanitarian
solution, and Extremis focusing on
the subsequent transition period
before victims return home or find a
permanent new home.
Glenn is on the steering
From left to right: chief executive Julia Glenn; inventor and director of technology David Watson; mechanical engineer Cillian Hickey; non-executive director (and chief executive of Adnams) Andy Wood
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committee of AidEx, a conference for the international aid and development
community, where Hush prototypes have been exhibited. The design of
the units has been adapted by working with international disability charity
Motivation. The company has partnered with local builders RG Carter and
Ridgeons timber and builders merchants on materials, and with Cranfield,
Hertfordshire, East Anglia and Cambridge universities on research and
development. It’s a member of Engineering and Physical Sciences Research
Council’s Centre for Innovative Manufacturing in Industrial Sustainability,
alongside industry heavyweights such as Airbus and Toyota. And Glenn
also has the support of Adnams’ chief executive Andy Wood, who is a non-
executive director at Extremis.
“By standing on the shoulders of giants you get to be taller,” she says.
The company’s first order is from a US logistics firm, FMN International, which
wants to act as a value-added reseller. “That’s another example of how to grow
when you’re small – by finding others who you trust to give you a voice in other
geographies,” says Glenn.
It’s a demonstration of the flexible approach that has helped Extremis
Technology to grow. But Glenn also highlights the value of perseverance.
Working in investment banking in the City while she had young children prepared
her for the necessary hard work and determination, she says. “You bang on the
doors until your knuckles hurt and you don’t ever take no for an answer.”
Business voice | June/July 2014 41
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First Utility, HL Plastics and Lion Trackhire were named larger, mid-
sized and smaller “Growing Business of the Year” respectively at this year’s
Growing Business Awards on 25 November. The awards, supported by the CBI
and in association with Lloyds Banking Group, are now in their 16th year. The
judges also recognised hospitality supplier Steelite International for the “Made
in Britain” award; turbine service Alba Power as “Export Champion of the
Year”; ecommerce technology provider Ve Interactive as “Digital Champion”;
independent children’s publisher Nosy Crow as “Young Company of the
Year”; Watchfinder as “Retail Hero”; domestic fire protection firm Plumis
as “Innovator of the Year” and luxury men’s underwear company Hamilton
and Hare as “Brand Builder of the Year”. Peter Digby at engine transmission
supplier Xtrac was “Entrepreneur of the Year”, while Simon Mellin at farm-
based retail and bistro business Roaming Roosters scooped the “Young
Entrepreneur of the Year” award.
Banks Group, the family-owned
energy and property development
business, has awarded contracts
worth nearly £500,000 to 26 local
businesses in the north-east. As
part of its continuing operations at
Shotton mine, Banks Mining had
to move its 20 buildings, including
site offices, processing facilities and
plant workshops 900 metres to allow
coal to be taken out from under their
original location. Suppliers for the
move included plant and tool hire
firm Hubbway, fastenings and fixings
stockists Thomas Potter, Cortech Fire
And Security Systems, Fergusons
Removals and plant and machinery
hire business J O Straughan & Co.
“We’ve worked on the Shotton site
for around five months in total, and
have seen at first hand the benefits
to all sides that Banks’ policy of
working with local suppliers brings
to everyone,”said Mike Allen, director
at Birtley-based KBR IT & Networking
Solutions. “Knowing that we’ve got a
clear way into competing for contracts
like this on our doorstep provides a
real incentive for our business.”
Charting business growth & investment around the UK
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Potter Logistics has delivered improved profits for the sixth consecutive
year, announcing in November that it had increased turnover by 8 per
cent to £24m in the year to April 2014. It has also continued its investment
in the business, spending £1.4m on its fleet and £900,000 on warehouse
improvements, including finalising the lease of a new warehouse in Knowsley,
Merseyside. The company celebrates its 50th anniversary next year.
Ryder Architecture has recruited
13 new architects on the back of a
string of significant UK project wins,
coupled with international growth.
The new architects will support the
company’s teams across four UK
offices – Glasgow, Liverpool, London
and Newcastle. Recent projects
include the Newcastle Freeman
Hospital Cardiothoracic Centre
expansion, Manchester University
Library and Thames Valley Science
Park. The architecture firm is the
highest ranked in its sector in the
Sunday Times 100 Best Companies
to Work For. The firm offers staff
international work experience and
study trips, sabbaticals, and time off
for their own charitable work, and
to work for Ryder’s own registered
charity, AzuKo.
SLR Consulting has acquired
UK-based Challenge Energy to boost
its global oil and gas sector advisory
services. It’s the consultancy’s
fifth deal in the sector this year.
Challenge Energy was founded in
1997 and has worked in 48 different
countries for over half of the FTSE
350 listed oil and gas producers.
It employs 16 professionals
comprising geoscientists, reservoir
and petroleum engineers and
economists, as well as commercial
and financial experts. Under the
agreement, the firms’ upstream
teams will merge under Challenge’s
founder Nick Hooke.
Let us know your news at [email protected]
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Earlier this year, DHL announced a £156m investment to increase its capacity in the UK and support the country’s export market. Phil Couchman, chief executive of DHL Express UK & Ireland, offers reassurance that entering new markets is easier than it’s ever been.
export to grow
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Expertise in the creation of state-of-the-art, consumer-friendly websites has grown in the UK quite quickly
“”
Q. What is the state of the UK export market
at the moment?
a. There has been double-digit annual growth since I
joined DHL in 2011. If you take it as some kind of barometer
of what’s happening, our business covers tens of thousands
of exporters, all geographic segments and all products and
we see nothing but optimism from our customers.
Back when the world fell apart in 2008, it was recognised
that exports would help the UK to get out of a recession. And
with that in mind, the government set some ambitious export
targets as a way of helping the country get back on its feet. We
think this policy has been, and continues to be, successful.
Q. Which sectors have experienced the greatest
success in exporting over recent years?
a. Traditional businesses such as financial services,
engineering companies and auto manufacturers, as well
as life sciences and pharmaceutical firms, are all doing
well. But the most spectacular growth has been in online
retailing.
Exporters in this sector hit a sweet spot about five or six
years ago, with a happy confluence of factors which put
them very much on the world stage.
Firstly, brand Britain is very strong in many parts of
world, especially in our two biggest export destinations:
the US and China.
The English language also plays a strong part in the UK's
attractiveness, as does our expertise in the creation of
state-of-the-art, consumer-friendly websites, which seems
to have grown in the UK quite quickly – certainly before the
rest of Europe.
This is particularly the case in fashion retailing: the likes
of Farfetch, Next, Net-a-Porter, Asos, Matches and Reiss
have highly developed, sophisticated and easy-to-use sites.
Q. What other advantages have UK firms
benefited from?
a. The strength of the British brand should not be
underestimated, in particular in a market like China. Take
Waterford Wedgwood Royal Doulton as an example:
if a plate has “Made in Britain” stamped on the back it
commands a premium.
Look at the behaviour of customers who come into
Harrods and spend vast sums of money on British-made
goods: the evidence points to the fact that British fashion,
such as Burberry and those sorts of brands, are very
sought-after. As well as luxury and fashion goods, the
success of Jaguar Land Rover and JCB in the auto industry
also means the sales of spare parts have increased.
Until recently, exchange rates have also been favourable
towards a basket of other currencies. The cheaper pound has
made it attractive to shop here, although maybe conditions
are going to get a little tougher this year and next.
Q. What role does the government play in
promoting exports?
a. Through collaborations with embassies and
trade commissioners around the world, the likes of UK
Trade & Investment have done a good job in networking
and getting importers in those countries together to
understand what Britain has to offer, as well as helping in a
technical sense.
Business voice | DecemBer/January 2015 45
member CliniC: Export to grow
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Q. What kind of practical assistance is available to
new exporters?
a. UKTI will get you talking to an expert who can
help you with questions about what happens in the
reciprocating country, with expertise and experience
covering issues of taxes, trade marks and any restrictions
that may exist.
In terms of being able to research foreign markets, the
world is a pretty small place these days. And the UKTI can
help you get a feel for whether you can make a go of it or
not in a particular market.
Alternatively, get in touch with the UK embassy of the
country you are looking to export to, and they might put
you in touch with a trade commissioner. The opportunities
for networking in the modern world are untold.
Q. What initial obstacles do firms face when starting
to export?
a. In my view it is just a perception that getting started
is difficult. We don’t think it’s anything like as challenging
as people might think.
Typically a manufacturer may be doing quite well in the
domestic market but then when it is suggested he might
export, he typically puts it in the “too hard” basket unless
he’s more entrepreneurial.
But you can start your export business very easily with
some samples or small amount of goods, with only a very
simple commercial invoice, directly to the customer’s door.
That can lead to moving large quantities of your product by
sea or air freight, or setting up wholesalers or agents around
the destination country if that’s the way you want to do it.
These are exciting times for exporters: it’s easier than
it’s even been. You can fly something, no matter what it is,
from one side of the world to another within two days.
As I have said, UKTI has a great depth of expertise
but sometimes people don’t know that. If their services
were better publicised and promoted I think you’d get a
corresponding lift in exports.
Q. What markets do you think more British firms
should be looking at?
a. We do not trade very much with Turkey and I often
wonder why. There must be goods from here that are of
interest: it is at the centre point between east and west. A
lot of the big auto manufacturers are down there and they
see Turkey as being a bridge between the two.
Q. What is the outlook for UK exporters?
a. The market is very healthy, although there is
a possibility that a strengthening pound could put a
dampener on things in the long term.
But the online retail industries in particular are not so
new any more: they have already established their brands,
their marketing techniques and their distribution channels
around the world, and they should be able to weather any
currency fluctuations.
The UKTI can help you get a feel for whether you can make a go of it or not in a particular market
“”
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Great Business Debate on flexible working
O n 26 November, businesses including Centrica, EY and Siemens joined Mumsnet bloggers and family campaigners to discuss the progress being made around flexible working.
The bloggers said it was still too hard for people – men as well as women – to ask for flexibility; that it was difficult to get hired for a new job if they wanted such arrangements; and that there were still negative connotations around the practice.
A YouGov poll, commissioned by the CBI, found that 42 per cent of workers were uncomfortable asking about working more flexibly. “Asking for flexible working is not asking for a favour,” said CBI deputy director-general Katja Hall, arguing that businesses should adopt a presumption in favour of flexibility, from the job ad onwards – or justify why not.
She added that shared parental leave would have a much bigger impact on corporate culture than most people expected.
The roundtable participants also discussed whether even the term “flexible working” was too tied to young mums, preventing the necessary change in mindset among both employers and their staff. Discussing how to open it up, Barclays director Wendy Papworth said the bank had switched to referring to it as “dynamic working”.
Mumsnet founder Justine Roberts argued that businesses needed to formalise the structures around flexible working policies so that employees felt more comfortable asking. She also highlighted that there was a clear business case to offer it, including improved productivity and retention and its popularity with clients.
Carol Rosati, director at Harvey Nash, agreed – saying that today’s corporate culture had been formed by baby boomers, while Generations X and Y expected less structure and more flexibility. And Andrew Kail, senior partner at PwC, said responding to this was an important part of attracting the talent that all businesses were competing for. “PwC is only as good as its employees,” he said.
Follow the debate at www.greatbusinessdebate.co.uk/ or @bizdebate
Business voice | DecemBer/January 2015 47
Cbi diAry: December/January 2015
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Infrastructure Survey
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48 Business voice | DecemBer/January 2015
P olitical uncertainty has prevented the delivery of the transformational infrastructure upgrades the UK needs, according to the latest CBI/URS Infrastructure survey.
A huge 96 per cent of respondents blamed the uncertainty for discouraging the necessary investment, while 93 per cent pointed to the damaging nature of political rhetoric.
Worryingly, the survey highlighted that businesses expected infrastructure to worsen in the next five years. Taking roads as an example, 77 per cent of firms believe motorways will either stay the same or get worse, rising to 86 per cent for local roads. (The survey took place before the government announced its new Road Investment Strategy.)
There is widespread support for an independent infrastructure commission, as recommended by Sir John Armitt, as well as strong backing for action on rail and roads, and commitment to implement the Airports Commission’s findings, in the party manifestos ahead of the election.
“There is a strong desire for a new approach to infrastructure that extends beyond the five-year electoral cycle,” says John Horgan, URS managing director, Europe, Middle East, Africa and India. “Separating short-term politics from infrastructure decision-making would help end the stop-start investment that has so often stalled progress in the past.”
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