Government should do more to support export-led recovery

28 January 2010

The Business, Innovation and Skills Committee releases its report 'Exporting out of Recession', which examines what should be done by Government to sustain and increase Britain's export strengths.

The impact that the recession has had on businesses is all too real, the report says. It is therefore essential that the Government does all it can to help to create an environment that is supportive of businesses’ engagement in international trade.

The report calls on all Government departments to involve themselves in the exporting effort and not simply to leave it to UK Trade and Investment (UKTI), the Government export promotion agency.

Peter Luff, Chairman of the Committee said:

"If Britain is to have any chance of exporting out of recession—and to flourish after it is over—then all parts of government, not just UKTI and the FCO, must work to promote the country as an ideal place to trade and do business with, the report says.

"All departments must be made to realise that they have a major role to play to help Britain trade its way out of recession and sustain its long term prosperity."

The Committee found that UKTI is, overall, a successful agency but that it has been subject to too much interference from other parts of government. Its priorities have been changed too often, leading to a lack of clarity. Treasury imposed revenue targets have also forced UKTI to offer businesses services it is able to charge for, rather than providing the services which will most benefit individual companies and the country.

Peter Luff said:

"The Treasury should not force UKTI to charge for services simply as a way of recovering the costs of the agency. Charging is appropriate to stop speculative and wasteful requests and to encourage firms to take the results of the agency’s work seriously.

"However, the charges for UKTI services should be geared to these aims and not to arbitrary cost recovery targets. Nor should these targets provide an incentive for UKTI to sell services to companies that they do not really need. In the long run, the additional revenue created by companies’ new export business flowing from UKTI’s work will benefit the UK and more than cover the cost of UKTI’s support."

The Committee was also concerned to hear worrying reports about unnecessary competition and wasteful duplication of services by the Regional Development Authorities (RDAs), whose activities often seen to conflict or overlapped with work being done by UKTI. If RDAs are to become more of a benefit than a burden to national trade promotion efforts this must stop, the report says.

The Committee expressed concerns about pressures from the Treasury for the FCO to sell embassies and high commissions in high profile locations in an attempt to reduce costs.

Peter Luff said:

"We saw for ourselves the importance of these high profile buildings to UKTI in their efforts to promote the interests of British businesses.

"The location and status of Embassies and High Commissions help UKTI to attract the highest quality of businessmen and politicians to meetings and functions. Short- term spending cuts in this area would only come at a significant long-term cost."

UKTI was one of the organisations to benefit from the Government’s Strategic Investment Fund. While this funding should be seen as a welcome vote of confidence in its work, the Committee was concerned that the need for rapid decision-making led to inappropriate spending decisions being made.

Peter Luff said:

"UKTI should have focused on providing additional temporary resources for its existing successful schemes rather than hastily inventing new ones. Its two main objectives should be to alert British business to the opportunities in markets that have been regarded as too challenging, while supporting companies in existing markets."

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