TUESDAY 27 FEBRUARY 2007

UKTI

  Q480  Chairman: Let the record read that Mr Hoyle said "Because he's the boss", which I think is probably the answer to the question.

  Mr Cahn: The other answer, of course, is that the Treasury does have a specific sponsoring role for the financial services sector. I would not want to develop a strategy for that sector without taking my Treasury colleagues along with me.

  Q481  Chairman: Just to clarify, you have done India and China because the Minister responsible for financial services asked you to?

  Mr Cahn: Yes, but of course, I agree entirely that that was a sensible judgement and, going on, your question specifically was "Why not Brazil as well?" and the answer is we do, of course, put a lot of effort into Brazil. I am not putting a financial services first secretary into Brazil so in that sense it has a lower priority than India and China but I have had discussions with our Ambassador in Brasilia and he is putting particular effort into financial services. So Brazil is not ignored and Brazil is, of course, one of our 10 key high-growth markets.

  Q482  Mr Hoyle: I think it is a bit more than that. It is actually number three super-JETCO, so I think it is higher up than just saying it is in the top 10. I think the danger is we have signed up to a JETCO with Brazil and we are paying lip service to it; we are not taking it as seriously as we should be. I think that is what we seem to be finding wherever we go.

  Mr Cahn: You are absolutely right that we do have a JETCO with Brazil and that shows its importance. Alistair Darling, the Secretary of State for Trade and Industry, was out there recently, specifically to sign up to the JETCO. I will be going there later this year. Other ministerial visits happen. We do take Brazil very seriously as a market. It being in the top 10 is, I think, significant. We do put new resource into it. So it is not true that we are ignoring Brazil. However, I would say that Brazil is not an easy market. It has always turned out to be a more challenging market than we had hoped.

  Q483  Mr Hoyle: One said it was lower down.

  Mr Cahn: It is a newer JETCO, of course. The India and China JETCOs have been going for longer, and I think it is a great success that we signed a JETCO with Brazil, and a lot of effort went into negotiating that. We then had a Cabinet Minister going out to launch it. All of that shows real focus on the Brazilian market.

  Q484  Chairman: You say you are putting new resource in. Actually, you are increasing resource there by 5%. It is quite a modest increase in resource and it has been achieved by entirely ending our representation in Uruguay. This is closing Uruguay and moving the resource across to Brazil. It may be the right thing to do—I happen to think it is and that Uruguay is a mistake—but you are not putting a huge amount of extra resource into Brazil really, are you?

  Mr Fletcher: Chairman, I will try and be briefer at this time. The extra resource we are putting into Brazil actually, I think, is quite focused and, although the numbers do not look large, we have an extra inward investment team going to Sa¯o Paulo, two locally engaged staff; we have a specific JETCO liaison officer, a UK-based officer, going into Brasilia, which is really to pick up some of the working level stuff we need to get done. We have an additional UK-based officer going into Rio on the oil and gas sector, where there is particular demand, as well as an additional UK-based officer in Sa¯o Paulo. So I think, although the total numbers perhaps do not look that large, what we are doing is disproportionately building up the UK-based staff, where I think we have learned with other JETCOs that is where we need the extra firepower.

  Q485  Chairman: I think we would like a note of exactly what resources you are putting in and what resources you are cutting where possible, because my Parliamentary Answer says you are increasing by two over a five-year period and you just said five additional staff, so three must have been cut from something else to achieve that five increase.

  Mr Fletcher: It is probably easier if we write to you rather than give you the long answer now.

  Q486  Mr Hoyle: There is a great danger we are just moving the deckchairs around. I think that is what we all feel and I would love to see the evidence to prove us wrong.

  Mr Cahn: If I may add just one point, Chairman, following on the 2004 Spending Review, there was a substantial cut to the overseas representation of UKTI, including in South America and including in Brazil. That has stopped and what I am doing now is shifting a static resource around the world, so in that sense Mr Hoyle is right; it is shifting deckchairs—not, I hope, on the Titanic. I do not have new resource so I am taking resource out of some parts of my network, out of Western Europe, for example, and putting it into my key markets, one of which is Brazil.

  Chairman: We will look at this in more detail a little later on. Thank you. That is helpful.

  Q487  Mr Hoyle: It would be interesting if we could have the figures and whether it is right for Uruguay. You did touch on something that was interesting about the importance of R&D. I find it very interesting that, quite rightly, the UK is a leader in R&D and how can we attract more investment and get the use of UK companies better Do you feel that the £9 million that you have been allocated to attract new R&D business is enough?

  Mr Cahn: First of all, Mr Hoyle, I agree with you very strongly that one of Britain's key selling points is the strength of our R&D base, which is, I was going to say second to none but I think it is second to the USA, but I think that is a pretty good position to be in globally. Not only that, we make better use of the funds we invest in R&D than almost any other country in the world in terms of outcomes. Plus we have some very impressive R&D-based companies, and we have a particular strength in attracting R&D facilities from overseas companies in this country. Just as an example, in the pharmaceutical sector Pfizer has 4,000 R&D staff based in the UK. So I agree with you about the importance. No amount of money is ever enough and, of course, we could use more money effectively but I think that to start a programme of going out, targeting specific must-win companies around the world that we want to attract into this country, we have recruited the staff, we are now training them and targeting them, and I think the current levels of resource for the moment are going to be adequate. In the future we may well want to improve it. If we can make the scheme a success, I may then hope to put more resources into it.

  Q488  Mr Hoyle: How far do you look over your shoulder when you have countries like Singapore, very small, but that are heavily promoting themselves as an R&D centre, particularly, as you have mentioned, in pharmaceuticals? Is that a worry? I am pleased the Government has put in £9 million. I just worry whether it is enough when we have places like Singapore really going to town on R&D.

  Mr Cahn: You have absolutely put your finger on the reason why we need the strategy and the reason why UKTI is important. It is a competitive world out there. It is more than that; it is an extremely competitive world out there. There are a number of other markets which not only want to eat our lunch but have the ability to eat our lunch, and Singapore is one of them, which is why we need to raise our game, and the whole of our strategy is designed to market ourselves better, to explain what a good investment location we are and how good British exporters are, and to sell ourselves more effectively. But yes, I do look over my shoulder and I do not always feel comfortable.

  Q489  Mr Hoyle: How do you intend to split the money, the spend, between inward investment and trade promotion? Is there a figure? Is it 60-40, 70-30?

  Mr Cahn: In a way, I would quite like to slip out from under that question by saying that I do not see trade development and inward investment as separate activities. I see them as joined-up activities, and I have restructured UKTI to reflect that, and indeed, both in terms of the headquarters organisation, where, as I said earlier, I have put inward investment in with business development, and overseas, where in many markets we now have staff double-hatting, doing both inward investment and trade in development. But of course, you can make a distinction and we have a rough 70-30 split, something like that, and I am comfortable that that is an appropriate sort of split.

  Q490  Chairman: What is the £9 million being spent on? How much of it is staff?

  Mr Cahn: Most of it is staff, and travel and subsistence, because in this business most of the time what you are doing is going and talking to firms rather more than trying to attract them. Some of it is being spent on research. We have done a certain amount of market research with some of the money.

  Q491  Chairman: I think Mr Fletcher is offering you some further details.

  Mr Cahn: He is making the point that it is staff, but some of it is contract staff so, if you like, the money is being spent on contracts with companies that provide staff.

  Q492  Mr Hoyle: Is it a one-off £9 million or is it going to be continuous every year?

  Mr Cahn: No, it is continuous.

  Q493  Mr Hoyle: Not on a sliding scale?

  Mr Cahn: No, in fact, it is the other; we are building up to £9 million.

  Q494  Mr Hoyle: It is ramping?

  Mr Cahn: It is ramping.

  Mr Hoyle: Excellent.

  Q495  Chairman: One of the criticisms we have heard about British trade promotion is that ministerial visits are often more effectively organised by other countries, who seem to make a bigger splash. There have been some very good ministerial visits recently, particularly to places like India. That is a generalisation and all generalisations are invalid. You are trying to co-ordinate ministerial overseas visits more effectively. I find it extraordinary that they are not already coordinated. Tell me more about this extraordinary bureaucracy involving all these Departments who are meeting in committees to coordinate ministerial visits.

  Mr Cahn: I think, Chairman, I am on a hiding to nothing with this one but I will have a go. First of all, I think it is something of an illusion that other countries do this much better than we do. We have really quite a lot of strings to our bow. Prime Ministerial visits are very successful. They can be very powerful and the Prime Minister has on a number of occasions taken substantial business delegations with him. For example, he went to the west coast of America last summer and took businessmen with him. I was accompanying him and it was very successful in commercial terms. You have other Ministers equally taking large business delegations. Most recently, the Chancellor of the Exchequer and the Secretary of State for Trade ands Industry were in India last month with a business delegation of over 150 businessmen, and it was really very successful. Over and above that, we have the Duke of York, as the UK's special representative for trade and investment, and he has incredibly strong drawing power for businessmen and Ministers.

  Q496  Chairman: Even without the Royal Yacht Britannia?

  Mr Cahn: Even without the Royal Yacht Britannia. I accompanied him to Spain, to the 3Global System for Mobile Communication trade fair a couple of weeks ago, and it was quite extraordinary how the cream of Spanish business wished to come and have dinner with him. It really was the absolute top flight and it was a remarkably effective way of getting at them. The first answer to the question is actually, I think we do pretty well but we could do better, and that is why we have proposed a coordination mechanism. This has been tried in the past. It is not easy to co-ordinate Ministerial travel plans. Departments and Ministers are slightly reluctant to be contained and guided but I think we have a light-touch mechanism, a committee chaired by my Minister, Ian McCartney, Minister for Trade and Investment, and what we are trying to do is get a programme of overseas visits so that we can identify which markets are under-served—and there are some, and South America, incidentally, which I know this Committee has a particular interest in, has in the past been somewhat under-served by Ministerial visits—we intend to address that. We are also going to provide coordinated messages and materials for Ministers so that when they go overseas all Ministers take a trade and investment manage message and a trade and investment responsibility. It is early days. We have only had one meeting of the committee but the machinery is up and running and I do believe it will improve our performance.

  Chairman: It seems rather a good idea to me. I hope it works.

  Q497  Mr Bone: You touched on the Prime Minister and the Chancellor taking business delegations overseas. When you said they went with you, was that on a commercial airline, and do you think it would be in the interests of UK industry to have something like Air Force One, where the Prime Minister has his own aeroplane and you all clamber on board and fly in and make a splash like that?

  Mr Cahn: I know that when the Prime Minister went to India and China in 2005, he chartered a plane and the businessmen actually accompanied him, but paid their way, of course. Alternatively, when the Chancellor of the Exchequer and the Secretary of State for Trade and Industry went last month, the businessmen travelled separately. There are lots of different ways you can do it. Clearly, from my narrow perspective, having some air transport devoted to export promotion seems like a rather good idea but I think it is a broader governmental decision than just my parochial concerns.

  Q498  Mr Bone: There is a serious point, is there not, Chairman? When we had Britannia and Concorde and things like that, we could go there and that was really attractive. If you were in New York and Concorde was on the runway, people would say, "There is Concorde." No other aeroplane was ever referred to in that regard. We seem to have lost these things. We have lost Britannia, we have lost Concorde. Having the Royal family help us is a great benefit but we seem to be down-scaling our assets in this regard.

  Mr Cahn: I do not think we are. I happen to know about Concorde from a previous life and it was right and proper that Concorde was retired when it was retired. It was sad but it was the right thing to do, and I think it was the most tremendous marketing asset while we had it. I am sure the economics of the Royal Yacht mean that it would not be a cost-effective thing to even imagine reinstating it. We do have real assets. The Duke of York is actually one of them. I repeat, he is a remarkable magnet for businessmen, for Ministers and so on, and we also have a tremendous staff overseas, as I think the Chairman said earlier on. I have a very dedicated and devoted 1,400 staff overseas who, I think, do a great job. What we are trying to do with improving our marketing is precisely to find hooks on which to sell the UK. Selling the City of London is easy because it is such a success, and we have other successes to sell, and we do not need iconic objects, though of course, they are always a nice thing to have.

  Q499  Chairman: Some of us might like the Royal Yacht Britannia back that is a personal view—or a new one. Let us move on to your staff. How are you going to manage your relationship with your customers? You have this new marketing-led focus for the organisation, which seems to be very sensible. It is a very entrepreneurial, private sector approach. Do you really think you have an organisation that can make this culture change?

  Mr Cahn: It is a real challenge, Chairman, to make this culture change but I think we are already doing so. I am not sure I like the phrase "culture change"; it may not be a particularly helpful one. What we need to do is to make sure that the organisation is commercially focused and marketing-focused. It always has been to an extent. It needs to be substantially more so, it needs to be less bureaucratic and it needs to devote less of its attention to having meetings and shuffling paper and more of its attention to going out there—