THURSDAY 3 NOVEMBER 2005

Professor Jim Norton, Mr Kevin Hawkins and Mr Alan Lacey

  Q360  Lord Taverne: What about the cost of all this contingency planning? How many small companies say, ­Well, if we take into account the possibility that it may not happen at all, the cost of planning against it, let's stick our head in the sand and do nothing"?

  Professor Norton: That is why I say there are many actions that could be taken in the normal way without having to appeal to resilience but actually do sharply increase the resilience capability. Working from home is a key example; backing up off-site is another. It is, to be blunt, commercial lunacy to run a business without proper backup to the information on which it runs. All past history suggests that something like eight out of 10 companies that lose their data never restart trading. That clearly cannot be a sensible thing. I think there is a lot that can be done - and we are certainly doing with our members - to improve resilience without saying ­You have to spend X on resilience" because, as you pointed out, that is quite a difficult sell. However I can show many of those things save money in the day to day operation of the business.

  Q361  Lord Taverne: There must be quite a lot of cost attached to contingency planning which the bigger companies are doing now. Do you have any estimates of the scale of this?

  Professor Norton: I cannot estimate it. Of course, if you are a quoted company then you have quite considerable obligations, particularly on risk, to show that you are managing this well and professionally. There is a significant compliance issue there but it is also part of being a listed company. On that front we, as IOD, through our chartered director programme are actually training directors in the requirements and giving them a professional qualification if they chose to take it. If they do that they will have had to confront these issues. If you are running a small business which is not a listed company the same framework does not apply and, indeed, it may be very difficult for reasons we have explored.

  Q362  Lord Howie of Troon: Obviously a good deal of planning has been done based on your experience of earlier crises of one sort or another. Can you tell me to what extent these plans have actually been tested?

  Professor Norton: Going back to that IOD survey which is a year old, of the 50 per cent who did have plans, 62 per cent have tested them inside the last 12 months and 81 per cent had given specific training to staff in the execution of those plans. That was a reasonable result. It is certainly clearly important to exercise those plans otherwise, as in the case of my man with no oil for his backup power tank, you do not discover it unless you test them.

  Q363  Lord Howie of Troon: Many companies - big and small - test their fire precautions quite regularly. Can they test disaster precautions regularly?

  Professor Norton: Certainly if you are a listed company it would be mandatory to do so. Many companies that I know would have a major annual exercise where they declare, for example, critical systems have failed; they would be forced to switch over and prove that their backup strategies and relocation strategies work. That is the large tier of companies who are not the key concern here.

  Q364  Lord Taverne: Do you get any reaction from some of the companies such as, ­Well, we're used to these scares"?

  Professor Norton: I have a very simple answer to it, Lord Taverne, and that is that in 1996 I had my headquarters wiped out by the IRA Docklands bombing so I actually had to do a complete disaster recovery. The date and time is certainly engraved on my memory. We got a lot of it right; we got some things wrong. One of the things I do is go round our members explaining that. When you have been through such an event you have slightly more credibility in telling people to take precautions.

  Q365  Chairman: Mr Lacey, has Sainsbury tested the procedures?

  Mr Lacey: Yes, we have major exercises to test our business continuity programme.

  Q366  Baroness Finlay of Llandaff: We have been talking a lot about food and food distribution and focussing on that. I backup organisations to you such as the banks or whatever did not continue with trying to maintain service but actually responded in a crisis by battening down the hatches and closing have you built in any contingency plan of any sort for that type of situation? Are there some third lines and fourth lines as part of the industrial sector where it is actually essential to you that they do not do that and they have the same thoughts about trying to maintain the services as we have been talking about?

  Mr Lacey: As part of our relationship with suppliers and contractors they are part of our contingency planning. As far as our suppliers are concerned in a situation such as we are facing now we start looking for alternatives in case there is a problem with a particular supplier or a particular part of the world that we draw a product from. Then we will have alternatives established, identified and ready to kick in when necessary.

  Professor Norton: It is also a key element in a larger company. The evaluation of risk is what is called ­supply chain risk". It is not ­Have I got plans in place?" but ­Have my suppliers and my distributors got plans in place?".

  Mr Hawkins: I agree with my two colleagues. I think there is just one caveat I would add and that is to remind oneself of Field Marshal von Moltke's famous rumination that no battle plan ever survives contact with the enemy and all contingency planning is based to a great extent on known scenarios, on hard-won experience in the past. The problem with a pandemic is that none of us have had experience of it and we do not know until it starts exactly what the depth of the crisis will be and how many people will be laid low by it. Everything that we have said and all the planning that rightly happens is subject to that caveat.

  Q367  Baroness Sharp of Guildford: Have you had any advice from the Government or from the Health Protection Agency on your planning?

  Mr Hawkins: We have had no advice either from the Health Protection Agency or the Department of Health. That is ourselves as a trade association and as far as we know none of our major members have had direct advice either. We, as the British Retail Consortium and some of our member companies, have had meetings with Defra officials who have briefed us on their own contingency plan. We first met them two months ago to talk about avian flu but we found ourselves talking to the specialists in Defra who focus on disease control and not those responsible for business continuity. I think it is also worth pointing out, without being critical of Defra, that this meeting took place at our request not at theirs. We seem to have to take the initiative every time in order to get answers to questions. That goes back to what I said earlier about proactivity - or the lack of it - from government departments.

  Q368  Lord Soulsby of Swaffham Prior: Do you find it very disappointing that you have to go to government departments to get information and action rather than them approaching you?

  Mr Hawkins: It is not that we expect any government department to be able to answer all our questions at any one time, but it would be reassuring if there was a little more proactivity on their part because, after all, they do have overall responsibility for the food supply chain - that is of course Defra - and one would have thought it would have been in their own interests to initiate an early dialogue with the key parties within that supply chain.

  Q369  Lord Taverne: Does this mean that companies are taking their own initiatives, for example in stocking antiviral drugs?

  Mr Hawkins: I am really not in a position to answer that question; I will find out if you wish.

  Q370  Baroness Sharp of Guildford: Can I take it that when you say you have had no contact with government departments this applies also to local authorities?

  Mr Hawkins: Yes.

  Q371  Baroness Sharp of Guildford: We have just been hearing about all these regional resilience teams so these have not yet percolated down to involving you.

  Mr Hawkins: Not yet.

  Q372  Lord Howie of Troon: Do you propose to ask for further meetings with the government departments?

  Mr Hawkins: Yes, most certainly. The alternative is to wait for something worse to happen, which we do not really want to do.

  Q373  Baroness Finlay of Llandaff: Can I just be clear on this, the resilience teams have not been talking to you about maintaining the food supplies in an emergency that goes on for several days and weeks.

  Mr Lacey : That is correct.

  Q374  Lord Soulsby of Swaffham Prior: What action would you like to see from the Government to support business in preparing for a possible pandemic, both legally and financially?

  Mr Hawkins: Following on from what I have just said, more willingness on the part of those departments and health officials who are responsible for drawing up emergency plans to engage with us in the food industry - not just the retailers but the industry as a whole - to get a better understanding of how the food supply chain works; we believe the understanding is limited. Secondly, while Defra always focuses on disease control - and I think generally does a good job there - I do not think it thinks enough about the practical issues of moving forward around the country. With the assistance of the Institute of Grocery Distribution (which represents all parties in the food supply chain) over the years we have encouraged and arranged for ministers and senior officials in Defra to walk the food supply chain to see in the course of one visit how the different parts of it link together. We still do not seem to have the response we would like from officials. We saw all these problems during the foot and mouth crisis when the Ministry of Agriculture was still in charge and things do not seem to have progressed a lot since then. I think the third point is that Defra has made it clear that their contingency plans only apply to England; what happens in Scotland, Wales and Northern Ireland is down to the devolved administrations. Defra says it has been liaising with the devolved administrations but we found during the foot and mouth crisis - and indeed the fuel crisis - that there seemed to be very little communication between the devolved administrations and Whitehall once the crisis was in full swing. We would very much like to see a uniformed approach across the UK because if there is not one it does make life harder for all business.

  Professor Norton: The IOD would welcome seeing the Civil Contingencies Secretariat - CCS - having a few more teeth which it could perhaps sink into the rump of recalcitrant government departments. Let me give you another example of lack of system thinking here. At the moment those who distribute power in the UK have maintained completely independent communication systems to enable them to restore power in the event of failure. Many of those companies have now abandoned those which had lengthy backup power provisions and resilience; they have been abandoned in favour of using cell phones. The cell phones disappear inside the first half an hour and you need communications to help restore the power. There is a certain circularity of thinking here that escapes me.

  Q375  Chairman: Mr Hawkins, you mentioned HGV drivers. How many HGV drivers are there? How close are we to already having a shortage?

  Mr Hawkins: I think I would ask my colleague from Sainsbury to answer for Sainsbury and then perhaps we could give a quick calculation.

  Mr Lacey: I am sorry; I really do not know the answer to that.

  Mr Hawkins: Some HGV drivers are directly employed by supermarkets; others are employed by third party specialists like Christian Salvesen and so on because some of the depots are run by third parties. We can let you have more detailed figures.

  Chairman: It did strike me that it was a speciality that could get us into trouble quite quickly.

  Q376  Lord Taverne: Say 2,000 for a company like Sainsbury, multiply that by seven or eight, is that the sort of figure you have overall?

  Mr Hawkins: The difficulty is to calculate the number of drivers who are employed by small suppliers who then deliver to regional distribution centres. I am sure the Freight Transport Association would have a reasonable up-to-date figure which we could get from them.

  Q377  Chairman: Presumably the forces would have drivers as well.

  Mr Hawkins: Yes, but I suspect not enough to cover any real shortfall.

  Q378  Baroness Finlay of Llandaff: You have told us what you think you would like the Government to do and so on; has there been any forum between the major food suppliers such as Sainsbury, Tesco, Asda and a few others to develop a food supply contingency plan? Has there been any initiative like that at all that has occurred? Or do the different retailers remain in competition?

  Mr Lacey: There is always a commercial aspect but clearly we work through the British Retail Consortium and I would guess - if you would allow me to do that - that our major competitors have very similar systems and plans in place, similar networks of supply. We made a point about HGV drivers and distribution and the need for a contingency plan throughout the United Kingdom and that is a real consideration for us because it is a fairly topical issue that food tends to travel fairly large distances and we have depots, for instance, in Scotland that supply our stores in Northern Ireland; in England they supply Wales. There is a lot of transfer of stock around the UK. One of our concerns when we have been considering transfer of management from one store to another in the event of it being particularly badly hit by an outbreak is whether there is a risk of transferring our colleagues from an area where there is no local infection into an area where there is an outbreak. We get the commercial imperatives conflicting then with the epidemiological considerations of this sort of situation.

  Mr Hawkins: After the fuel crisis in October 2000 Defra did set up an emergency contingency planning group on which BRC and the manufacturing representatives were represented and it has from time to time met ever since. However I think in real life what would happen in the event of an emergency of this kind is that we, as BRC, would call together the leading food retailers and the IGD would probably set up a parallel body involving food retailers, manufacturers and transport companies and that is really where the co-ordinating work would be done.

  Mr Lacey: If I could add one more point, we did exactly that in the event of the foot and mouth outbreak. There was a working party with the British Retail Consortium who shared ideas and formulated a policy to deal with that crisis. I think it works extremely well.

  Chairman: Thank you very much; you have been very helpful indeed in answering our questions. As I said to our previous witnesses if anything occurs to you that you think might be useful for us then please let us know. Thank you.