|CONFIDENCE AND AN ENTERPRISE FRIENDLY ENVIRONMENT ARE KEY TO GROWTH
March 14 2013.
The British Chambers of Commerce (BCC) held its Annual Conference at Central Hall in Westminster today. Addressing businesses and Chambers of Commerce from across the globe, BCC Director General, John Longworth urged the government to make bold decisions, and divert resources away from unproductive spending towards growth measures that will benefit the nation as a whole.
"Good Morning. It is so good to see so many accredited Chambers of Commerce and businesses from all around the world, here today, at this, the Annual Conference of the British Chambers of Commerce.
"Tomorrow, at our International Chambers Day, we will be joined by even more British Chambers and like minded business organizations from around the globe, connecting UK business with world markets and promoting exports, trade and inward investment.
"Accredited Chambers of Commerce, up and down the country, do an incredible job supporting business growth, enabling exports and building local business communities. It is the determination of the British Chamber Network to do even more and in particular, to drive exports in the coming years, whatever current or future governments decide to do, or not do.
"The Accredited Chamber Network is already the most important business provider of trade support to UK companies, and tomorrow we will see major new initiatives to support exports.
"We have a great line-up for both today and tomorrow and I hope you're looking forward to what is an exciting programme, as much as I am.
"It is a year since I gave my first speech to this event as the newly appointed Director General of the British Chambers of Commerce. Then we were facing major, national challenges: a prolonged period of austerity, unparalleled since the great depression of the 1930's; a Eurozone crisis with no certain outcome; and a US budget deficit which threatened to derail global economic recovery.
"As I speak today, the Chancellor has declared an even longer period of austerity, longer than the Great Depression; the Eurozone crisis has deepened and is without a certain outcome; and there is a US budget deficit which has gone over the fiscal cliff - twice. As the French might say, "Plus Ca Change".
"I always imagine that phrase being used in combination with a "Gallic shrug". Perhaps that's the best way to react to these challenges, which all too easily overtake businesses, politicians and nations. After all, it is the fundamentals of human behaviour and the economics and politics that flow from this, which really count in the long run, rather than the temporary problems of institutional structures, which come and go and will, no doubt, be viewed as short-term follies in the long sweep of history.
"So we have to ask ourselves in the UK: do we have the creativity, the talent, the enterprise and the capacity for sheer hard work, to build and drive the UK economy? And I say - you are darn right we do!
"When I go around the country meeting businesspeople, seeing companies and talking to young entrepreneurs who say to me: 'It's tough but we are doing OK', then I can say quite definitely: 'Yes, we have what it takes'.
"How do I know this? Because I visit hundreds of Chamber businesses every year and it strikes me that they can do anything they set their minds to and can trade the world with the best.
"To those who say our SME and mid-sized businesses are not up to it, not ambitious enough, I say you are behind the times, living in the 1970's.
"Britain's future story could be built on the Doncaster business whose innovative software is now part of the national school's curriculum in Malaysia.
"The Birmingham manufacturer whose precision products make the Hadron Particle Collider at CERN in Switzerland work.
"The dozens of Aberdeen oil and gas service sector companies doing business in Southern Africa and South America.
"The Northern Ireland bus manufacturer that's created more than just a new Routemaster, but new buses for countries around the world.
"One of the world's few manufacturers of centrifuges, based in Huddersfield and exporting to Brazil and North America, Australia and South East Asia.
"The Isle of Wight provider of oil spill clean up services who export to over 60 countries.
"The Lancashire soft drinks brand who export to more than 65 countries, including nearly 30 in Africa.
"The Newport, South Wales company whose remote monitoring solutions keep our infrastructure running in the UK.
"And, yes, the legions of Chamber members in financial and business services in the South East and across the country, who make Britain into a service-sector champion across the globe.
"I could go on.
"These are not businesses in the supply chains of multi-nationals, important as those companies are. Instead, they are some of the legion of businesses who do it for themselves, selling direct to markets overseas and providing services and goods to the home market.
"So we have what it takes, but to allow this great manufacturing base to grow, and to enable our cutting-edge service sector to prosper, we must create a truly business friendly, enterprise friendly, environment, so as to release our latent energy. It is only this that will create the growth and the wealth we need to pay for the things we currently take for granted like the NHS, welfare and pensions.
"Some people say: "We can't do it. Britain is locked into long term, relative economic decline. Slow growth is the new normal".
"They say that Britain has a highly specialised economy that leaves us no room for manoeuvre. They say, especially, that we cannot do it ourselves, we need to rely on others, we need a crutch to lean on, and that politicians always come to this conclusion when considering our future.
"I don't accept this - not for one minute!
"I hesitate to make international comparisons, as there are rarely truly translatable circumstances, and really we need to simply be the best Britain we can be. But, for the purposes of illustration allow me to expound on a comparison for a moment. In other words, South Korea.
"This is a nation that is not blessed with natural resources; is not part of a major political bloc like the EU; is sandwiched between two of the largest economies in the world, China and Japan; and which has a hostile nation on its northern frontier. And yet they have doubled their economy nine times in the last fifty years or so, have had, until recently, growth in excess of 4%, even today at over 2%, as a fully developed economy, and are soon set to become wealthier than the UK.
"They have, like us in Britain, a spirit of enterprise, talent and hard work.
"So why is it are we not going "gangbusters", just as they are going Gangnam Style!?
"Well, for one thing, they have had successive governments who have put business front and centre stage in national policy and have had a culture of government and business working together for growth, for the benefit of their people, and in their national interest.
"We, by contrast, have a political class in the tradition of the interested amateur, in many cases having little or no experience of business, and who have generally never run anything. That ensures they are at the mercy of the Mandarins of the civil service - just like the Chinese Emperors whose actions were constrainedas they tried to rule from the original Forbidden City.
"Now, we are blessed with a separation of powers. We have the Executive, Parliament and the Courts. We have the fourth estate, a vigorous media, who challenge and expose. What we don't need is a fifth estate, a group of people at the centre who think it is their job to mitigate the worst excesses of the politicians, lest they should, horror upon horrors, actually have the audacity to decide to do what they were elected to do! We can't have that! They might even cut government departments.
"Ironically, and by chance, we do seem to be developing some characteristics of Korea.
"We are deliberately denying ourselves natural resources as we lack a long term energy security policy, preferring to play at the margins exclusively with green energy policy.
"Our failure to deal with planning rules will make for an interesting future as we realise that the bulk of our natural gift of shale deposits are predicted not to be below the leaning tower of Blackpool, but in fact below Buckinghamshire, Oxfordshire, Hampshire, Berkshire and Surrey.
"On top of this we are collectively doing our best to create a hostile nation on England's northern frontier and absent ourselves from our only trading bloc. These, I would say are not the aspects of our friends in Korea that we should be seeking to emulate!
"I think that is enough of international comparisons for now.
"Returning to Britain's prospects: there are those who also worry that we no longer have the investment capacity to seek to grow.
"They need not.
"The government is to be congratulated in that they have so far successfully maintained market confidence, so that money can be raised in the UK at reasonable rates of interest, despite the UK having the second highest combined public and private level of debt as a percentage of GDP in the G7. Quite a feat!
"Many large companies and some mid-sized and SME businesses are cash-rich and are currently sitting on potential investment pots for lack of confidence and opportunities to invest.
"Private Equity and Venture Capital have funds which they are finding it difficult to place.
"Pension funds and foreign Sovereign Wealth Funds are looking for secure, long term investments.
"It is the banks that have struggled with balance sheet constraints, arising from foolish investment, bad debt and the regulatory requirements which have flowed from this. But even they are now beginning to lend at lower rates, although only to safe bets.
"Confidence is the key, confidence and an enterprise friendly environment.
"We, in the Chamber Network, believe that these can be created by stimulating growth through a massive infrastructure development programme and by addressing a long term structural fault in UK business finance, which has been brought into sharp focus by the credit crunch.
"This is why we have said to the Chancellor that we want to see new roads and railways, national schemes and local schemes. Seaports and airport development, and soon, so that we have global reach.
"We want a skills programme that responds to business needs, rather than the vested interests of training providers and the educational establishment. This is so vital in a knowledge based economy - and must happen so that in future we avoid the skills shortages we have in areas like engineering.
"Digital and wireless connectivity second to none. A long term energy security programme, not just a green energy policy, so that we can have secure energy at reasonable cost, so that the lights don't go out and we don't drive high energy businesses offshore. Many of these things can be achieved with private funding if imagination is used to find ways to de-risk private investment in infrastructure, which has traditionally been a political football.
"On business finance the Government has, to its credit, backed the Business Bank for which we, in the British Chambers Network, have campaigned for since 2011, but nothing practical has yet been delivered. What's more, it is vital the Business Bank is prepared to lend direct to fast growing, cash hungry businesses.
"It is for these reasons that we have called upon the Chancellor to use his Budget to boost funding for the Business Bank so that it can be up and running sooner and have a direct relationship with customers.
"This is why we have asked, also, for short-term infrastructure spending on the building of new social housing and on road maintenance to boost confidence and kick start growth.
"More support for exports to match and exceed that of competitor countries and a freeze in business rates to ease cash flow pressures on businesses.
"Measures to encourage entrepreneurialism and investment through expansion of the Entrepreneurs' Allowance
"That doesn't mean deviating from deficit reduction - at least not yet
"It does mean bold decision making and a determination to actually deliver - on a large scale, and soon. Scale, delivery and urgency are the key.
"It does mean diverting resources from unproductive spending to stimulate growth for the benefit of us all, to safeguard the future of our children and grandchildren, and to be able to continue to afford the NHS, pensions and welfare in the years to come.
"Why, in a country crying out for a radical growth strategy, do our politicians stubbornly ring-fence areas of public spending, like benefits for wealthy pensioners and overseas aid, when those resources could be improving our infrastructure, creating jobs, and fostering the conditions for our economic renaissance?
"We have been predicting for some months that growth would be as important as deficit reduction to the ratings and very likely the markets.
"So, a drive for growth, in parallel to deficit reduction, is vital to the future of our country. It would be vital even in the good times. Massive infrastructure coupled with access to finance will stimulate confidence and investment. It is, in effect, a New Model Economy.
"Looking forward, if by this autumn there is no prospect of growth to be seen, there may have to be more borrowing. But this should only be in areas which would receive a positive welcome from the markets, so that the borrowing would be for the short term, with no let up to the reduction in current spending, and maintaining the medium to long term deficit targets.
"Such a programme would pay for itself in the long term if it were for such things as reductions in Capital Gains Tax, to promote enterprise, and reductions in Corporation Tax to attract business and cut tax avoidance. These measures would stimulate growth and raise tax receipts, bringing deficit reduction back on target.
"Of course, this would be analogous to a dose of defibrillation, as the body lays dying on the table. But, when you have a body on the table that's what you have to do if you want the patient to get up and running.
"All these measures amount to actually taking charge of our own economy, our own destiny. They all have the advantage of being largely independent of external factors.
"For sure, it is no use hoping for a Eurozone recovery any time soon, or a booming US economy in the immediate future, for sure -
"Hope is not a strategy.
"Speaking of the Eurozone, we find ourselves again at a point of inflection, which has profound implications for business.
"The Prime Minister has made a bold move on Europe, while putting off any negotiation or decision until after the next election. The vast majority of businesses in our network want to remain in the European Internal Market, but not at any price.
"The vast majority want no further integration - with all the burdens and constraints that will bring - and almost half want a renegotiation of existing terms, with only just over a quarter being prepared to accept the status quo.
"But the status quo is not an option, in the medium to long term. The EU is moving away from us. We would, by necessity, have to renegotiate our relationship with the EU even to maintain the status quo, even if we were completely happy with what we have at present. The history of currency unions, like the Eurozone, is that they all fail unless there is a high degree of fiscal, political and monetary policy integration. This was obvious to many from the beginning of the project; others willfully denied it. The economic crisis has brought the inevitable into sharp focus far earlier than some had clearly hoped for.
"Britain currently runs a massive trade deficit in goods with the EU, and a small trade surplus with the rest of the world; so the Prime Minister's negotiating position is strong. Trade is rapidly shifting away from a stagnant Europe and towards the rapidly growing emerging markets around the globe, markets which we historically traded with, for hundreds of years.
"The UK is very unusual in the EU in the extent to which it is a service sector economy and although we have a small but perfectly-formed, cutting-edge and efficient manufacturing sector, which we can and should seek to grow, this means that the Internal Market is not designed for us.
"The Internal Market for goods, in which Germany is the leading trader, is officially complete, albeit flawed in practice.
"By contrast, the Internal Market in services, in which Britain is the leading nation, has hardly started.
"Others gain significant advantage. France has a highly subsidised and protected agricultural sector, which merely adds to inflation in the UK, while Germany is able to maintain an artificially low currency value.
"And so it goes on.
"It is for these reasons that the Accredited Chamber Network supports the Prime Minister's position and why we would expect any future administration to pursue the same goals, after the next election. There is a BUT, however, and that is time and uncertainty. Once again the government has chosen to push a decision until after the next election. Uncertainty is not helpful and the Prime Minister should reconsider engaging in negotiations this side of the election, and bringing forward a referendum.
"We live in interesting and exciting times. For the Chamber Network the opportunity has rarely been greater. Almost a year ago, the Network set out its strategic objectives for the next three years. Top of the list was a significant step change in our work to support international trade. Accredited Chambers throughout the UK are busting a gut to help business export and it is working. The proportion of companies in our network exporting has increased from 22% fifteen months ago, to 39% today. There has been a significant shift of exports to the rest of the world, outside our EU home market. And tomorrow, we are driving a big new initiative to promote exports further still.
"The Network has also been determined to support small and growing businesses. Significant work is underway to support business growth locally and we will here later today from Lord Heseltine about other initiatives in which Accredited Chambers are participating.
"Finally, much work is underway to help support the development of skills so that young people can find work and we can continue to support what is so vital in a knowledge based economy.
"Chambers of Commerce have been around a long time. Constantly changing and adapting, the Accredited Chamber Network enters 2013 stronger and more vital than ever, covering all parts of the country, supporting local business communities - a 'first stop shop' for business needs and the number one business provider of trade services for UK companies.
"Never has the Accredited Chamber network been more important for the success of the businesses that are the backbone and future of the UK economy.
"Never has it been more important that even more businesses join Chambers and get the support that only Chambers can provide.
"Many thanks for listening and enjoy your day."