Business Voice December 2014/January 2015 by The CBI

Busines s voice | the CBI magazine

Growth ambitions A healthy UK economy depends on the success of its medium-sized businesses, says Lloyds Banking Group’s António Horta-Osório

December/ January 2015

B u s i n e s s vo i c e | t h e C B I m ag a z i n e

December/January 2015

20 Interview:

António Horta-Osório 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.

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.

26 feature:

32 building britain:

38 Member profile:

New age thinking

ahead of the curve

extremis technology

The ageing population poses many challenges, but it also offers opportunities for business to benefit from new markets and more experienced employees.

The 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.

The 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.

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.

regulars 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.

6 guest columnist:

Andy Haldane

While strong employment demand has boosted wages for the highly skilled, lower-skilled employees have been left behind. It’s a tale of two workers.

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.

The choices ahead As 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

Busines s voice | august/september 2014

Cridland’s notebook

A steady 2014

work launched by the CBI at the

The UK has continued its journey

conference: the Better off Britain

back to growth this year. The CBI’s

report. As household budgets

updated economic forecast is for

have been squeezed since

3 per cent GDP growth in 2014 and

2008, addressing wage levels

2.5 per cent next year, underlining

and identifying solutions to fix

the fact that our recovery has firmly

underlying imbalances in our

taken root. Significant challenges

economy have become the subject

have loomed large throughout the

of intense public debate.

year and remain, with a challenging

Our report sets out some bold

global outlook – especially in the

policy solutions: short-term help

eurozone – and political uncertainty

for the hardest pressed, a focus

at home moving up risk registers.

on competitiveness and skills,

As we move into an election year

improving our school system to

which inevitably brings further

address disadvantage, and helping

uncertainty, it’s more important than

people build up financial resilience.

“Our business tax regime, a single energy market and a thriving financial services sector must remain the hallmarks of the UK’s economic brand”

ever that, as businesses, we work facing the UK and how best to

A business-like autumn statement

overcome them.

Measures targeted towards raising

with politicians on the challenges

UK investment were central to our

Building a better off Britain

submission to the chancellor in

Pillars of strength

At our annual conference in

advance of his autumn statement

In the last edition I updated you

November we heard from all three

on 3 December.

on the outcome of the Scottish

major political party leaders, business

With little fiscal room for

referendum. As the debate over

leaders from across all sections of

manoeuvre business wanted the

further devolution continues, I gave

the economy and – a first for a CBI

Treasury to focus on infrastructure

a speech in Cardiff earlier this month

platform – the Archbishop of York. A

investment, innovation and tackling

setting out the need for devolution

personal highlight for me was sharing

barriers to enterprise, as well as

to support, not shake, the UK’s

the stage at one point with R2D2

continued efforts to balance the

economic pillars.

from the Star Wars films – hopefully

books. The autumn statement laid

our other speakers didn’t mind being

bare the scale of the fiscal challenge

a single energy market and a thriving

upstaged by a movie star!

facing the next government of

financial services sector – these are,

whichever political colour.

and must remain, the hallmarks of

Sir Mike Rake set out the stark choice faced by the UK between

What was announced by the

Our common business tax regime,

the UK’s economic brand.

openness and isolation on key

chancellor on stamp duty and

issues like markets, the EU and

business rates has offered help

evolves business is clear that any

immigration. His message to all

to firms and families across the

new powers or funding for our

politicians ahead of the election was

country. Similarly we welcomed

devolved administrations must

to create the right conditions for

the roads investment strategy and

complement not cut across our

businesses to grow, create jobs and

I was particularly glad to see CBI’s

overriding and unified aim of creating

boost living standards for all people

calls heeded for a tunnel under

jobs, encouraging growth and inward

in the UK.

Stonehenge to improve the A303. As

investment across the UK.

The issue of how to go about

So as the devolution debate

with all government projects the real

raising living standards was the

work starts now – getting this from

I wish you all a happy Christmas and

subject of a flagship piece of

the drawing board to delivery.

a prosperous new year. Busines s voice | December/January 2015

A tale of two workers The 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

he Bank of England has

rate falling to around 6 per cent. And

perhaps slower than usual? Or

had a long and strong

both inflation and interest rates are at

instead a more protracted period

relationship with the

historically exceptionally low levels.

of sub-par growth? Answers are

Yet this recovery has been far

important for companies planning

Committee (MPC) listens carefully

from “normal”. The productivity

investment and setting wages and

to what the organisation, and its

of UK businesses is pretty much

prices, for households planning

members, say about the UK economy.

unchanged since the crisis started.

spending, not to forget central banks

This would put it around 13 per cent

setting interest rates.

CBI. Its Monetary Policy

One message that comes across loud and clear is that the UK

below its pre-crisis trend, its worst

Yet it could just be the answer is

economy is growing. Growth in the

run in living memory. And inflation-

both. Certainly, recent developments

UK is running at an annual rate of

adjusted wages are 8 per cent lower

in the labour market are consistent

over 3 per cent, above its historical

than in 2007, also its worst run in

with that interpretation – we have “a

trend and at the top of G7 league

living memory.

tale of two workers”.

table. An extra 700,000 jobs have

This leaves a macro-economic

been created in the UK in the past

puzzle. Is the UK experiencing a

Uneven distribution

year alone, with the unemployment

fairly conventional recovery, if

Since at least the 1980s, a

“”

“In principle, strong demand should have buoyed real wages at either end of the skill distribution. In practice, this has not happened” 6

Busines s voice | December/January 2015

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.

guest column: Andy Haldane

“”

“Displaced mid-skilled workers may have sought jobs for which they are overqualified in order to stay in employment” crisis is likely to have reinforced.

both employment and real wage

have buoyed real wages at either

These mid-skilled workers are, in

terms; and for the lower skilled,

end of the skill distribution, leaving

other words, underemployed. That

employment is up at the cost of

the overall distribution relatively

may have contributed to the UK’s

lower real wages for the group as

unchanged. In practice, this has not

poor productivity performance.

a whole.

In principle, strong demand should

happened. Real wages among the top

Second, participation rates within

Where next? Inflation has fallen

10 per cent of earners rose faster pre-

the labour force have increased

to well below the 2 per cent

crisis than among the bottom 20 per

significantly, especially among

inflation target, easing pressures

cent. And although real wages have

women and older age cohorts.

on household budgets. And there

fallen across the distribution, the

This reflects a range of factors

are some early signs of regular pay

gap between the top 10 per cent and

including the abolition of the default

picking up to growth rates above the

bottom 20 per cent remains larger

retirement age, concerns about

inflation rate. After five years flat or

today than it was in the late 1990s.

pension and saving income and

falling, the MPC’s central view is that

These polarising forces in the

changes to the benefits regime.

this will continue, with real wages

labour market are also evident

Third, levels of immigration have

rising henceforth. Indeed, the MPC

across industries. The dispersion

increased significantly over the past

needs that to happen if inflation is to

of real wages across industries has

20 years, boosting labour supply.

return to target.

become more pronounced since

There is an active debate on its

the crisis. In some sectors (energy,

effects, but it is possible that this

this burst of real-wage sunshine will

retail trade and repairs, other service

may have had different impacts

come to pass. The MPC has been

activities) wages are growing faster

across the wage distribution.

forecasting brighter weather for

Yet it is too early to tell whether

the past five years, without much

than before the crisis. In many others (agriculture, parts of manufacturing,

Polarising patterns

meteorological success. This time

arts and entertainment), they are still

At a headline level, these polarising

may be different. But if past patterns

falling in real terms.

patterns are also clear in aggregate

were to be repeated, with a growing

wage data. According to contacts

but diverging labour market,

demand boosted real wages for

of the Bank’s agents and surveys,

intermittent sunshine and showers

the highly skilled, but not among

including those of CBI members,

remain a risk.

the lower skilled?The most likely

staff shortages are rising in highly

explanation is that rising demand for

skilled professions, with annual rates

companies is that changes in Bank

lower-skilled workers has been more

of wage inflation of 3-4 per cent. But

rate, whenever these come, will

than offset by the rise in the supply

at an economy-wide level, average

probably be gradual, and the Bank

of labour for these services. Several

weekly earnings are growing at just

rate itself is likely to remain below

factors are likely to have been at play.

over 1 per cent.

average historical levels for some time

So why has strong employment

First, displaced mid-skilled

So we have an upper peak of the

Either way, the MPC’s message to

to come. This is not a weather forecast,

workers may have sought jobs for

labour market which is thriving in

and it is certainly not a promise, but it

which they are overqualified in order

both employment and wage terms;

hopefully helps companies prepare,

to stay in employment, a trend the

a mid-tier which is languishing in

come rain or shine.

Busines s voice | December/January 2015

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.

£30bn

The potential prize over the next 10 years if the UK had a focused strategy to boost innovationand service-driven supply chains. It could create up to 500,000 jobs.

Busines s voice | December/January 2015

infographic: Supply chains

£ The UK needs to be better at commercialisation The UK science budget provides

The seven Catapult centres receive

£4.6bn

£50m

for research, but Innovate UK receives less than a tenth of that amount.

of core funding; Germany’s 67 Fraunhofer institutes receive x10 that amount.

Just over

50 patents using graphene – a substance discovered in the UK – had been registered in this country by 2013. In the US and China, they had registered almost

2,000 patents apiece.

Busines s voice | December/January 2015

UK firms need to invest more

Investment intentions among manufacturers are at a 17-year high

BUT

R&D expenditure in the UK is only

1.7% of GDP.

AND France’s outstrips that by

40% 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.

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.

Busines s voice | December/January 2015

infographic: Supply chains

The foundation industries the UK relies on are under pressure They are responsible for

500,000+ jobs, contribute ÂŁ24.6bn to the economy and account for

29% of purchases by manufacturers of motor vehicles.

BUT

Industrial energy prices in the UK were over

33%

higher than the EU15 average in 2013

The skills crisis needs to be addressed Then

Only

More than

The foundation industries the 1 in 5 1 in 20 1 in 3 UK relies on are under pressure. YET

employers in the manufacturing, engineering, hi-tech, IT and science sectors are reporting shortage in STEM graduates and technicians.

AND

university students studied engineering or technology subjects to 2010.

chose to go into a unrelated job.

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

Busines s voice | December/January 2015

Sharing in the recovery With 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

Busines s voice | December/January 2015

event focus: CBI Annual Conference 2014

“U

nderpinning many of the major political debates of our time is

And, on the immigration debate, he turned to his own business

the fundamental question about

experience as chairman of BT. “We

Britain’s role in the world in the face

estimate that 15-20 per cent of the

of globalisation and increased

frontline staff who work for BT’s

competition.”

main contractors come from outside

With these words, CBI president

“British business will always choose openness for the UK”

in our national interest”.

Britain and Ireland,” he said.

Sir Mike Rake encapsulated what

“Without the availability of this

was to follow at the CBI’s Annual

labour much of Britain would still be

Conference, held on 10 November in

waiting for superfast broadband.”

London, as political leaders aimed

Moving on to issues of improving

to woo business support for next

skills and living standards within the

year’s general election, and

UK, he also introduced the CBI’s

business leaders spoke about the

latest report, Better off Britain (see

importance of talent and trade.

box, page 17) and its new campaign

Rake said the UK faced a choice between “shutting ourselves off

“The Great Business Debate”. “Business understands its

from the world” or “embracing the

responsibility to society,” he said.

openness which has always been

“It is in our interest to have healthy

the foundation of Britain’s success”.

and well-paid consumers and

He argued the UK’s membership of

employees.”

a reformed EU was “overwhelmingly Busines s voice | December/January 2015

The Political Debate

urope remained the central

there is simply no future for you, for

issue for the politicians in the

our country, if we turn our backs on the

room. David Cameron argued

world and try and pull up the

his case for reform in a Europe that

drawbridge. We are nothing if we are

“isn’t working properly for us at the

not an open, vibrant economy.”

moment,” he said. “I want to make sure

He said that was fundamentally more

we belong to a Europe that is about a

important than the “twists and turns”

common market and cooperation and

of various directives or individual

not about an ever-closer union.”

“spats” in Brussels.

And in response to audience concern

Miliband said even flirting with an EU

about the damage the uncertainty of a

exit was “a betrayal of our national

referendum could do to the economy,

interest” and “a clear and present

Cameron asked: “If there has been

danger to businesses” that would “risk

uncertainty, why is it that there has

billions of pounds in lost profits, risk

been such an extraordinary period of

millions of jobs and would make Britain

investment into our country?”

weaker, not stronger, in the world”.

Neither Nick Clegg nor Ed Miliband

It was left to Fredrik Reinfeldt

disagreed with the need for reform, but

(pictured right), former prime minister

Clegg argued: “In this highly

of Sweden and leader of the Moderate

globalised, mobile world economy,

Party, to give an international perspective on the UK’s stance, and

“There is simply no future for our country if we turn our backs on the world” 14

Busines s voice | December/January 2015

how to restore the eurozone’s competitive advantage. On the latter, he emphasised the

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” importance of completing the single market for both services and digital.

from taxpayers); and trade. While he felt the UK’s attitude towards

But his advice for increased

trade was similar to that of Sweden’s,

competitiveness boiled down to three

he was clear that immigration had been

elements: good order to public

helpful for his country. He added that he

finances; structures to handle financial

wanted Britain to stay in the EU, but

crises (which don’t rely on support

“not at any price”.

Conservative leader David Cameron

Labour leader Ed Miliband argued

Liberal Democrat leader Nick Clegg

focused, as last year, on his five-

that the Europe issue was being used

also spoke about the importance

point plan for a stronger economy:

as an excuse for the UK’s problems –

of infrastructure and sound public

cutting the cost of government;

the challenges posed by globalisation

finances, arguing once the “black

making the country more business-

and pressure on jobs and living

hole” of the deficit had been filled, he

friendly; getting Britain back to work;

standards. His plan for making “this

wanted government to borrow only for

investing in infrastructure; and

country work again for everyday

productive infrastructure investment.

rebalancing the economy. On each

working people”, he said, included

of his five points he said: “The job is

maintaining a competitive tax

a return to single-party government

not yet complete.”

regime, investing in infrastructure,

to “be careful what you wish for”. He

devolving more economic power

argued that the Liberal Democrat

400,000 more businesses in Britain

to build on the Local Enterprise

role was to keep government

today than when he become prime

Partnerships, banking reform and a

anchored to the centre ground, to

minister and 2 million more private-

“revolution in vocational education

stop the Conservatives severing ties

sector jobs (five times as many as

and apprenticeships”.

with Europe, or Labour from not

He highlighted that there were

have been lost in the public sector).

He also reiterated proposals for

But he warned those who wanted

balancing the books.

He said he wanted to improve on the

raising the minimum wage and tax

“Sound public finances; an open,

2 million apprentices trained over

incentives to help companies meet

trading Britain that stands tall in our

the course of this parliament, with

living wage requirements.

European backyard; an unrelenting

a target of 3 million for the next. He

“I want to be clear this is about

also announced a £15m investment

big reform, not big spending,” he

the nation from rescue to renewal.

in roads, and said that HS3 was an

said, promising credible change,

These are the building blocks of a

“extremely powerful vision” to create

a pro-business agenda and that

strong and prosperous economy,

a northern powerhouse.

he would work with business “to

filled with opportunity and success –

ensure our economic recovery

and we are going to do everything in

works for everyone”.

our power to defend them,” he said.

focus on infrastructure to help move

Busines s voice | December/January 2015

The great business debate

he Archbishop of York John Sentamu kicked off a session focused on raising living

Busines s voice | December/January 2015

explained that his business took the call it couldn’t afford to introduce the

to pay the living wage. He said it was

living wage in one year. Instead it

a “flaw of the free market economies

opted to do it in two, and found the

that there are no mechanisms to

funds by distributing its executive

reduce the disparities between the

bonus pool. But Mitie chief executive Ruby

ongoing economic uncertainties meant

McGregor-Smith argued businesses

there was now the impetus to find a

were not incentivised to act – either

system, based on fairness and equity,

by the tax system, or government

that worked for the common good.

procurement teams only interested in

To the argument that not all

Adnams chief executive Andy Wood

standards by calling for all businesses

haves and the have-nots”, and that

“There are no mechanisms to reduce disparities between the haves and the have-nots”

giant we must slay together,” he urged.

price. Adding that mindsets needed

businesses can afford to pay the living

to change, she said businesses were

wage, he said that 53 per cent of

good at telling employees what they

SMEs already were – and recognising

have done wrong, rather than raising

the benefits of doing so. He said

aspirations by encouraging what they

government should help reduce the

were doing right.

costs of doing business and simplify

This widened the conversation to

the tax system to encourage more to,

social mobility and the fact that the UK

but called on the business brains in

has the lowest rates of social mobility

the room to help come up with the

in the OECD. “Improving that starts in

solution. “Income inequality is the

the classroom,” said Damon Buffini,

event focus: CBI Annual Conference 2014

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.

Better Off Britain Business wants to help build a more

stronger role in helping employees save for a rainy day. It also makes several requests to

prosperous Britain where everyone

government, including: reducing

has the chance to get on in life.

National Insurance contributions

The CBI’s Better off Britain report

for employees; extending statutory

founding partner of Permira and

is a blueprint for improving living

maternity pay and childcare

chairman of the Social Business Trust.

standards in the UK.

provision to support children in

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,

Its recommendations for business

their first four years; simplifying

include improving flexible working

the support for SMEs to improve

practices; working with education

take-up and enhance productivity

establishments to create “learn-

potential; and a new government

while-you-earn” routes up the ladder

strategy for adult retraining.

now had an impressive career thanks

and incentivising line managers to

to a supportive employer who helped

make staff development a priority;

her return to education later on in life.

increasing commitment to schools

http://news.cbi.org.uk/reports/

“If businesses ignore the people at

and work experience; and playing a

better-off-britain/

Read the report

the bottom of their organisation, they are missing out on talent,” agreed

vodka” in the world – was once an

Wood. Adnams has a board director

engineering apprentice, he said. Wood

of opportunity,” said Sentamu, again

who was once a cleaner, and its head

also added that businesses had a

urging companies to get involved in

distiller – now winning awards for

responsibility to share best practice with

the schools and communities in which

making the “best gin” and the “best

smaller firms in their supply chains.

they work.

“Businesses are the gatekeepers

Busines s voice | December/January 2015

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 successes But 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

The focus on trade

products are made in Shepton Mallet for the purposes of quality control. Pentland Brands, which owns Speedo and Berghaus, on the other hand, took

he afternoon of the conference

the opportunities for exporting British

was once again devoted to the

talent and for promoting the UK as a

importance of encouraging

tourist destination.

exports, and it was introduced with

“The UK film industry is a thriving

an overview of the UK’s world-leading

part of a thriving sector, delivering

film industry from Ivan Dunleavy, chief

jobs, exports, a platform to promote

executive of Pinewood Shepperton

Britain abroad – and a large flow of

(pictured above).

inward investment and revenue to the

Highlighting that other sectors can replicate its success, Dunleavy said: “Brush away the stardust, and

Exchequer,” he said. “We mustn’t let this success be put at risk.” However, he expected a skills

Pinewood is a British, world-class

shortage to hit the industry in the next

manufacturing business.”

18 months, and although Pinewood

But it’s also one that has “stayed

was administering some “self-help” in

sharp and competitive”, keeping up

the form of apprenticeship schemes

with technological developments and

and a partnership with the Open

taking advantage of clustering (Dunleavy

University, he urged government to

pointed to the ecosystem of many

do more to back schemes that provide

related, small businesses situated in and

practical business skills.

around Pinewood’s studios). With nine cinemas opening every day across China, he also highlighted

And, as a reminder of the prize, he shared the stage with Star Wars robot, R2D2, which was built in the UK 30

“Under the stardust, Pinewood is a world-class manufacturing business” 18

its sales outside the UK, although all

Busines s voice | December/January 2015

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

event focus: CBI Annual Conference 2014

Jacqui Miller of Miller International

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

“We’re winning back business we used to have here in the UK”

EY, gave some insight into where

government, trade minister Lord

the new markets might come from,

Livingston spoke of strengthening

as he highlighted £300bn worth of

UK brand, thanks to the Olympics,

opportunities in fintech, infrastructure

the Great Britain branding campaign

and reshoring.

and the UK’s improving economic

And although he seemed less than certain that the UK could reach the ambitious export target set by

performance. “People want branded quality; Britain

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.

Thank you to our sponsors The 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 partners Barclays, BAE Systems, Jones Lang LaSalle and Ricoh, and our networking partner, the Open University.

has plenty of that to give,” said CBI

THE TEMPERATURE IN THE ROOM 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.”

Busines s voice | December/January 2015

HARNESSING POTENTIAL The 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

Busines s voice | December/January 2015

BIG interview: Lloyds Banking Group

“”

We should not underestimate the potential of medium-sized businesses for the UK economy in the years ahead.

“A

healthy economy

they are making to UK GDP and

Some of the measures Lloyds has

needs healthy

employment,” he explains. “We

taken are those you’d expect from a

banks,” says Lloyds

should not underestimate the

bank part-owned by the taxpayer – it

Banking Group’s

potential of medium-sized businesses

was the first to access the

António Horta-Osório. But that also

to make an even more significant

government’s Funding for Lending

works the other way around – and

contribution to the UK economy in

scheme, for example. But Horta-

the chief executive of the UK’s

the years ahead.”

Osório adds that Lloyds has used it

Speaking as co-host of the CBI’s

more than any other bank, and is

sized businesses (MSBs) have a

first MSB Summit, he adds that the

also approving more than 90 per

significant role to play in delivering a

event is a “small demonstration of

cent of loan applications from

sustainable recovery.

the bank’s commitment to help

medium-sized businesses (which it

businesses succeed”.

classes as those with revenues of

largest bank believes that medium-

“They may not individually have the same brand recognition that

He is also quick to recognise that it

between £25m and £750m). In fact, he says, Lloyds has

many larger businesses enjoy. But

will take actions, rather than words,

they do punch above their weight

to help the banks regain the trust of

increased its net lending to MSBs by

when it comes to the contribution

their customers and stakeholders.

8 per cent this year in a market that is

Busines s voice | December/January 2015

“”

The solution for the UK’s MSBs will be unique to the UK

shrinking by 4 per cent. At the same

been helped by larger teams in

solution to harnessing the maximum

time, it has increased the number of

regions including the South Midlands

potential of the UK’s medium-sized

MSBs it has a relationship with by 5

and Hertfordshire, and investment in

businesses will be unique to the UK

per cent. Horta-Osório promises an

new business teams in London and

and take account of the particular

additional £3bn in net lending to

around the country.

characteristics of our economy”.

MSBs over the coming three years.

Horta-Osório also emphasises the bank’s exclusive UK focus. It has

Playing its part

rowed back from its international

But the banking group has also made

operations, selling off its Spanish

more unusual moves in support of

that businesses of this size are still

retail and international private

smaller British businesses. In

not getting the support they need, he

banking operations last year, for

October, it unveiled a £50m private

pledges: “I can promise that we are

example, as the chief executive has

equity fund to support small and

committed to hearing every case.”

set his stall on making the banking

medium-sized housebuilders, which

group stronger, simpler, “low cost

Horta-Osório hopes will add vitality

and low risk”.

to the sector and help drive the

“I hope that goes a long way to help the UK prosper,” he says. And in response to the challenge

Lloyds Bank has a charter for MSBs (as well as a SME charter that will be renewed in the new year) built on its

And by focusing on UK retail and

development of financial skills and

relationship-led approach, its pledge

commercial banking, he says it’s

ambition within it – as well as doing

to make 95 per cent of credit

easier to understand what customers

something to address the current

decisions locally and a switcher

want and need. For all the

housing shortage.

promise to make it “quick, easy and

international comparisons,

economic” to change banks. Its

particularly with Germany’s support

Advanced Manufacturing Training

growth in customers has, no doubt,

of its Mittelstand, he argues that “the

Centre at the Manufacturing

Busines s voice | December/January 2015

Lloyds Bank is also sponsoring the

BIG interview: Lloyds Banking Group

“”

We are committed to providing manufacturing businesses with access to finance and competitive rates of funding

Technology Centre, Coventry, to the

“We are committed to providing

Digital efficiency

tune of £1m a year. The centre is set

manufacturing businesses with

But there, Lloyds has something in

to open in 2015, with more than 250

access to finance and competitive

common with many of its business

engineering apprenticeships and

rates of funding,” he adds. In the first

customers. Just over a month ago,

trainees graduating each year,

nine months of 2014, Lloyds lent over

Horta-Osório announced a new

accredited by the Institution of

£925m to the sector – putting it on

strategy for the bank, which will

Mechanical Engineers.

track to achieve its target of lending

involve closing a net total of 150

£1bn a year, for this year and the

branches, investing £1.6bn in digital

next three.

services and increased automation

“By training the next generation of engineers in the UK, the Lloyds Bank Advanced Manufacturing Training

But rebalancing will also require

and driving efficiency across its

Centre will help address the skills gap

businesses to be more outward-

– which is one of the main barriers to

looking and ambitious in seeking new

growth that the sector currently

export markets, Horta-Osório adds.

offering around customer needs –

faces,” says Horta-Osório.

And in August, Lloyds Bank research

and not the other way around,” he

services. “We must continue to shape our

And continuing his focus on the

found that 58 per cent of mid-sized

explains. “Customers’ increasing

manufacturing sector – one he sees

firms weren’t exporting, and 7 per

adoption of technological change is

as crucial to rebalancing the UK’s

cent planned to do so within the next

only going to increase the demands

economy – he explains that the bank

five years – although three-quarters

they place on their bank.”

has also worked with the University

of them said they knew the benefits.

of Warwick Manufacturing Group to

Instead, more cautiously, they chose

have access to a new, tailored

train 200 relationship managers, so it

to focus on cutting costs and

internet banking offering in 2015,

can better serve the sector.

increasing productivity at home.

which Andrew Connors, head of

And for MSBs in particular, they’ll

Busines s voice | December/January 2015

“”

We must continue to shape our offering around customer needs – and not the other way around.

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 mid-sized business at Lloyds Bank

with the customers that use it is far

workshop session at the MSB

says will “help them become more

higher than those that don’t.

Summit: “Seizing the digital

efficient and make it easier for them

The company is certainly

opportunity”, led by Sean Gilchrist,

to transact globally”. He expects

throwing its weight behind the

managing director, global digital

greater use of digital channels, as

digital shift. Lloyds Banking Group

channels, Lloyds Bank Commercial

well as increased functionality.

was a founding partner of the UK’s

Banking. He was clear about the

Already mobile is Lloyds Bank’s

Digital Skills Alliance, Go ON UK,

challenges that face Lloyds shifting

fastest growing channel. Its

and, more recently, has been

to new ways of working, but that it

business banking mobile app, for

appointed to drive a government

was willing to learn, adapt and

example, gives businesses the

initiative to increase the digital

enhance what it offered as it went

ability to control their money on the

capability of SMEs and charities

along. “Digital has to start from the

move. And the frequency of contact

across the UK. The bank’s own

top in any business,” he said.

Busines s voice | December/January 2015

BIG interview: Lloyds Banking Group

“MSBs generate a

MSB Summit

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

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 directorgeneral 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 mediumsized 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.

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 longterm 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 Busines s voice | December/January 2015

New age thinking By Pip Brooking

The ageing population poses clear challenges for the health and social care sectors. But it also demands radical action and innovation from business.

Busines s voice | December/January 2015

feature: Ageing UK

“1

00 is the new 70,”

The skills shortage tops many

labour market in that time. “Businesses are going to need more

said former Swedish

businesses’ agendas and the UK

prime minister

already has an older workforce than

older workers and therefore they need

Fredrik Reinfeldt at

it did pre-recession. That’s not just

to think about how they change their

this year’s CBI’s Annual Conference.

because of the age discrimination

attitudes and their practices to employ

One out of every three children

legislation or about delaying

older people,” he says.

born in the UK today will become

pensions liabilities, says Sarah

centenarians. The number of those

Harper, director of the Oxford

idea that fit, healthy, active men

aged over 85 is expected to double

Institute of Population Ageing.

and women in their 50s could leave

“We have institutionalised this

“Employers look at the older

the labour market and [taxpayers]

be two people in work for every

workforce as more experienced,

would support them for 30 years,”

pensioner, compared with four today.

especially when the skills shortage

Harper agrees. “Many people could

is being felt,” she says.

work well into their early 70s in a

by 2030. And by 2050 there will only

Often the ageing population is portrayed as a threat to the UK and

And that skills problem is only

knowledge economy.”

an increasing burden on the state,

likely to get worse. Lord Filkin,

which is still reeling from austerity

chairman of the Centre for Ageing

Valuable resource

measures. But it also brings plenty of

Better, points to the disparity

Ros Altmann, the government’s

opportunities for businesses willing

between the 13.5 million job

business champion for older workers,

to adapt and innovate, including

vacancies expected over the next 10

emphasises the urgency. She warns

access to a wider skills pool as well

years and the fact that only 7 million

of long-term economic decline if

as new markets.

young people will be entering the

organisations fail to change their

Busines s voice | December/January 2015

“Many people could work well into their early 70s” mindsets. “Make a plan now,” she

this area (Harper names BT as an

enjoy an “extended middle age”,

says. “Don’t let the demographics

example), in the US, it is far more

and living better for longer, there’s

overtake you.”

common to find gerontologists in

a ready market that businesses

personnel departments who can

should be exploring more for their

of the “three ‘r’s”: retain, retrain and

help find relevant services and

products and services, says Filkin.

recruit. Letting employees walk out

eldercare facilities, particularly when

And when people want to sustain

the door for no other reason than

employees relocate.

their independence for as long as

As part of that plan, Altmann talks

age, taking their skills with them, is a

Altmann argues that age should

possible, there is also plenty of

“waste of resources”, she says.

be a part of the diversity agenda,

Flexible working – which can benefit

and that a revolution is needed in

all employees – or moving workers

terms of attitudes to and among older

director at Serco Health, adds that it

into a more suitable role might be all

workers – similar to that experienced

is in the best interests of businesses

it takes to keep them on. But too

by working mothers over the past

to step up and engage with older

many businesses train only their

30 years. She’s setting up a business

people, building better relationships

young employees, when many of

taskforce on ageing in the hope of

with the communities in which they

their older counterparts would

driving the necessary change.

operate.

potential for innovation. John Myatt, strategic development

Serco is signed up to Public Health

benefit, she says.

A ready market

England and Alzheimer’s Society’s

aged 50-plus, who have lost their

According to Filkin from the Centre

“Dementia Friends” initiative, training

job through redundancy or ill

for Ageing Better, there’s another

staff to understand more about the

health, find it hard to re-enter

good reason to employ older

condition which affects 850,000

the workplace, when businesses

workers: they’ll have a greater

people and the small things they can

should be better at recognising their

understanding of older customers.

do to help sufferers they meet.

She adds that too many people

experience and talent.

Bank of America Merrill Lynch

In February, Argos, Homebase,

estimates that the over-50s account

Marks and Spencer, Lloyds

suggests those aged between 40 and

for 50 per cent of total UK consumer

Pharmacy and Lloyds Banking Group

60 tend to take fewer days off sick

spending. That’s likely to grow:

committed to create more than

than their younger colleagues. She

according to Eurostat, spending

190,000 Dementia Friends in shops

also argues that the UK lags behind

among the over-60s has risen 50 per

and banks across the UK. A study by

other countries in its support of older

cent faster than among the under-30s

the Alzheimer’s Society found that

workers, and that work-life balance

in the past two decades.

one in four people with dementia

Harper points to research that

tends to focus around supporting

Globally, the opportunities are

have given up shopping since being

those with young children, not those

even more significant, given that

diagnosed, even though the majority

aged 50 or 60 who may have frail,

Euromonitor predicts the spending

feel that this is the most common

dependent parents.

power of the “baby boomer”

activity that enables them to feel part

generation will surpass £9trn by 2020.

of their community.

Although there are firms in the UK that employ good practice in

Busines s voice | December/January 2015

With more people wanting to

At the time, M&S retail director

feature: Ageing UK

“The scale of the challenge is unprecedented and historic” Sacha Berendji said: “We want

keep up to date with technology and

and the government’s financial

our stores to be friendly, safe

get the most out of online. It has

projections, suggest a funding gap

environments for customers with

6,000 Digital Eagles in its branches

by 2020 “that would result in local

dementia. That’s why we will be

throughout the country, with some

councils doing little more than

empowering all 60,000 of our store

visiting care homes.

caring for old people and looking after children”.

colleagues to become Dementia Friends over the course of the year.”

Thinking differently

It’s a similar story with the Five

But the biggest test of all is how to

Year Forward View from NHS

for helping older people in other

reform public services as demand

England, which argues that the

ways too. Although it’s likely to

on pensions, health and social care

service faces a £30bn shortfall by

change in the future, according to the

rises – and here too businesses need

the end of the decade thanks to, as

Office of National Statistics, three in

to play their part. “The scale of the

Myatt puts it, the almost inevitable

10 people aged over 65 have never

challenge of our ageing population

continuation of the 66 year trend of

used the internet – and that rises

is unprecedented and historic,” says

healthcare inflation caused by new

to seven in 10 for those over 75. In

David Sparks, chair of the Local

treatments and changing demands.

response to this challenge, Barclays

Government Association.

And there is a clear business case

has set up “Digital Eagles”, a free service aimed at helping customers

The organisation’s own calculations, based on demographics

“The urgency is being felt,” says Sparks. “It’s directly analogous to a major company within a sector that is

Busines s voice | December/January 2015

under threat having to adapt to new

with the Health Service Journal on

and designing new facilities with

markets, and there is a paramount

the Commission on Hospital Care

the needs of older people in mind

need to listen to customers.”

for Frail Older People. Its report,

to improve their experience and enhance their recovery.

There is growing consensus –

published in November, recognised

as heard at the CBI’s latest Public

that improving out-of-hospital care

Services Network event – around

can improve care for older people

Joining the dots

the need to include the public in

but dismisses as “magical thinking”

There’s also a strengthening view,

honest discussions about the future

the idea that merging health and

voiced by Filkin, that more needs

provision of services, the cost of

social care budgets will automatically

to be done to encourage people to

them and the difficult decisions

reduce the long-term need for acute

shift their behaviours to avoid “self-

that need to be made. But Sparks is

hospital beds.

inflicted health problems” caused

Myatt is concerned that politicians

by smoking and eating. He adds that

the country have an appetite for

of all parties are too quick to offer the

the solutions must include how town

new solutions and new methods of

public what might appear an enticing

planners, transport operators and

delivery, and that they’re more open-

service without providing adequate

housing providers are adapting to the

minded on procurement than ever

funding in their plans.

rise in elderly users.

confident that councils up and down

before.To make that possible, he also

Within a hospital environment,

On the latter, for example, he

emphasised the need for innovation

Serco is trying to do things

says there is still too little suitable

and the importance of partnership

differently. For example, it is

accommodation to keep older

with the private sector.

equipping support workers with

residents independent for longer and,

listening and observation skills to

without it, they have no choice but

complement the work of clinical staff

to remain in expensive hospital beds

But Myatt warns that there is “no convenient solution”. Serco is working

Busines s voice | December/January 2015

feature: Ageing UK

Our Future Public Services The 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 or in houses that would suit larger

active. But he emphasises the

the needs of an ageing

families better.

importance of using health budgets

population, while we start to

This is something Neil Euesden, managing director at housing services provider Pinnacle PSG is trying to

earlier to prevent more expensive health problems down the line. “Technology also has a huge role to

tackle. “Housing is at the heart of the

play in making their lives easier,”

community, and it forms the centre of

Euesden adds. Here he chimes with the

health and wellbeing,” he says.

CBI’s latest report, Our Future Public

live within our means; • Public services need to fit around people’s lives and match their changing expectations; • People need to be confident that ongoing change is the right thing to do and support it.

His company is involved in a PFI

Services, which calls on government to

initiative with John Laing and Wates

digitise more health services, including

It urges the next government to

Living Space to provide extra care

appointment booking for all GPs,

build a consensus on what our

housing schemes to those aged

e-prescriptions for smartphones and

future public services look like

50-plus who want to retain their

online GP consultations where

and implement a plan to make the

independence, but need some care

appropriate, by 2020.

and support in order to do so. Some

Yet at the PSN event, MP Stella

of the homes are designed for those

Creasy implored both those in the

with dementia, others for wheelchair

public sector and businesses to be

access, but they also include “hubs”

even more radical in their thinking.

for communal facilities, while staff

Meanwhile CBI deputy director-

work closely with local health

general Katja Hall warned that

partners including district nursing

“tinkering around the edges of public

and community care teams to

service reform” would not meet

provide a holistic and streamlined

these new challenges.

approach to care provision. For Euesden, it goes back to

The only long-term solution is for people and organisations to start

tackling loneliness by involving

thinking differently about ageing –

elderly residents in the communities

and innovate as if their long lives

where they live and keeping them

depended on it.

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/businessissues/public-services/publicservices-network/podcasts/

For more information on the PSN, visit: www.cbi.org.uk/psn

Busines s voice | December/January 2015

Ahead of the

curve

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 ÂŁ315m 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 â&#x20AC;&#x201C; as well as drive regeneration in the wider area.

Busines s voice | December/January 2015

building britain: Circuit of Wales

750,000 The estimated number of people who will visit the track, in Blaenau Gwent, South Wales, each year.

ÂŁ50m The 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.

150m The number of households worldwide that events at the Circuit of Wales will be broadcast to â&#x20AC;&#x201C; providing an international platform to promote Wales to a potential 300 million people.

6,000 The full-time jobs that could be on offer, including apprenticeships, in sectors ranging from security and catering to retail and hotels.

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.

Busines s voice | December/January 2015

50 years 5.325km The Circuit of Wales is the most

The distance of the track, designed

significant capital investment

to host international events

programme in automotive

including the MotoGP, World

infrastructure in the UK since

Superbikes, World Motocross and

the 1960s.

World Touring Car.

830 acres

2024

The size of the development site,

The circuit could host the British

which will also house an indoor

round of the FIM MotoGP World

dirt track (the first in the UK),

Championship until 2024 after

an international kart circuit and

agreeing a five-year contract, with

driver training facilities, as well as

the option for a five-year extension,

leisure and cultural amenities. An

with the commercial rights holders

automotive park will be established

Dorna Sports. Donington Park has

to target the growth of low-carbon

agreed to host the first race under

industries and events.

the contract in 2015.

Busines s voice | December/January 2015

building britain: Circuit of Wales

25 years The Circuit of Wales has signed a long-term, ÂŁ10m 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 venueâ&#x20AC;&#x2122;s buildings where appropriate.

Busines s voice | December/January 2015

A body blow By Sarah Knaus

Republican success in the US mid-term elections signalled votersâ&#x20AC;&#x2122; frustration with President Obama, but itâ&#x20AC;&#x2122;s less certain what the results mean for business. 36

Busines s voice | December/January 2015

International: US mid-terms

“Republicans will need to reach across the aisle to work with Democrats in order to achieve anything substantive”

n 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. sarah.knaus@cbi.org.uk

Busines s voice | December/January 2015

Building blocks An initial concept for a portable post-disaster shelter is now the foundation of a company worth ÂŁ1.5m, with ambitions for further growth. But securing finance has been a challenge. By Pip Brooking

Busines s voice | December/January 2015

member profile: Extremis Technology

“”

“There are new opportunities almost on a daily basis”

n 2012, Extremis Technology

quickly reconfigured to withstand

from a job in the city in 2012. But

was an idea, an invention –

hurricanes (the name of the product

it’s been helped along by the fact

not a company. Now, after

has its origin in “hurricane shelter”).

the humanitarian aid market is

two rounds of funding it’s

The third – the Push (or push-up

“incredibly welcoming”. “It’s not

valued at £1.5m, with its sights

shelter) – is a more commercial

the easiest market to sell to because

set on becoming a £40m business

product, which helps make Extremis

of the decision-making process

within the next five years. How?

a more viable business. These can be

involved, but there’s a lot of good

By choosing the right partners,

used as temporary accommodation

will,” she says.

attracting the relevant funding and,

for workers, for example.

of course, having a product that’s

And even before the Lowestoft-

That was proved by a visit from chancellor George Osborne early

based company’s first order is

on. Now, she adds, “there are

complete, Extremis is continuing

new opportunities presented to us

products, all from the same IP. Two

to focus on research and

almost on a daily basis”.

– the Hush1 and the Hush2 – are

development, looking at ways to

robust, portable shelters, designed

add on cooking facilities, water

Funding struggle

to be repairable and recyclable, for

purification and waste disposal

But finding the finance to support

those displaced by environmental

technologies, among others.

growth has been a different story.

clever and unique. In fact Extremis has three related

disasters or war. They can be

The speed of growth has been

“Raising money is incredibly

constructed from flatpacks into

something of a surprise for the

difficult. There are always fashions

homes in less than two hours –

company’s chief executive Julia

linked to the general stock market

and the walls of the Hush2 can be

Glenn, who joined the company

and you can see a craze for apps

Busines s voice | December/January 2015

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

and technology start-ups,” Glenn

Technology has won have also

says Glenn. She talks of attitudes

explains. “But when you have a

attracted a small number of private

at a recent trade and export

really solid product, based on UK

investors and Glenn applauds their

course where many of the other

engineering, pretty much 100 per

loyalty. “Those investors have

participants said business “is just

cent in the export market, [access

strapped themselves in for the

about who you can make the most

to finance] is something that needs

ride,” she says.

money from”. But her belief is that

to be improved.”

Extremis has also called on the

you make progress by building

support of UK Trade & Investment

relationships. “And that’s certainly

Smart Award from the Technology

(UKTI) and the Manufacturing

what we’ve tried to do.”

Strategy Board, and it has since

Advisory Service – which is

secured funds from the Low Carbon

helping to identify the best place

agreement with ShelterBox, for

Innovation Fund and the EU.

to manufacture the product, and

example, which helps with product

But Glenn is critical of the fact

advising on a possible licensing

testing. The two companies are also

that it’s too onerous to access the

model overseas, so that the units

complementary when it comes to

public funds set up to help small

can be built closer to deployment.

disaster response, with ShelterBox

Extremis was jump-started by a

Extremis has a joint project

offering an immediate humanitarian

businesses. “You need to have

solution, and Extremis focusing on

it for a month,” she says – and that’s

Progress through partnerships

a resource that this business (and

Reaching out and working with

before victims return home or find a

others like it) doesn’t have.

others has been central to getting

permanent new home.

three members of staff working on

But the public funds that Extremis

Busines s voice | December/January 2015

the company up and running,

the subsequent transition period

Glenn is on the steering

member profile: Extremis Technology

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 nonexecutive 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.”

Busines s voice | june/july 2014

Charting business growth & investment around the UK 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 stockistsThomas Potter, Cortech Fire

First Utility, HL Plastics and Lion Trackhire were named larger, mid-

And Security Systems, Fergusons

sized and smaller “Growing Business of the Year” respectively at this year’s

Removals and plant and machinery

Growing Business Awards on 25 November. The awards, supported by the CBI

hire business J O Straughan & Co.

and in association with Lloyds Banking Group, are now in their 16th year. The

“We’ve worked on the Shotton site

judges also recognised hospitality supplier Steelite International for the “Made

for around five months in total, and

in Britain” award; turbine service Alba Power as “Export Champion of the

have seen at first hand the benefits

Year”; ecommerce technology provider Ve Interactive as “Digital Champion”;

to all sides that Banks’ policy of

independent children’s publisher Nosy Crow as “Young Company of the

working with local suppliers brings

Year”; Watchfinder as “Retail Hero”; domestic fire protection firm Plumis

to everyone,”said Mike Allen, director

as “Innovator of the Year” and luxury men’s underwear company Hamilton

at Birtley-based KBR IT & Networking

and Hare as “Brand Builder of the Year”. Peter Digby at engine transmission

Solutions. “Knowing that we’ve got a

supplier Xtrac was “Entrepreneur of the Year”, while Simon Mellin at farm-

clear way into competing for contracts

based retail and bistro business Roaming Roosters scooped the “Young

like this on our doorstep provides a

Entrepreneur of the Year” award.

real incentive for our business.”

Busines s voice | august/september 2014

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 SundayTimes 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

Potter Logistics has delivered improved profits for the sixth consecutive

UK-based Challenge Energy to boost

year, announcing in November that it had increased turnover by 8 per

its global oil and gas sector advisory

cent to £24m in the year to April 2014. It has also continued its investment

services. It’s the consultancy’s

in the business, spending £1.4m on its fleet and £900,000 on warehouse

fifth deal in the sector this year.

improvements, including finalising the lease of a new warehouse in Knowsley,

Challenge Energy was founded in

Merseyside.The company celebrates its 50th anniversary next year.

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 edit@businessvoice.co.uk Busines s voice | august/september 2014

Export to grow 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.

Busines s voice | December/January 2015

Member clinic: Export to grow

“”

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

This is particularly the case in fashion retailing: the likes

at the moment?

of Farfetch, Next, Net-a-Porter, Asos, Matches and Reiss

have highly developed, sophisticated and easy-to-use sites. There has been double-digit annual growth since I

joined DHL in 2011. If you take it as some kind of barometer

Q. What other advantages have UK firms

of what’s happening, our business covers tens of thousands

benefited from?

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

The strength of the British brand should not be

underestimated, in particular in a market like China. Take

that exports would help the UK to get out of a recession. And

Waterford Wedgwood Royal Doulton as an example:

with that in mind, the government set some ambitious export

if a plate has “Made in Britain” stamped on the back it

targets as a way of helping the country get back on its feet. We

commands a premium.

think this policy has been, and continues to be, successful.

Look at the behaviour of customers who come into Harrods and spend vast sums of money on British-made

Which sectors have experienced the greatest

goods: the evidence points to the fact that British fashion,

success in exporting over recent years?

such as Burberry and those sorts of brands, are very

sought-after. As well as luxury and fashion goods, the Traditional businesses such as financial services,

engineering companies and auto manufacturers, as well as life sciences and pharmaceutical firms, are all doing

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

well. But the most spectacular growth has been in online

towards a basket of other currencies. The cheaper pound has

retailing.

made it attractive to shop here, although maybe conditions

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

are going to get a little tougher this year and next.

What role does the government play in

promoting exports?

Through collaborations with embassies and

trade commissioners around the world, the likes of UK

attractiveness, as does our expertise in the creation of

Trade & Investment have done a good job in networking

state-of-the-art, consumer-friendly websites, which seems

and getting importers in those countries together to

to have grown in the UK quite quickly – certainly before the

understand what Britain has to offer, as well as helping in a

rest of Europe.

technical sense.

Busines s voice | December/January 2015

“”

The UKTI can help you get a feel for whether you can make a go of it or not in a particular market

What kind of practical assistance is available to

That can lead to moving large quantities of your product by

new exporters?

sea or air freight, or setting up wholesalers or agents around

the destination country if that’s the way you want to do it. UKTI will get you talking to an expert who can

These are exciting times for exporters: it’s easier than

help you with questions about what happens in the

it’s even been. You can fly something, no matter what it is,

reciprocating country, with expertise and experience

from one side of the world to another within two days.

covering issues of taxes, trade marks and any restrictions that may exist. In terms of being able to research foreign markets, the

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

world is a pretty small place these days. And the UKTI can

corresponding lift in exports.

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

What markets do you think more British firms

should be looking at?

you in touch with a trade commissioner. The opportunities

for networking in the modern world are untold.

wonder why. There must be goods from here that are of

interest: it is at the centre point between east and west. A What initial obstacles do firms face when starting

We do not trade very much with Turkey and I often

lot of the big auto manufacturers are down there and they

to export?

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

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.

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,

But you can start your export business very easily with

their marketing techniques and their distribution channels

some samples or small amount of goods, with only a very

around the world, and they should be able to weather any

simple commercial invoice, directly to the customer’s door.

currency fluctuations.

Busines s voice | December/January 2015

cbi diary: December/January 2015

Great Business Debate on flexible working

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

Busines s voice | December/January 2015

Infrastructure Survey

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 fiveyear 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.” http://www.cbi.org.uk/business-issues/infrastructure/infrastructure-survey/

Save the date CHINESE NEW YEAR DINNER Date: Thursday 5 February Venue: Victoria & Albert Museum, London http://www.cbi.org.uk/events/ chinese-new-year-dinner-2015/

Busines s voice | December/January 2015

CBI ANNUAL DINNER Date: Wednesday 20 May http://news.cbi.org.uk/news/ annual-dinner-2015-pre-booking/

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