Business Voice - February/March 2014

Busines s voice | the CBI magazine

Efficiency Drive MITIE’s Ruby McGregor-Smith is on a mission to lead the outsourcing sector to a brighter future

February/ March 2014

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

February/March 2014

14.interview:

Ruby McGregorSmith The MITIE boss on what can be achieved with big-business ambition and small-business attitude.

JOB CENTRE 8.infographic:

back to work The latest CBI/Accenture Employment Trends Survey reflects an improving economy – but worries remain.

Regulars 04 Cridland’s Notebook: The year has got off to a good start, but businesses have work to do to restore public trust and to share the benefits of recovery with their staff. These are the 22.creative industries:

30.building britain:

Mobile technology is rapidly taking

London gateway

gaming to a mass market. But is the

The prime minister has called the

UK’s creative talent equipped to fully

London Gateway super-port in

capitalise on the shift to new digital

Essex “one of the most compelling

business models?

things showing Britain’s industrial

Game changer

renaissance”.

CBI’s top priorities.

28 International: David Cameron took more than 100 companies to China, in a visit that saw deals struck and new alliances forged.

34 Member News: Charting business growth across the UK. In this issue: Cambridge Consultants, Brittany Ferries, Center Parcs, Henry Boot & Barbour.

40 Member Clinic:

10.EVENT FOCUS:

BRazil Trade Mission

Standard Life’s head of workplace policy Jamie Jenkins looks at the issues 36.Member profile:

surrounding workplace pensions a year after auto-enrolment legislation

The seventh largest economy in the

Aga rangemaster

world offers exciting opportunities for

When sales took a dive after 2008,

the UK’s medium-sized businesses, as

Aga Rangemaster delivered a

42 CBI Diary:

long as they enter the market with their

“fundamentally new proposition”

Events and photo gallery. In this issue:

eyes wide open. Delegates on the CBI’s

for its product base and a plan for

celebrating Chinese New Year and a

latest trip discovered more.

international growth.

look ahead at regional events for 2014.

6.guest columnist:

Lord Livingston We need to be more confident about what the UK has to offer investors and trading partners.

was introduced.

“Last year saw growth build slowly and steadily, and I’m hopeful for further improvement, which can be sustained throughout the new year”

The CBI pledges for 2014/15

Delivering prosperity for Britain.

Winning the public’s confidence in business.

Securing a global future for Britain in a reformed Europe.

Boosting businesses’ capacity to grow and compete.

Getting Britain building to deliver investment and jobs.

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Busines s voice | february/march 2014

Ensuring growth makes a difference to everyone.

Cridland’s notebook

A matter of trust 2014 will be the year the CBI takes serious action on improving the standing of business in society. We need to properly tackle the build-up of mistrust which has become much more prevalent over the last few years; winning the public’s confidence in business will be top of my agenda.

Economic progress

Broader benefits

of the CBI’s work, and the non-party

Happy New Year. I hope you’re

Our job at the CBI is to champion

political engagement we have with

feeling refreshed from the festive

the role of the private sector as the

all politicians, we are well-placed

break and looking forward to a

engine that drives the economy

to steer the debates and influence

successful year ahead.

forward. As growth becomes more

manifestos to reflect the positive role

The UK economy was carried into

established – and with it the increase

that business has at the heart of this

2014 on a fair wind and is continuing

of business investment, productivity,

country’s recovery. As ever you, our

to steadily improve. We’re aiming for

and the number of full-time jobs – I

member companies, will be crucial

a much better-balanced economy than

want to see people feeling more

to our efforts.

was in evidence before the crisis.

benefit, particularly at work. We are

CBI on the move

Last year saw growth build slowly

fiercely protective of the UK’s flexible

and steadily, and I’m hopeful for

labour market: it’s saved jobs and

further improvement, which can

kept our economy afloat over the

be sustained throughout the new

last few years. But there is important

year. All indications so far suggest

work to be done by employers to

that the recovery which took hold in

promote training, raise productivity,

the service sector has now fanned

and thereby provide progression

out more widely; to construction,

routes to better-paid opportunities.

where December’s PMI of 62.1

Less predictable however will

You will already know that we’ve found our new home at Cannon Place, London EC4. We’ll be moving in the spring and, after 34 years at Centre Point, it will be the start of an exciting new chapter in the CBI’s history.

Are you in schools?

showed strong growth in the sector,

be the rather politically-charged 16

Following the prime minister’s pledge

with its recovery broadening from

months ahead of us. In the run-up

at our annual conference to increase

beyond just house building in recent

to the next general election, we

the number of business men and

months; and to manufacturing,

have several significant electoral

women involved in the “Speakers for

which ended the year strongly with

milestones including the local and

Schools” initiative, I have signed up,

increases in production, orders and

European elections in May, followed

as has CBI president Sir Mike Rake.

employment. Economic growth is

in September by the referendum

Please consider joining us in this

certainly shaping up to be much

on Scottish independence. And

superb cause.

more entrenched.

because of the cross-sector nature

Busines s voice | february/march 2014

5

Thinking positive Lord Green has handed over the trade promotion baton to Lord Livingston, who is convinced that the UK can do better.

Words: Lord Livingston, minister of state for trade and investment

One of the things that has struck

the phenomenal success of the

me most during my first few

Olympics and helped by our ongoing

weeks as government minister is

“Great” campaign.

the commitment and enthusiasm

The London 2012 Games

for British trade right across

represented all that’s good about

government and business. The fact

Britain: forward, outward-looking

that our efforts are supported so

and positive. I am continually

strongly at the very top levels of

frustrated by the way that some

government was one of the main

people in the UK seem to revel

reasons I accepted the job.

What is also very clear is that we have made a lot of progress in supporting and promoting our trade efforts. With that in mind, I don’t see the future as being about any massive change in direction; it’s about building on the very good work that’s been done and taking it further – our trade figures continue to be testament to there being much more to do.

in putting our country down. I

I’ve also been hugely inspired

travel a lot and the strengths and attractiveness of the UK seem more readily recognised and celebrated around the world than here. We need to bring that positivity into everything we do and to be more confident about what the UK has to offer investors and trading partners.

Focusing our efforts Although the UK economic recovery is gathering pace, trade and

by the many highly talented and

investment will still be crucial. That

innovative companies that I’ve met

means renewing our efforts over the

so far.

coming months to drive the prime

The British brand is held in very high regard, reinforced by

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Busines s voice | february/march 2014

minister’s target to double the value of exports to £1trn by 2020.

“The British brand is held in very high regard, reinforced by the phenomenal success of the Olympics and helped by our ongoing ‘Great’ campaign”

guest column: Lord Livingston

“We attracted more investment from China in the past 18 months than the previous 30 years combined”

But one group that I would like to see a greater focus on is Britain’s

We can do more I’d also like us to build on our

10,000-strong medium-sized

fantastic position in foreign direct

company segment. Not all of these

investment. We are the number

businesses have the capability to

one location for inward investment

export, but I want to ensure that any

in Europe but as one of the most

with the potential to do so are fully

open economies in the world, we

aware of the ways government can

can do more. Indeed, we attracted

help them to become an exporter or,

more investment from China in the

indeed, a bigger exporter.

past 18 months than the previous

One of the ways we are doing this

30 years combined. This, of course,

is through our trade missions. In

complements our position as a

December, I joined the prime minister

major global investor.

To help foster the UK’s competitiveness, we have underlined our commitment to creating the most competitive tax regime in Europe.

We have pledged to reduce the rate of corporation tax to 20 per cent by 2015 – making the UK rate one of the lowest in the G8. Other initiatives such as the Patent Box are helping to support high-tech research and development, while the government’s entrepreneur visa will help to attract the world’s leading companies and the best, most dynamic, entrepreneurs.

on our largest-ever trade mission to China. It was a huge success, reflected not just in the deals signed but the reaction of the businesses on the trip. While our exports to China have doubled since 2009, we still only have around one per cent market share and the opportunities provided by the next phase of China’s development are particularly relevant to UK areas of expertise such as environmental design, healthcare, agri-tech and professional services, to name but a few.

While London is a great magnet for inward investment, we also have some exciting opportunities across the whole country that we can deliver alongside our partners in Local Enterprise Partnerships and devolved administrations.

There will be challenges, but there will be unprecedented opportunities too. It is these opportunities that we need to embrace. I know that there is a huge demand for UK expertise around the world, particularly in areas where the fast-growing middle classes want to spend on the things that Britain is so good at producing.

Strong support for free trade agreements will help this and add hugely to the prosperity of the UK and living standards across the world.

My message to those businesses that are not yet exporting is simple: this time next year, you may be asking yourselves not whether you should sell abroad, but which market you should sell to next. The UKTI can help.

Busines s voice | february/march 2014

7

Back to work Caution remains on pay

The number of full-time jobs in the UK economy increased by 400,000 over the year to September. But what is the employers’ perspective? The CBI/Accenture Employment Trends Survey found out.

Only 8% of firms are planning to freeze pay, half the level of a year ago.

35% Recruitment picks up pace

29%

Are expecting to recruit

...expecting to

permanent workers

hire temporary

compared with...

workers.

51%

of employers expect their workforce to be larger in 12 months than it is today. Including...

59% 49%

in construction

in manufacturing

58% of firms in knowledge

12% of all firms expect their workforce to be smaller.

industries [science, hi-tech, IT & professional services].

infographic: Employment Trends

But

And

Only 7% of firms intend to raise pay by more than RPI inflation (42% said they’d match it).

Only 12% think the living wage concept should be made mandatory for all businesses, in order to avoid job losses – although 43% see the debate as important.

an eye on productivity 97% of firms believe that a flexible workforce – through use of agency workers or zero-hours contracts – is important to the competitiveness of the UK.

tackling youth unemployment

81%

33%

41%

expect to have roles

are planning to

intend to increase

available which could

increase their

apprentice

be suitable for a 16-24

graduate recruitment.

recruitment.

year old seeking work.

But

And

67% of businesses say the

51% of employers think better

main obstacle in the way of

links between business and

But

And

unemployed young people

education are as important as

68% say that is

they don’t expect

securing job openings is a

improving skills in boosting their

threatened by

either to get much

lack of appropriate skills.

job prospects.

the burden of

better over the next

73% of businesses already have

employment

five years.

informal links with schools – or

regulation.

are considering developing them.

65% worry about low skill levels.

Busines s voice | february/march 2014

9

Mission possible The CBI’s third joint trade mission with UKTI, again focusing on mediumsized businesses, was to Brazil in December.

It’s a challenging country to do business in, but delegates found that that it was more than worth taking a look.

“We thought it would be good to go

keen to leapfrog the learning stage

to South America,” says CBI deputy

the UK has gone through when it

director-general Neil Bentley. “Brazil

comes to how to run successful

is a long way to go but we thought

public-private partnerships. In

it would be worthwhile given the

meetings with the CBI’s counterpart,

scale of the opportunity there – and

CNI, and the Brazilian government,

a good thing for the UKTI and CBI to

discussions included familiar issues

help support and encourage a lot of

– on skills, energy policy and the

businesses that wouldn’t necessarily

importance of the UK’s continued

think about jumping on a plane and

membership of the EU. But what

going that far themselves.”

surprised Bentley most was that the

British businesses have directly

first thing the locals wanted to talk

relevant skills to tout to a population

about was the creative industries.

of nearly 200 million. Brazil hosts

“They wanted to talk about TV

the FIFA World Cup this year and

formats, architecture, design and

the Olympics in 2016. It has a

fashion,” he says. “They think

dynamic consumer market, with an

that the UK is a world leader in

emerging middle class. Its oil and

creative talent.”

gas sectors are burgeoning, with the country eager to learn from the UK’s experience in the North Sea. And with stalled growth – GDP grew 0.9 per cent in 2012 – a renewed focus on improving infrastructure and education offer further possibilities for UK expertise.

To attract private investment in infrastructure, Bentley says Brazil is 10

Busines s voice | february/march 2014

“It’s about using British expertise to work with local people to develop something that suits local needs” Neil Bentley, CBI deputy director-general

event focus: Brazil Trade Mission

Competitive advantage

there was demand for Comtek’s

There were 20 delegates on

services in Brazil, and he had just

the mission, including those

signed a potential partner for

from engineering company AVF

doing business there. He was also

Group, Cambridge firm Amino

attracted by the two-hour time

“It’s a long way to go, but was worthwhile given the scale of the opportunity there...”

Technologies and medical device

difference between the UK and Rio

Neil Bentley, CBI deputy director-general

supplier Owen Mumford. Some

and Sao Paolo. However, he was

were complete newcomers to Brazil, while others, such as architects Foster + Partners and

aware of significant challenges.

He sent two members of staff on the mission – the first time Comtek

– it’s about using British expertise

representatives had gone to Brazil

to work with local people to

– to explore the ways of dealing

develop something that suits local

with those challenges. “Our main

needs,” repeats Bentley.

worries were customs duties and

“Brazil likes doing business with

bureaucracy. Because we are not

us; they think we’re honest and

local, we could be looking at 40

make good partners. But they think

days’ additional turnaround time,”

that we’ve taken our eye off the

he explains. At meetings with

ball. They’re not sure why we were

potential clients, they discussed

there in the Victorian era helping

alternative approaches to minimise

them build railways and we’re not

this impact – from remote access

there now.”

solutions and, more innovatively

Feedback from CBI members

for the business, leaving spare

that went on the trade mission

parts at client offices.

suggests that they viewed the trip

“We knew there were going to be

as more than simple fact-finding –

challenges that might put people

they came away with a sense that

off,” says Sheibani. “But brave

there was real potential for doing

Turner &

organisations will be the winners,

business in the country. Many are

Townsend,

as there is no doubt Brazil will get

now following up on the contacts

rid of these barriers.”

they made. “There are clearly huge

construction consultancy

wanted to expand their presence in the market.

Askar Sheibani, chief executive of IT support firm Comtek, was already exploring the potential of doing business in Brazil when he heard of the trade mission.

Having previously attended the CBI/ UKTI trade mission to Russia, he knew a high-level delegation with the support of the embassy was useful to open doors.

With 40 per cent of his company’s revenues already coming from exports, and business going well in Mexico, Sheibani identified Latin America as an important growth market. His research had shown

Perfect partners?

opportunities in Brazil and we could make more of them,” says Bentley.

Brazil is a very welcoming place,

“If you’re prepared to put the hours

but delegates were warned not to

in – not just on the ground, but

take the positivity around meetings

in the air as well – then Brazil is a

at face value. “Don’t misinterpret

place that wants to do business

that as meaning ‘let’s sign on the

with Britain.”

dotted line tomorrow’. It’s how they do business,” says Bentley. “They place a premium on getting to know you, so you have to be in it for the long haul.”

Larger UK firms already present in Brazil were encouraging about the potential of the market, but highlighted the importance of being prepared to listen and adapt.

“Don’t just rock up with your British solutions and expect it to be all-go Busines s voice | february/march 2014

11

Brazil in numbers Population: 198.7m Inflation: 5.4% (2012) Ease of Doing Business ranking: 116/189 World Competitiveness Index ranking: 56/148 (Sources: World Bank; OECD; World Economic Forum)

A Brit on the ground John Doddrell, consul general, Sao Paolo “Brazil is the seventh largest economy in the world and there is potential to do business right across the board. As well as the emerging middle class, Brazil has a rich elite, particularly in Sao Paolo, which has the highest private ownership of helicopters in the world and the second highest ownership of Ferraris. There are big opportunities in infrastructure and oil and gas, and huge demand for education and for healthcare.

But it’s not necessarily an easy market to do business in. You can’t assume that everybody will speak English; you will need someone to help you operate in Portuguese. Bureaucracy can slow things down and the tax system is very complicated. All this points to working with a local partner, whether that be an agent, in a joint venture or through acquisition.

Scale counts Many people don’t realise the scale of the country. It is bigger than the US, excluding Alaska; it’s bigger than western Europe; the state of Sao Paolo is bigger than France, with an economy the size of Poland.

With that, people underestimate

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Busines s voice | february/march 2014

other cities.

They have not necessarily heard of the cities beyond Sao Paolo and Rio de Janeiro, which are still home to more than two million people, and present many opportunities to do business, with less competition.

It’s well worth venturing beyond the established route.

Realistically, it’s difficult to cover the whole of Brazil. UKTI can help firms with advice on where the opportunities are for products and services, how to address the markets, what the competition is like and who might represent them in some way. Beyond Sao Paolo and Rio, we have offices in the capital Brasilia, Recife, Porto Alegre, Belo Horizonte – and eyes and ears in other cities too.

The UK is the fourth-largest foreign investor in Brazil, which means there are familiar faces that newcomers can look to for examples of how to do business here. BG Group, BP, Shell, Rolls Royce and others are all actively engaged in

Brazil’s booming oil and gas sector. And the country is one of JCB’s most profitable businesses – the prime minister opened the JCB factory just outside Sao Paolo when he visited in 2012 and it’s one of their biggest factories in the world. Pearson has just acquired one of the big language schools, HSBC is the biggest foreign bank operating in Brazil and GSK is doing well.

It’s not a market for companies that don’t have the resources to take a medium- to long-term view of an investment here, but I don’t think people should be put off by the challenges. It’s about approaching the market in a realistic way.”

“Brazil is bigger than the US, excluding Alaska; it’s bigger than western Europe; the state of Sao Paolo is bigger than France, with an economy the size of Poland”

event focus: Brazil Trade Mission

GDP:

GDP growth:

$2.25trn

0.9%

(2012)

(2012)

GDP growth forecast: 2.5% (2013) 2.2% (2014)

Why growth has slowed Marcos Casarin, economist, Oxford Economics “After recording very strong growth under President Lula between 2003 and 2010, the Brazilian economy was already slowing down when President Dilma Rousseff took office in 2011.

Her economic policy has favoured more state intervention – but has seen GDP growth slow even further, from around five per cent a year between 2003 and 2010, to one per cent in 2012. In 2014 we are forecasting growth of 1.7 per cent, compared with 2.2 per cent in 2013.

Business investment, which was one of the factors underpinning growth under Lula, has slowed as fiscal policy deteriorated following the financial crisis. October’s general election will bring more volatility, with investors reluctant to commit until they know the outcome. The change in US monetary policy – with the era of cheap money coming to an end – is also affecting Brazil, as financial markets withdraw

money from the main emerging economies.

And consumer spending is decelerating – from growth of seven per cent in 2010 to an expected two per cent in 2013 and 2014 – as household budgets are stretched, people pay down debts and real wage growth slows.

However, the unemployment rate is currently at record lows and consumption will still be able to outpace GDP in the medium to long term thanks to Brazil’s big domestic market of almost 200 million people. The depreciation of the real will also help Brazilbased businesses export consumer goods to the rest of the world. Other sectors that offer opportunities include agriculture and financial services.

Trading dynamics • UK is Brazil’s 11th largest trading partner for exports, 14th for imports.

• 4% – the amount UK imports to Brazil rose in 2012. They increased by more than 30% in 2007, 2008 and 2010.

Brazil has got a lot of potential – but it needs the right economic policies to realise it. To return to growth rates of four to five per cent, it needs a reform agenda that includes a more responsible monetary policy, some austerity measures, reforms to labour laws and the tax code and a reduction in bureaucracy. Just achieving the simple ones first would provide some good results.”

“Brazil has got a lot of potential – but it needs the right economic policies to realise it”

• $1bn – the trading surplus in 2012, in favour of Brazil.

• The biggest sector for imports in 2012 was medicinal and pharmaceutical products. Automotive is also prominent in the top 10 – with vehicles for goods transportation up 260% on 2011.

(Source: Embassy of Brazil in London) Busines s voice | february/march 2014

13

BIG interview: Ruby McGregor-Smith

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Busines s voice | february/march 2014

Championing a cause MITIE’s Ruby McGregor-Smith is no stranger to fighting for what she believes in. Now she’s determined to give outsourcing a better name.

Words: Pip Brooking | Photography: Peter Searle

Who would take on the job of championing the outsourcing

“I want to raise aspirations in people and make them all realise they can do so much more if they choose to”

sector at the moment? Just when its value should be becoming more clear to more people, the prospect of a witch hunt is looming ever closer. Now, following fraud allegations and negative publicity, it has never been more important to make the case for the benefits to taxpayers of private involvement in the public sector.

Busines s voice | february/march 2014

15

BIG interview: Ruby McGregor-Smith

I

t’s a situation that makes

practice. And she describes the

Ruby McGregor-Smith, chief

reasons things haven’t worked in

executive at MITIE, all the

the “one or two extreme examples” that have attracted huge negative reaction as “complicated” – adding that the issues need to be dealt with “properly and appropriately”. There are examples of both good and bad procurement, she says.

As chair of the CBI’s board, McGregor-Smith wants to end the latter. “We need to focus on how we are going to deliver public services in the most effective way, what the learnings are that we can take from some of the recent challenges, and how we can ensure that we are seen as transparent, as real experts and really good at what we do.”

She doesn’t just want the sector to be seen as a supplier of services.

“We want to be seen by everybody across the public sector as a partner that is actually helping them sort out some really big challenges around their budgetary spend, delivering great innovation and making the UK’s services better,” she says.

more determined to support

the business as the new chair of the CBI’s Public Services Strategy Board. “It’s a young industry learning in tough economic times.

It’s still got a lot to learn,” she says.

The concept of outsourcing has

been around for less than 30 years, yet it’s grown rapidly – according to Oxford Economics, turnover from outsourced services in the UK had already crossed the £200bn mark by 2011. That has inevitably caused some growing pains.

It doesn’t help that the industry has been pretty much under the radar – and McGregor-Smith says it needs to be more open and talk more about what it achieves. She emphasises the tax take from the industry (£30bn+), its contribution to GDP (eight per cent) and the jobs it supports (10 per cent of the UK workforce). But she’s more keen to get across the success stories driven by those within that 10 per cent: “It’s been a sector that hasn’t

Accidental role model

sung about what it’s good at. We

McGregor-Smith has had plenty of practice of standing up for what she believes in. She was thrust into the limelight seven years ago, as the first Asian woman CEO of a FTSE 250 company. “It never occurred to me for a minute that anybody would think of me as a role model,”

tend to do things for our clients, rather than focusing on the wider picture. The public deserve to know exactly what we’re doing.”

It goes without saying that she believes the sector can deliver great value, innovation and best

16

Busines s voice | february/march 2014

“”

We need to ensure that we are seen as transparent, as real experts and really good at what we do

she says. “But I’ve learnt that until there is equality on every front in business you are a role model, because others need to realise that they can get there.”

So she’s been vocal about being

that policy could better support the agenda, especially if the government joined up its own approach between the different issues.

In November, MITIE won the Leadership Diversity

November alone, the company won five significant contracts – two of which were in the public sector. And over the last year it has mobilised its largest ever contract, worth £775m, for Lloyds Banking

a mum and the difficulties of

Award at the National

balancing that with a high-powered

Business Awards,

job. “It may not be for everyone, but

which McGregor

I want to raise aspirations in people

Smith says was

London, which is

and make them all realise they can

one of the most

designed to attract

do so much more if they choose to,”

important things

cleaning contracts

she says. But she also worries the

the company has

from SMEs.

diversity debate is too centred on

won. But she won’t

gender – that it is somehow easier

rest there.

for people to grapple with that

“I want us to get

Group. At the other end of scale, it’s trialling MITIE Local in

Although it now has 74,000 employees, McGregor-

topic, while few speak up on the

better every year,” she

challenges around race, disabilities

says. “And we need to get on

and age.

“Diversity is about diversity of thinking,” she explains. “That doesn’t come from an equal gender split. How can you possibly know what it’s like to be disabled, when no one around you has been and you haven’t had those experiences? If you look at the race statistics around senior leaders from a BME [black and minority ethnic] background they’re really, really poor. Why? And what are we going to do about it?”

Just as the challenges that face outsourcing can be improved by a greater level of understanding, she argues that the issue of diversity won’t be solved until they are really understood. She has undergone bias training herself – and, of course, leadership is important. But she adds

and change the workplace. Every

– and ambition. “The business is

business leader should want to

flat structured. We never ever think

encourage their teams to want to be

we’ve reached any dizzy heights. We

like that.”

Despite the depth of feeling she obviously has around diversity, she doesn’t want championing it to be her legacy. She’d rather it was simply: “Ruby McGregor-Smith, she grew a great business” – with no reference to her gender or where she was from, because there would be nothing unusual about it.

feel very humble about what we’ve

Being mighty

Smith insists the company has a small business attitude

achieved,” she says. “We think we’ve only just started.”

In some sectors, it has. Energy and healthcare are new, and fast growing, areas for the business as it has adapted to the opportunities.

It launched MiHomecare following the acquisition of Enara, the UK’s largest provider of home care services in the UK, in October 2012.

Take a closer look at MITIE though,

Earlier that year, it bought energy

and the fact that McGregor-Smith is

and carbon management specialist

growing a business is not in doubt.

Utilyx, complementing the purchase

In just under seven years at the

of the British arm of Veolia and

helm, she’s seen revenues increase

EDF’s energy management business

from £0.5bn to more than £2bn. In

Dalkia it made in 2009.

Busines s voice | february/march 2014

17

BIG interview: Ruby McGregor-Smith

The McGregorSmith CV March 2007-present: CEO, MITIE.

2002-2007: Group finance director, then chief operating officer, MITIE.

2000-2001: Joins SGI | Babcock International.

1991-2000: A range of operational and financial roles at Serco.

1985-1991: Accountant, BDO Stoy Hayward.

Other roles: Non-executive director at Michael Page International and on the board of the UK Government’s Department of Culture, Media and Sport. In 2013, she chaired the Women’s Business Council.

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Busines s voice | february/march 2014

Busines s voice | february/march 2014

19

“That was about building capability,” says McGregor-Smith.

“What you’ll see us do more of as we grow is to focus much more on some of the smaller niche markets we’re in. M&A remains part of the strategy, but we’re really passionate about growing what we’ve got organically.”

For someone who is quick to highlight the sector’s achievements oversees – Britain is seen as the world leader in outsourcing – MITIE is yet to exploit many of the opportunities, choosing to expand with existing clients. Meanwhile, the Lloyds contract demonstrates the success it’s having in moving clients which take single or bundled services across to a broader, integrated model.

People power It’s not all easy. In a business designed to save its clients cost, maintaining margins is challenging – although McGregor-Smith says it’s as simple as “delivering great service” that clients are happy to pay for. MITIE, like others in the sector, has also been criticised for its use of zero-hours contracts. Its workers for First Great Western, for instance, went on strike over them for a third time in November.

On zero-hour contracts, she says: “We’re not doing anything that’s not the norm in certain industries. You have debate on both sides, and many of our people will say it suits them.

Equally, it’s about what our clients want too – and our clients are very keen for those models as well.”

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Busines s voice | february/march 2014

It’s difficult to square those problems with a business that has also featured in the Sunday Times Top 100 Best Companies to Work For list for three years running. McGregorSmith also spends a lot of time talking about the talent throughout the company, pursuing recognition for them with both international and external awards. On several occasions she refers to the “unsung heroes that deliver great things across many contracts,” who deserve greater levels of public support.

She adds that the apprentices that MITIE recruits (which now number in the hundreds) are “as important as graduates”, contributing “hugely to the growth of the group”.

She’s also quick to deflect any talk of her own success as a CEO. “It’s not just about me. There are many people across MITIE who share a real passion to grow our business.

I’m just one more employee that happens to have a rather fantastic job title,” she says. “I never want to be seen as a conventional CEO, that’s for sure.”

And she finishes the interview as it started – chatting and laughing with the colleagues she hot-desks alongside, in their new offices on the outskirts of Reading. The environment gives a good insight into what sort of firm she wants MITIE – and the wider sector – to be: modern, fresh and open. For her it’s all about doing things differently, and better. She just needs to deploy some of her powerful persuasion tactics to win over the public sector sceptics.

On social media Ruby McGregor-Smith is a big fan of Twitter – and questions why so many businesses are scared of it. “Why aren’t we all on social media? Why aren’t we all communicating more? The fear of the unknown stops us,” she says, and turns the question on its head: “I’m surprised more of us are not on social media when every teenager is. They’re my next generation of employees and if I don’t understand the way they communicate then that doesn’t make me a great people employer.”

“Public services are too important to too many people to be allowed to be the monopoly of the public sector”.

A letter on outsourcing from Francis Maude.

Better business

Hardworking taxpayers expect world-class public services, delivered in the most cost-effective way possible. That’s why after the last general election I set up an efficiency and reform group, based in the Cabinet Office. The group’s mission is to find savings, drive up standards and improve the way Whitehall works. Last year it helped departments save £10bn. I’m really proud of the work it’s doing, but we know there’s so much more to do to slice out waste.

This government is looking beyond the old binary choice between bureaucratic in-house provision and redblooded privatisation. We want to see a diverse ecosystem of providers that includes mutuals, joint ventures, the voluntary sector and the private sector working alongside the public sector.

We are making progress. The civil service pension provider MyCSP was spun out from the public sector in April 2012 to become a mutual joint venture, with ownership split between the staff, the government and a private sector partner. And late last year we launched a joint venture with Steria to run shared services for Whitehall departments. The new company, SSCL, can also bid for business from the private sector and profits will be split with the taxpayer.

So the private sector is very much part of our plans to drive up standards. We want to partner with those that are flexible in how they work, innovative in how they deliver and that treat taxpayer money as if it were their own.

Our procurement reforms are stripping out unnecessary bureaucracy to ensure SMEs can compete on equal terms with bigger players. We are already seeing a difference as our spend with SMEs is significantly higher now than it was in 2010. In the digital world, our recently-launched services framework contains 84 per cent SMEs.

We know that outsourcing can improve services and save money. But in the past Whitehall has not been good enough at managing contracts. Our long-overdue reforms are all about sharpening commercial capability. At the same time, we have introduced Crown representatives from the private sector to improve our relationships with suppliers and negotiate better contracts. By publishing all significant contract opportunities online on our contracts finder website everyone can see just what business they can do with government.

These procurement reforms saved taxpayers £3.8bn last year and there’s more to come. This year we will be launching the Crown Commercial Service to bring together government’s central commercial capability into a single organisation. The service will ensure we have more informed purchasing, intelligent supplier engagement, and smarter contract and relationship management. For the first time ever, Whitehall has management information that is consistent and comparable across departments.

My mission in government is to save taxpayers money, improve public services, and boost growth. A more efficient, leaner Whitehall is crucial to helping Britain win the global race. Since the last general election the civil service has shrunk by 15 per cent to its smallest size since the Second World War. It is now on track to be a quarter smaller – and much more productive – by 2015.

As the government implements its ambitious reform programme we want to see a hybrid economy of suppliers emerging. It has been an interesting few months for outsourcing. But let no one have any doubt: public services are too important to too many people to be allowed to be the monopoly of the public sector.

Francis Maude is the minister for the Cabinet Office

Busines s voice | february/march 2014

21

game changer

22

Busines s voice | february/march 2014

CREATIVE INDUSTRIES: Gaming

From Grand Theft Auto to Moshi Monsters, the UK video games industry has enjoyed a string of recent successes. And it’s set to reap big benefits from the shift to digital business models – provided it can master challenges in its path.

When video game Grand Theft Auto V was released in September 2013, it achieved global retail sales of more than $1bn in just three days – making it the fastest-selling entertainment product ever.

But while the crime adventure series is played by gamers worldwide, far fewer people know that it was originally developed in Dundee and is today produced in Edinburgh by studio Rockstar North, part of international gaming company Take-Two Interactive Software.

It’s just one of a string of recent hits for British game developers, from Mind Candy’s online game Moshi Monsters to Jagex’s multiplayer role-playing title RuneScape. Indeed, the UK has a history of producing high-quality video games since the 1980s, as programming talent has emerged from the country’s cultural and creative strengths in fields from film and TV, fashion and music, to art and design.

Research published by games industry trade association TIGA reveals that the sector contributed £947m to UK GDP in 2012, employing more than 9,000 people in games development and indirectly supporting almost 17,000 further jobs.

Today it’s the fifth largest developer of video games in the world, according to TIGA chief executive Richard Wilson. But he warns that the industry has declined in both employment and GDP terms since 2008. Canada, for example, has leapfrogged ahead, backed by government tax incentives. “We’ve lost projects to overseas competitors and jobs, investment and studios as a consequence,” he says.

Busines s voice | february/march 2014

23

Although calls for a UK games tax relief were answered in the

and tablet apps.

This transition has seen console-

chancellor’s 2012 Budget, it has

based studios Blitz and Eurocom

since been held up by a European

go out of business and retailers

Commission investigation into

have suffered. But it also offers

whether it breaches state aid rules.

significant opportunities and is

Nevertheless, Wilson is confident it will happen. “If they give the green light, I think the industry will

opening up game-playing to mass-

“Games are a service they can use analytics and metrics to find out what customers do and don’t like, and change them”

market audiences.

“Super-high speed broadband

The trend also places new

be set for significant growth. There’s

and app stores enable small, agile

creative demands on the games’

lots to look forward to in 2014.”

content creators to reach global

creators. “Because games are a

audiences directly and push the

service they can use analytics and

traditional gatekeepers of the

metrics to find out what customers

supply chain to one side,” says

do and don’t like, and change

Ian Livingstone, vice-chairman of

them,” says Livingstone. “This

interactive entertainment trade

allows fantastic innovation

association UKIE and former

and creativity.”

Unlocking new levels Momentum has already been gathering thanks to the preChristmas launches of Microsoft’s Xbox One and Sony’s PlayStation 4 consoles. “It’s very exciting; there’s pent-up demand,” says Jason Kingsley, chief executive of Oxfordbased studio Rebellion, the creator of Sniper Elite. It’s been more than seven years since a similar launch, compared with a gap of five years previously. “I think take-up will be greater than ever,” he adds.

But this extended wait for new consoles has been accompanied by shifts in the market and the rapid development and adoption of mobile devices has changed the way people play games over the past few years. It’s seen the games industry undergo a major structural

chairman of Eidos.

The new platforms enable small

Kingsley agrees: “Rather than being an auteur, you have to

studios to publish their own titles,

change your game if people think it

made with smaller budgets and

sucks. Otherwise they’re not going

teams and with the potential

to pay you.” Rebellion is adopting a

to earn higher margins and

portfolio approach, launching free-

retain their IP, rather than being

to-play games such as Harmony Isle

dependent on commissions from

as well as £30-£40 console titles.

the major publishers. “Most publishers are changing to this new model; it’s a hell of a leveller,”

But the digital market isn’t a nirvana. “There are lots of studios doing well out of it but it’s

says David Braben,

getting more and

chief executive

more competitive

of Cambridge-

– particularly

based Frontier

on iOS,” says

transition. At one end, companies

Developments.

such as Rockstar are continuing

“We’re side by side

to invest hundreds of millions of

with them on digital

dollars in premium console and

stores. There’s a new digital

PC franchises such as Grand Theft

high street taking form.” He adds

a good game that’s hard so much

Auto with cinematic production

that Frontier is responding to

as getting noticed.” His company

values. At the other, studios are

consumers’ desire to use their

is currently 100 per cent self-

increasingly focusing on digital

content on different devices: it

publishing but is for now focusing

“free-to-play” or “freemium”

produced one game for Android,

on the more condensed console

games delivered via smartphones

iOS and the Xbox 360, for example.

and PC audience as well as those on

24

Busines s voice | february/march 2014

Patrick O’Luanaigh, chief executive of Farnborough-based nDreams. “It’s not making

CREATIVE INDUSTRIES: Gaming

the Steam online game download

Wilson believes that the

A creative growth strategy

platform. It’s also moving into

introduction of games tax relief

virtual reality games. “I’m a massive

will increase inward investment

believer that that’s going to be a big

into the sector and help

new segment of technology, starting

indigenous developers to access

industries – of which the games

in gaming,” he adds.

finance. A greater understanding

sector is an important part – play

between financiers and the

a vital role in attracting foreign

creative industries more broadly

direct investment. But how can

The quest for finance The move to self-publishing brings a range of challenges for games companies, from the need for enhanced leadership, management and commercial skills to financing this new business model. Studios need the cash to market and launch games as well as develop them – money that was traditionally provided by the big publishers.

It’s not always easy to find: the banks have traditionally been reluctant to lend to the industry given its IP-based nature and lack of tangible assets. Crowdfunding has opened up a new financing channel – Rebellion has just funded a roleplaying game through Kickstarter, for example. The Enterprise Investment Scheme and Seed Enterprise Investment Scheme can also be useful. But these can only take a company so far.

O’Luanaigh believes there’s a gap in the funding market for studios that are too big to raise money

– something that’s a

The UK’s successful creative

the creative industries be

priority for the CBI

equipped with the tools

– would also be

they need to continue

helpful.

to thrive in the future

Nevertheless,

as they face up to

Frontier’s listing

shifting business

on AIM in

models, increased

summer 2013 is

digitisation and

an encouraging

intense international

development, ending a run of British

competition?

The CBI has published a

companies, including Candy

new report – The Creative Nation:

Crush’s King, favouring the Nasdaq.

a Growth Strategy for the Creative

Braben believes that problems

Industries – that attempts to

with some games-company IPOs

answer these questions. It has

early in the industry’s life soured

worked closely with the Treasury,

the City’s view of the industry. But

the Department for Business,

he hopes that Frontier’s decision

Innovation and Skills and the

will help to change the tide – and

Department for Culture, Media and

it is a sign that there is investor

Sport to identify ways that the UK

appetite in the UK for successful

can retain and enhance its status as

games companies. The company

a leading creative hub.

raised £4m.

A battle for skills But it’s not just management

from business angels or friends and

and commercial skills that are

family but don’t have the £3m-plus

needed. While the skills of UK

turnover to raise £3m-£4m from

programmers and coders, games

investors or venture capitalists. “A

designers and artists are globally

lot of smaller studios are finding

recognised, there aren’t enough of

that at the moment. We’re trying

them. Kingsley is concerned that

to raise £0.5m-£1m to help us

this could hold the industry back.

accelerate and it’s a really difficult

“Rebellion is 95 per cent export-

amount to look for.”

driven. If we can’t get the skilled

The report recommends a series of policy measures that the government could take to support the creative industries in areas such as skills, access to finance and digital infrastructure. It also examines how the UK can expand its creative footprint overseas and the levers the government can use to promote greater IP protection for content producers in export markets.

Busines s voice | february/march 2014

25

“ ICT gave children no idea about how they could make their own technology. They could play Angry Birds but they couldn’t make it” Ian Livingstone, vice-chairman, UKIE

26

Busines s voice | february/march 2014

CREATIVE INDUSTRIES: Gaming

people and they’re going to other

to introduce a new computing

in the industry are optimistic about

places because of tax competition,

curriculum from September 2014.

the future. The number of start-ups

we won’t do as many titles and that

This will encourage children to be

in the past few years is an indication

will reduce our exports,” he says.

“digital makers” as well as users.

of the UK games sector’s dynamism

The industry has suffered from a

“That could be transformational

and adaptability. The exponential

talent drain to the City, although that

for every industry that has digital

growth of mobile and tablet gaming

has eased over the past few years.

components,” he says.

is opening up new markets and

But a bigger problem has been with

He’s also keen to see

improving perceptions of the

the ICT curriculum in schools: while

improvements in teacher training

industry; no longer are games the

coding was taught in the 1980s,

in computing and for art and

sole preserve of teenage boys.

the emphasis of the curriculum

creativity to be recognised as part

“There’s an ever-growing market

later shifted. “ICT as it was taught

of the STEM (science, technology,

of young people around the world

became largely about learning Office

engineering and maths) agenda.

who are going to get into computer

skills – Word, PowerPoint and Excel

But such measures are long-term

games,” says Kingsley. “You’ve got

– but gave children no idea about

in nature. In the meantime, Braben

emerging markets such as Brazil,

how they could make their own

believes that a more sympathetic

Russia, China and the Middle East.

technology,” says Livingstone. “They

approach to migration policy is

Games can transcend cultural

could play Angry Birds but they

needed. “UK people are migrating

and communication barriers. Our

couldn’t make it.”

abroad, but it’s much harder

audience is only going to get bigger.”

This is now changing. Livingstone

to bring Singaporean, US and

was the co-author of the 2011

Canadian nationals here because

Next Gen report, which has

of issues with visas,” he says.

been instrumental in convincing

“That’s problematic.”

education secretary Michael Gove

www.cbi.org.uk/creative-nation

Despite these challenges, those

Busines s voice | february/march 2014

27

Healthy prospects for the Year of the Horse The largest-ever business delegation joined the prime minister in China – many came away with deals and alliances struck.

Words: Guy Dru Drury

28

Busines s voice | february/march 2014

International: China trade mission

The largest-ever business delegation joined the prime minister in China – many came away with deals and alliances struck.

The UK prime minister visited Beijing, Shanghai and Chengdu in December, accompanied by a business delegation of more than 100 companies. It was unprecedented for a number of reasons.

The delegation included a breathtaking variety of companies ranging from a West Country sausage manufacturer to the National Theatre and its iconic War Horse. Its sheer scale and diversity sent a real message of intent to China: the UK has the goods, services and know-how that Chinese consumers wish to use – and it is an open and dynamic economy that welcomes Chinese investment.

For the first time, an official prime minister-led delegation visited Chengdu, the capital of Sichuan province. It made the connection with the 100-plus UK companies already doing business in the city and highlighted the need for UK plc to look regionally for new markets.

Deals done CBI director-general John Cridland was part of the delegation. He spoke at a British Council organised “Generation-UK” event, an EY seminar on entrepreneurship, and gave opening remarks on business partnerships at the UK-China Summit held in Beijing.

There were plenty of business announcements made

by CBI members during the delegation’s 72-hour trip.

This included a £4.5bn deal to supply 100,000 Jaguar Land Rover cars to China in 2014; Rolls-Royce confirmed a major pipeline infrastructure deal in Xinjiang worth £17m; Shell announced a second two-year energy policy research project with the Development Research Council; and the universities of Nottingham, Lancaster, Cardiff and King’s College London all made collaboration or investment announcements.

“the UK has the goods, services and know-how that Chinese consumers wish to use” Reflecting the depth and diversity of the delegation, MIRA announced £2m worth of new automotive contracts, while BSI signed an memorandum of understanding (MOU) that could ensure that British standards are used for certain goods and services in China.

And it was not only one-way traffic. Chinese automotive manufacturer Changan motors announced an investment of £60m into a West Midlands R&D centre, which will create 300 jobs in the region.

Breaking down barriers A particularly welcome outcome was the easing of visa requirements for Chinese business visitors to the UK, with no cap on the number of Chinese students. A oneday visa service is also being set up in Shanghai.

The signing of a digital alliance MOU between UKTI and China could unlock up to £2bn of business in entertainment and digital media, and a similar UKTI MOU with Alibaba’s Tmall online platform could open a virtual door for UK SMEs keen to sell direct or source in China.

But one of the unexpected highlights of the visit was the arrival of the life-size puppet horse from the hit play War Horse at the official banquet in Shanghai. The National Theatre is hoping to bring a Chinese language version to mainland theatres in 2014.

Its appearance was particularly apt considering that 2014 will mark the arrival of the Year of the Horse in China.

Guy Dru Drury is the CBI’s chief representative in China. guydd@cbi.org.uk

Busines s voice | february/march 2014

29

building britain: London Gateway

Gateway to the world In November, the Commons Transport Committee said ports were vital to UK prosperity but were not being given enough priority. In the same month, the MOL Caledon became the first container ship to dock at London Gateway – DP World’s new £1.5bn super-port in Essex.

“The DP World project will help position London as one of the world’s greatest ports and a gateway to world trade” Boris Johnson

30

Busines s voice | february/march 2014

9m sq ft The size of the new logistics park situated next to the port.

24 The number of quay cranes that will be in place when completed. They are some of the tallest in the world, reaching higher than the London Eye, and their outreach is currently wider than the world’s largest ship.

The construction downright The preferred bidder is

300,000

Merseylink group, comprising Macquarie Capital Group,

Bilfinger Project Investments The number of animals relocated Europe and FCC Construcción. to new habitats (the largest such downright The construction jointventure project in the UK).

3.5m The number of containers (TEUs) the port will be able to handle each year.

2,700m

involves Kier Infrastructure and Overseas, Samsung

£400m

C&T Corporation and FCC Construcción.

The cost of initial dredging and downright They will deliver and reclamation work, started in 2010 operate the tolling element for and overseen by Laing O’Rourke the consortium. Procurement and Dredging International. contracts are expected to be finalised by the end of the year.

Length of quay across six deep-water

3,500

berths, designed to accommodate

The number of construction workers

new-generation ultra large container

employed each day on the project.

ships (over 400m long). Only the first is currently operational.

The Port

Busines s voice | february/march 2014

31

building britain: London Gateway

The economic benefits “London Gateway is one of the most compelling things I’ve seen in recent years showing Britain’s industrial renaissance” David Cameron

27,700 The number of jobs created in London and South East, long-term, as a result of the development. On a UK-wide basis, according to Oxford Economics, London Gateway will create 36,000 jobs and contribute £3.2bn to GDP annually.

£200 The estimated amount

£200m The investment made by Marks & Spencer

businesses could save for each container they move to or from London and the surrounding area.

– the first tenant announced for the logistics park. Its new depot will service half its stores, cut turnaround times from two weeks to three days and create 700 jobs.

Other UK port p

Felixstowe

owned by Hutchison P

planning to double its TEUs by 2030. In July

railway terminal, doub

32

Busines s voice | february/march 2014

Market access

78% London Gateway is closer to 78 per cent of the UK market (including the Midlands and the North West) compared with the country’s current largest port, at Felixstowe, where 30 per cent of UK deep-sea containers are destined.

65 million The number of HGV road miles that could be saved each year. The amount of CO2 potentially saved is estimated at 148,000 tonnes.

30% The proportion of freight that is expected to go by rail. The port has six 750m-long rail sidings to accommodate it. DB Schenker Rail UK and Freightliner are both providing rail services to and from the port.

projects include...

Port of Liverpool

Southampton

Port Holdings, is

owned by Peel Ports, started dredging

owned by Associated British Ports, got the

s capacity to 8 million

operations for a new deep-water terminal in

green light for an £150m expansion project

June 2013 – part of a £300m expansion project.

in 2012.

2013, it opened a £35m

bling rail capacity.

Busines s voice | february/march 2014

33

Charting business growth & investment around the UK Cambridge Consultants

Brittany Ferries

Center Parcs

has been named one of the

has teamed up with Torquay

is on track to open its fifth

best mid-sized companies to

Boys’ Grammar School and

UK resort – Woburn Forest in

work for in the latest Sunday

Exeter University to encourage

Bedfordshire – in spring 2014.

Times rankings. Benefits for the

students to learn French.

More than 500 people had been

400 employees at the product

Normal lessons were swapped

recruited before Christmas, with

and design development

for a French-themed day,

more than 90 per cent living

firm include free lunches, a

and year 8 children designed

within 15 miles of the holiday

healthcare package, an active

posters, wrote and performed

village. A further 1,000 will join

social club and performance-

a play and put together a

between January and March.

related bonuses. £500,000 is

PowerPoint presentation in the

After 21 months of construction,

invested in training each year.

language. Exeter University

the first buildings have also

Staff turnover is less than five

students were on hand to help

been completed. “It’s a hive of

per cent a year.

and described what to expect

activity on site at the moment

“We employ exceptional people

when studying the language

with shops and restaurants

who do difficult projects which

at a higher level, while Richard

being fitted out and the lodges

they execute very fast,” said

Price, head of marketing at

being handed over weekly,” said

chief executive Alan Richardson.

Brittany Ferries, explained to

Woburn Forest general manager

“Our role as an employer is

the pupils how learning French

Wayne Matton.

to provide an environment in

could help them broaden

which they can grow to their

their horizons and develop an

full potential – and reward them

enjoyable career.

according to their development

The ferry company is

and achievements.”

supporting a further project

The company is a third of the

involving older students at the

way through a four-year plan to

school with a study comparing

double in size. It aims to recruit

the approach to language

70 people during 2014.

learning trips abroad among UK and French schools.

34

Busines s voice | february/march 2014

CBI members: News in brief

Barbour

Henry Boot Developments

has opened its first standalone store to promote its

has been selected by Aberdeen City Council as the

Barbour International collections. The 3,000 sq ft

preferred development partner for the new Aberdeen

store opened at the end of November, on London’s

Exhibition & Conference Centre (AECC). The facility, near

Piccadilly, and is devoted to the clothing brand’s

Aberdeen International Airport, will include increased

motorcycling-inspired collections.

exhibition and conference space, hotel and car parking.

Barbour-brand cycle suits were worn by every British

It also aims to be the most sustainable facility of its kind

national motorcycle team from 1936 to 1977 and the

in the UK.

launch was attended by Johnny Giles and Johnnie

“The AECC makes a crucial contribution to the economy

Brittain, two of Britain’s leading ISDT riders from

of Aberdeen and the broader city region. We must ensure

the 1960s. Brittain’s speech remembered Duncan

Aberdeen continues to attract large and popular events,

Barbour – who joined the family business in 1928

like Offshore Europe,” said council leader Barney Crockett.

and introduced the first collections – coming to the

“The AECC is a key element of the business infrastructure

Trials and measuring up the British team for suits.

needed to promote Aberdeen as the energy capital of Europe.”

Let us know your news at edit@businessvoice.co.uk

Busines s voice | february/march 2014

35

CV Revenue (2012):

ÂŁ244.6m Operating profit (2012):

ÂŁ6.5m Employees:

2,500 Brands:

Aga, Rangemaster, La Cornue, Stanley, Rayburn, Falcon, Mercury, Redfyre, Fired Earth, Grange, Divertimenti, Marvel, Leisure Sinks 36

Busines s voice | february/march 2014

member profile: Aga Rangemaster

Hot prospects Trading conditions have been tough for Aga Rangemaster but the company has positioned itself to cook up a storm in the kitchen market now consumer interest is starting to bite again.

As people typically spend as much in the first six months after moving house than they do in the next five years, many business leaders are breathing a sigh of relief at signs of life in the housing market.

William McGrath, chief executive at range cooker specialist Aga Rangemaster, is one of them.

When the bottom fell out of the market in 2008, sales of the company’s cast-iron products – which also cover its Rayburn and Stanley brands – nearly halved.

Since then, they have grown slowly.

Sales of its Fired Earth tiles and Grange kitchens (sold under the Fired Earth brand in the UK) were also hit hard.

“But over the past six months we’ve started to see a material alteration, a turning of the tide,” says McGrath, drawing comparisons between the shape of economic trends and that of a bath (as you might expect from someone involved in interior design). “The number of people spending money on their home should be picking up.”

The chief executive hasn’t just been waiting for customers to return.

The company remained profitable because it took swift action on its cost base. Aga Rangemaster had been targeting a 10 per cent return on sales and “we were headed merrily in that direction,” says McGrath. “Obviously sustaining profitability through the recessionary period suddenly became rather more the central target.”

The group cut the size of its workforce – by as much as 20 per cent at its US operations, where it also consolidated three factories into one new one. Its factories switched to short-time working and efforts were made to adopt lean manufacturing principles.

McGrath adds: “The big story for us has not just been about adjusting the cost base, but developing a new product base so that we’re not just going to relive the economic cycles of the past – we’ve got a fundamentally new proposition.”

Flexible approach In fact, 60 per cent of the products Aga Rangemaster sold in the second half of 2013 weren’t on the market in the first half of 2011. For Aga, its main focus has been on more controllable, electric cookers. In May 2011 it launched the Total Control range, which can be programmed through a touchscreen or remote control, with the user deciding what elements of the cooker they want to use and when, whether to leave it running or to switch it off. In June 2013, it launched the Dual Control range, which can be switched off when not in use, has a low-energy setting and hotplates that can be controlled independently. It is designed to cost up to 50 per cent less to run than a 13-amp electric Aga. The issue of running costs has come to the fore over recent months,

Busines s voice | february/march 2014

37

member profile: Aga Rangemaster

with widespread concern around

in Britain. At the time it was a big

same strategy, focusing on the

energy bills. “Fortunately we were

shift and Vatti, Aga Rangemaster’s

product portfolio and getting its cost

already on the case,” says McGrath.

partner for its Chinese venture,

structures right. It has highlighted

He is confident that the flexibility

has identified that interest in the

its in-vogue, retro chic design

in these products has the power

premium, western product could

credentials in partnership with

to attract new audiences, as well

fuel a similar change in the East.

Transport for London, recreating tiles

as encourage brand stalwarts to

“Vatti approached us, rather

from the London Underground’s 150-

upgrade. Using a plug, they are

than us heroically concluding that

year old archives. It’s also opened

also simpler to install than the Agas

this could be a major market,” he

new stores in its south-east England

of old, freeing up sales staff to talk

adds. “Clearly our cookers have to

heartland, in anticipation of market

about the different ways of cooking

cook the Chinese menu as well as

recovery. New London locations

and the ovens’ unique features and

anything that’s currently available

include Blackheath, Dulwich,

benefits, rather than tricky questions

on the market – we think we can

Richmond and Clapham, where it has

about flues and “whether it needs a

do that.”

every chance of attracting yummy

plinth or not”.

This will come in handy

Nevertheless, it has taken a

mummies pushing buggies down

solid 12 months to get the right

the high street, rather than relying on

considering Aga Rangemaster

accreditations to launch there.

larger, out-of-town formats.

is targeting more international

“There is no real category in China

growth. Its target is for 50 per cent

for ovens – so it meant starting

basis of the recovery in the housing

of sales to come from outside the

from scratch, explaining what

market, is he not worried by talk of

UK – it has been stuck at 37 per

it is and how it works.” But the

another housing bubble, particularly

cent for the past couple of years.

agreement with Vatti is designed to

in the south-east? No. McGrath points

But McGrath explains that the

be reciprocal, as there is potential

to mortgage levels still being lower

new operational structure in the

demand for Vatti’s gas-burners,

than they were a few years ago –

US, where the group also makes

used for wok cooking, in Aga’s

although he says consistent planning

fridges, presents good growth

more traditional markets. Using

and policy development is needed

opportunities for North America.

each others’ existing distribution

to ensure enough houses are being

structures should keep risk to a

built. “I think it’s no reason why we

minimum, says McGrath.

shouldn’t see the next few years as

He’s also keen to see increased sales in the near continent – in France, Holland and Belgium. And he has his eye on Germany, which continues to be dominated by the built-in appliances made familiar by the post-war, small “Frankfurt kitchen” design.

The other, rather more ambitious target, is China. “The Chinese story is fascinating,” he says. “At one level it looks too thorny and tough a road

London calling Another market gap that McGrath is hoping to plug is in 60cm appliances

have proved to be,” he concludes.

for owners of small kitchens. This would be particularly pertinent for the younger, flat-dwelling audience that has had its interest piqued by

optimistic than you might think that

of baking – Great British Bake-Off

the Chinese, after 3,000 years, will

presenter Mary Berry has been a

remember in the next three years

long-term Aga enthusiast, working

that the oven is a good idea?”

with the brand for 30 years.

They are also the kind of people

having a family life surrounding

who would be attracted by Fired

the cooker as the heart of the

Earth’s tiles. With this brand, Aga

home only dates back to the 1930s

Rangemaster has followed the

Busines s voice | february/march 2014

company than the past few years

dull, soulless” built-in appliances

the resurgence in the popularity

38

being rather better for our kind of

– delivering an alternative to “the

to achieve much. Why are we more

He explains that the idea of

But if he’s setting out his stall on the

“The big story for us has been developing a new product base so that we’re not just going to relive the economic cycles of the past”

“If we’re not beating the drum, more fool us. Nobody is going to do it for us” International appeal McGrath credits the change in “mood music” from the government around exports, its collaboration with organisations including the CBI, and the significance of the “Great” campaign in helping businesses such as his succeed overseas. But Aga Rangemaster is also running its own advertising aimed at international customers – it recently filmed an ad, which is likely to appear on TV, “for

McGrath senses an attitudinal shift in readiness to celebrate British design, helped by the Olympics. The company is a founder member of IDEA Birmingham, a business and university collaboration across the Midlands, with support from Birmingham City, Aston, Staffordshire, Wolverhampton and West Midlands universities. It promotes design-driven innovation, talent and knowledge transfer.

“It’s not all about money. Sometimes it’s a marketing job

the first time in a very long time”. As well as the brand’s

to promote the positives, what we’re good at, what our

heritage, lifestyle and aesthetic qualities, it emphasises

strengths are. Business plays an important role in that,” he

the range of food that you can cook using an Aga – from

says. “If we’re not beating the drum, more fool us. Nobody

making toast to Christmas or Thanksgiving dinner.

is going to do it for us.”

Busines s voice | february/march 2014

39

Autoenrolment: One year on Following the CBI’s latest pensions survey, Standard Life’s head of workplace policy Jamie Jenkins reflects on the first year of autoenrolment, and the lessons that have been learnt.

Q. Major reform of the UK pensions landscape is obviously underway, but how are businesses reacting?

A. It’s encouraging to see that so many employers believe offering a pension scheme is a good thing. In the CBI’s report, 94 per cent recognised that there is a good business case for offering a workplace pension, with 89 per cent saying that pensions help recruit, retain and motivate staff.

We’re seeing a paternalistic attitude from employers across the board – in both large and smaller businesses.

But there are some concerns about employers’ readiness for auto-enrolment. Although nearly 90 per cent of businesses say they are well prepared for the impact of auto-enrolment, more than half of those who haven’t reach their staging date say they still don’t fully understand the rules.

Q. We’re a year into auto-enrolment – what have been the main lessons learnt?

A. One of the biggest is around timing. Employers that leave it too late to make important decisions – such as using salary sacrifice, making changes to payroll and IT systems, and using contract of employment join – risk

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Busines s voice | february/march 2014

not meeting all their staging duties on time and creating additional administration later down the line.

It’s easy to underestimate the complexity of the data required around employee eligibility assessment, joining, contributions and opt-outs. It’s important to conduct a data cleansing exercise early on and to have one point of contact in the business that is responsible for delivering auto-enrolment to decrease the risk of inconsistency and error. We’ve also seen most of our existing clients using waiting periods of up to three months of their staging date to align contributions to their pay reference period, avoiding part payments and the need to manage refunds for opt-outs.

Q. Some clear preferences are emerging (ie. defined-contribution schemes over definedbenefit; private schemes over NEST), but should that affect the choices of those still preparing for their staging date?

A. It’s great that smaller employers can gain insight from the experience of larger employers that have already staged, but this shouldn’t necessarily influence their decision making. When choosing a qualifying workplace pension scheme, a business must make decisions based on what is best for their company and workforce.

Member clinic: Auto-enrolment

Q. The CBI survey flagged concern over the issue of employee engagement. How can companies best help employees understand their options?

A. By ensuring that employees value the pension being provided, employers can benefit from attraction and retention of talent. Employees who are engaged in their pension are better equipped and more likely to make contribution and investment decisions that lead to them saving more for retirement.

One of the best ways for companies to deal with employee engagement is to first segment their employees.

This allows targeted messages to be sent to employees – and messages received at the right time are the key to effective communications.

It’s also worth considering the channels through which employers communicate with their workforce and to use a suitable mixture of online and offline channels – from online tools and email campaigns to posters and letters.

Q. Companies are worried about compliance.

What’s your advice for dealing with this?

A. The value of advice cannot be underestimated.

Businesses that are concerned should seek help from a qualified financial adviser. They can also look on the Pension Regulator’s website for details of the new duties they need to comply with.

Having a good plan for the data that’s required, and clear roles and responsibilities within the company for who is

likely to experience will be different to those experienced by larger ones. They may have less complexity to deal with, such as number of employees or number of employee categories, but they are also less likely to have the in-house expertise.

To reduce some of the administration burden, employers should use waiting periods to tune the autoenrolment processes to payroll. They should also consider which joining method to use: contract join, for example, minimises the ongoing admin if most employees are eligible to be auto-enrolled. If not, auto-enrolment helps to reduce contribution costs by only enrolling employees that are eligible. Salary sacrifice is another good way to offset costs, as National Insurance savings of up to 12 per cent can be made.

Q. What tips for continued success would you give those that have already gone through the auto-enrolment process?

A. The next step is to get employees to pay more than the minimum, as paying just the auto-enrolment minimum might not get the best retirement outcome. That requires employee engagement. But pensions isn’t the only thing.

Employers should take the opportunity to review their wider workplace benefits package to better attract and retain their talent.

Q. What can we expect from the auto-enrolment story in 2014?

responsible for what, is a good start. Well-defined and well-

A. There is an unprecedented volume of employers

organised systems and processes for managing data on an

staging in 2014, which is a massive opportunity to get

ongoing basis will make it easier to comply with the rules.

more employees saving for their future. Opt-out rates so

Q. What should employers bear in mind when

far have been less than 10 per cent. This is encouraging,

dealing with the regulator?

A. Business owners should consider that the Pension Regulator’s enforcement actions are dependent on an employer’s behaviour. If an employer is honest and proactively contacts the regulator where there is a breach, it is likely to be sympathetic and offer guidance to help the employer comply. But if an employer hasn’t complied deliberately, or because they haven’t bothered, it will potentially use its full enforcement powers.

but the real test will be what opt-out rates look like in smaller companies.

There are nearly 40,000 employers due to stage in 2014, compared to around 6,000 in 2013 – so it’s a massive leap for the industry in terms of capacity. Employers should start planning early to make sure they find a provider that has the capacity to take them. The CBI research shows that only 7 per cent of employers are considering using NEST, but it will be interesting to see what happens if more traditional providers are facing capacity issues.

Q. Will smaller businesses experience the same problems as their larger counterparts? If not, what can they expect and what can they do to tackle them?

A. Some of the problems that smaller businesses are

www.cbi.org.uk/2013-pensions-survey/ Busines s voice | february/march 2014

41

News & events from the CBI Upcoming events

New year, new links On his largest ever trade mission to China, the prime minister made it clear that the UK is a major investment destination for the country – and we are all keen to see how Britain and China can successfully collaborate to drive business partnerships and prosperity. The CBI is hosting its inaugural Chinese New Year Dinner, in partnership with Huawei, on Thursday 6 February at London’s Claridge’s Hotel. Join senior business leaders as we explore the opportunities and celebrate.

Click for more information

Pensions progress The CBI Pensions Conference is being held at The Royal Society, London on Thursday 23 January. At the half day, morning event, leading business and political figures will provide practical insights into how HR departments can make the most of autoenrolment. And with just over two years to go until the new state pension regimes comes into force, experts will offer insight about what this means for your company and the benefit package you offer employees. Speakers include minister of state for pensions Steve Webb and Julie Parker-Welch, pensions manager at Marks & Spencer. The event is sponsored by Scottish Widows and supported by NOW: Pensions and Barnett Waddingham.

Click for more information

CBI Annual Dinner Date: Wednesday 21 May 2014 Venue: Grosvenor House Hotel, London Contact: carley.warner@cbi.org.uk 42

Busines s voice | february/march 2014

regional events

northern Ireland Public Procurement Conference with minister Simon Hamilton Date: Wednesday 29 January Venue: Hilton Hotel Belfast Contact: anthea.savage@cbi.org.uk Women in Leadership dinner with Mark Ennis (Airtricity) and Alastair Hamilton (Invest NI) Date: Thursday 6 February Venue: Ulster Bank HQ, Belfast Contact: kirsty.mcmanus@cbi.org.uk Members breakfast briefing with DEL Minister, Dr Stephen Farry Date: Thursday 6 March Venue: The Merchant Hotel, Belfast For more info: www.cbi.org.uk/ni

North West Employment Summit with employment minister Esther McVey Date: Thursday 30 January Venue: University of Liverpool Email: angie.gault@cbi.org.uk Cumbria dinner with Ian McCubbin, SVP, GlaxoSmithKline Date: Thursday 6 February Venue: Low Wood Bay Resort Hotel & Marina, Windermere Email: angie.gault@cbi.org.uk

CBI DIARY: February/March 2014

London

East Midlands Experian lunch Date: Thursday 27 February Venue: The School of Artisan Food Email: julia.fox@cbi.org.uk

West Midlands Our Global Future business breakfast with Shehla Hasan, CBI policy director, India and John Dickerman, CBI’s senior policy advisor in Washington Date: Wednesday 12 February Venue: Newman University, Birmingham Email: julia.fox@cbi.org.uk Annual dinner with CBI president Sir Mike Rake Date: Thursday 5 June 2014 Venue: Edgbaston Stadium, Birmingham Email: julia.fox@cbi.org.uk

The rise of the female economy in business.

Launching the CBI’s latest research findings Date: Wednesday 29 January Venue: Bloomberg, Finsbury Square, London Contact: rebecca.clarke@cbi.org.uk Reflections on doing business in China.

Breakfast briefing with the CBI’s chief representative in China, Guy Dru Drury Date: Friday 7 February Venue: Grant Thornton, Finsbury Square, London Contact: rebecca.clarke@cbi.org.uk

Thames valley HR Forum Round table discussion for HR directors on current policy issues.

Date: Tuesday 4 March Venue: TBC Contact: rebecca.clarke@cbi.org.uk Senior executive round table with Stephen Gifford, CBI director of economics Date: Thursday 6 March Venue: Centre Point Contact: rebecca.clarke@cbi.org.uk Busines s voice | february/march 2014

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Bv Published by Caspian Media for the CBI www.caspianmedia.com

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Contact the CBI 020 7379 7400 www.cbi.org.uk

Tell us what you think businessvoice@cbi.org.uk Opinions expressed do not necessarily reflect the policies of the CBI. Caspian Media Ltd and the CBI accept no responsibility for the views expressed by contributors.

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Busines s voice | february/march 2014

JOIN THE CBI PUBLIC SERVICES NETWORK

Be a part of our new network to shape the future of public services.

To join the network simply fill in this form or click here for more information.

Join us, and some very key speakers, as we launch the network on 6 March at the Hospital Club, 24 Endell St, London, WC2H 9HQ from 4pm – 6pm.

Busines s voice | february/march 2014

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