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.
4
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
14
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.
18
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
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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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Busines s voice | february/march 2014
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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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