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Committee publishes report on supporting UK exporters overseas.

The Rt Hon Margaret Hodge MP, Chair of the Committee of Public Accounts, today said:

"Despite some progress by the FCO and UKTI in supporting UK exporters overseas, the UK is not performing as well as Germany, France and Italy.

In 2012-13, UKTI and FCO spent £420 million to promote exports but we are currently not on track to achieve the Chancellor’s target of doubling the value of our exports to an annual £1 trillion by 2020. For the last two years, the annual value of UK global exports has been flat.

If the UK is to hit this target, then we will not only have to maintain our current market share in advanced markets such as the US and Europe, but also secure new exports to the new, faster growing emerging markets.

Small and medium sized enterprises have a vital contribution to make towards helping the Government achieve its ambitions. At present UK SMEs do not perform as well in terms of exporting as their French and German counterparts. UKTI needs to be a more effective source of intelligence on new opportunities in overseas markets. It needs to get better at helping SMEs export more by supporting them in overcoming the barriers they face.

One problem is that, unlike UKTI, the FCO lacks information on how effective its activities are in promoting exports and their likely costs and benefits.

The Home Office’s measures to secure the UK’s borders can discourage foreign business travellers from visiting the UK, thereby affecting opportunities for exports. UKTI and the FCO should look into the difficulties experienced by business travellers in obtaining UK visas and work with the Home Office to minimize them."

Margaret Hodge was speaking as the Committee published its 37th Report of this Session which, on the basis of evidence from the Foreign and Commonwealth Office (FCO) and United Kingdom Trade and Investment (UKTI), examined their work to support UK exporters overseas.

In March 2011, the government published its Plan for Growth. This set out its strategy to encourage economic growth and included a focus on increasing investment and exports.  In 2012, the Chancellor set a very challenging ambition of doubling UK exports to £1 trillion a year by 2020. Achieving this ambition will depend on, at least, maintaining the current market share in advanced markets and securing greater exports to new, faster-growing emerging markets.

In 2012-13, the UKTI and FCO spent £420 million on promoting UK economic growth through supporting UK businesses overseas. In general terms, the FCO tries to create the conditions overseas for growth, and UKTI works directly with UK businesses to help them make the most of these market conditions.  The FCO estimates that 1,000 of its 14,000 staff spend at least a quarter of their time promoting economic growth, across its international network of 270 embassies, high commissions and consulates. UKTI is a non-ministerial department of both the Department for Business, Innovation & Skills (BIS) and the FCO and nearly 1,000 UKTI staff in 160 international locations work on export-related activities.

From 2000 to 2012, the annual value of UK exports nearly doubled. During the same period, the annual value of exports globally nearly trebled. UKTI told us that while the share of UK total exports to key emerging markets remains low (compared to the share of UK exports to advanced markets such as the United States) they are growing faster than exports from Germany, France and Italy to emerging markets.  These latter three countries have a faster overall export growth rate than the UK.

Recommendations

Recommendation: UKTI and FCO need to understand the reasons behind these stronger overall export growth rates of other countries and use this research to inform their future planning to close the gap.
 
UK export performance is currently not on-track to meet the Chancellor’s ambition to double the value of exports to £1 trillion a year by 2020. Current forecasts indicate that a 10% year-on-year growth in UK exports is needed to achieve the £1 trillion ambition. However, for the last two years the annual value of UK global exports has been flat. A significant step-up in performance is now needed to achieve a doubling of annual exports to £1 trillion. UKTI and the FCO still consider the ambition to be realistic, particularly as the UK’s standing and profile are built up in emerging markets. UKTI told us that progress in increasing UK exports to emerging markets will be crucial. Without a strong performance in increasing exports to these markets, UKTI emphasised that the total value of the UK’s annual exports will not increase to £1 trillion by 2020—no matter how successfully UK exporters perform in advanced markets, such as the United States and Europe.

Recommendation: UKTI and FCO need a defined joint ‘roadmap’ to support the £1 trillion annual exports by 2020, particularly focusing on what FCO and UKTI need to do to help UK businesses maximise export opportunities to emerging markets, as well as maintaining, at least, export levels to advanced markets.

UKTI and FCO have not always worked together effectively to promote export growth. To meet the challenging £1 trillion exports ambition requires UKTI and FCO to take a planned approach to supporting UK businesses to export, based on an understanding of what works, and to collaborate with each other effectively.  There are examples of UKTI and FCO working together effectively in some overseas locations, for example, in Colombia where UKTI and FCO staff worked together in sector-based teams. However, there has been limited joint-planning centrally and at other overseas locations. UK based businesses have told FCO that it needs to be more closely co-ordinated with UKTI. The two departments acknowledge that they could work together more effectively.  They intend to create a joint overarching strategy that defines the contributions of UKTI, FCO and BIS. Planning at overseas posts will be more integrated with a single country business plan and set of metrics.
 
Recommendation: The proposed joint strategy between UKTI, FCO and BIS on exports, and the new joint country plans will need to be clear on roles and responsibilities, set out how the organisations will work together, and provide a single action plan for promoting UK exports centrally and at overseas locations. 

UKTI needs to be a more effective source of intelligence on new opportunities in order to support small and medium-sized enterprises (SMEs). UKTI told us that increasing the exports from mid-sized businesses and SMEs in the UK is critical to achieving the £1 trillion exports ambition, but UK SMEs do not perform as well as their French and German counterparts. We heard that surveys by business bodies such as the Confederation of British Industry and Federation of Small Businesses indicate that many SMEs are unaware of, or do not use, UKTI’s export services.

Recommendation: UKTI needs to be a more effective source of intelligence on new opportunities in order to help make it less difficult for SMEs to export. It should actively market to SMEs the export opportunities available in different overseas markets, as well as the support it can provide to help overcome barriers to exporting.

The FCO would benefit from a ready means to evaluate the impact of its work to promote exports. UKTI has several metrics which help it measure the impact of its services, including the new trade growth value measure. However, the FCO does not have equivalent measures to assess the impact of its work.  In particular, FCO lacks information on outcomes which it could use to judge which of its activities are most effective at promoting exports in different circumstances. This makes it difficult to demonstrate whether the FCO achieves value for money on its work to promote exports.

Recommendation: The FCO should develop measures to evaluate the relative impact of its interventions, to understand their likely costs and benefits.

The actions of other departments, such as the Home Office to secure UK borders, can lead to tensions with the UKTI and FCO’s work to promote UK exports. The Home Office’s measures to secure the UK's borders, for example, through setting visa entry requirements, can discourage business travellers from other countries from visiting the UK. This potentially affects export opportunities.  The FCO and UKTI told us that they are aware of a high level of concern in some countries about the time-consuming process of getting a UK visa. They told us that expanding the priority visa service would help to address the concerns of business travellers from overseas.
Recommendation: UKTI and FCO need to identify the key problems which business travellers face in obtaining UK visas, and the impacts on export opportunities. They should work with the Home Office to minimise barriers while maintaining UK border security.