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Business Secretary Lord Mandelsons CBI annual conference speech

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Date: 24 Nov 2008

Check Against Delivery

Nobody would have predicted at last year's CBI Annual Conference that we would be meeting this year in quite these circumstances.

Arguably no British Secretary of State for Business has addressed senior British business leaders at a time of such economic disruption since the Second World War. Then and now, events demand a bold and serious response from government.

We rightly describe this financial crisis as global, but its impacts are local. Behind the headlines are tens of thousands of companies fighting for cash-flow or credit. Looking for the investment and orders they need to survive.

Depending on each one of those businesses are workers in families that are now trying to stretch household budgets.

This government is determined to support business through these tough times. Indeed, the best way in which we can stand up for workers and their families is by standing up for business. It is not one or the other. We stand or fall together.

Standing up for business

That means helping strong and viable businesses stay in business. It means doing everything we can to ensure that demand in the British economy remains strong.

That there is work on the order books and there are customers in the shops. And that supply chains are being kept in business.

In the weeks since the credit crunch came to a head in early October, when wholesale lending markets almost completely collapsed, this government has acted decisively to get our banking system working again. We have given the banks the cushion of recapitalisation to protect them through the downturn.

Britain under Gordon Brown's leadership has led the push for a coordinated international approach in monetary and fiscal policy to boost growth and confidence.

The Prime Minister has consistently led the drive since the Asian crisis at the end of the 90s for reformed and renewed institutions of global economic governance.

Economists will all have different views on the effects of the governments chosen tax changes both now and in our plans for the medium term. These are difficult calls.

I would like to thank the CBI for what it has done so far to get the government to its current mix of monetary and fiscal policies. We have heard your message that exceptional circumstances demand exceptional measures. Your response to the government's package today will have a crucial impact on gaining positive consumer reactions. Our task now is to persuade people to have confidence in these policies so that demand in the economy is strong.

In this the media also has a crucial role to play, as do the other political parties. I appeal to the media: report the facts, and analyse them, of course. But please do not over-sensationalise or stoke unnecessary fears. Careless reporting can cost people's jobs.

I must say this also to the banks. If, locally, the banks are tightening their grip on credit at precisely the time when we need them to start lending again;

If the stories that banks are unilaterally reorganising overdrafts or withdrawing them altogether are true;

If it's the case that new terms are being issued by email, with immediate effect, or 48 hours to comply, sometimes without even a face-to-face meeting being granted;

If these things are true then they will mean real damage to the economy. Banks would be cutting off their noses to spite their faces.

I acknowledge the BBA has reported a rise in lending to small businesses in the third quarter. One survey of SMEs in the first week of November suggested that the great majority of small firms are not facing problems accessing finance. The CBI quarterly report from October suggested the same.

I want to establish the facts. The banks have agreed to provide government with data on their business lending that will allow us to get a sense of the scale of the problem. I am also inviting the Regional Development Agencies to report to me in total confidence on cases of companies they come across in their day to day to day dealings with the private sector where in their view access to finance has been unreasonably denied or the terms on which is is being made available changed without due justification.

We all recognise that there will be a correction in banks away from the risky lending that provoked the credit crunch.

But we need to be clear that excessive risk-aversion in lenders will do as much damage as excessive risk taking to both the long term health of the economy - and to the banks ability to strengthen their balance sheets and act prudently in the long term interests of their shareholders.

In Britain, we need our bankers to be good, plain, bankers. As they get back into their stride - and they must - our economy will get back into the game and optimism will return.

So rebuilding trust is absolutely vital.

Putting knowledge at the centre

Inevitably today our minds are on the current crisis. But my job is also to look to the future.

It is important to recognise that the foundations that government and business have put in place in Britain over the last decade will serve us well in moving from this downturn to recovery, and beyond.

Your willingness to invest in skills and innovation has boosted the productivity of UK companies and workers over the last decade. Since 1997, the UK has consistently outperformed its main European competitors in terms of productivity growth.

The UK continues to attract massive foreign investment inflows - $224 billion in FDI in 2007. The World Bank ranks us sixth in the world for ease of doing business - and second in Europe.

That achievement is precious - as I remind my colleagues when their minds turn - as they occasionally do - to regulation.

After the crisis we have seen unfold in the last year, there is no merit in kneejerk assumptions that "all regulation is bad and free markets are automatically good". We need better regulation in future,conscious as we now fully are that markets can and do fail. But regulation where it's necessary should be smart: it musn't stifle. And new rules should be developed in close partnership with the private sector, though it is ultimately the best judgement of the public interest that must prevail.

Britain's economic future lies in building a diversified modern economy that builds on and nurtures our technological and other strengths.

I sometimes hear the term 'post-industrial economy' used to describe the UK.

I barely understand what it means, and I hate the term because
it doesn't describe where Britain is, or where it is going.

Everybody recognises the strength and value and global competitiveness of our services sector. But despite intense competition, the latest comparable data suggest that the UK remains the world's sixth largest manufacturer by output.

Manufacturing adds more than 150billion to the economy every year and accounts for half of our exports.

Nothing post-industrial about that.

From the depths of recession in the eighties, UK manufacturing has worked hard to reinvent itself.

It's built on generations of manufacturing expertise to seize global opportunities in cutting-edge areas such as fuel cells, plastic electronics and Bluetooth technology.

But we also retain our strengths in sectors such as information and communications technology and biosciences.

What the manufacturing sector in Britain knows very well is that we are becoming, not a post-industrial economy, but a knowledge economy in which our most valuable assets are our skills and capacity for innovation.

Those skills and that knowledge underpin our creative and telecommunications industries, our financial and business services, and they are the lifeblood of the UK's engineering and manufacturing base.

In 2006 a quarter of UK exports were high-tech. 75% of business research and development in the UK is in manufacturing.

This industry is not about mills and smokestacks. It is about the next industrial revolution and the low-carbon or post-carbon technologies that that will define the twenty first century. If you really want to change the world - choose a career in engineering. And I mean real engineering, not financial engineering.

The reason we're establishing the Manufacturing Insight programme to help challenge and change public perceptions of the sector, including campaigns in schools to build enthusiasm for careers in manufacturing.

For the same reason we're creating a further 1,500 manufacturing apprenticeships, in addition to the 9,000 places announced this year.

And we're inviting bids from large manufacturers to train apprentices for firms in their supply chain. Which means that smaller companies, which may not have the resources to train staff themselves, will no longer miss out.

The next industrial revolution

Without these skills we will risk Britain failing to grasp some of the biggest economic opportunities of this century.

We want the UK to be the best place in the world to develop and implement low-carbon solutions and a magnet for new green-collar jobs - a global sector that could be worth trillions of pounds annually by the middle of this century.

If China and India are going to need half a billion low carbon vehicles in two decades time, we must be working to ensure that British companies are designing and making some of them.

We should be leading the technological work that will power the nuclear renaissance. UK companies who can capture work supplying civil nuclear technologies will have first-mover advantage in a growing global market.

We have started to put the policies in place that will enable these things.

A new Manufacturing Technology Centre for applied research in Coventry in 2010 in partnership with Rolls Royce and Caterpillar.

A 100million investment by the Technology Strategy Board and the Energy Technology Institute in low carbon vehicles.

A 24million tender by the Technology Strategy Board at the start of next year for research central to high-value manufacturing.

Two months ago BERR's renewed Manufacturing Strategy set out a clear vision for the sector - and I'd like to thank John Rose and Richard Lambert and all those who contributed to that work.

My job now is to take that forward, first by building the broader arguments and then by defining the right collaborative relationship between government and the private sector.

New Labour orthodoxy has made the government rightly suspicious of ministerial entanglement in markets. We learnt form past experience the perils of Ministers substituting their judgement for company boards. And in 1997, quite honestly, when we came to office, governing was easier, in simpler economic conditions. Put in place stability, strengthen the supply side and the rest will look after itself.

It's a good time to reflect further. Not because we want the government micromanaging our economy, but because we need to rethink the frameworks government puts in place within which the private sector is free to take its decisions. I intend to say more about this in a lecture next week.

Conclusion

It is almost a decade exactly since I last addressed this conference - and a lot has changed since then. A billion new workers in the global economy and a massive shift in global economic power that is driving huge corporate restructuring.

We are part of a global economy set to grow and double in size. That means double the opportunities for Britain to seize if we are well prepared.

Even before the credit crunch, it was clear that we face a new generation of global challenges for British business.

I know what that means because I've spent the last four years working with British and European businesses at the sharp end of globalisation and across the negotiating table from some of our biggest trading partners.

We all recognise that we are going to come out of the current crisis with a consolidated - I hope stronger but probably smaller - financial services industry.

We all recognise that British consumer pockets may not borrow and spend as freely in future - all the more reason to be building our presence in the large emerging markets.

We all recognise the need to ensure that the British economy has the strength and growth that comes with sustained investment and economic diversity.

What I want to do over the next couple of months is launch a national debate on just how we make our existing strengths part of an even more comprehensive vision of how we can nurture and reinforce world class business growth over the long term.

Building on what we have learnt over the last decade.

Building on the fact that there are lessons in this crisis for all of us and perhaps a chance to do some fresh thinking.

And throughout, my department - BERR - will remain the firm advocate and voice for business, entrepreneurialism and innovation across government. I am impressed by BERR's leadership and vigour. They are a good team to be part of.

These are difficult times. But we will get through them. For all my concern about the immediate crisis, I am hugely optimistic about our potential. Working together we will create a stronger future.

Department for Business, Enterprise & Regulatory Reform
7th Floor, 1 Victoria Street, London SW1H 0ET

Public enquiries +44 (0)20 7215 5000
Textphone +44 (0)20 7215 6740 (for those with hearing impairment)
http://www.berr.gov.uk


About the Author

Crown Copyright. Material taken from the BERR- Department for Business, Enterprise and Regulatory Reform replacing DTI - Department for Trade and Industry. Reproduced under the terms and conditions of the Click-Use Licence.


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Article Published/Sorted/Amended on Scopulus 2008-11-26 08:00:53 in Business Articles

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