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