Business Voice December 2014/January 2015

December/ January

2015

Business voice | the cBi magazine

GrowthambitionsA healthy UK economy depends on the success of its medium-sized businesses, says Lloyds Banking Group’s António Horta-Osório

Business voice | the cBi magazine

December/January 2015

10 infographic:

forging stronger supply chains

With industrial strategy at the top of the political agenda, the CBI’s Pulling Together report highlights ways to boost the UK’s supply chains.

We’ should not underestimate the potential of

the UK’s medium-sized businesses, says the

Lloyds Banking Group boss and co-host of

the CBI’s inaugural MSB Summit.

20 interview:

AntónioHorta-Osório

4 CridlAnd’s nOtebOOk:An election year inevitably brings further uncertainty. Businesses must work with politicians more than ever and encourage bold policy solutions to the UK’s challenges.

36 internAtiOnAl:While Republican success in the US mid-term elections revealed voters’ frustration, its impact on business is uncertain.

42 member news:In this issue: Banks Group; First Utility; HL Plastics; Lion Trackhire; Potter Logistics; Ryder Architecture; and SLR Consulting.

44 member CliniC: Entering a new market can be daunting. But Phil Couchman, chief executive of DHL Express UK & Ireland, says the technology and support available is making it easier than ever.

47 Cbi diAry:In this issue: the Great Business Debate on flexible working; the latest CBI/URS Infrastructure survey.

regulars

38 MeMber profile:

extremis teCHnOlOgyThe global success of an innovative post-disaster shelter is driving growth for the small Suffolk-based business. But its CEO says hurdles to accessing initial funding must be addressed.

26 feature:

new Age tHinkingThe ageing population poses many challenges, but it also offers opportunities for business to benefit from new markets and more experienced employees.

12 event focus:

AnnuAl COnferenCe urges grOwtH fOr All This year’s event focused on the UK’s future in Europe, the economic recovery and the importance of sharing increased prosperity.

32 building britain:

AHeAd Of tHe CurveThe Circuit of Wales is set to bring the excitement of MotoGP to the Heads of the Valleys, as well as investment, employment and a higher international profile.

6 guest coluMnist:

Andy HAldAneWhile strong employment demand has boosted wages for the highly skilled, lower-skilled employees have been left behind. It’s a tale of two workers.

Thechoices

aheadAs we enter an election year,

businesses must work with politicians more than ever to tackle

the uncertainties and encourage bold policy solutions to the UK’s

challenges – and the evolving debate around devolution

should not shake the pillars of our success.

Our recovery has firmly taken root but significant challenges have loomed large

“”4 Business voice | august/septemBer 2014

A steady 2014 The UK has continued its journey

back to growth this year. The CBI’s

updated economic forecast is for

3 per cent GDP growth in 2014 and

2.5 per cent next year, underlining

the fact that our recovery has firmly

taken root. Significant challenges

have loomed large throughout the

year and remain, with a challenging

global outlook – especially in the

eurozone – and political uncertainty

at home moving up risk registers.

As we move into an election year

which inevitably brings further

uncertainty, it’s more important than

ever that, as businesses, we work

with politicians on the challenges

facing the UK and how best to

overcome them.

Building a better off Britain At our annual conference in

November we heard from all three

major political party leaders, business

leaders from across all sections of

the economy and – a first for a CBI

platform – the Archbishop of York. A

personal highlight for me was sharing

the stage at one point with R2D2

from the Star Wars films – hopefully

our other speakers didn’t mind being

upstaged by a movie star!

Sir Mike Rake set out the stark

choice faced by the UK between

openness and isolation on key

issues like markets, the EU and

immigration. His message to all

politicians ahead of the election was

to create the right conditions for

businesses to grow, create jobs and

boost living standards for all people

in the UK.

The issue of how to go about

raising living standards was the

subject of a flagship piece of

work launched by the CBI at the

conference: the Better off Britain

report. As household budgets

have been squeezed since

2008, addressing wage levels

and identifying solutions to fix

underlying imbalances in our

economy have become the subject

of intense public debate.

Our report sets out some bold

policy solutions: short-term help

for the hardest pressed, a focus

on competitiveness and skills,

improving our school system to

address disadvantage, and helping

people build up financial resilience.

A business-like autumn statement Measures targeted towards raising

UK investment were central to our

submission to the chancellor in

advance of his autumn statement

on 3 December.

With little fiscal room for

manoeuvre business wanted the

Treasury to focus on infrastructure

investment, innovation and tackling

barriers to enterprise, as well as

continued efforts to balance the

books. The autumn statement laid

bare the scale of the fiscal challenge

facing the next government of

whichever political colour.

What was announced by the

chancellor on stamp duty and

business rates has offered help

to firms and families across the

country. Similarly we welcomed

the roads investment strategy and

I was particularly glad to see CBI’s

calls heeded for a tunnel under

Stonehenge to improve the A303. As

with all government projects the real

work starts now – getting this from

the drawing board to delivery.

Pillars of strengthIn the last edition I updated you

on the outcome of the Scottish

referendum. As the debate over

further devolution continues, I gave

a speech in Cardiff earlier this month

setting out the need for devolution

to support, not shake, the UK’s

economic pillars.

Our common business tax regime,

a single energy market and a thriving

financial services sector – these are,

and must remain, the hallmarks of

the UK’s economic brand.

So as the devolution debate

evolves business is clear that any

new powers or funding for our

devolved administrations must

complement not cut across our

overriding and unified aim of creating

jobs, encouraging growth and inward

investment across the UK.

I wish you all a happy Christmas and

a prosperous new year.

“Our business tax regime, a single energy market and a thriving financial services sector must remain the hallmarks of the UK’s economic brand”

Business voice | DecemBer/January 2015 5

CridlAnd’s nOtebOOk

The Bank of England has

had a long and strong

relationship with the

CBI. Its Monetary Policy

Committee (MPC) listens carefully

to what the organisation, and its

members, say about the UK economy.

One message that comes across

loud and clear is that the UK

economy is growing. Growth in the

UK is running at an annual rate of

over 3 per cent, above its historical

trend and at the top of G7 league

table. An extra 700,000 jobs have

been created in the UK in the past

year alone, with the unemployment

rate falling to around 6 per cent. And

both inflation and interest rates are at

historically exceptionally low levels.

Yet this recovery has been far

from “normal”. The productivity

of UK businesses is pretty much

unchanged since the crisis started.

This would put it around 13 per cent

below its pre-crisis trend, its worst

run in living memory. And inflation-

adjusted wages are 8 per cent lower

than in 2007, also its worst run in

living memory.

This leaves a macro-economic

puzzle. Is the UK experiencing a

fairly conventional recovery, if

perhaps slower than usual? Or

instead a more protracted period

of sub-par growth? Answers are

important for companies planning

investment and setting wages and

prices, for households planning

spending, not to forget central banks

setting interest rates.

Yet it could just be the answer is

both. Certainly, recent developments

in the labour market are consistent

with that interpretation – we have “a

tale of two workers”.

Uneven distributionSince at least the 1980s, a

number of countries have seen a

“hollowing out” of their labour

markets, with employment growth

strongest among the highest and

lowest-skilled workers, but falling

among the mid-skilled. This is

usually attributed to technological

displacement of mid-skilled jobs due

to automation and digitisation.

A tale of two workersThe UK’s economy is giving mixed messages. While GDP and employment levels are up, productivity and wage growth paint a more negative picture. And there are polarising forces at work in the labour market.

Words: Andy Haldane, chief economist, Bank of England

“In principle, strong demand should have buoyed real wages at either end of the skill distribution. In practice, this has not happened”

“”

6 Business voice | DecemBer/January 2015

In principle, strong demand should

have buoyed real wages at either

end of the skill distribution, leaving

the overall distribution relatively

unchanged. In practice, this has not

happened. Real wages among the top

10 per cent of earners rose faster pre-

crisis than among the bottom 20 per

cent. And although real wages have

fallen across the distribution, the

gap between the top 10 per cent and

bottom 20 per cent remains larger

today than it was in the late 1990s.

These polarising forces in the

labour market are also evident

across industries. The dispersion

of real wages across industries has

become more pronounced since

the crisis. In some sectors (energy,

retail trade and repairs, other service

activities) wages are growing faster

than before the crisis. In many others

(agriculture, parts of manufacturing,

arts and entertainment), they are still

falling in real terms.

So why has strong employment

demand boosted real wages for

the highly skilled, but not among

the lower skilled? The most likely

explanation is that rising demand for

lower-skilled workers has been more

than offset by the rise in the supply

of labour for these services. Several

factors are likely to have been at play.

First, displaced mid-skilled

workers may have sought jobs for

which they are overqualified in order

to stay in employment, a trend the

crisis is likely to have reinforced.

These mid-skilled workers are, in

other words, underemployed. That

may have contributed to the UK’s

poor productivity performance.

Second, participation rates within

the labour force have increased

significantly, especially among

women and older age cohorts.

This reflects a range of factors

including the abolition of the default

retirement age, concerns about

pension and saving income and

changes to the benefits regime.

Third, levels of immigration have

increased significantly over the past

20 years, boosting labour supply.

There is an active debate on its

effects, but it is possible that this

may have had different impacts

across the wage distribution.

Polarising patternsAt a headline level, these polarising

patterns are also clear in aggregate

wage data. According to contacts

of the Bank’s agents and surveys,

including those of CBI members,

staff shortages are rising in highly

skilled professions, with annual rates

of wage inflation of 3-4 per cent. But

at an economy-wide level, average

weekly earnings are growing at just

over 1 per cent.

So we have an upper peak of the

labour market which is thriving in

both employment and wage terms;

a mid-tier which is languishing in

both employment and real wage

terms; and for the lower skilled,

employment is up at the cost of

lower real wages for the group as

a whole.

Where next? Inflation has fallen

to well below the 2 per cent

inflation target, easing pressures

on household budgets. And there

are some early signs of regular pay

picking up to growth rates above the

inflation rate. After five years flat or

falling, the MPC’s central view is that

this will continue, with real wages

rising henceforth. Indeed, the MPC

needs that to happen if inflation is to

return to target.

Yet it is too early to tell whether

this burst of real-wage sunshine will

come to pass. The MPC has been

forecasting brighter weather for

the past five years, without much

meteorological success. This time

may be different. But if past patterns

were to be repeated, with a growing

but diverging labour market,

intermittent sunshine and showers

remain a risk.

Either way, the MPC’s message to

companies is that changes in Bank

rate, whenever these come, will

probably be gradual, and the Bank

rate itself is likely to remain below

average historical levels for some time

to come. This is not a weather forecast,

and it is certainly not a promise, but it

hopefully helps companies prepare,

come rain or shine.

“Displaced mid-skilled workers may have sought jobs for which they are overqualified in order to stay in employment”

“”


guest COlumn: Andy Haldane

£30bnThe potential prize over the next 10 years if the UK had a focused

strategy to boost innovation- and service-driven supply

chains. It could create up to 500,000 jobs.

fOrging strOnger suPPly CHAins

There is consensus across the political parties about the importance of industrial strategy, but more work needs to be done to boost the UK’s supply chains. The

CBI’s Pulling Together report highlights some of these challenges.


£

The UK needs to be better at commercialisation

Just over

using graphene – a substance discovered in the UK – had been

registered in this country by 2013.

The UK science budget provides

for research, but Innovate UK

receives less than a tenth of that amount.

£4.6bn

The seven Catapult centres receive

of core funding; Germany’s 67

Fraunhofer institutes receive x10 that amount.

£50m

50 patents

In the US and China, they had registered almost

patents apiece.

2,000

infOgrAPHiC: Supply chains


££

£

£

UK firms need to invest moreInvestment intentions among manufacturers are at a 17-year high

The UK needs to get even better at attracting investment

Headline corporation tax rate may help make the UK more attractive BUT the country ranks only 28th for “starting a business” in the World Bank’s Ease of Doing Business report.

BUT

As the significance of automation grows, the UK has proportionately invested in x5 fewer industrial robots than Germany, x4 fewer than Italy and half as many as France.

R&D expenditure in the UK is only

of GDP.

1.7%

France’s outstrips that by

40%

AND


Opener: Forging strong supply chains

The foundation industries the UK relies on are under pressure.

The UK needs to be better at commercialisation

UK firms need to invest more…

£

££

£

£

They are responsible for

jobs, contribute £24.6bn to the economy and account for

of purchases by manufacturers of motor vehicles.

500,000+

29%

33%

BUT

The foundation industries the UK relies on are under pressure

The skills crisis needs to be addressedMore than

employers in the manufacturing, engineering, hi-tech, IT and science

sectors are reporting shortage in STEM graduates and technicians.

Only

university students studied engineering or technology

subjects to 2010.

Then

chose to go into a unrelated job.

1 in 5 1 in 20 1 in 3YET AND

In its Pulling Together report, the CBI calls for a commitment to increasing overall government spending on R&D in the next parliament, and makes a range of recommendations on skills, procurement, materials, investment and the overall business environment.http://www.cbi.org.uk/media/3576042/cbi_supply_chain_report.pdf

higher than the EU15 average in 2013

Industrial energy prices in the UK were over

infOgrAPHiC: Supply chains


Sharing in the recoveryWith the leaders of all three main political parties taking to the stage, this year’s CBI’s Annual Conference focused on the UK’s economic recovery and how to ensure we all benefit from increased prosperity.


“Underpinning many of

the major political

debates of our time is

the fundamental question about

Britain’s role in the world in the face

of globalisation and increased

competition.”

With these words, CBI president

Sir Mike Rake encapsulated what

was to follow at the CBI’s Annual

Conference, held on 10 November in

London, as political leaders aimed

to woo business support for next

year’s general election, and

business leaders spoke about the

importance of talent and trade.

Rake said the UK faced a choice

between “shutting ourselves off

from the world” or “embracing the

openness which has always been

the foundation of Britain’s success”.

He argued the UK’s membership of

a reformed EU was “overwhelmingly

in our national interest”.

And, on the immigration debate,

he turned to his own business

experience as chairman of BT. “We

estimate that 15-20 per cent of the

frontline staff who work for BT’s

main contractors come from outside

Britain and Ireland,” he said.

“Without the availability of this

labour much of Britain would still be

waiting for superfast broadband.”

Moving on to issues of improving

skills and living standards within the

UK, he also introduced the CBI’s

latest report, Better off Britain (see

box, page 17) and its new campaign

“The Great Business Debate”.

“Business understands its

responsibility to society,” he said.

“It is in our interest to have healthy

and well-paid consumers and

employees.”

“British business will always choose openness for the UK”


event focus: CBI Annual Conference 2014

E urope remained the central

issue for the politicians in the

room. David Cameron argued

his case for reform in a Europe that

“isn’t working properly for us at the

moment,” he said. “I want to make sure

we belong to a Europe that is about a

common market and cooperation and

not about an ever-closer union.”

And in response to audience concern

about the damage the uncertainty of a

referendum could do to the economy,

Cameron asked: “If there has been

uncertainty, why is it that there has

been such an extraordinary period of

investment into our country?”

Neither Nick Clegg nor Ed Miliband

disagreed with the need for reform, but

Clegg argued: “In this highly

globalised, mobile world economy,

there is simply no future for you, for

our country, if we turn our backs on the

world and try and pull up the

drawbridge. We are nothing if we are

not an open, vibrant economy.”

He said that was fundamentally more

important than the “twists and turns”

of various directives or individual

“spats” in Brussels.

Miliband said even flirting with an EU

exit was “a betrayal of our national

interest” and “a clear and present

danger to businesses” that would “risk

billions of pounds in lost profits, risk

millions of jobs and would make Britain

weaker, not stronger, in the world”.

It was left to Fredrik Reinfeldt

(pictured right), former prime minister

of Sweden and leader of the Moderate

Party, to give an international

perspective on the UK’s stance, and

how to restore the eurozone’s

competitive advantage.

On the latter, he emphasised the

“There is simply no future for our country if we turn our backs on the world”

The Political Debate


importance of completing the single

market for both services and digital.

But his advice for increased

competitiveness boiled down to three

elements: good order to public

finances; structures to handle financial

crises (which don’t rely on support

from taxpayers); and trade.

While he felt the UK’s attitude towards

trade was similar to that of Sweden’s,

he was clear that immigration had been

helpful for his country. He added that he

wanted Britain to stay in the EU, but

“not at any price”.

Conservative leader David Cameron

focused, as last year, on his five-

point plan for a stronger economy:

cutting the cost of government;

making the country more business-

friendly; getting Britain back to work;

investing in infrastructure; and

rebalancing the economy. On each

of his five points he said: “The job is

not yet complete.”

He highlighted that there were

400,000 more businesses in Britain

today than when he become prime

minister and 2 million more private-

sector jobs (five times as many as

have been lost in the public sector).

He said he wanted to improve on the

2 million apprentices trained over

the course of this parliament, with

a target of 3 million for the next. He

also announced a £15m investment

in roads, and said that HS3 was an

“extremely powerful vision” to create

a northern powerhouse.

Labour leader Ed Miliband argued

that the Europe issue was being used

as an excuse for the UK’s problems –

the challenges posed by globalisation

and pressure on jobs and living

standards. His plan for making “this

country work again for everyday

working people”, he said, included

maintaining a competitive tax

regime, investing in infrastructure,

devolving more economic power

to build on the Local Enterprise

Partnerships, banking reform and a

“revolution in vocational education

and apprenticeships”.

He also reiterated proposals for

raising the minimum wage and tax

incentives to help companies meet

living wage requirements.

“I want to be clear this is about

big reform, not big spending,” he

said, promising credible change,

a pro-business agenda and that

he would work with business “to

ensure our economic recovery

works for everyone”.

Liberal Democrat leader Nick Clegg

also spoke about the importance

of infrastructure and sound public

finances, arguing once the “black

hole” of the deficit had been filled, he

wanted government to borrow only for

productive infrastructure investment.

But he warned those who wanted

a return to single-party government

to “be careful what you wish for”. He

argued that the Liberal Democrat

role was to keep government

anchored to the centre ground, to

stop the Conservatives severing ties

with Europe, or Labour from not

balancing the books.

“Sound public finances; an open,

trading Britain that stands tall in our

European backyard; an unrelenting

focus on infrastructure to help move

the nation from rescue to renewal.

These are the building blocks of a

strong and prosperous economy,

filled with opportunity and success –

and we are going to do everything in

our power to defend them,” he said.



“(An EU exit would) risk billions of pounds in lost profits, risk millions of jobs and would make Britain weaker, not stronger, in the world”

T he Archbishop of York John

Sentamu kicked off a session

focused on raising living

standards by calling for all businesses

to pay the living wage. He said it was

a “flaw of the free market economies

that there are no mechanisms to

reduce the disparities between the

haves and the have-nots”, and that

ongoing economic uncertainties meant

there was now the impetus to find a

system, based on fairness and equity,

that worked for the common good.

To the argument that not all

businesses can afford to pay the living

wage, he said that 53 per cent of

SMEs already were – and recognising

the benefits of doing so. He said

government should help reduce the

costs of doing business and simplify

the tax system to encourage more to,

but called on the business brains in

the room to help come up with the

solution. “Income inequality is the

giant we must slay together,” he urged.

Adnams chief executive Andy Wood

explained that his business took the

call it couldn’t afford to introduce the

living wage in one year. Instead it

opted to do it in two, and found the

funds by distributing its executive

bonus pool.

But Mitie chief executive Ruby

McGregor-Smith argued businesses

were not incentivised to act – either

by the tax system, or government

procurement teams only interested in

price. Adding that mindsets needed

to change, she said businesses were

good at telling employees what they

have done wrong, rather than raising

aspirations by encouraging what they

were doing right.

This widened the conversation to

social mobility and the fact that the UK

has the lowest rates of social mobility

in the OECD. “Improving that starts in

the classroom,” said Damon Buffini,

“There are no mechanisms to reduce disparities between the haves and the have-nots”

The great business debate


From left to right: Mitie's Ruby McGregor-Smith, Social Business Trust's Damon Buffini; the CBI's Katja Hall; the Archbishop of York John Sentamu; and Adnam's Andy Wood.

founding partner of Permira and

chairman of the Social Business Trust.

He argued this wasn’t just about

going into schools to improve the

aspirations of the young either. He said

that his sister, who left school at 16,

now had an impressive career thanks

to a supportive employer who helped

her return to education later on in life.

“If businesses ignore the people at

the bottom of their organisation, they

are missing out on talent,” agreed

Wood. Adnams has a board director

who was once a cleaner, and its head

distiller – now winning awards for

making the “best gin” and the “best

vodka” in the world – was once an

engineering apprentice, he said. Wood

also added that businesses had a

responsibility to share best practice with

smaller firms in their supply chains.

Better Off BritainBusiness wants to help build a more

prosperous Britain where everyone

has the chance to get on in life.

The CBI’s Better off Britain report

is a blueprint for improving living

standards in the UK.

Its recommendations for business

include improving flexible working

practices; working with education

establishments to create “learn-

while-you-earn” routes up the ladder

and incentivising line managers to

make staff development a priority;

increasing commitment to schools

and work experience; and playing a

stronger role in helping employees

save for a rainy day.

It also makes several requests to

government, including: reducing

National Insurance contributions

for employees; extending statutory

maternity pay and childcare

provision to support children in

their first four years; simplifying

the support for SMEs to improve

take-up and enhance productivity

potential; and a new government

strategy for adult retraining.

Read the reporthttp://news.cbi.org.uk/reports/

better-off-britain/

“Businesses are the gatekeepers

of opportunity,” said Sentamu, again

urging companies to get involved in

the schools and communities in which

they work.



the opportunities for exporting British

talent and for promoting the UK as a

tourist destination.

“The UK film industry is a thriving

part of a thriving sector, delivering

jobs, exports, a platform to promote

Britain abroad – and a large flow of

inward investment and revenue to the

Exchequer,” he said. “We mustn’t let

this success be put at risk.”

However, he expected a skills

shortage to hit the industry in the next

18 months, and although Pinewood

was administering some “self-help” in

the form of apprenticeship schemes

and a partnership with the Open

University, he urged government to

do more to back schemes that provide

practical business skills.

And, as a reminder of the prize, he

shared the stage with Star Wars robot,

R2D2, which was built in the UK 30

The focus on trade

“Under the stardust, Pinewood is a world-class manufacturing business”

T he afternoon of the conference

was once again devoted to the

importance of encouraging

exports, and it was introduced with

an overview of the UK’s world-leading

film industry from Ivan Dunleavy, chief

executive of Pinewood Shepperton

(pictured above).

Highlighting that other sectors

can replicate its success, Dunleavy

said: “Brush away the stardust, and

Pinewood is a British, world-class

manufacturing business.”

But it’s also one that has “stayed

sharp and competitive”, keeping up

with technological developments and

taking advantage of clustering (Dunleavy

pointed to the ecosystem of many

related, small businesses situated in and

around Pinewood’s studios).

With nine cinemas opening every

day across China, he also highlighted

years ago. Although it has spent much

of its time abroad, R2D2 returned to film

the latest instalment of the film series,

Episode 7, at Pinewood last year. The

eighth is now booked in. “We’re winning

back business we used to have here in

the UK,” said Dunleavy.

Small business successesBut it’s not just big businesses making

a difference to the UK economy

through their exports. In a series of

short interviews, Fever-Tree, Extremis

Technology, Pentland Brands, Miller

International and Hotel Chocolat

shared the ways they have found

success overseas.

Within 10 years, premium mixer firm

Fever-Tree is making 70 per cent of

its sales outside the UK, although all

products are made in Shepton Mallet

for the purposes of quality control.

Pentland Brands, which owns Speedo

and Berghaus, on the other hand, took

16 years to reverse its ratio of domestic

to international sales from 80:20, and

it has chosen to split manufacturing

(which is now done in Asia) from its

creativity and innovation teams (which

continue to reside in the UK).

Extremis Technology (see Member

Profile) and Hotel Chocolat have had

their sights set on international markets

from the off. Hotel Chocolat founder

Angus Thirlwell said it was important to

choose a brand name that would work

anywhere, for example. Engineering

firm Miller International, on the other

hand, decided to export to make itself

“recession proof” in the 1980s.

The message from each of their

executives on the stage was that

it takes guts and determination to

succeed; it was important to access

available support, from the likes of UK

Trade and Investment, as well as the

necessary finance; and businesses

have to follow the opportunities as and

when they are presented.

These points were echoed by Alistair

Cox, CEO of recruiter Hays, as he


made the reasons for international

expansion simple. “It’s because there

are opportunities are going begging or

because it protects, and de-risks, your

business at home,” he said.

Steve Varley, chairman and

managing partner, UK & Ireland, at

EY, gave some insight into where

the new markets might come from,

as he highlighted £300bn worth of

opportunities in fintech, infrastructure

and reshoring.

And although he seemed less

than certain that the UK could reach

the ambitious export target set by

government, trade minister Lord

Livingston spoke of strengthening

UK brand, thanks to the Olympics,

the Great Britain branding campaign

and the UK’s improving economic

performance.

“People want branded quality; Britain

has plenty of that to give,” said CBI

Jacqui Miller of Miller International

“We’re winning back business we used to have here in the UK”

THE TEMPERATURE IN THE ROOM

director-general John Cridland – who

ended the conference on the positive

note that while uncertainties remained

for businesses to navigate, he was

confident in their ability to do so.

Alistair Cox, CEO of Hays “This was the most positive economic background to a CBI Annual Conference

in around seven years and the mood of the day

seemed to reflect this. I was heartened to see that skills featured heavily on the agenda as it’s vital that business and government ensure the UK has access to world class talent in order to build a world class economy.”

Guy Grainger, UK CEO, JLL “Business can help ensure that more of UK society takes a share in economic growth by widening the talent pool from which we recruit and forging more links with schools. From a business perspective nobody wants to miss out on potential new talent simply because they are not aware of the

benefits of a career in property, finance or professional services.”

Karl Nolson, managing director and head of debt, Barclays Corporate Banking “If UK business

galvanises even a small amount of the energy,

enthusiasm and optimism we saw in this room, and we put our collective shoulder behind the ‘Better off Britain’ initiatives, then 2015/2016 should be a real needle mover for growth in our economy, workforce skills and exports.”

Phil Keoghan, CEO, Ricoh UK “The conference crystallised which drivers will take the UK economy forward. However change can only come about if everyone, from the top down, leads by

example. From our perspective, this is particularly true of areas such as employee productivity and apprenticeships.”

Graham Copland, offset campaign support director, BAE Systems “This was a very useful conference. I was particularly interested by the way the debate moved beyond pure business, into topics of social concern.”

Steve Varley, chairman & managing partner, UK & Ireland, EY “I took away two key messages from

the prime minister’s speech. The first is how

confident he feels in the UK economy; the second, his reinvigorated commitment to infrastructure. We believe the UK is in a great position to provide growth and jobs.”

Thank you to our sponsorsThe CBI Annual Conference would not be

possible without the generous support of

our strategic partners EY and Hays. We

would also like to thank our corporate part-

ners Barclays, BAE Systems, Jones Lang

LaSalle and Ricoh, and our networking

partner, the Open University.



HArnessingPOtentiAlThe UK’s “forgotten army” of medium-sized businesses has the full support of Lloyds Banking Group, but its chief executive argues that many of them need to be more ambitious.

Words: Pip Brooking | Photography: Bloomberg


We should not underestimate the potential of medium-sized businesses for the UK economy in the years ahead.“”

“A healthy economy

needs healthy

banks,” says Lloyds

Banking Group’s

António Horta-Osório. But that also

works the other way around – and

the chief executive of the UK’s

largest bank believes that medium-

sized businesses (MSBs) have a

significant role to play in delivering a

sustainable recovery.

“They may not individually have

the same brand recognition that

many larger businesses enjoy. But

they do punch above their weight

when it comes to the contribution

they are making to UK GDP and

employment,” he explains. “We

should not underestimate the

potential of medium-sized businesses

to make an even more significant

contribution to the UK economy in

the years ahead.”

Speaking as co-host of the CBI’s

first MSB Summit, he adds that the

event is a “small demonstration of

the bank’s commitment to help

businesses succeed”.

He is also quick to recognise that it

will take actions, rather than words,

to help the banks regain the trust of

their customers and stakeholders.

Some of the measures Lloyds has

taken are those you’d expect from a

bank part-owned by the taxpayer – it

was the first to access the

government’s Funding for Lending

scheme, for example. But Horta-

Osório adds that Lloyds has used it

more than any other bank, and is

also approving more than 90 per

cent of loan applications from

medium-sized businesses (which it

classes as those with revenues of

between £25m and £750m).

In fact, he says, Lloyds has

increased its net lending to MSBs by

8 per cent this year in a market that is


big interview: Lloyds Banking Group

The solution for the UK’s MSBs will be unique to the UK“”

shrinking by 4 per cent. At the same

time, it has increased the number of

MSBs it has a relationship with by 5

per cent. Horta-Osório promises an

additional £3bn in net lending to

MSBs over the coming three years.

“I hope that goes a long way to help

the UK prosper,” he says.

And in response to the challenge

that businesses of this size are still

not getting the support they need, he

pledges: “I can promise that we are

committed to hearing every case.”

Lloyds Bank has a charter for MSBs

(as well as a SME charter that will be

renewed in the new year) built on its

relationship-led approach, its pledge

to make 95 per cent of credit

decisions locally and a switcher

promise to make it “quick, easy and

economic” to change banks. Its

growth in customers has, no doubt,

been helped by larger teams in

regions including the South Midlands

and Hertfordshire, and investment in

new business teams in London and

around the country.

Horta-Osório also emphasises the

bank’s exclusive UK focus. It has

rowed back from its international

operations, selling off its Spanish

retail and international private

banking operations last year, for

example, as the chief executive has

set his stall on making the banking

group stronger, simpler, “low cost

and low risk”.

And by focusing on UK retail and

commercial banking, he says it’s

easier to understand what customers

want and need. For all the

international comparisons,

particularly with Germany’s support

of its Mittelstand, he argues that “the

solution to harnessing the maximum

potential of the UK’s medium-sized

businesses will be unique to the UK

and take account of the particular

characteristics of our economy”.

Playing its partBut the banking group has also made

more unusual moves in support of

smaller British businesses. In

October, it unveiled a £50m private

equity fund to support small and

medium-sized housebuilders, which

Horta-Osório hopes will add vitality

to the sector and help drive the

development of financial skills and

ambition within it – as well as doing

something to address the current

housing shortage.

Lloyds Bank is also sponsoring the

Advanced Manufacturing Training

Centre at the Manufacturing


We are committed to providing manufacturing businesses with access to finance and competitive rates of funding

“”

Technology Centre, Coventry, to the

tune of £1m a year. The centre is set

to open in 2015, with more than 250

engineering apprenticeships and

trainees graduating each year,

accredited by the Institution of

Mechanical Engineers.

“By training the next generation of

engineers in the UK, the Lloyds Bank

Advanced Manufacturing Training

Centre will help address the skills gap

– which is one of the main barriers to

growth that the sector currently

faces,” says Horta-Osório.

And continuing his focus on the

manufacturing sector – one he sees

as crucial to rebalancing the UK’s

economy – he explains that the bank

has also worked with the University

of Warwick Manufacturing Group to

train 200 relationship managers, so it

can better serve the sector.

“We are committed to providing

manufacturing businesses with

access to finance and competitive

rates of funding,” he adds. In the first

nine months of 2014, Lloyds lent over

£925m to the sector – putting it on

track to achieve its target of lending

£1bn a year, for this year and the

next three.

But rebalancing will also require

businesses to be more outward-

looking and ambitious in seeking new

export markets, Horta-Osório adds.

And in August, Lloyds Bank research

found that 58 per cent of mid-sized

firms weren’t exporting, and 7 per

cent planned to do so within the next

five years – although three-quarters

of them said they knew the benefits.

Instead, more cautiously, they chose

to focus on cutting costs and

increasing productivity at home.

Digital efficiencyBut there, Lloyds has something in

common with many of its business

customers. Just over a month ago,

Horta-Osório announced a new

strategy for the bank, which will

involve closing a net total of 150

branches, investing £1.6bn in digital

services and increased automation

and driving efficiency across its

services.

“We must continue to shape our

offering around customer needs –

and not the other way around,” he

explains. “Customers’ increasing

adoption of technological change is

only going to increase the demands

they place on their bank.”

And for MSBs in particular, they’ll

have access to a new, tailored

internet banking offering in 2015,

which Andrew Connors, head of



We must continue to shape our offering around customer needs – and not the other way around.

“”

mid-sized business at Lloyds Bank

says will “help them become more

efficient and make it easier for them

to transact globally”. He expects

greater use of digital channels, as

well as increased functionality.

Already mobile is Lloyds Bank’s

fastest growing channel. Its

business banking mobile app, for

example, gives businesses the

ability to control their money on the

move. And the frequency of contact

with the customers that use it is far

higher than those that don’t.

The company is certainly

throwing its weight behind the

digital shift. Lloyds Banking Group

was a founding partner of the UK’s

Digital Skills Alliance, Go ON UK,

and, more recently, has been

appointed to drive a government

initiative to increase the digital

capability of SMEs and charities

across the UK. The bank’s own

research has shown that as many of

1.7 million organisations in the UK

have a very low level of skills in this

area, with only half having a

website and nearly a third stating

that the internet wasn’t relevant to

their business or charity. Of those

that did have a website, only one in

five allowed payments or donations

via their site.

It also explains Lloyds Bank’s

workshop session at the MSB

Summit: “Seizing the digital

opportunity”, led by Sean Gilchrist,

managing director, global digital

channels, Lloyds Bank Commercial

Banking. He was clear about the

challenges that face Lloyds shifting

to new ways of working, but that it

was willing to learn, adapt and

enhance what it offered as it went

along. “Digital has to start from the

top in any business,” he said.


MSB Summit

Despite the economy, 51 per cent of MSBs managed to post growth of 10 per cent or more each year for the past three years – and more than 80 per cent are confident of growth in their businesses over the next five years. That’s according to CBI research launched to coincide with the MSB Summit.

Yet, three years on from the CBI’s Future Champions report, CBI director-general John Cridland argued that the “forgotten army” was still not getting the focus and support they need to really realise their potential.

He called for wider finance options to include a private placement market for MSBs, a larger late-stage venture capital market and reform of capital gains tax to incentivise long-term equity investments. He also argued that MSBs and “scale-up Britain” should be given much more attention in their own right than the start-up focus emphasised by the term SME.

Minister of State for business and enterprise Matthew Hancock agreed with the difference: “People talk about small businesses being the lifeblood of the economy. I say that they are. And if they are then medium-sized businesses are its beating heart.”

Referring to the British Business Bank, procurement reforms, the Red Tape Challenge and support through UK Trade & Investment (UKTI) and UK Export Finance, he assured the members of the audience that MSBs were part of the government’s long-term plan to create a strong, sustainable and balanced economy.

The rest of the summit was designed to offer useful insight for growing businesses. There were workshops from each of the event partners (Lloyds Bank, BDO, Grant Thornton and Standard and Poor’s) on digital, access to finance, exports and long-term business planning. Rita Clifton, chair of Populus, highlighted the importance of brand building – and having ambition in doing so. A panel session, including The Alchemists’ CEO Lucy Armstrong, Buddi CEO Sara Murray and Mike Wright, professor of entrepreneurship at Imperial College, discussed why it’s good to take risks and to fail. And Daisy Group CEO Matthew Riley spoke of his experience in growing the communications company.

His advice was straightforward as he emphasised the need to understand the market you operate in; plan for growth, while keeping it flexible; finding the right people and developing them; and getting the best advisers, suitable for each stage of the journey.

“MSBs generate a

third of private

sector turnover

in the UK and

access to finance

continues to be a

challenge. A lively

debate showed that traditional debt

still seems to dominate the balance

sheets of MSBs. The need for a real

relationship with the bank provider was

seen as key. Alternative sources are

slowly seeping into the marketplace but

the take up of Regional Growth Fund or

UKEF financial support needs to improve

to drive local output and export growth.”

Kevin Cook, partner, BDO

“It was clear that

the mid-market

companies

attending the

event were very

focused on how to

move their businesses

forward and address the challenges of

achieving growth. This showed through

at Standard & Poor’s session on long-

term planning, as there was a high level

of engagement from the audience and

a willingness to openly discuss real-life

issues they are currently facing.”

Roberto Rivero, vice president, head of

market development, Standard & Poor’s

“MSBs are the key

agents of growth

in the UK, so we

were delighted to

bring government,

advisers and

experienced

internationalised MSBs together to

share insights on success overseas. Key

takeaways included having the right

partners; using all your networks; getting

help wherever you can, including UKTI

and UKEF; real face-time beats Facetime;

and language need not be a barrier.”

Simon Bevan, partner,

Grant Thornton UK



The ageing population poses clear challenges for the health and social care sectors. But it also demands radical action and innovation from business.

New age thinkingBy Pip Brooking


“1 00 is the new 70,”

said former Swedish

prime minister

Fredrik Reinfeldt at

this year’s CBI’s Annual Conference.

One out of every three children

born in the UK today will become

centenarians. The number of those

aged over 85 is expected to double

by 2030. And by 2050 there will only

be two people in work for every

pensioner, compared with four today.

Often the ageing population is

portrayed as a threat to the UK and

an increasing burden on the state,

which is still reeling from austerity

measures. But it also brings plenty of

opportunities for businesses willing

to adapt and innovate, including

access to a wider skills pool as well

as new markets.

The skills shortage tops many

businesses’ agendas and the UK

already has an older workforce than

it did pre-recession. That’s not just

because of the age discrimination

legislation or about delaying

pensions liabilities, says Sarah

Harper, director of the Oxford

Institute of Population Ageing.

“Employers look at the older

workforce as more experienced,

especially when the skills shortage

is being felt,” she says.

And that skills problem is only

likely to get worse. Lord Filkin,

chairman of the Centre for Ageing

Better, points to the disparity

between the 13.5 million job

vacancies expected over the next 10

years and the fact that only 7 million

young people will be entering the

labour market in that time.

“Businesses are going to need more

older workers and therefore they need

to think about how they change their

attitudes and their practices to employ

older people,” he says.

“We have institutionalised this

idea that fit, healthy, active men

and women in their 50s could leave

the labour market and [taxpayers]

would support them for 30 years,”

Harper agrees. “Many people could

work well into their early 70s in a

knowledge economy.”

Valuable resourceRos Altmann, the government’s

business champion for older workers,

emphasises the urgency. She warns

of long-term economic decline if

organisations fail to change their


feAture: Ageing UK

mindsets. “Make a plan now,” she

says. “Don’t let the demographics

overtake you.”

As part of that plan, Altmann talks

of the “three ‘r’s”: retain, retrain and

recruit. Letting employees walk out

the door for no other reason than

age, taking their skills with them, is a

“waste of resources”, she says.

Flexible working – which can benefit

all employees – or moving workers

into a more suitable role might be all

it takes to keep them on. But too

many businesses train only their

young employees, when many of

their older counterparts would

benefit, she says.

She adds that too many people

aged 50-plus, who have lost their

job through redundancy or ill

health, find it hard to re-enter

the workplace, when businesses

should be better at recognising their

experience and talent.

Harper points to research that

suggests those aged between 40 and

60 tend to take fewer days off sick

than their younger colleagues. She

also argues that the UK lags behind

other countries in its support of older

workers, and that work-life balance

tends to focus around supporting

those with young children, not those

aged 50 or 60 who may have frail,

dependent parents.

Although there are firms in the

UK that employ good practice in

this area (Harper names BT as an

example), in the US, it is far more

common to find gerontologists in

personnel departments who can

help find relevant services and

eldercare facilities, particularly when

employees relocate.

Altmann argues that age should

be a part of the diversity agenda,

and that a revolution is needed in

terms of attitudes to and among older

workers – similar to that experienced

by working mothers over the past

30 years. She’s setting up a business

taskforce on ageing in the hope of

driving the necessary change.

A ready marketAccording to Filkin from the Centre

for Ageing Better, there’s another

good reason to employ older

workers: they’ll have a greater

understanding of older customers.

Bank of America Merrill Lynch

estimates that the over-50s account

for 50 per cent of total UK consumer

spending. That’s likely to grow:

according to Eurostat, spending

among the over-60s has risen 50 per

cent faster than among the under-30s

in the past two decades.

Globally, the opportunities are

even more significant, given that

Euromonitor predicts the spending

power of the “baby boomer”

generation will surpass £9trn by 2020.

With more people wanting to

enjoy an “extended middle age”,

and living better for longer, there’s

a ready market that businesses

should be exploring more for their

products and services, says Filkin.

And when people want to sustain

their independence for as long as

possible, there is also plenty of

potential for innovation.

John Myatt, strategic development

director at Serco Health, adds that it

is in the best interests of businesses

to step up and engage with older

people, building better relationships

with the communities in which they

operate.

Serco is signed up to Public Health

England and Alzheimer’s Society’s

“Dementia Friends” initiative, training

staff to understand more about the

condition which affects 850,000

people and the small things they can

do to help sufferers they meet.

In February, Argos, Homebase,

Marks and Spencer, Lloyds

Pharmacy and Lloyds Banking Group

committed to create more than

190,000 Dementia Friends in shops

and banks across the UK. A study by

the Alzheimer’s Society found that

one in four people with dementia

have given up shopping since being

diagnosed, even though the majority

feel that this is the most common

activity that enables them to feel part

of their community.

At the time, M&S retail director

“Many people could work well into their early 70s”


Sacha Berendji said: “We want

our stores to be friendly, safe

environments for customers with

dementia. That’s why we will be

empowering all 60,000 of our store

colleagues to become Dementia

Friends over the course of the year.”

And there is a clear business case

for helping older people in other

ways too. Although it’s likely to

change in the future, according to the

Office of National Statistics, three in

10 people aged over 65 have never

used the internet – and that rises

to seven in 10 for those over 75. In

response to this challenge, Barclays

has set up “Digital Eagles”, a free

service aimed at helping customers

keep up to date with technology and

get the most out of online. It has

6,000 Digital Eagles in its branches

throughout the country, with some

visiting care homes.

Thinking differentlyBut the biggest test of all is how to

reform public services as demand

on pensions, health and social care

rises – and here too businesses need

to play their part. “The scale of the

challenge of our ageing population

is unprecedented and historic,” says

David Sparks, chair of the Local

Government Association.

The organisation’s own

calculations, based on demographics

and the government’s financial

projections, suggest a funding gap

by 2020 “that would result in local

councils doing little more than

caring for old people and looking

after children”.

It’s a similar story with the Five

Year Forward View from NHS

England, which argues that the

service faces a £30bn shortfall by

the end of the decade thanks to, as

Myatt puts it, the almost inevitable

continuation of the 66 year trend of

healthcare inflation caused by new

treatments and changing demands.

“The urgency is being felt,” says

Sparks. “It’s directly analogous to a

major company within a sector that is

“The scale of the challenge is unprecedented and historic”


feAture: Ageing UK

under threat having to adapt to new

markets, and there is a paramount

need to listen to customers.”

There is growing consensus –

as heard at the CBI’s latest Public

Services Network event – around

the need to include the public in

honest discussions about the future

provision of services, the cost of

them and the difficult decisions

that need to be made. But Sparks is

confident that councils up and down

the country have an appetite for

new solutions and new methods of

delivery, and that they’re more open-

minded on procurement than ever

before. To make that possible, he also

emphasised the need for innovation

and the importance of partnership

with the private sector.

But Myatt warns that there is “no

convenient solution”. Serco is working

with the Health Service Journal on

the Commission on Hospital Care

for Frail Older People. Its report,

published in November, recognised

that improving out-of-hospital care

can improve care for older people

but dismisses as “magical thinking”

the idea that merging health and

social care budgets will automatically

reduce the long-term need for acute

hospital beds.

Myatt is concerned that politicians

of all parties are too quick to offer the

public what might appear an enticing

service without providing adequate

funding in their plans.

Within a hospital environment,

Serco is trying to do things

differently. For example, it is

equipping support workers with

listening and observation skills to

complement the work of clinical staff

and designing new facilities with

the needs of older people in mind

to improve their experience and

enhance their recovery.

Joining the dots There’s also a strengthening view,

voiced by Filkin, that more needs

to be done to encourage people to

shift their behaviours to avoid “self-

inflicted health problems” caused

by smoking and eating. He adds that

the solutions must include how town

planners, transport operators and

housing providers are adapting to the

rise in elderly users.

On the latter, for example, he

says there is still too little suitable

accommodation to keep older

residents independent for longer and,

without it, they have no choice but

to remain in expensive hospital beds


or in houses that would suit larger

families better.

This is something Neil Euesden,

managing director at housing services

provider Pinnacle PSG is trying to

tackle. “Housing is at the heart of the

community, and it forms the centre of

health and wellbeing,” he says.

His company is involved in a PFI

initiative with John Laing and Wates

Living Space to provide extra care

housing schemes to those aged

50-plus who want to retain their

independence, but need some care

and support in order to do so. Some

of the homes are designed for those

with dementia, others for wheelchair

access, but they also include “hubs”

for communal facilities, while staff

work closely with local health

partners including district nursing

and community care teams to

provide a holistic and streamlined

approach to care provision.

For Euesden, it goes back to

tackling loneliness by involving

elderly residents in the communities

where they live and keeping them

active. But he emphasises the

importance of using health budgets

earlier to prevent more expensive

health problems down the line.

“Technology also has a huge role to

play in making their lives easier,”

Euesden adds. Here he chimes with the

CBI’s latest report, Our Future Public

Services, which calls on government to

digitise more health services, including

appointment booking for all GPs,

e-prescriptions for smartphones and

online GP consultations where

appropriate, by 2020.

Yet at the PSN event, MP Stella

Creasy implored both those in the

public sector and businesses to be

even more radical in their thinking.

Meanwhile CBI deputy director-

general Katja Hall warned that

“tinkering around the edges of public

service reform” would not meet

these new challenges.

The only long-term solution is for

people and organisations to start

thinking differently about ageing –

and innovate as if their long lives

depended on it.

Our Future Public ServicesThe CBI’s latest report issues an

urgent call to action in response to

three challenges:

• Public services need to get

ahead of the game in meeting

the needs of an ageing

population, while we start to

live within our means;

• Publicservicesneedtofit

around people’s lives and match

their changing expectations;

• Peopleneedtobeconfident

that ongoing change is the right

thing to do and support it.

It urges the next government to

build a consensus on what our

future public services look like

and implement a plan to make the

vision a reality.

Read the report

http://www.cbi.org.uk/ media/3589619/cbi_public_ services_reform_report.pdf

Listen to the latest PSN podcast, featuring Neil

Euesden and Stella Creasy

http://www.cbi.org.uk/business-

issues/public-services/public-

services-network/podcasts/

For more information on the PSN, visit: www.cbi.org.uk/psn

feAture: Ageing UK


The new Circuit of Wales has secured a five-year contract to host the British round of the MotoGP, even before building work has begun. The

team behind the £315m project, on the edge of the Brecon Beacons, is hoping it will clear the last planning hurdle in time for it to stage its first

event in 2016 – as well as drive regeneration in the wider area.

Ahead of the

cUrvE


90%The proportion of the estimated 3,000 construction jobs at the site that

the Heads of the Valleys Development Company has pledged will go to

local people.

6,000The full-time jobs that could be on offer, including

apprenticeships, in sectors ranging from security and

catering to retail and hotels.

150mThe number of households

worldwide that events at the Circuit

of Wales will be broadcast to –

providing an international platform

to promote Wales to a potential 300

million people.

£50mThe potential boost to the UK

economy each year over the

next 10 years, thanks to the

economic growth and employment

opportunities that could be provided

by the motorsports venue.

750,000The estimated number of people

who will visit the track, in Blaenau

Gwent, South Wales, each year.


building britAin: Circuit of Wales

2024The circuit could host the British

round of the FIM MotoGP World

Championship until 2024 after

agreeing a five-year contract, with

the option for a five-year extension,

with the commercial rights holders

Dorna Sports. Donington Park has

agreed to host the first race under

the contract in 2015.

830 acresThe size of the development site,

which will also house an indoor

dirt track (the first in the UK),

an international kart circuit and

driver training facilities, as well as

leisure and cultural amenities. An

automotive park will be established

to target the growth of low-carbon

industries and events.

5.325kmThe distance of the track, designed

to host international events

including the MotoGP, World

Superbikes, World Motocross and

World Touring Car.

50 yearsThe Circuit of Wales is the most

significant capital investment

programme in automotive

infrastructure in the UK since

the 1960s.


25 yearsThe Circuit of Wales has signed a long-term, £10m partnership deal with Chinese solar

energy provider Hanergy. The circuit wants to be a low-carbon facility, while Hanergy wants

to highlight that China is prepared to invest in regeneration in the UK. It will showcase its

innovative thin-film solar modules in a solar park, which will also form part of the roofs and

sides of the venue’s buildings where appropriate.


building britAin: Circuit of Wales

A body blow

Republican success in the US mid-term elections signalled voters’ frustration with President Obama, but it’s less certain what the results mean for business.

By Sarah Knaus


On 4 November the US went to the polls to vote in the mid-term elections. Held in the

years between presidential elections, mid-terms are typically overlooked by American voters. However, this year’s election proved to be dramatic.

Voters overwhelmingly supported the Republican Party in one of their biggest wins in recent history. Across the board, Republicans trounced the Democrats in the Senate, House of Representatives and gubernatorial races.

Republicans now hold 53 of the 100 seats in the Senate, a net increase of eight seats. One Senate race – in Louisiana – is yet to be decided and will go to a run-off election in December. On the House side, Republicans widened their majority to at least 244 seats, up from 233. Republicans also won 24 of the 36 governor’s seats up for grabs this year, including several in traditionally Democrat-strong states such as Massachusetts, Illinois and Maryland.

So what does this all mean for business and policy makers? In truth, it is difficult to say. After their win Republicans insisted that they would take advantage of their majority in Congress to show the American public that their party can break

the deadlock in Washington. Over the past few weeks, the leadership has listed priorities that include the approval of the Keystone XL pipeline, comprehensive tax reform, the conclusion of free trade agreements and the overhaul of Obamacare.

But the Republican “wave”, as the result has been called, is hardly a mandate. Although many on the right are calling this a conservative directive from voters, the general consensus is that the public voted against incumbents and voiced their frustration with President Obama’s leadership because they are sick of Washington’s gridlock, not because they support Republican ideals. This is apparent because a number of states which President Obama and the Democrats easily won in 2008 and 2012 voted Republican in the mid-terms.

There is also a question of who actually voted. Mid-terms traditionally attract an abysmal turn-out, and this year was no different. Although there were some exceptions, Democrats in particular were unable to mobilise their all-important base: youth, minority and female voters.

On Capitol Hill, Republicans will find their legislative ambitions controlled by the small majority in the Senate. Although they outnumber Democrats, they didn’t reach the 60

votes required to break filibusters and they are well below the 67 needed to override presidential vetoes. This means that Republicans will need to reach across the aisle to work with Democrats in order to achieve anything substantive.

President Obama also presents a significant obstacle for Republicans. By using executive action to get around Congressional deadlock or obstruction – as Obama has proposed to do with immigration reform – the president has made a bold statement that he will find ways to achieve his policy goals, with or without the support of Congress. Over the next two years the president is likely to move boldly to ensure a sound legacy. Potentially this could come in areas where he agrees with Republicans though, such as trade.

Finally, just when the American public thought that campaigning would take a back seat to legislating, attention shifted the morning after the elections to the 2016 presidential campaign. With less than two years to go, both sides are gearing up for an intense fight.

Sarah Knaus is manager, policy

and government affairs at the CBI’s

Washington office.

[email protected]

“Republicans will need to reach across the aisle to work withDemocrats in order to achieve anything substantive”

internAtiOnAl: US mid-terms


By Pip Brooking

An initial concept for a portable post-disaster shelter is now the foundation of a company worth £1.5m, with ambitions for further growth. But securing finance has been a challenge.

BuilDing Blocks


In 2012, Extremis Technology

was an idea, an invention –

not a company. Now, after

two rounds of funding it’s

valued at £1.5m, with its sights

set on becoming a £40m business

within the next five years. How?

By choosing the right partners,

attracting the relevant funding and,

of course, having a product that’s

clever and unique.

In fact Extremis has three related

products, all from the same IP. Two

– the Hush1 and the Hush2 – are

robust, portable shelters, designed

to be repairable and recyclable, for

those displaced by environmental

disasters or war. They can be

constructed from flatpacks into

homes in less than two hours –

and the walls of the Hush2 can be

quickly reconfigured to withstand

hurricanes (the name of the product

has its origin in “hurricane shelter”).

The third – the Push (or push-up

shelter) – is a more commercial

product, which helps make Extremis

a more viable business. These can be

used as temporary accommodation

for workers, for example.

And even before the Lowestoft-

based company’s first order is

complete, Extremis is continuing

to focus on research and

development, looking at ways to

add on cooking facilities, water

purification and waste disposal

technologies, among others.

The speed of growth has been

something of a surprise for the

company’s chief executive Julia

Glenn, who joined the company

from a job in the city in 2012. But

it’s been helped along by the fact

the humanitarian aid market is

“incredibly welcoming”. “It’s not

the easiest market to sell to because

of the decision-making process

involved, but there’s a lot of good

will,” she says.

That was proved by a visit from

chancellor George Osborne early

on. Now, she adds, “there are

new opportunities presented to us

almost on a daily basis”.

Funding struggleBut finding the finance to support

growth has been a different story.

“Raising money is incredibly

difficult. There are always fashions

linked to the general stock market

and you can see a craze for apps

“There are new opportunities almost on a daily basis”“”


member PrOfile: Extremis Technology

and technology start-ups,” Glenn

explains. “But when you have a

really solid product, based on UK

engineering, pretty much 100 per

cent in the export market, [access

to finance] is something that needs

to be improved.”

Extremis was jump-started by a

Smart Award from the Technology

Strategy Board, and it has since

secured funds from the Low Carbon

Innovation Fund and the EU.

But Glenn is critical of the fact

that it’s too onerous to access the

public funds set up to help small

businesses. “You need to have

three members of staff working on

it for a month,” she says – and that’s

a resource that this business (and

others like it) doesn’t have.

But the public funds that Extremis

Technology has won have also

attracted a small number of private

investors and Glenn applauds their

loyalty. “Those investors have

strapped themselves in for the

ride,” she says.

Extremis has also called on the

support of UK Trade & Investment

(UKTI) and the Manufacturing

Advisory Service – which is

helping to identify the best place

to manufacture the product, and

advising on a possible licensing

model overseas, so that the units

can be built closer to deployment.

Progress through partnershipsReaching out and working with

others has been central to getting

the company up and running,

says Glenn. She talks of attitudes

at a recent trade and export

course where many of the other

participants said business “is just

about who you can make the most

money from”. But her belief is that

you make progress by building

relationships. “And that’s certainly

what we’ve tried to do.”

Extremis has a joint project

agreement with ShelterBox, for

example, which helps with product

testing. The two companies are also

complementary when it comes to

disaster response, with ShelterBox

offering an immediate humanitarian

solution, and Extremis focusing on

the subsequent transition period

before victims return home or find a

permanent new home.

Glenn is on the steering

From left to right: chief executive Julia Glenn; inventor and director of technology David Watson; mechanical engineer Cillian Hickey; non-executive director (and chief executive of Adnams) Andy Wood


committee of AidEx, a conference for the international aid and development

community, where Hush prototypes have been exhibited. The design of

the units has been adapted by working with international disability charity

Motivation. The company has partnered with local builders RG Carter and

Ridgeons timber and builders merchants on materials, and with Cranfield,

Hertfordshire, East Anglia and Cambridge universities on research and

development. It’s a member of Engineering and Physical Sciences Research

Council’s Centre for Innovative Manufacturing in Industrial Sustainability,

alongside industry heavyweights such as Airbus and Toyota. And Glenn

also has the support of Adnams’ chief executive Andy Wood, who is a non-

executive director at Extremis.

“By standing on the shoulders of giants you get to be taller,” she says.

The company’s first order is from a US logistics firm, FMN International, which

wants to act as a value-added reseller. “That’s another example of how to grow

when you’re small – by finding others who you trust to give you a voice in other

geographies,” says Glenn.

It’s a demonstration of the flexible approach that has helped Extremis

Technology to grow. But Glenn also highlights the value of perseverance.

Working in investment banking in the City while she had young children prepared

her for the necessary hard work and determination, she says. “You bang on the

doors until your knuckles hurt and you don’t ever take no for an answer.”

Business voice | June/July 2014 41

member PrOfile: Extremis Technology

First Utility, HL Plastics and Lion Trackhire were named larger, mid-

sized and smaller “Growing Business of the Year” respectively at this year’s

Growing Business Awards on 25 November. The awards, supported by the CBI

and in association with Lloyds Banking Group, are now in their 16th year. The

judges also recognised hospitality supplier Steelite International for the “Made

in Britain” award; turbine service Alba Power as “Export Champion of the

Year”; ecommerce technology provider Ve Interactive as “Digital Champion”;

independent children’s publisher Nosy Crow as “Young Company of the

Year”; Watchfinder as “Retail Hero”; domestic fire protection firm Plumis

as “Innovator of the Year” and luxury men’s underwear company Hamilton

and Hare as “Brand Builder of the Year”. Peter Digby at engine transmission

supplier Xtrac was “Entrepreneur of the Year”, while Simon Mellin at farm-

based retail and bistro business Roaming Roosters scooped the “Young

Entrepreneur of the Year” award.

Banks Group, the family-owned

energy and property development

business, has awarded contracts

worth nearly £500,000 to 26 local

businesses in the north-east. As

part of its continuing operations at

Shotton mine, Banks Mining had

to move its 20 buildings, including

site offices, processing facilities and

plant workshops 900 metres to allow

coal to be taken out from under their

original location. Suppliers for the

move included plant and tool hire

firm Hubbway, fastenings and fixings

stockists Thomas Potter, Cortech Fire

And Security Systems, Fergusons

Removals and plant and machinery

hire business J O Straughan & Co.

“We’ve worked on the Shotton site

for around five months in total, and

have seen at first hand the benefits

to all sides that Banks’ policy of

working with local suppliers brings

to everyone,”said Mike Allen, director

at Birtley-based KBR IT & Networking

Solutions. “Knowing that we’ve got a

clear way into competing for contracts

like this on our doorstep provides a

real incentive for our business.”

Charting business growth & investment around the UK

42 Business voice | august/septemBer 2014

Potter Logistics has delivered improved profits for the sixth consecutive

year, announcing in November that it had increased turnover by 8 per

cent to £24m in the year to April 2014. It has also continued its investment

in the business, spending £1.4m on its fleet and £900,000 on warehouse

improvements, including finalising the lease of a new warehouse in Knowsley,

Merseyside. The company celebrates its 50th anniversary next year.

Ryder Architecture has recruited

13 new architects on the back of a

string of significant UK project wins,

coupled with international growth.

The new architects will support the

company’s teams across four UK

offices – Glasgow, Liverpool, London

and Newcastle. Recent projects

include the Newcastle Freeman

Hospital Cardiothoracic Centre

expansion, Manchester University

Library and Thames Valley Science

Park. The architecture firm is the

highest ranked in its sector in the

Sunday Times 100 Best Companies

to Work For. The firm offers staff

international work experience and

study trips, sabbaticals, and time off

for their own charitable work, and

to work for Ryder’s own registered

charity, AzuKo.

SLR Consulting has acquired

UK-based Challenge Energy to boost

its global oil and gas sector advisory

services. It’s the consultancy’s

fifth deal in the sector this year.

Challenge Energy was founded in

1997 and has worked in 48 different

countries for over half of the FTSE

350 listed oil and gas producers.

It employs 16 professionals

comprising geoscientists, reservoir

and petroleum engineers and

economists, as well as commercial

and financial experts. Under the

agreement, the firms’ upstream

teams will merge under Challenge’s

founder Nick Hooke.

Let us know your news at [email protected]

Business voice | august/septemBer 2014 43

Earlier this year, DHL announced a £156m investment to increase its capacity in the UK and support the country’s export market. Phil Couchman, chief executive of DHL Express UK & Ireland, offers reassurance that entering new markets is easier than it’s ever been.

export to grow


Expertise in the creation of state-of-the-art, consumer-friendly websites has grown in the UK quite quickly

“”

Q. What is the state of the UK export market

at the moment?

a. There has been double-digit annual growth since I

joined DHL in 2011. If you take it as some kind of barometer

of what’s happening, our business covers tens of thousands

of exporters, all geographic segments and all products and

we see nothing but optimism from our customers.

Back when the world fell apart in 2008, it was recognised

that exports would help the UK to get out of a recession. And

with that in mind, the government set some ambitious export

targets as a way of helping the country get back on its feet. We

think this policy has been, and continues to be, successful.

Q. Which sectors have experienced the greatest

success in exporting over recent years?

a. Traditional businesses such as financial services,

engineering companies and auto manufacturers, as well

as life sciences and pharmaceutical firms, are all doing

well. But the most spectacular growth has been in online

retailing.

Exporters in this sector hit a sweet spot about five or six

years ago, with a happy confluence of factors which put

them very much on the world stage.

Firstly, brand Britain is very strong in many parts of

world, especially in our two biggest export destinations:

the US and China.

The English language also plays a strong part in the UK's

attractiveness, as does our expertise in the creation of

state-of-the-art, consumer-friendly websites, which seems

to have grown in the UK quite quickly – certainly before the

rest of Europe.

This is particularly the case in fashion retailing: the likes

of Farfetch, Next, Net-a-Porter, Asos, Matches and Reiss

have highly developed, sophisticated and easy-to-use sites.

Q. What other advantages have UK firms

benefited from?

a. The strength of the British brand should not be

underestimated, in particular in a market like China. Take

Waterford Wedgwood Royal Doulton as an example:

if a plate has “Made in Britain” stamped on the back it

commands a premium.

Look at the behaviour of customers who come into

Harrods and spend vast sums of money on British-made

goods: the evidence points to the fact that British fashion,

such as Burberry and those sorts of brands, are very

sought-after. As well as luxury and fashion goods, the

success of Jaguar Land Rover and JCB in the auto industry

also means the sales of spare parts have increased.

Until recently, exchange rates have also been favourable

towards a basket of other currencies. The cheaper pound has

made it attractive to shop here, although maybe conditions

are going to get a little tougher this year and next.

Q. What role does the government play in

promoting exports?

a. Through collaborations with embassies and

trade commissioners around the world, the likes of UK

Trade & Investment have done a good job in networking

and getting importers in those countries together to

understand what Britain has to offer, as well as helping in a

technical sense.


member CliniC: Export to grow

Q. What kind of practical assistance is available to

new exporters?

a. UKTI will get you talking to an expert who can

help you with questions about what happens in the

reciprocating country, with expertise and experience

covering issues of taxes, trade marks and any restrictions

that may exist.

In terms of being able to research foreign markets, the

world is a pretty small place these days. And the UKTI can

help you get a feel for whether you can make a go of it or

not in a particular market.

Alternatively, get in touch with the UK embassy of the

country you are looking to export to, and they might put

you in touch with a trade commissioner. The opportunities

for networking in the modern world are untold.

Q. What initial obstacles do firms face when starting

to export?

a. In my view it is just a perception that getting started

is difficult. We don’t think it’s anything like as challenging

as people might think.

Typically a manufacturer may be doing quite well in the

domestic market but then when it is suggested he might

export, he typically puts it in the “too hard” basket unless

he’s more entrepreneurial.

But you can start your export business very easily with

some samples or small amount of goods, with only a very

simple commercial invoice, directly to the customer’s door.

That can lead to moving large quantities of your product by

sea or air freight, or setting up wholesalers or agents around

the destination country if that’s the way you want to do it.

These are exciting times for exporters: it’s easier than

it’s even been. You can fly something, no matter what it is,

from one side of the world to another within two days.

As I have said, UKTI has a great depth of expertise

but sometimes people don’t know that. If their services

were better publicised and promoted I think you’d get a

corresponding lift in exports.

Q. What markets do you think more British firms

should be looking at?

a. We do not trade very much with Turkey and I often

wonder why. There must be goods from here that are of

interest: it is at the centre point between east and west. A

lot of the big auto manufacturers are down there and they

see Turkey as being a bridge between the two.

Q. What is the outlook for UK exporters?

a. The market is very healthy, although there is

a possibility that a strengthening pound could put a

dampener on things in the long term.

But the online retail industries in particular are not so

new any more: they have already established their brands,

their marketing techniques and their distribution channels

around the world, and they should be able to weather any

currency fluctuations.

The UKTI can help you get a feel for whether you can make a go of it or not in a particular market

“”


Great Business Debate on flexible working

O n 26 November, businesses including Centrica, EY and Siemens joined Mumsnet bloggers and family campaigners to discuss the progress being made around flexible working.

The bloggers said it was still too hard for people – men as well as women – to ask for flexibility; that it was difficult to get hired for a new job if they wanted such arrangements; and that there were still negative connotations around the practice.

A YouGov poll, commissioned by the CBI, found that 42 per cent of workers were uncomfortable asking about working more flexibly. “Asking for flexible working is not asking for a favour,” said CBI deputy director-general Katja Hall, arguing that businesses should adopt a presumption in favour of flexibility, from the job ad onwards – or justify why not.

She added that shared parental leave would have a much bigger impact on corporate culture than most people expected.

The roundtable participants also discussed whether even the term “flexible working” was too tied to young mums, preventing the necessary change in mindset among both employers and their staff. Discussing how to open it up, Barclays director Wendy Papworth said the bank had switched to referring to it as “dynamic working”.

Mumsnet founder Justine Roberts argued that businesses needed to formalise the structures around flexible working policies so that employees felt more comfortable asking. She also highlighted that there was a clear business case to offer it, including improved productivity and retention and its popularity with clients.

Carol Rosati, director at Harvey Nash, agreed – saying that today’s corporate culture had been formed by baby boomers, while Generations X and Y expected less structure and more flexibility. And Andrew Kail, senior partner at PwC, said responding to this was an important part of attracting the talent that all businesses were competing for. “PwC is only as good as its employees,” he said.

Follow the debate at www.greatbusinessdebate.co.uk/ or @bizdebate


Cbi diAry: December/January 2015

cHInese neW YeAR DInneRDate: Thursday 5 FebruaryVenue: Victoria & Albert Museum, Londonhttp://www.cbi.org.uk/events/ chinese-new-year-dinner-2015/

cBI AnnuAL DInneRDate: Wednesday 20 Mayhttp://news.cbi.org.uk/news/ annual-dinner-2015-pre-booking/

Save the date

Infrastructure Survey

Opinions expressed do not necessarily reflect the policies of the CBI.

Caspian Media Ltd and the CBI accept no responsibility for the views expressed by contributors.


P olitical uncertainty has prevented the delivery of the transformational infrastructure upgrades the UK needs, according to the latest CBI/URS Infrastructure survey.

A huge 96 per cent of respondents blamed the uncertainty for discouraging the necessary investment, while 93 per cent pointed to the damaging nature of political rhetoric.

Worryingly, the survey highlighted that businesses expected infrastructure to worsen in the next five years. Taking roads as an example, 77 per cent of firms believe motorways will either stay the same or get worse, rising to 86 per cent for local roads. (The survey took place before the government announced its new Road Investment Strategy.)

There is widespread support for an independent infrastructure commission, as recommended by Sir John Armitt, as well as strong backing for action on rail and roads, and commitment to implement the Airports Commission’s findings, in the party manifestos ahead of the election.

“There is a strong desire for a new approach to infrastructure that extends beyond the five-year electoral cycle,” says John Horgan, URS managing director, Europe, Middle East, Africa and India. “Separating short-term politics from infrastructure decision-making would help end the stop-start investment that has so often stalled progress in the past.”

http://www.cbi.org.uk/business-issues/infrastructure/infrastructure-survey/

Bv

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Business Voice December 2014/January 2015

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