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Rt. Hon. Margaret Beckett - Former Secretary of State for Trade and Industry (May 1997 - Jul 1998)CBI Annual Conference |
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When I spoke to you last year I referred to some of the things which needed to be addressed if we were to maximise UK competitiveness. I said we needed to reform Competition Law. I've begun that process - the Bill has been introduced. So, too, have two more minor Government Bills, three being taken through by private Members and there are two more on the National Minimum Wage and late payment which are close to publication. I said we would carry out the long overdue review of regulation of the utilities to give a stable framework for firms and consumers. That review is under way and will report soon. I said that I would build on what is best in existing business support services and initiatives. And we have already completely re-focused and re-launched Business Links and Foresight. And most important I said that we would have a dialogue - about our ideas and proposals - and we have begun these discussions as we said we would. That dialogue is built on a common understanding of where we are. Britain's interest and long-term future requires us as a country and as a people to strive to be the best. We must promote investment, skills and creativity. We must compete on quality not just on cost. And we must be ready to face the challenges of the future. Only in a modern economy - strong in manufacturing and in services - can companies be profitable, invest in new ideas, and deliver new jobs. Only in a country where the Government is determined to deliver for all our people can we perform to our full potential. And only such an economy can support the world class public services the British people need and deserve. The UK economy has in the past delivered the very highest levels of prosperity. But in recent years our full potential has not been realised - as our position in the GDP league table shows. For that potential to begin to be realised means planning for the long term. But before we can properly prepare for the future, we need to know where we are now. And more importantly we have to agree - Government and business - on an understanding of where we are now. Today's Benchmark for Business document seeks to set out where UK business stands in comparison with business overseas. It is very deliberately not a policy document. It is the common ground on which I would hope we can reach broad agreement. I look forward to your comments on it. It is an important part of the bedrock on which we will set out to build policy together. Following publication of our outline document, participants at July's business summit called for more sector specific examination. So as well as reviewing performance across the economy, the document includes more in-depth studies of seven business sectors from automotive components, to chemicals, to telecoms. There is no suggestion that they cover the whole economy but they are representative of much of it, and we believe they suggest lessons that apply to many other sectors. So what does a Benchmark for Business say? As you'd probably expect it's a mixed picture. The climate for business in the UK is strong. How else could we lead Europe in attracting inward investors. We've got some excellent firms, big and small.Our best firms are amongst the very best in the world. But our overall performance on several counts - innovation, skills, productivity - remains behind that of other developed economies. And the benchmark - which draws upon the work of many experts in the field -suggests that there are some weaknesses which are common to firms in all sectors of the economy: - relatively low levels of investment - a failure of SMEs with growth potential to succeed - a failure by too many businesses to adopt best practice - low levels of skills - weakness in exploiting export markets Many of these messages are familiar messages, according with the conclusions of many reports, not least from the CBI, but one of the most important parts of the analysis looks at the familiar story it tells about the supposed problem that characterises British Industry. That is that we have a few good firms, a few middling ones, but too many in the lowest performance band. This 'long tail' theory helpfully points a finger at the need for all our firms to try and benchmark themselves at least against the best British firms. But we are beginning to think that is not enough. New work carried out by the DTI suggests that the 'long tail' theory of convention may be somewhat misleading. It suggests that distribution of performance among UK firms is much the same as elsewhere - a few at the top end, plenty in the middle, a few at the bottom. But apart from a few stars - which are as likely to be small firms as large ones - it is suggested that the problem is that our performance across the whole spread of firms isn't as good as the performance of companies overseas. Our average isn't as good as their average. And it seems to be the same in services as for manufacturing, although there's not as much hard data about services sector performance. This picture is consistent with other data. For example, our overall productivity is a quarter to a third below that of France and Germany. And this is not just down to a few SMEs in the 'tail'. So what does this mean? It means that maybe the task is bigger than we thought. It may mean that all our firms need to benchmark themselves against the best in the world, not just in the UK, and that that applies to firms throughout the supply chain even at the top. And it means that performance has to be raised across all of business, not just in the UK's weakest performers. And that means more impetus from business itself, through new products, new processes, more commitment to investment both in people and in plant. But whilst business has the leading role, we accept that Government too has a job to do in partnership with UK business. As you repeatedly told us in opposition, the key goal for Government is to deliver the macro-economic stability - the policy stability - within which business can work, as Gordon Brown has pledged to do. But that alone is not enough. My department's work is also an essential part of this strategy - looking to the long-term in science and technology; promoting competition and consumer protection; seeking high standards and fairness at work. We must tread a fresh path - neither too much interference nor the neglect of sheer indifference - but a new third way. Appropriately I see our policy approach as resting on 3 pillars: - strong markets - modern companies - looking to the future.^M These are the themes which bind all of the activities of my Department to the pursuit of competitiveness, and against which we shall measure the worth and relevance of those activities. First, strong markets. I am absolutely clear that a strong competition policy is fundamental to competitiveness. That's why one of this government's earliest actions was to find Parliamentary time for a Competition Bill, which will replace an outdated regime with a modern, effective system. I recognise that there are some concerns, but I welcome the overall reaction that a competition law which creates a more transparent and predictable regime, and which is more consistent with the EU law that already applies to many big businesses, will be a big improvement on the slow moving and ineffective structures that we have today. And our review of regulation for the utilities - the search for greater transparency, predictability and consistency in regulation - is also vital. And the second pillar is modern companies. Only modern companies can address modern challenges. And increasingly companies meet the challenge by benchmarking themselves against their competitors and by the pursuit of best practice - something I am delighted to see the CBI so assiduously promote. But a modern company must also have the right internal framework within which to work. Increasing the competitiveness of UK companies relies on our companies operating under forms of corporate governance and company law that prepare them for the challenges ahead. Greenbury, Cadbury and now Hampel, as well as others have stimulated a lively debate on the role of the modern company in society. I welcome this; and I look forward to seeing how his committee reflects in its final report the range of the many comments stimulated by their draft report. We ourselves will respond more fully after its publication. But let me set out the basic principles that will guide my approach in this area. We want forms of governance and company law that encourage companies to invest and grow - to take the long terms strategic view, and a broad view of their obligations. They should also ensure guarantee openness, transparency and accountability not least in the relationship between shareholders and management. To be successful in the next millennium, modern companies must motivate all their people, must build on a spirit of common purpose. Of course managers need to manage but we believe that fair basic standards at work are key to a modern economy in which the greatest asset a company can have is a creative and committed workforce. We need modern companies succeeding in new markets with new products - companies that are competing on our strengths in design, in science, in ideas - not merely on cheaper labour. Such companies get the best from their people through partnership and investment in their potential. They help create an economy where firms and managers alike can respond quickly and flexibly to new demands, new technologies, new markets because it is on that response that all their futures depend. In the ideal world, partnership would be practised in every workplace. But the reality now is that there is a huge gulf between the best and worst workplaces. Here too we want to promote good practice, to transplant partnership from the best workplaces to the rest. But it is right to establish a basic framework of legal minimum standards to ensure that people are treated decently at work. We will implement the National Minimum Wage at a rate set in accordance with the economic conditions of the time on the basis of the recommendations of the independent Low Pay Commission that includes on it representatives of business. We will move forward - very soon - to make clear the way we intend to implement the Working Time Directive. For we all know workers putting-in excessive hours and with no vacations do not maximise productivity, let alone have a decent family life. For thousands of people this will be the first time they have had a right to take an annual holiday. Through a Fairness at Work White Paper we will lay out clearly where we are going on other issues such as recognition. At the Prime Minister's request, the CBI is discussing this issue with the TUC. We are waiting to learn to what degree you can identify common ground before formulating our proposals. I know that there are anxieties about the impact of particular aspects of these policies, though I am pleased to see survey evidence showing increasing support from employers. But let me make plain that these issues are being handled by my Department because the Prime Minister wishes them to be seen as what they are - relevant to business success, and to our drive for competitiveness. They are - like the Social Chapter - industry issues and are addressed as such. But as Tony Blair said at the TUC conference in September. "..let us not treat flexibility and fairness as if they were opposites. As if you can't have flexibility without injustice. Fairness without rigidity". Alongside strong markets and modern companies, our third theme is the need to look to the future. Many of the industries that will employ your children and grandchildren haven't even been thought of yet. But what we as the Government do - or fail to do- to day will make a real difference to those industries and therefore to the prosperity and quality of life of your children and your grandchildren. We can help or hinder the development, of new firms - new ideas keep them here or let them drift abroad. It is clear that we must embrace the industries of the future, and in particular we must address the specific needs of smaller firms. That is why last week I launched the new Enterprise Zone - an internet information service for SMEs an idea conceived in opposition, with startup funding from DTI and provided in partnership with the private sector. This general determination to look to the future is why for example we weigh the impact of new EC Directives on small firms - the firms of the future - and of firms and industries yet to be born. My Department's Foresight programme has made a real contribution in some areas building on Britain's capacity as a world leader in innovative and imaginative ideas. But despite that lead we're not as good as we could be at taking the potential advantage for ourselves. And the British economy and our people are poorer for that. Since taking office, I have put Foresight at the heart of business competitiveness and given fresh impetus to its work, including its work in Government. I want to drive forward the Foresight Programme so that companies can improve their competitiveness, innovate and be successful by working in partnership with the science base. I am delighted to see the support the CBI is giving to the Foresight programme and would welcome top-level CBI representation on the Foresight Steering Group. But I want to take a further step. Within my Department itself I plan to establish a "Future Unit". Its job will be to create a forward looking strategic focus for the Department's work. That new Unit will start by considering whether our business support activities are properly focused to ensure that we are not overlooking new market opportunities. It will examine existing policies and new proposals to try to make sure that what we do now does not inadvertently jeopardise our role in the industries of the future - that our approach is flexible enough to adapt to change - and that, where possible it promotes small firms growth and self-employment. Preparing for EMU too is a vital step in preparing for the future. We must ensure that EMU works. It must be strongly based to deliver success because of the impact that its success or failure is bound to have on our economy, whether or not we are early participants, as present exchange rate fluctuations indicate. And across British business we must prepare for that impact whatever Britain's decision may be, and whenever it is made. The Standing Committee monitoring EMU - of which your President and I are members as is David Simon - has vital work to do. It must draw up a programme at a national and regional level to help Britain prepare for the Euro. EMU will have big implications for our firms across the board though most particularly in financial services.It certainly reminds us of the need to make real progress on the Single Market. The Single Market Action Plan has four strategic targets: - making the rules more effective - dealing with key market distortions - removing sectoral obstacles to market integration - delivering a Single Market for the benefit of all citizens. These are crucial. Unless we can make the rules more fair and effective, we will continue to see barriers to trade, markets skewed by state subsidies and the prize of increased job opportunities and prosperity for all will continue to elude us. Those, then, are the three pillars - strong markets, modern companies, looking to the future - which underpin our approach to industrial policy. And I believe they are as relevant to business competitiveness in Europe as they are in the UK. So they will inform my approach to the Industry Council and our Presidency next year as surely as they inform my decision-making here at home. Under the UK Presidency we shall have a full debate on Competitiveness in the Industry Council. I am told, extraordinarily, that this will be the first time the Council has had such a debate and, also for the first time, I hope to involve representatives from the business community in that debate. I emphasised last year, as I did at the start of this speech today, the worth of a strong partnership between Government and business to advance our country's interests. Today's benchmarking document will now go for discussion in a series of working parties chaired by DTI Ministers or advisers. Their work, with that of my Competitiveness Advisory Group, will feed into our first White Paper. This will make it not only a first for us but the first drawn up in partnership and in consultation with business. I hope you will find it all the more relevant to your daily struggle for prosperity and for success. That struggle is one in whose outcome we all have an interest. It is only fitting that we face it together. |
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Other speeches by Rt. Hon. Margaret Beckett - Former Secretary of State for Trade and Industry (May 1997 - Jul 1998)
(the following are available from the archive) |
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