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Lord Simon of Highbury - Former Minister for Trade Promotion in Europe and Competitiveness (May 1997 - Jun 1998)The Franco-British Council |
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"THE UNITED KINGDOM AND FRANCE - WORKING TOGETHER FOR COMPETITIVENESS" Thank you for those kind words of introduction. I am delighted to have been offered the opportunity to come and speak to the Franco-British Council today on the theme of Working Together for Competitiveness. France and the UK have an impressive track record of working together - despite some of the ?Fantasy Rows? that the media love to report. We are major trading partners. The UK is France?s second largest export market while France is the UK?s third largest market. We look to each other for investment. In 1996 the UK accounted for 18% of all foreign investment in France - worth nearly £14 billion. And France is the sixth biggest investor in the UK, ahead of Japan, with some 1,300 French companies investing in the UK to a value of just under £9 billion. French companies are important players in running privatised UK utilities: Lyonnaise des Eaux runs the Northumbrian Water Group; Videndi managers 20% of our passenger rail network through its subsidiary Connex Rail. And the partnerships formed between our companies have produced some truly world class joint ventures: Rolls Royce/Turbomeca?s turbo jets, Thomson-Marconi Sonar?s underwater detection equipment and the Sema Group?s IT consultancy services. And as the millennium approaches we face very similar and powerful economic challenges: the drive for sustainable growth, the need to create jobs. For the UK the former has proved somewhat elusive, for France the latter. It is perhaps the sharing of insights on both these issues that bring us to my first theme of today?s lecture entrepreneurship. Why so? Entrepreneurship Well - a key part of the answer for both of our countries lies in developing the small firms sector - a major source of new jobs and economic growth. Not that nurturing medium-sized companies is unimportant, but it is a wholly different cultural challenge from starting new businesses. So entrepreneurship is a challenge for both countries - that is why Tony Blair and Lionel Jospin agreed, a year ago, to set up a Franco-British Taskforce so that together we could consider the contribution which smaller businesses make to our two economies and examine ways in which our policies could be more positive towards entrepreneurs. Christian Pierret and I were charged with taking the initiative forward. Our discussions within the Taskforce have highlighted striking similarities between the small and medium-sized business communities of France and the UK. In both countries the vast majority of businesses fall into this category. In both countries these companies are the major source of private sector employment 12m and 10m jobs respectively with 50% being in the manufacturing sector in both countries. And, most importantly, in both countries they have been the main source of employment growth in recent years. That is why it is imperative that we do all we can to promote the dynamism of the smaller business sector and encourage a climate in which people are ready and able to seize business opportunities. We are talking of at least 12% of business stock each year being provided by business start-up - so there is much to encourage. These ambitions are easily expressed by Governments, but we cannot ignore the high levels of individual commitment and personal risk which entrepreneurship carries with it. Up to half of new business will close within their first three years. Against that background we must take care that we do not stigmatise failures. A flourishing small business sector is in large measure dependent on better and more positive attitudes to responsible risk-taking throughout society. These attitudes are something both of our Governments want to encourage. Competitiveness A key theme for our taskforce discussions and a vital ingredient for the successful development of our smaller businesses as well as for our biggest companies is competitiveness. What do I mean by competitiveness? I mean adding value to human assets and fixed assets faster than your rivals in a particular sector. Competitiveness is the pre-requisite to sustainable growth, to creating new and lasting jobs and the standard of living which people want and deserve if they are prepared to strive for them. The UK Government is determined to help business close the performance gap with its competitors - both in terms of productivity and the ability to innovate ahead of the market. But we recognise that our firms will only match the best in the world if they make their knowledge, skills and creativity their chief competitive assets. Turning information into knowledge and knowledge into value is the key to modern success. This is true of all businesses - traditional manufacturing and services as much as new creative and high-tech industries, Hence our focus in the UK on what we call the ?knowledge driven economy?. In a global economy, traditional physical assets can be increasingly easily copied elsewhere, often more cheaply. Businesses have to compete by exploiting capabilities that competitors will find hard to imitate - knowledge, skills, creativity combined in a business process and organisation which is constantly benchmarking itself against the best of its competitors. It is a truism that Government alone cannot create wealth - only business can do that. But as Governments we play a vital role in setting the framework both economic and cultural within which our companies do business. We also have a clear responsibility for Public Sector performance and value creation. Government certainly can create value by achieving better service from public sector expenditure. In these areas of how Government can best create value there is an ongoing and stimulating debate with our French counterparts. We usually agree that competition is the sharpest spur to improve productivity and the best guarantee of reward for talent and innovation. That is why open, transparent and effective markets are so crucial. And why in the UK we have announced new initiatives to crack down on harmful anti-competitive behaviour and to open up and modernise markets. We do agree that our aerospace and defence industries provide a good example of the need to modernise markets. Aerospace and defence are sectors where the UK and France have a proud heritage. Today both face a major challenge, striving to be globally competitive in the post Cold War future. American companies have reacted swiftly to the changing marketplace. Our companies must do so too if they are to remain in the game. That is why our Governments, with Germany, made clear in their Trilateral statement at the end of 1997 that restructuring was vital for the competitiveness of the industry. As Governments, we are working closely with our industries to help facilitate the restructuring process. But we all agree that it must be for the companies themselves to lead. And they are starting to act: Aerospatiale and Matra are finalising their merger; BAe and Marconi have announced their intention to merge. But the need for further action remains, and I hope that there will be further moves soon. One area where we have looked for progress for some time, and where I would hope for developments in the near future is at Airbus, in work towards the Single Corporate Entity. Airbus has been a success story of the last two decades. We want to see it given the opportunity to build on that success. Regardless of how successful our companies are in their efforts to restructure elsewhere, I hope that we will see Airbus take what could be a huge step towards cementing its long term future. We are agreed also that Government must also take the lead in investing in our countries? capabilities such as science and the digital technologies. Our universities and research centres too have a key role to play in helping businesses achieve sustainable competitive advantage through technological breakthrough. It is for Governments to reinforce the process by which ideas are generated, brought to market and translated into economic success. Our researchers must be encouraged to create their own companies. In France the law has recently been changed to make this possible. We must encourage more and still more leading edge scientists and technologists to think entrepreneurially. We must also support the infrastructure around our universities and research centres that facilitate commercial opportunities - business angels, networks of business expertise, venture funds. That is why, in the UK, we are planning a range of new programmes to promote enterprise, the exploitation of science and technology, the development of skills, and the use of information and communications technology. In the Competitiveness White Paper we published last December we announced a stream of new initiatives with precisely this aim. We are
These themes of science, new structures and venturing have also been central to our work within the Franco-British Taskforce. Training for entrepreneurs, improved business support, better regulation at local, national and the European level; incentives for research and development and a joint approach to electronic commerce are some of the first practical outcomes we are following up. And we are seeking to co-ordinate even more closely our approach towards encouraging small businesses to make full use of opportunities across the Single European Market. The taskforce has shown that by working together in these areas we can achieve more than by tackling them alone. Economic reform Governments in Europe are turning full headlights on entrepreneurship and smaller businesses given all the evidence from USA of their job creating attraction. They will help lead to sustainable growth, but it will require a more stable macro-economic climate and competitive, liberalised markets. The UK approach to economic development and reform sees a key role for Government, in partnership with business, to provide the right environment for business. This role is different in form from the French Government?s relationship with the business community. This has often had a more formal "steering" quality - those who think this might be the bias of Perfide Albion need only read Jean Claude Casanoves? piece in Figaro today to see how interestingly diverse is the French industrial approach to the concept of liberalisation. However the objectives are crucially similar: I will point out five such areas:
We will not always agree on the best way to deliver these goals. But we must never lose sight of the shared objectives which unite us. And we must seize the opportunities learning from each other in reaching them. Peer group pressure and peer review now feature as acceptable processes in the working of the Internal Market Council. That is how we have been developing the Single Market and what we are attempting to do with our shared economic reform agenda. The Single Market has already brought great benefits for European businesses and consumers. But we must extend and improve its operation. We must ensure that the Single Market actively encourages entrepreneurship and facilitates wealth creation. That means better implementation and enforcement of existing Single Market legislation as well as making sure that future legislation is business friendly and does not hinder job creation. We have much to gain by studying approaches in other Member States and indeed in the USA in pushing forward these objectives within our own market. Over the next few years the Single Market will expand as the countries of Central and Eastern Europe join the EU. The lessons of better implementation and enforcement apply particularly to the applicant states. That is why the UK and France together are devoting significant resources to help the applicants understand exactly what they need to do and how to do it. We both know how important it is for our businesses and economies that enlargement is a success. We are doing our best to ensure that it is. But economic reform goes wider than the effective operation of the single market. Europe needs to have flexible, strong and open markets if its companies are to improve competitiveness and create new jobs. The onset of economic and monetary union, and the transparency this will bring, make the need for economic reform in Europe that much greater. I am confident that we now have a sound process in place for our micro-economic work in the EU. Under the UK Presidency, all EU Member States and the European Commission agreed to produce annual reports on the functioning, respectively, of national and community markets. By examining the first set of these reports, the Internal Market Council last Thursday (25 February) under very positive German Presidency leadership was able to agree the key areas on which Member State and the Commission must now focus, including:
Further progress must be made in all these areas and I and my colleagues in the Internal Market Council will agree a more detailed implementation plan in June. Furthermore, the ECOFIN Council will examine these priorities when considering the Broad Economic Policy Guidelines for EU Member States. Reaching an agreement was not easy and this achievement by the Internal Market Council as I said under the German Presidency should not be underestimated. EU Member States must, quite rightly, ensure that their interests are defended when taking forward measures at the European level. But, as a result of this agreement, I believe we have a solid basis for further economic reform, wider market opening, the creation of further opportunities for our companies across Europe and a better deal for our consumers. The arrival of the euro adds urgency. We want it to succeed. I hope Prime Minister Tony Blair made that clear last week when he launched our Outline National Changeover Plan. But it needs to be underpinned by continuing economic reform throughout Europe. The euro will begin to transform markets across Europe. Price transparency and exchange rate certainty within the eurozone will remove two more barriers to the single market. Competition will increase. Customers should, and will, benefit. But it is not just in the single market that the euro will be a catalyst. The single currency has the potential to put Europe at the forefront of trade at the start of the new century. Along with the Internet and the growth of electronic commerce, the euro will accelerate the globalisation of markets. A globalisation which is already powering ahead as companies from all over the world try to gain a foothold in our lucrative European market. CONCLUSION As I said a few moments ago, the French and the British may have different ways of doing things. But I hope I have shown that the challenges faced by France and the UK are very similar. Our companies must compete with each other in world markets. This applies to all Member States, not just to France and the UK. But we have also and importantly shown that we are capable of working productively on the threads that bind us together. I?ve mentioned just a few of these: entrepreneurship, defence, enlargement, micro-economic flexibility and social policies particularly those designed to reduce youth unemployment and create new jobs (400,000 to date in this Government). We are, and must continue to be, capable of working together to find common milestones and a common programme of work for the future. The competitiveness of Europe is at stake and the prize is too great for us to fail to find that elusive way - La Troisième voie, die Neue Mittee - which builds on both our social and our entrepreneurial traditions. Rich and rewarding as they have always been in Europe, one cannot help but feel that we have another remarkable opportunity to walk together into the Millennium with a new spring in our collective stride. I do hope so. Vive l?entente cordiale. |
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Other speeches by Lord Simon of Highbury - Former Minister for Trade Promotion in Europe and Competitiveness (May 1997 - Jun 1998)
(the following are available from the archive) |
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