Written Evidence submitted by British Marine (SEI0023)

 

British Marine welcomes the inquiry of the House of Commons’ International Trade Select Committee into Support for Exports and Investment. British Marine submitted evidence to the former Business, Innovation and Skills Select Committee inquiry into Exports and the Role of UKTI. We would be happy to provide further detail on the issues we have raised during the oral evidence sessions.

 

British Marine is a member of both the Confederation of British Industry (CBI) and the Sponsors’ Alliance, who have both submitted evidence to this inquiry. We would like to associate ourselves with those submissions as well.

 

Introduction

 

1.1              British Marine is the national representative body for the UK’s leisure, superyacht and small commercial marine industry. We represent over 1,550 member companies, which account for over 70% of the industry’s £3.01bn turnover (2015/16[1]). This is the highest recorded industry turnover since before the recession.

 

1.2              There are 4,568 marine businesses operating across the UK’s marine industry, over 97% of which are micro or small businesses, and they directly employ 33,048 (+4.6% on the previous year) full time equivalent (FTE) jobs. While it is a cottage industry, it is founded on small business innovation and enterprise, and is a haven for start-up businesses, with over 100 start-ups registered in the last year.

 

1.3              In a 2012/13 report, commissioned by British Marine, it was estimated that the overall economic contribution of the UK marine industry to the UK economy was £6.2 billion. This turnover supports approximately 141,000 FTE jobs (both direct and indirect) and delivers more than £5.3 billion of GVA (gross value added) in the UK economy[2].

 

1.4              International trade accounts for 29% of the industry’s total revenues (£882m), with Europe and the United States currently the most important overseas markets for UK marine businesses. For some marine companies, international trade accounts for over 95% of their business and this is particularly the case in the high-end luxury yacht sector, where the UK has some of the world’s leading yacht manufacturers and a supply chain second to none.

 

1.5              British Marine is also a member of Maritime UK, the single promotional body born out of the Maritime Growth Study. Maritime UK brings together the UK's shipping, ports, marine and business services sectors, to drive forward an ambitious agenda for growth, to promote the UK as a world-class maritime centre and to unite the maritime community in meeting the challenges of tomorrow. With a world leading marine manufacturing sector, the UK maritime industry is estimated to support over 500,000 jobs and contribute £22.2bn to the UK economy.

 

Summary

 

2.1              British Marine has provided responses to the Committee’s key questions below, which are summarised here.

 

2.2              As set out in our response to the former Business, Innovation and Skills Select Committee’s inquiry, we believe the Department for International Trade still urgently needs to address a number of key issues on policy and its own structure and activities, to ensure that UK businesses have access to the right support, when they need it, to enable them to export for the first time or grow their export activity into new markets.

 

2.3              Ahead of the recession, almost 40% (£1.25bn) of our industry’s turnover was from exports. In 2015/16 export accounts for 29% (£882m). This can in part be attributed to depressed consumer markets in the UK’s primary marine trading partners as well as recent impacts from the price of sterling, but it is also down to issues in developing a fully support strategic export plan.

 

2.4              In light of the UK’s impending departure from the European Union, it is more important than ever that the Department and the Government address these widespread industry concerns. We would like to see:

 

 

 

 

 

What progress have International Trade and Investment (ITI, formerly UKTI) and UK Export Finance (UKEF) made on their performance since the Business, Innovation and Skills Committee finished work on its inquiry in 2016?

 

3.1              British Marine welcomed the creation of the new Department for International Trade (DIT), with a designated Secretary of State and a larger ministerial team to lead its work. Since its creation, we have been able to meet with the minister responsible for the UK’s marine and maritime sector and hear the Department’s ambitions for the UK’s trading future.

 

3.2              However, given this bold ambition and the fact that the UK finds itself needing to build significantly on its current export performance, we have seen no evidence of growth in the Department’s resources or its funding. We have been informed that work is ongoing to develop a long term business plan, but there is no additional finance available for the delivery arm of the Department (the former UKTI) and this section will continue to work on a declining financial model.

 

3.3              The marine and maritime sector does have a dedicated resource within DIT, who has been working very closely with us and other representative bodies to understand the markets of interest of our industry, and the type of support that is needed to grow UK exports. Unfortunately, this resource equates to one person, with occasional support from market and region experts. This is completely insufficient to meet the needs, or the ambitions, of the sector and does not go nearly far enough to match ministers’ rhetoric on maritime growth.

 

3.4              If this Government is sincere and committed to expanding UK exports and encouraging companies to export for the first time, then it needs to be bold in its provision of resources to support the UK marine and maritime sector and ensure there is adequate funding in place to deliver on the ambitious goals that the industry can achieve.

 

How has the absorption of UKTI into the new Department for International Trade affected its performance?

 

4.1              As stated, we remain very concerned about the Department having the right resources to deliver on its remit. Since UKTI was absorbed into DIT we have heard of a number of experienced, knowledgeable and well respected international trade advisers (ITAs) being made redundant from posts around the world. Given the highly publicised resource deficiencies the UK Government currently possesses in qualified and experienced trade negotiators, to be reducing other necessary resources around its international trade network is of equal concern.

 

4.2              One such example was the loss of an important senior trade adviser post in Italy in September 2016. This Italian post had been one of the most successful drivers for UK leisure marine and superyacht exports into one of the world’s largest marine markets, which makes its loss all the more difficult to understand. British Marine, along with numerous member companies, had worked very closely with this post over many years. The Italian post has been one of the biggest supporters of our annual ‘Meet The Buyer’ event at the London Boat Show and has supported hundreds of UK businesses in accessing this vital marine market. And it is not just the loss of the post, but the highly knowledgeable and well respected person who filled it.

 

4.3              We have heard of other similar overseas posts (in the Netherlands and USA) being made redundant, often at quite short notice. What is equally disturbing is that these decisions appear to be made at a local level, without the knowledge or full input from DIT central office. This suggests a distinct lack of planning by DIT and that it does not yet have full control over all the resources that it should. This must be addressed as a matter of urgency.

 

4.4              The overall structure appears to be fragmented still, with poor internal communication negatively impacting planning and delivery. It was only very recently that we discovered the GREAT initiative had been transferred into DIT. But its budgets appear to have been kept very separate from the wider DIT budget. We have been informed that if bids for funding are granted by GREAT, we would not be eligible for funding from other DIT pots. This confusion has a significant impact on our applications for financial support, ultimately wasting precious time and resources within our organisation, and DIT too.

 

4.5              Having said all this, we have seen more overseas collateral (embassy facilities and even UK ambassadors) offered to support trade show efforts, and this is welcome. We hope to see more of this engagement and support from the UK’s overseas network in the years to come. For example, we would like the UK marine and maritime industry to benefit from the types of trade missions we see the Government run with the aerospace and automotive sectors. While trade mission support from Government ministers has been extremely limited in the past, we have welcomed the forthcoming UK maritime showcase in Shanghai, China on board the Queen Mary 2, which is just the type of activity we are calling for. The only negative in this instance is this mission has been born more out of opportunity than planning, meaning limited involvement from our sector of the maritime industry due to short planning timeframes. It should be added that China is very much a long term market for the leisure marine, superyacht and small commercial marine sectors, as there is a lot of work required to turn it into a viable and stable market for our members.

 

Are the Department for International Trade's export and investment services fit for purpose and sufficiently resourced?

 

5.1              In a word, no. The single resource currently leading on DIT’s marine and maritime export strategy, while making excellent efforts to support all the diverse sectors within this industry, is insufficient to meet its needs. There needs to be a full team, with relevant experience of the industry and its sectors, and this team needs to know that there are central funds and resources available to actually deliver the strategy. And the Department needs to ensure there is the knowledge and expertise in markets to support this strategy and act quickly in response to opportunities.

 

5.2              One such example of a DIT service which is insufficiently resourced or organised is the Tradeshow Access Programme (TAP). If the UK wishes to increase its exports (both value and volume), then a tradeshow access scheme (the existing TAP or something like it) must be available, and it must have a budget that is sufficient, stable and consistent over a three to five year period. The Department must mirror this stability.

 

5.3              The TAP scheme was introduced in 2002 with a budget of £22m. The budget for this year’s scheme is worth just £9m. As evidenced in our submission to the BIS Committee’s inquiry (see chart in Annex 1), the levels of financial support to British Marine and companies in the industry we represent have dropped significantly over time. When companies operate in a sector/industry where government to government deals and support are less prolific, ensuring access for UK companies to overseas exhibitions and consumer shows is absolutely vital to enable them to explore new markets and meet with those overseas buyer and distributor networks.

 

5.4              The current situation regarding TAP is, quite simply, unsupportive of normal and necessary business planning. We have only just been informed of spending commitments for the first half of 2017/18. Where planning and budgets for marketing, stand and travel commitments for overseas shows need to be made well in advance, the uncertainty surrounding the level of support that will be provided by the Government makes any form of meaningful planning almost impossible. As a nation we are supposed to be encouraging companies to export for the first time or grow their export activity. The provision of adequate support, not all of which must be financial, is absolutely essential to help companies meet the risks of investigating and entering new markets.

 

5.5              As an example of the problems the late announcement of TAP grants has caused, the allocation of TAP grants (10 per show worth £2,500 each) for shows in Columbia and Singapore (both in April this year) has come so late it is highly unlikely we will be able to allocate them to UK exhibitors, given the existing rules around eligibility. We need to be following the examples set by our competitors, like Germany, who are looking to give their exporters a competitive advantage.

 

5.6              The announcement for TAP for the second half of the year is being withheld while yet another review of this scheme is conducted, at the Secretary of State’s request. We understand that the evidence gathering period for this review will close at the end of April, which means we will not see any report/proposals until late May at the earliest. This means yet more uncertainty for UK businesses and the Trade Challenge Partners that support them.

 

5.7              In a nut shell, the Government needs to understand that there is significant value in the TAP scheme as part of an overall export support strategy. But the economic value of TAP is often not immediately evidenced. Success can be measured almost instantaneously, but also it can take anywhere from six months to a year for a company to realise the full benefits/effects of attending an overseas show. The Department needs to take this into account when assessing the success of a TAP grant, which does mean that the reporting functions need to be changed to fully take into account all the evidence and the time periods involved. The TCP network can be used to support this and we are ready to.

 

5.8              Over the past few years we have also seen the demise of various other support packages such as Passport to Export and Market Research funding, which has had a detrimental effect on new to and infant exporters. We must highlight again, in an industry where 97% of the companies are micro or small, DIT must provide a complimentary range of support measures to encourage them to export and maximize their potential.

 

In the light of the Secretary of State's admission that £1 trillion export target will not be met, are the Department's export and investment targets transparent, appropriate and achievable? How should the performance of ITI and UKEF be measured?

 

6.1              At the moment we believe there is far too much focus from the Government on the value of exports, as opposed to the volume of our exports. Not every company in the UK that starts exporting is going to achieve millions of pounds in revenue from this venture, but they are going to expand their markets and revenue streams. While there is nothing wrong with backing those companies that offer the highest return on investment, it must not be done at the expense of all other companies.

 

6.2              Until the Brexit negotiations have been settled, the UK needs to provide maximum encouragement and support to those companies who are prepared to tackle a new market or seek to grow into an existing one. Each company is uniquely different for a whole host of reasons, but if we can get each company educated and exploring international markets then ongoing support can only serve to achieve greater objectives over time.

 

6.3              As a starting point, we need to get better at recording exactly who a company supported by UK money is meeting with at Shows, who they are having follow-up conversations with, when a contract is signed (including the value and volume of sales), and we need to be tracking the time frames from start to finish. Alongside this, the TCPs and ITAs can ensure that they maximise a UK company’s presence at an overseas show by arranging meetings with key international buyers. And importantly, if a company does not succeed in a market, it must not be chalked down as a failure. The reasons for the lack of success must be investigated, so that the company and the UK can learn from this.

 

What standard of advice do ITI and its International Trade Advisers provide?

 

7.1              Overall, the advice that we and our member companies receive from ITAs in our core export markets (Europe and the US) is good with a sound knowledge base. There is broader maritime knowledge in the campaign markets, which include Brazil and China, and while these are less important for UK leisure marine and superyacht sectors at present, there is no doubting their expertise or knowledge.

 

7.2              As highlighted by the Sponsors’ Alliance, there needs to be much more strategic engagement between the industry and the sector specific ITAs. This will enable better planning for in country events, missions etc. and ensure that opportunities are being filtered down to companies in our industry. The new Exporting is GREAT website is meeting certain information sharing requirements across our industry, but we know that our industry uses the internet less than others when it comes to seeking out market opportunities, not least because so many companies in our industry are small and micro sized and they simply do not have the time to get online.

 

What standard of support does UK Export Finance provide to companies seeking to export?

 

8.1              We continue to have limited engagement with UK Export Finance (UKEF) and we have received very little feedback from our membership about it and its services. In our limited dealings with UKEF we have always found them keen to engage with our member companies and quick to respond to enquiries, but we have no information on whether or not these have led to actual support. We believe that there is now a marine sector lead at UKEF, but we have had limited contact with them to date (and we do not know if he is dedicated to marine or covering multiple sectors).

 

8.2              It is our understanding and belief that while UKEF has become much more visible to small companies, their products continue to be aimed at much larger companies and are simply too difficult to access, especially for smaller businesses operating in markets that do not have UK campaign market status.

 


Annex 1

 

This chart shows total Government awarded funds to the UK leisure marine, superyacht and small commercial marine industry, alongside that which British Marine invests from its own budget.

 

 

 

 

 

March 2017

 

[1]BMF UK Leisure, Superyacht and Small Commercial Marine Industry Key Performance Indicators 2015/16

[2]BMF Economic Benefits of the UK Marine Industry 2012/13