Almost back to pre-crash levels

Almost back to pre-crash levels

David Coppock heads UKTI in the North East. He talks to Peter Jackson about the region’s international trade performance

David Coppock is a reasonably happy man. He is regional director, North East region, of the UKTI and last month’s latest quarterly report on exports showed continued progress. The region’s exports are now just short of the £12bn per annum figure on an annualised basis. If not a record, that’s getting us back to where we were before Lehman Bros.

Coppock says: “We’ve clawed all that space back and that’s a healthy position for the region to be in.’’

He points out that we are still the only region with a positive balance of trade. Not that he believes, for one minute, that the North East can afford to sit back and relax on the overseas trade front. UKTI in the region is supporting the Government’s target of reaching £1trn of exports nationally by 2020, double its current level. To that end, the organisation is working on two initiatives.

Coppock explains: “The first one being that UKTI are focusing on medium sized business, what we call MSBs. We have signed up 150 MSBs from the North East region to the UKTI programme who are going to work with us and commit to developing the international agenda over the coming years.’’

MSBs are defined as being businesses with between £320m and £500m in annual turnover. Coppock adds: “But we’re not precious about it, if someone with £15m turnover said they needed help in China, we’d be delighted to help.”  

Why is the emphasis being placed on MSBs?

“The emphasis is there because there are about 10,000 of them across the UK. They are an engine room for growth and there is a view that if they were all to adopt a strong international position it would add a tremendous amount towards the £1trn export target. I’ve even heard it said that if all of those companies were to export – if even 2.5% of their activity was exported – then the UK’s balance of payment problem would be solved.’’

So what will UKTI do for them it wouldn’t be doing for other exporters?

“It’s a much more bespoke and tailored service – it’s not really an off the shelf process. It’s much more about talking to the business, understanding their strategy, understanding the markets that they may want to penetrate and understanding the business model they want to use. They may want to work through an agent, they may want to work through a subsidiary, they may want to sell direct to consumer or they may want to sell through some sort of intermediary. It’s about understanding the business model, then working with the company to understand that process. It’s very much a bespoke tailored programme, rather than just saying, well we’ll put you on a passport to export programme and in a years’ time you’ll be accredited.’’

The second initiative is around the e-exporting agenda, getting specialist advisers in UKTI who can support companies which want to trade in the international retail arena through markets such as eBay and Alibaba.

UKTI is also working closely with the British Chambers of Commerce and the regional chambers of commerce on developing the overseas network of chambers to provide a support level which in the past would have been provided by the Foreign Office or UKTI.

“Now we’re trying to get chambers’ people to deliver the same service,’’ says Coppock.

“There’s quite a big push and our target is to get 40 overseas markets to that level within the next four years or so. We’re going to accredit each market and we’re going to accredit each chamber and we’re going to be connecting those overseas British chambers to UK chambers here so that we’re getting a private sector solution as well as the UKTI solution.’’

Dominic Jermey is the new chief executive of UKTI nationally, having previously served as ambassador to the United Arab Emirates. “He has got lots of new ideas about how UKTI should be presenting itself and working with companies,’’ says Coppock. “He’s keen to spread UKTI’s network of partners even further and in partnership with lots of different private sector organisations and service providers.’’

He says that one of the most active markets for the North East currently is the Netherlands at about £1.6bn, although that is rather overstated because much of that will be transhipped from Rotterdam to other destinations. The US remains a strong market for the region, as do Belgium, Canada, and Finland. Hungary, it seems, also showed up strongly in the last quarter, but nobody is yet entirely clear why. As usual the big sectors for the region were – as well as automotive and road vehicles – chemicals, machinery, mechanical machinery, pharmaceuticals and iron and steel.

“In the Eurozone we have seen a slight bounce back in activity in the last quarter and therefore I suspect the Eurozone as a market has bottomed out and we will see strong growth in a key market for us going forward. The European Commission themselves have said they are prepared to intervene to stimulate that market so I think Europe remains very important to us going forward and I can see growth there now,’’ says Coppock.

“In terms of the rest of the world, activity remains strong, Brazil will remain strong, India and China are still significant to us and we’re seeing a lot of Chinese interest in the region. We’ve got three senior Chinese delegations coming into the North East over the next three months, including the Chinese embassy in the UK, who are also visiting the region. So we’re getting significant interest.

“So, no real change in the markets we’re doing business with and no real change in our strong sectors,’’ he adds. “I suppose what that means is that we still need further work,  we’d like to see more of our service sector doing more internationally, and again that’s something we’re looking to work on with the new programme coming through.’’

Unsurprisingly the automotive sector is performing well both in terms of vehicle manufacture and the attendant supply chain.

“Linked to that, we’re looking at an initiative called re-shore UK, which is looking at companies who have outsourced activity previously, to get them to bring that back into the UK and back into the region,’’ says Coppock. “We’ve got some support work going on with that as well at the moment and we’re trying to encourage companies to relocate back into the UK.’’

What’s driving that?

“It’s all about logistics costs, it’s all about de-risking the business and it’s all about a shorter supply chain and taking out the costs of transport for companies that re-shore. That’s very much from a manufacturing side, from a services side it’s about providing a total quality solution, in terms of being able to manage the quality of the service in a much more hands-on way.’’

But does that mean businesses made a mistake in taking operations offshore in the first place?

“I think circumstances are changing,’’ says Coppock. “I think that companies are re-evaluating just how much supply chain is offshore, and of course transport costs can be prohibitive.’’

And are not offshore labour costs becoming more prohibitive with the days of cheap overseas labour being over?

“That’s also part of it, it’s a complex picture, it’s partly about cost of labour, it’s partly about cost of transport, it’s partly about cost of energy and fuel, it’s partly about corporate social responsibility,’’ he says. “You know, there’s a huge raft of reasons behind those decisions.’’

Our exporters are not usually slow to complain about the strength of the pound and although it has been appreciating, they have remained strangely quiet. Are they just getting used to exchange rate fluctuations?

“That’s a very good question. I think we have seen the pound strengthen by about 10% or so against the euro and the dollar. It has kind of weakened recently, as we went through the Scottish debate but you’re right it has generally strengthened. You’re also right in that I don’t think companies have kicked back on that so much. I think what we’re seeing is companies not passing it on so much and absorbing the costs of the strong pound. I’m speculating here but it probably can’t go on much further. But companies, certainly at the moment, are still forecasting growth, they’re forecasting an uptake in the order books and export growth.

“I met with the Bank of England last week and they confirmed that currency did not seem to be a prohibiter at the moment.’’

Apart from export, he confirms that inward investment activity remains strong.

“The UK is a very attractive proposition, given the trend of corporation tax, and the R&D tax credits, and the intellectual property capacity here. The North East similarly remains an attractive area. I recently reviewed the Hitachi project, and was delighted to see the buildings in place and the test track going in. It all looked very exciting down at Newton Aycliffe and I hope that we can push on with further investment there.

“Working in partnership with the North East LEP, and the Tees Valley LEP, we’ve got some very good projects happening and there are other projects in the pipeline so, I think as a marketing proposition the North East remains a very strong asset.’’

It will also be attracting more attention with one forthcoming attraction he is keen to
flag up.

“The Rugby World Cup is coming in 2015 and there will be a huge number of international competitors and international businesses coming to the UK. Newcastle will be hosting South Africa amongst others and I would make an early call to businesses to think about how they may be able to leverage the high profile the region will get through the Rugby World Cup.’’

Coppock adds: “You know, the region has a lot to offer in terms of its assets, in terms of its business interests. I think we’ve got to get out there and connect.’’