Interview: John Cridland, DG of the CBI
Director-general of the CBI John Cridland says that the government is not doing enough for Britain's manufacturing base.
Whenever you switch on Radio 4 in the morning and hear the newscaster delivering a statement on business confidence in the UK, you can be sure that the data presented is more often than not based on a survey conducted by the Confederation of British Industry. The CBI represents almost a quarter of a million businesses in Britain, from FTSE 100 behemoths to the minnows of the SME sector. From automotive to aerospace, e-business to engineering, its stated aim is to provide a voice for employers at national and international level.
The CBI's director-general is John Cridland who, despite his vast wealth of experience in policy advising and economic analysis across all industrial sectors, is one of those old-school commentators. There are times when he'd rather go and meet the people he represents than sit behind a desk, so today he's on walkabout at Brompton Bicycle, a well-documented British manufacturing success story located near London's Hammersmith.
We are at Brompton Bicycle because Cridland is "relentless in pursuing the forgotten army of world-class British manufacturing companies". He says that for too long the government has focused on startups – "which are important, you need a seedbed" – and the largest companies in the country. Cridland thinks this is because "these are the people who are highly visible and also very important to the economy".
But government policies have failed to focus on a whole category of companies such as Brompton. "You know the sort of company I mean. Manufacturers with maybe a ballpark turnover of around £10m, with the scale of a smaller business, but the opportunity of a larger business. These are the companies that are trading in 40 countries around the world, who need to take the opportunity to present their product on a global stage." They are important, not just because they are a forgotten voice in British manufacturing, but because "these are the companies that have the ability to pay more taxes and create jobs. A £10m business with a growth plan can become a £100m business and move from employing a hundred to a thousand people".
Cridland feels that it his part of his job to show them off, "because they are too busy getting on with their business to do their own PR. I think it's hugely important that the commentators in the City of London, the media and the politicians recognise that this is the strength of the British economy".
Before Cridland and I can discuss this disenfranchised community, Brompton's managing director Will Butler-Adams takes us on a good old-fashioned factory tour. He shows us everything from the frame-brazing process to finished goods. What message did Butler-Adams have for the director-general of the CBI? "We talked about how you add value to a business and how you grow a business. What's very apparent from this manufacturing facility is the importance of process innovation – not just in Brompton's, but any company."
Cridland goes on to explain that while there are bits of kit (such as presses) visible on the production line that were made in the 1930s, "we were looking at a £160,000 piece of kit that is unique to here, that nobody in China would be able to copy". It's a design-intensive process too as three-quarters of the components on a Brompton bike are bespoke: "You can't buy those parts off the shelf, and so if you want them, you're going to need somewhere in the order of 500 machine tools that are unique to your process."
But Brompton, as Cridland says, is not a big company with money to install cutting-edge technology every day of the week, and has to fund investment out of its own earnings. "It has to find its own way to grow," says Cridland, "and this is done by process innovation. Sometimes government talks about advanced manufacturing as if that's only ever going to happen on a spanking new business estate and that you'd never expect to find it in London at the end of the M4 next to a railway line. But advanced manufacturing is not unique to a high-tech sector. It's everywhere in business."
If Brompton is representative of a deeper stratum of manufacturing facility in the British economy, how important are the £10m companies? Cridland says they are "mission-critical". He describes a recent site visit to a company that "used to be a Brompton, but has made the leap". Daisy Communications in Lancashire started a decade ago from nothing, but now provides integrated telecoms to small businesses and has a turnover of £250m.
"This was done in ten years. From the bedsit to 1,500 employees. So every time a small business employs an extra person that's a success for Britain. Every time a multinational invests in the UK that's a success too. But we hear about those. What we don't hear about are the companies like Brompton. With a few thousand companies like this we could rule the world."
A year in business
Although Cridland has been with the CBI for 30 years, he is new to the position of director-general, which he took on a year ago. Before that he spent a decade preparing for the role as deputy director-general, and before that he was director of environmental affairs and a policy adviser. Among his many professional industry affiliations, he is a board member of Business in the Community and a UK Commissioner for Employment and Skills, as well as member of the Council of Cranfield University. A former vice-chair of the National Learning and Skills Council, he has spent 10 years on the Low Pay Commission and the ACAS Council. But it wasn't until 2011 that he took the reins at the CBI. I ask him what, if anything, has changed in his first 12 months.
"A year ago there was a real feeling that 2011 was going to be a good year for Britain, that the plane was really going to take off. We thought this because international markets were good and the new middle classes of China, Asia generally, and Latin America all wanted British-branded products. They want to drive a Jaguar car, wear Burberry and were into classic, iconic British brands."
But it was a year of disappointment, not because individual companies didn't achieve all that they wanted to achieve, but "because the politicians messed up". In July 2011, when the Eurozone debt crisis reached catastrophic levels, "everything seemed to go pear-shaped". For Cridland, the Eurozone became such a risk that companies in Britain battened down the hatches, stopped investing, stopped recruiting and stopped spending, based on the understandable fear the politicians would not be able to keep the world economy moving. "So I had a vision for growth. But a year on we've not made the progress we should have, because of the bit that we don't control: political risk."
Cridland claims he's not downhearted or pessimistic. "In fact, we are just beginning to see signs that the black cloud is moving over. If you look at the most recent hot intelligence about what the economy's doing – for exporters, manufacturers and the professional services for that value chain – business confidence is beginning to return. Maybe the European politicians have done enough. But China is still going strong and the American economy is picking up."
Cridland cheerfully admits that it does feel like Groundhog Day: "March 2012 feels a lot like March 2011. But the difference is that if 2011 started strongly and then faded, 2012 started strongly and is going to gain." He likes to keep his analogies simple with his feet on the ground. "If I pop into my local pub, what my neighbours ask me is how their kids are going to get a job, who their grandchildren are going to be working for, how will they buy a house or get a pension. What they are asking is whether Britain has a chance of maintaining its living standards. This is a really good set of questions and I think it's the CBI's job to answer them."
Three new pillars of growth
Cridland says that it may just be a matter of common sense, but "if you have a vision for growing the economy for the benefit of the British citizen, you have to decide what it is you want to grow. We had a model that turned out to be a false paradise and went pop in 2007-08. It was driven government spending and the consumer driving growth – nothing wrong with that, except that the consumer was funding it with debt."
Any new model for growth must be based on business investment. Cridland explains that "we need a financial system that gives businesses the loan capital that enables investment. This leads to the only other engine of growth, which is net trade." He remembers: "when we had the 'Nine O'Clock News' the lead item was always the balance of payments. Now on the 'Ten O'Clock News' it's never mentioned. But ever since 1979, every year we've been running a trade deficit".
It leads to the sort of questions that Cridland gets asked in the pub, by regulars eager to know how the nation can protect its standard of living as well as its future prosperity. "I believe business investment and net trade will lead to a renaissance in British manufacturing. These are huge drivers for growth and there are really good reasons to be optimistic.
"We've identified one: branded iconic British products that the emerging middle classes of the world are desperate to spend their money on. The second is the unlocked potential of businesses like Brompton to achieve scale growth if government policy focuses on nurturing these companies.
"My third reason is that I think the manufacturing renaissance will happen in the low-carbon arena. Not gooey-eyed, green policies, but practical industrial policy that helps British manufacturing become energy-efficient, resource efficient and green in terms of what it offers to the customer. If you go up to the manufacturing heartlands of the past such as the Tyne River you will find small-scale British manufacturing flourishing around marine technology and renewable energy. Those are the pillars that contribute to the opportunity for a manufacturing renaissance."
The question is, of course, will this happen? "It will if we are determined to be youthful, energetic and innovative. But it needs government to pull the right levers and we need these levers to be pulled in the right order. That's all about industrial policy. For too long, because of those bad memories of nationalisation in the 1970s and picking winners that went bust, industrial policy has been a dirty word. But we can deliver that policy for growth based on engineering."
There's also another opinion-former, and this is the commentator who thinks that the big inhibitor of the renaissance is that political cycles are too short to have any real effect on industrial policy. Today's government sits for four years, spending half that time campaigning for re-election. You can't realistically ask a modern government to be concerned with plans requiring decades to come to fruition, while their short-term battle for political survival is the furthest their horizon extends. Does Cridland feel – as a man who's served one employer for three decades – that there's not enough long-term thinking in the government's strategy?
"There's not enough long-term thinking in Britain. Companies like Brompton will grow if there is patient capital. Do we as a nation think in terms of long-term investment or are we a fast-buck mentality?"
education: the key to economic growth
According to John Cridland, director-general of the Confederation of British Industry, if he were to assemble a round table debate with a handful of his CEO members, they would inevitably fall into discussion about education.
"If you look at the biggest single factor that will determine our competitiveness to deliver iconic branded goods and services to world markets, it's the talent of the people. But, if you look at the biggest single weakness on any international league table of the British economy, it's that our education system fails so many of our young people."
One of the reasons for this is that the government "chops and changes" on what it thinks schools should be delivering in terms of young adults preparing to enter the industrial world. "It's ridiculous. You don't get bike manufacturers completely overhauling their design every year, saying next year we'll have square wheels. But this is what the government is doing with our education system."
The bike's design can change with developments and innovations, but the core concept remains constant, says Cridland, before adding: "If you're going to have a good education system, make up your mind what works. It's not rocket science. You need world-class teachers, inspirational head teachers and a curriculum that's relevant to the 21st century. Relevant to engineering skills and the ability to use technology. And until we have a political system that's prepared to make up its mind and stick with it we won't achieve our potential."
The latent talent is available, says Cridland – it's just that we're not able to exploit it properly. "There's huge talent in Britain. Why are so many of the world's patents coming from British people? Why are so many of the world's businesses run by British people? And the STEM issue's a classic. We've all been banging on about this. Twenty years of pointing in the wrong direction. Twenty years of allowing the number of young people who are doing maths, physics and chemistry – and then able to do engineering – to fall year on year. There have been some successes in this area recently, but there is still a STEM crisis."
Cridland can't contain his frustration with "a political system that fails to deliver sustainable improvements in our education system. And so we need a long-term strategy for providing business with the talent to enable us to dominate the world economy".
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