Laura Sandys is the MP for Thanet South.
25 years ago I was in Lima, Peru, when a salesman turned up in town from BT to try to sell the industry minister a fixed line telephone system: “It will only cost $2 billion and we will have telegraph poles in every part of the country within 10 years”. The Minister laughed him out of the room: “Why would we even consider fixed line telephony when we can have mobile phones at a tenth of the cost?”
This experience has guided our thinking behind the 2020 Efficiency and Productivity Commission report “Sweating our Assets”, produced by me, David Ruffley MP, Patience Wheatcroft, Nicola Blackwood MP and Steve Barclay MP working together. The last thing that we want to do is replicate an old-fashioned economy when we are competing with new economies who are much smarter and intelligent when it comes to their ambition to “own their future”.
So what does modernity look like? Well, it is not wasteful – these newer economies have always been smart with resources, as they were never that plentiful. Also they are not as obsessed with labour productivity as they are about total productivity.
We, on the other hand, are captured by strange and rather old fashioned metrics: GDP is so last century, so British Leyland! While the Chancellor and Treasury rightly talk about competitiveness I am sure they realise that that is a different concept to just measuring GDP.
Top-line sales were never the core ambition of the companies that I founded – I was interested in margin and profit. Competitiveness, particularly in a developed economy, should all be about margin not about sales for the sake of sales. GDP rises if energy prices rise, and no one can say that improves competitiveness!
So what might be the new paths to competitiveness? Firstly, it would be great if government focused on profitability rather than sales. We were pretty surprised – if not flabbergasted – that BIS does not mention the word profit or profitability in its corporate plan. We could find few references to it in any part of government. Sales, sales and sales through growth, but little or no focus on profit or helping support margin. So how are we going to achieve the holly grail of being more competitive?
We were also intrigued that there is so much more interest in labour productivity than resource productivity. Not that it isn’t important to be labour productive, but we are missing a big trick if we only focus on employment, rather than the much larger input in manufacturing: imported resources. Germany and particular Japan are über-resource efficient. They know that importing minerals, materials, rare earth metals et al is risky and expensive. Analysts say that manufacturers in the UK face serious insecurity because of not being resource smart.
So we need to be smarter – and the really smart business to be in is a sector that we propose called “Remade In Britain”. Remanufacturing and reuse of resources is being adopted by the biggest and best in the UK – Rolls Royce, Caterpillar, Kingfisher – not marginal companies but the brightest. We need to make remanufacture mainstream and we ask BIS to start a new sector support group to focus on this. It could be a really winner for British industry – both its top line (GDP) and its profitability. Where there is muck there is most certainly brass – it just that muck has become so much more exclusive.
An economy that is committed to “sweating its assets” and delivering high levels of resource efficiency will be significantly more competitive than its more wasteful peers. So as we come out of this very difficult downturn it is vital we don’t repeat the old models. It would be tragic if we recreate a 19th century model when we are slimming to compete with economies shaped by the 21st century.
The 2020 Group’s report was published yesterday, and can be read online here.