6 November 2017

News

CBI President opens #CBI2017 Annual Conference

CBI President Paul Drechsler delivered the opening speech of the CBI’s Annual Conference.

CBI President opens #CBI2017 Annual Conference

Five key takeaways from the CBI President’s speech:

  1. 'Until everybody feels the benefits of capitalism in their pockets and in their homes, we will have a problem' – Paul Drechsler highlighted that capitalism has driven ‘the biggest, and most sustainable increase in health and wealth the world has ever seen’, and that ‘UK household wealth stands at over £11 trillion’. Yet, he recognised that ‘15% of adults either have no share of it, or are in debt’, and the country must look to unite behind inclusive capitalism that delivers more equal growth.
  2. 'We need to eat, drink and sleep productivity' – Data from the ONS shows Britain’s output per hour worked is now around 22% lower than the US and around 27% lower than Germany. The CBI President stated that with those figures, ‘it no longer seems unfortunate that Germany has grown its exports twice as fast as us over the past five years, it seems inevitable.’ To close the gap, he said ‘we need to invest in infrastructure, in education and in management.’
  3. 'Business and education must overlap as a matter of course, not as an optional extra' – Paul Drechsler praised the work of Teesside University in getting local businesses, local government and students to work together to drive a new range of STEM Apprenticeships in areas critical to the local economy. ‘We know what happens when we get this right’, he stated. ‘A more inclusive economy, one that grows consistently, and one that is not only resilient to change but that powers it in the first place’.
  4. 'We need a single, clear strategy' on Brexit – The CBI President stressed ‘we are 100% committed to making a success’ of Brexit, but the UK needs ‘a plan for what we want, and what kind of relationship we seek with the EU’. At the moment, however, he said he is ‘reminded of a prime-time soap opera with a different episode each week.’
  5. 'The Prime Minister was spot on when she described the free market as the greatest agent of collective human progress ever created.' – Paul Drechsler closed his speech by reaffirming that when it comes to the free market, ‘there is no better system for creating hope and opportunity’. However, it won’t fall on our laps, and he urged for united politics, united business and a united Britain in order to get the Brexit we need, the economy we deserve and prosperity for all.

 

Speech in full

Ladies and Gentlemen.

I’d like to start by mentioning the CBI’s former President, Dame Helen Alexander, who died earlier this year.

As a fantastic chief exec of the Economist, a tremendous advocate for business and an absolutely unique woman, she was always in her element at Annual Conference. And she was the one against whom all other Presidents have been judged.

We all miss her. And we send our thoughts to her family.

Fifteen years ago, Teach First was launched just across the river in Canary Wharf.

Since then, London has gone from the worst place in the UK for children from challenging backgrounds to be educated, to the best. Teach First has worked in every region of England, trained over 10,000 teachers and changed the lives of over one million children.

How have they been so successful?

By taking other people with them.

Graduates. Universities. The schools themselves. And of course business.

UK firms are crying out for skills and employability. So Teach First got them to contribute the expertise, the advice and much of the cash they need to do it.

Ladies and gentlemen, British industry has never been more keen to prove its worth to society than it is today.

I know it’s not a numbers game, but that doesn’t mean the numbers aren’t impressive.

Three quarters of all UK tax revenue – £500 billion – is supported by private sector activities, through the taxes they pay, the jobs they create and the products they make.

The private sector employs almost 27 million people, over 83% of all employment.

Business has injected billions into UK infrastructure: the energy sector invested £11.9bn last year, airport operators alone will invest over £8 billion by 2022, and for rail operators, it’s at least £11.6 billion by 2027.

And we’re fantastic at turning our heritage of diplomacy and innovation into international trade, such as our over-$1 trillion trading and investment relationship with the USA, split 50:50 each way, our $2 trillion trading and investment relationship with the EU, our status as the largest G20 investor and job creator in India or even our approach to China, where we’ve been the first to shift our investments into high growth regions and sectors.

The entire nation can feel proud of this.

We can feel ownership. We can feel achievement. We can feel fulfilment. We can feel all of these. But we cannot feel complacent.

Because in 40 years of business, I have never known a commercial environment so rich in opportunity yet so mired in threat.

On the one hand, the fourth industrial revolution: a ‘big bang’ of automation and AI that will create massive new trading opportunities.

But on the other, a system of capitalism that seems to have forgotten its purpose and a Brexit that threatens to overshadow national decision-making at the very moment where decisiveness is more important than ever.

Those two issues, and how to overcome them, are what I want to talk about today. Beginning with capitalism.

Capitalism has driven the biggest and most sustainable increase in health and wealth the world has ever seen. Since 2000, global life expectancy has risen by five years, 300,000 people daily gain access to electricity and a quarter of a million people every day escape poverty.

These are fantastic stats. We should be proud of them. But we should also listen when people’s own experiences are less positive.

UK household wealth stands at over £11 trillion. Yet 15% of adults either have no share of it, or are in debt.

Until everybody feels the benefits of capitalism in their pockets and in their homes, we will have a problem.

No PR in the world can fix this. It has to be action – collective action, for shared challenges.

But here’s the good news: history shows us that we can turn things around. Just as Carnegie and Ford did a century ago. Just as British industrialists, like the Cadburys and the Lever brothers, did with their model villages. Just as the British people embraced the competitive market in the 1980s.

We can do the same. And once again unite the country behind inclusive capitalism, more equal growth and a sustainable, resilient economy.

Here’s what we need to do.

First, we need to eat, drink and sleep productivity. Data from the ONS shows that Britain’s output per hour worked is now around 22% lower than the US and around 27% lower than Germany.

With those figures, it no longer seems unfortunate that that Germany has grown its exports twice as fast as us over the past five years – it seems inevitable.

As a CBI report identified last year, to close the gap we need to invest in infrastructure, in education and in management.

This will take time. But it is possible.

For example, one advantage Germany has over us is the strength of its apprenticeship schemes. Around 60% of young Germans participate in vocational training programmes.

We can’t conjure a scheme like that out of thin air, but we can do more to catch up.

The apprenticeship levy can help us to do that. But only if it’s made more flexible and responsive.

And at the same time, we have to invest in all schools by protecting ‘per pupil’ funding, replenishing capital budgets and making sure that young people have the skills, experience and guidance they need to succeed.

But we can also respond ahead of time to the fact that many jobs in the future will be automated. Over 35%, according to some studies.

This has huge workplace implications. But it also has huge implications for inequality.

The low-skilled jobs that disappear will be replaced by high-skilled jobs – responsible for oversight and management.

This is more than a step change. It’s a completely new era. One that will require a massive programme of education and training. So business, government and unions must work together, and make sure that our economy and our employees are able to adapt.

Elsewhere, we need to unlock greater regional growth.

The new metro-mayors are a great start. Such as Andy Street in the West Midlands. Andy Burnham in Manchester. And Ben Houchen in the Tees Valley.

Now, I remember arriving in Teesside aged 21. I ended up staying for a decade. And when people say to me, ‘Paul, how come you’re always so enthusiastic?’ I reply, ‘Well, you try supporting Middlesbrough football club for ten years – it does funny things to you!’

Teesside is a very different place now. But they’re still pioneering great ways to remain competitive. Teesside University has created a new range of STEM Apprenticeships in areas critical to the local economy: engineering, digital tech, and logistics. They’ve attracted £250,000 funding from the Higher Education regulator by getting local businesses, local government and students to thrash out a plan of action together.

Similar schemes exist across the country. But not nearly enough. Business and education must overlap as a matter of course, not as an optional extra.

We know what happens when we get this right: a more inclusive economy. One that grows consistently. And one that is not only resilient to change, but that powers it in the first place.

So sustainable growth will only happen if business plays its part.

But business has another responsibility. A central clause in its social covenant.

We have a responsibility to speak up and suggest solutions when we see obstacles in the way of UK prosperity.

Currently we see one major challenge.

Not Brexit itself: we’re 100% committed to making a success of it.  But the approach to Brexit.

We need a single, clear strategy. A plan for what we want, and what kind of relationship we seek with the EU.

But at the moment I’m reminded of a prime-time soap opera with a different episode each week.

First Lancaster House, then article 50, then the European Council, two dinners with Juncker, and no doubt many exciting instalments to follow.

Each one becomes the Big Story until the next one rolls around. And the effect is that genuine steps forward, such as the Prime Minister’s Florence speech, don’t get the recognition they deserve.

That speech represented real progress. It put the needs of the economy first. It set a co-operative tone. And it unlocked progress in Brussels.

We need to learn from that, and recognise that this is the moment to unite behind the principles of the Florence speech. To make the Florence speech the Florence treaty.

But time is of the essence. We must leave behind the episodic approach and take this opportunity to move forward as one.

Business. Politicians. Here. Abroad. Everyone in this room.

According to a new CBI survey, 87% of companies have discussed Brexit at board level. If anything, that’s too low. So the other 13% need to roll up their sleeves and get a move on.

As you’d expect, our largest and best-resourced companies – financial services, tech, logistics – lead the way with contingency planning.

But for SMEs, powerhouses of the UK economy, things are taking longer. They tell us they’re struggling to plan, to predict, to calculate.

To those companies I say this: we will support you.

But to Whitehall and Brussels, the Bundestag and the Assemblée Nationale, I say this: now more than ever, business is looking for political leaders across Europe to step up.

Brexit is only 508 days away. But for many businesses, their alarms clocks are set even earlier than that. They’re set to the moment they will actually enact their contingency plans.

For 10% of business, the alarm has already rung and they’ve begun moving staff or slowing recruitment.

Without a transitional deal when EU leaders gather in Brussels for the March summit, a total of 60% of businesses will have done the same.

The clock is ticking. So government and the EU need to get a move on. Making progress, remaining flexible and, first of all, sorting out transitional arrangements.

These arrangements won’t solve everything. But 75% of the country’s largest firms say it would halt their preparations for no deal. And then, after banking that short-term stability, we can turn to the biggest prize of all: the long-term relationship between the UK and the EU, based on a trade deal for goods and services that’s right for the people of Britain.

But this will never happen while the EU27 is more united than the UK1. We will never secure that deal if the successors to Churchill and Attlee don’t own the moment and come together in the national interest.

Every business here today knows this. We all have our own cabinets, of sorts: they’re our boards. And every one of them has a diversity of opinions.

Even the successful ones. Especially the successful ones.

But the difference is this: that success comes from developing those different views into a shared vision.

The same is true wherever you look. Teamwork pays dividends.

33 of the last 40 Nobel prizewinners in science and economics have gone to teams. The most rapidly-improving schools are praised for the cohesion of their leadership teams. And firms whose boards share a common vision are almost twice as likely to have above-average financial performance than those that don’t.

I know that Brexit is a huge issue. But parliament has a proud history of meeting unprecedented challenge with unprecedented co-operation.

In the 30s, after the Great Depression. During World War Two, under the great unifier Winston Churchill.

We need that spirit again and we need it now.

Just think what we could achieve if we do it right: a constructive and collaborative approach to Brexit would reassure millions of EU nationals in the UK and tell them that yes, we do want you to carry on contributing. It would make free trade deals quicker and easier to accomplish. It would project an image of a strong, self-confident nation across the world.

But most of all it would be a principled way to get the deal that we want and that Europe wants.

A good deal. A deal that allows businesses to grow, to import and to export easily. A deal that keep our R&D structures intact, for new work into robotics and AI. A deal that protects jobs, people’s ability to travel and their freedom to choose the life they want.

In other words, a good deal would secure our prosperity for generations.

The Prime Minister was spot on when she described the free market as “the greatest agent of collective human progress ever created”. There is no better system for creating hope and opportunity. But it won’t fall in our laps.

We need politics united, business united and Britain united. That’s the only way to get the Brexit we need, the economy that we deserve and prosperity for all.  

Thank you and enjoy the rest of the conference.