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q & a

Nick Baird, Chief Executive Officer

Nick Baird is the president and CEO of  UK Trade and Investment. He recently sat down for an interview with Report on Business reporter Iain Marlow.

Why are you in Canada?

The British government is on a big drive around exports and attracting foreign investment to the U.K. at the moment. This is largely because we believe the growth model we had before the global crisis was not sustainable. It was basically debt-fueled domestic consumption. Too much of our growth came from people's credit cards and borrowing by government for big public projects.

And as a country, we've run a trade deficit now for some 40 years, so there was a strong belief that's not a healthy growth model. And as we grow out of the crisis, we've got to re-balance. We've set some pretty hard and challenging targets: to more than double our exports to more than 1-trillion pounds by 2020, get another 100,000 British companies exporting, double our stock of inward investment to 1.5-trillion, as well. And then, obviously, we have a big focus on emerging economies – on Asia, Latin America, Africa – as part of that, because of their growth trajectories.

But Canada holds a very interesting and particular place for us, in this, because Canada is that rare thing, which is a developed economy that has a very strong growth path between now and 2020. And where you can combine developed markets with growth, that, obviously, is even better, (because) you don't have all the scary bits – where our companies are trading into China and India. You have both growth and an open, well regulated (market), where English is spoken, (there are) long historical ties.

In terms of what we've been doing specifically… on the investment side, we saw some of the big pension funds, and the Canadian pension funds are very big investors in British infrastructure, in particular, and we want that to continue and grow. We have a very big infrastructure program at the moment in the U.K. We have 100-billion pounds of offshore wind to invest in. We've got a nuclear program. And so on.

I recently spoke to the head of the Asia Pacific Foundation of Canada, who contrasted Britain's success in doing business with countries in the ASEAN (Association of Southeast Asian Nations) region to Canada's relative lack of progress there. Can I get your thoughts on this?

On the free trade agreement side of things, we obviously do all this through the European Union, because that's how the system works, but it is a very big drive for the European Union, generally, and us (the U.K.) in particular. (One of the) most successful recent ones has been with South Korea. To give you an example, our trade with Korea went up 80 per cent in the year following the agreement. It just shows you how much these things make a difference. We have a good new agreement with Singapore.

As a union, we're pursuing an agreement with India at the moment, although that's quite challenging, particularly because the Indian government is just not really taking decisions at the moment… We're pursuing an agreement with Japan, as well, and then in Latin America we're pursuing a Mercosur (the Mercado Comun del Sur, or Southern Common Market, agreement). Those are very important to us, but beyond free trade agreements, we do have a big focus on that part of the world – both ASEAN countries and beyond, obviously, China, India and so on…

Trade and export promoters in Canada have often found it difficult to encourage businesses, particularly small or medium sized businesses, to export globally – rather than simply to the U.S. Does the U.K. face a similar situation?

We have exactly the same issue. Our SMEs are much more comfortable operating in a European environment or U.S. environment. Although there are some very good, notable exceptions – who have done very well – broadly speaking they're quite nervous about those big markets.

The sort of things we do, are to try and address those issues that make them uncomfortable about those markets. So, it's lack of knowledge about the opportunities, about how you do business in those markets, about who you should partner with and so on. We have particular products as an organization that address those issues. We do market research for them. We do work on the regulatory environments, so they understand that. We identify for them partners who we know will work well for them. Then, on the risk side of things, we look at particular ways in which we can reduce the risk for them. For example, we focus quite heavily on trying to get our small companies into the supply chains of large Western companies operating in those places, or large trusted Chinese, Indian or other companies.

We advise, a lot, to springboard out of the more developed and regulated markets in that part of the world, so a lot of our companies have found it's been a sensible thing to establish first in Singapore or Hong Kong or, indeed, Taiwan – and then springboard off those easier markets, once they've built their reputation.

In an era in which Canadian spies have allegedly been caught out targeting Brazil's mining ministry, and when state-owned companies in various parts of the world hold a lot of sway, what role is there for a government to promote trade and protect national industries? What goes too far?

Where we're engaging in a large government procured, or state-owned, enterprise-procured project, we often will front up with a consortium of British companies. Obviously we do so in a completely above board and transparent way, and we have to do that. And I'd say the U.K.'s commercial reputation, and the commercial reputation of our companies, depends massively on doing that.

That is why, although many people were nervous about it, this very pro-business government introduced a Bribery Act in the U.K.. Companies may sometimes feel "Oh, is this making it more difficult to compete with international companies who don't operate under the same (rules)." But, actually, the downside risk of doing something stupid and getting it wrong is so vast – plus, there's a real benefit to companies engaging with decent partners, because they know if the British company is going to be controlled by the Bribery Act, then they seriously cannot misbehave in the way that other companies can.

The other thing I'd say, is that we help advise companies on how not to be spied on. How to protect your intellectual property, what sort of technologies you can use and support – many of which are produced in the U.K. Many big international companies, IBM for one, do their cyber defence work in the U.K. Even Huawei, the big telecoms company, does its cyber security work in the U.K.

I'd be remiss if I didn't ask about your BlackBerry on the table in front of us. Is it still a popular tool within the British government?

Well, we all use BlackBerrys. So the answer is yes. BlackBerrys are quite popular in the U.K.. And they're popular with kids because of their free messaging system, BBM. My kids like it.

Of course, this is massively competitive market, and people love their iPhones. But BlackBerry does pretty well in the U.K.. What is the latest on that?

They're up for sale.

(At this point, the British Consul General in Toronto, Jonathan Dart, jumps in: "They're a major investor in the U.K. At one stage, they had about 1,300 employees there.")

When you met with some of Canada's pension funds, did you discuss anything relating to the ongoing debate about financial regulation in the U.K. and the City of London's role as a financial capital within Europe?

I think broadly speaking, they regard the U.K. as a very good market and they've traditionally invested quite heavily in the U.K.. They're heavily interested in water, transport in the U.K., energy more broadly, and so on. And broadly speaking, they regard it as a very well regulated, a very certain environment – where they don't have to put in their investment and then find it all looks very different going forward. That is what they stressed to us for the future, as well. They really need that kind of certainty. And if we preserve that, which we have every certainty of doing, they see us as a really good prospect going forward.

One of the things we (also) talked about is sometimes, in the U.K. as compared to emerging markets, it takes a while for infrastructure to become 'shovel-ready.' But one of the reasons that is the case is because our politicians are really determined to make sure you get cross-party agreement on a particular program, so it doesn't change when the government changes. That's one of the reasons Heathrow is taking a while and the London aviation strategy is taking a while. Because it's no good if this government decides to build another runway at Heathrow, and then when the next government gets in they say, "That's not going to happen." And that's why our big high speed rail program is taking, perhaps, longer than some may like, to get completely shovel ready.

Who did you meet with?

Ontario Teachers' [Pension Plan].

There was some news about Teachers recommending gender equity motions at the Ontario Security Commission. They cited the U.K.'s moves as evidence that you need more penalties in order to enforce the rules. Did they bring that up?

They didn't bring that up actually. But it's a very interesting area and we do have quite a big drive on it at the moment. We got Mervyn Davies, who's actually a former trade minister and head of Standard Chartered, (to do) a report for government on women in the boardroom. And it's certainly true, in our top companies, it's true we are nowhere near where we should be. And the issue therefore becomes, for government, do you step in and have some form of concrete regulatory way, or do you just stick to encouragement – and that's the kind of discussion that's happening at the moment. And the government leans more toward encouragement, and creating the right environment for it to happen, rather than the penalties, etc. But you know, it's a live discussion.

I'm wondering about Bombardier's Derby train factory in England, which lost a huge contract and was set to close after contracts wound down. Do you have views on it?

Before I come to Bombardier trains, which I will do – Bombardier Aerospance is also fantastic in the U.K.. Of course, it's in Belfast, and they're just opening a new factory at the moment. I've been there myself. It's fantastic. It's the biggest employer in Northern Ireland, so it's critical to that – a troubled, or in the past troubled, part of the United Kingdom. And it is right at the front edge of technology. They do terrific composites and development. That's going really well.

In the rail area, there have been one or two knock backs for Bombardier there, in not winning a particular procurement. But, you know, there's a hell of a lot out there which they are bidding for now, because we have – as part of the big infrastructure program I described – a huge rail program, so Crossrail, which is almost done and is underway, that's the biggest infrastructure project in Europe, bar none. That's a big rail project there. So you've got a lot of ongoing rolling stock procurements, going on as well, we have electrification of a lot of our lines. There's big, big opportunities in rail going forward. And we're also investing quite heavily in the rail industry in the U.K., under the new industrial strategy which we've developed – rail is a major focus. And this is partly about creating opportunities, it's partly about incentives to come and land in the U.K.. So, for example, Hitachi has established a new rolling stock production facility in the northeast of the country. And it's partly about strengthening the supply chain and increasing the innovativeness of the supply chain in the country. I think it's a really big opportunity for companies in rail, and I think Bombardier thinks so, too.

Given your background as U.K. ambassador to Turkey, I'm wondering if you could comment about the impact of the Arab Spring on regional markets?

(Turkey) is a phenomenal market and all of us are doing very good business there, and our exports are expanding fast. It is a stable, democratic (country). Of course, difficult neighbours – and there's lots of Syrian refugees. But it is a very strong market. And indeed, we partner a lot with Turkish companies into the wider Middle East, as well: Turkish construction, Turkish energy companies, are hugely active across those markets and we know them very well and they complement our own companies. In the construction area, we often find it's a Turkish construction (company), but a British project manager or British design engineer doing the work together. So that's Turkey.

In the wider region, it is challenging. I was in Libya myself last month, and you know, it's difficult to do business there at the moment. It's difficult to do business because of the security situation. It's difficult to do business because you have a government that is looking toward elections, where there will then be a more permanent government, so it's not procuring and making decisions as much as it should. On the other hand, things continue to happen. While I was in Libya, I opened the first Debenhams stores, it's one of the big department stores there. There's plenty of money there. They have their oil and gas. And, of course, in environments that are as challenging as that, they have a lot of security procurement that they have to do. And we'll obviously be looking at that area as well. And I would say, alongside the countries that are having a lot of difficulty, there are countries you can do quite a lot with. On the same trip I was in Libya, I was also in Morocco. They basically had a good Arab Spring and it's very, very interesting, from our point of view. Like a number of countries in the region, it has not been an oil and gas producer in the past; it's got oil and gas, but it was too deep to access. And now technology has caught up, British companies are involved – and once these countries have oil and gas, if they use it properly, it will drive a whole range things.

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