Business Leaders Summit 2016 - Risks and challenges to business

 

Our first panel tackled some of the major issues facing British business today. Naga Munchetty chaired the debate and the panellists were: Lord Blackwell, Chairman, Lloyds Banking Group; Rt. Hon. Lord Maude of Horsham, Minister of State for Trade and Investment; Juergen Maier, Chief Executive, Siemens plc; and Carolyn Fairbairn, Director-General, Confederation of British Industry (CBI).

Naga Munchetty: What are the key drivers of the economic outlook?

Juergen Maier: Uncertainty is the new norm, so how do we live and manage within that? There are massive digital opportunities, and we are investing heavily in the Fourth Industrial Revolution. Societal impact, which corporations need to put much higher on our agenda, is one thing that can be seen either as an opportunity or as a challenge. Unless you really look at your impact on society, you will probably struggle to be in business by 2030. Corporate responsibility is what new employees and consumers want.

Lord Blackwell: Clearly, some of the geopolitical risks could change the outlook overnight. But so far as the UK is concerned I’m probably an optimist. I think our economy is reasonably well placed and to some extent isolated, because of the strength we’ve built back into financial services and the safe haven of our currency and political system. The biggest risks are in countries in the developing world and Europe’s periphery, which never adjusted to the 2008 debt crisis.

From right to left:

  • Juergen Maier, Chief Executive, Siemens plc
  • Rt. Hon. Lord Maude of Horsham, Minister of State for Trade and Investment (February 2016)
  • Lord Blackwell, Chairman, Lloyds Banking Group
  • Carolyn Fairbairn, Director-General, Confederation of British Industry (CBI)

Lord Maude: I think we’re in danger of talking ourselves into a downturn. I grew up in a world where it was a good thing if commodity and oil prices fell, because that drives up opportunity. People see the UK as a good environment to do business, but we do less well on exports; that’s a big upside opportunity. There’s much prestige attached to high-end British stuff, but we undersell ourselves in a rather self-deprecating British way. I think too many British businesses get comfortable in the home market and haven’t understood that you are either growing or shrinking.

If you think you’re in a "steady state", believe me, you’re shrinking, either absolutely or relatively. On Juergen’s point, there’s growing evidence of a correlation between building social and environmental responsibilities into company DNA and creating long-term shareholder value.

Naga: Are British businesses too comfortable in their home market?

Carolyn Fairbairn: Visiting companies up and down the country, I see resilience and optimism. Multinationals like the UK’s creativity, ideas and innovation.

But we have outdated infrastructure in aviation and roads, and we’re behind in broadband. Another challenge is ensuring our education system delivers the people we need for the next generation of jobs, not the last generation.

Naga: Juergen, is this a transformative period for Siemens?

Juergen: It is hugely transformative. Top of our agenda is how do we, as a very large organisation, behave in a very agile way? We are creating organisations within our organisation, designed to disrupt us and help create a start-up mentality.

Video: Panel Discussion - Risks and Challenges to Business

Naga: Are you seeing a proactive government to help British exports?

Juergen: I’ve been a great supporter of the British move to re-industrialise, which has been positive. We could do more in terms of business and government partnerships to work out a stable framework. For instance, we all know about some of the chopping and changing we’ve had with energy policy. Those things are unhelpful.

Carolyn: Businesses like consistency of policy, even if the policy itself is not welcome news. On exports, I think there are reasons to be optimistic, such as tapping into China’s retail internet market, which grew 32% last year. There is real opportunity for digital to lift our exports.

Lord Blackwell: Creating organisations with enterprise and innovation within them, rather than being rigid bureaucracies is critically important.

Lord Maude: That’s difficult, because when you create something new in a big organisation, the antibodies tend to get there very quickly! Big organisations need to be willing to cannibalise their existing business models.

Naga: One downside of digitalisation is cyber risk and willingness to be open about it…

Carolyn: Companies are hugely aware of it, but it has emerged as such a high risk that there is some catch-up going on. The learning curve is fast.

Lord Maude: In some ways, the danger is thinking it is okay because Britain is seen to be the best in the world at this. But it is not okay. Things are moving incredibly fast.

Naga: To finish, can Britain be at the heart of the global economy if it isn’t in the EU?

Lord Blackwell: There are economic issues on which people have different opinions, but this is a political question as well, and that debate will take place. The UK may be better off one way or the other, but it will survive and prosper in either case.

Carolyn: There are some very significant advantages to remaining in: the scale of the market and the guaranteed access, the ability to influence regulation, and the trade deals. Not all our members agree we would be better in but, at our last consultation, the majority did.

Juergen: Britain is a great country, but would it be able to lead outside the EU? I’m pretty clear the answer is "no".

Lord Maude: My own view is we must be part of the single market. We have to hold firm to our commitment to free trade.

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