If you're fronting a drive to boost UK exports, there's no point being invisible


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Lord Livingston raised a smile at the CBI conference on Monday, relating a story from his travels to China with UK Trade & Investment, the export agency.

Baroness Brady, of The Apprentice and West Ham United fame, was on the same trip, standing up to address 120 business leaders with the words: “UKTI is like your mother: it will do anything for you and ask for very little in return.”

Lord Livingston, who became trade minister 11 months ago, had responded: “Karren, that’s really nice – but the problem is, most people know who their mother is.”

In Britain’s export drive, UKTI has suffered from a chronically low profile. Ministers who jet to China or India with a plane load of bosses get the headlines. During William Hague’s stint as foreign secretary, embassies made it clear they had been refocused to sell Britain to the world, not merely entertain local dignitaries. And the British Chambers of Commerce has been much noisier about its role in helping overseas sales, despite having far less to spend on a push than UKTI.

According to Lord Livingston, most people who use the agency – to identify the right market to launch into, or to find the right distribution partner – appreciate it, even though small businesses have to pay for the service. It is another piece of the export jigsaw he has tried to improve since arriving in government from BT.

There are bright spots, such as the doubling of exports to South Korea in three years since a free trade agreement was signed. Meanwhile progress made in China, worth £1bn a month in sales from Britain, is well documented. But overall, exports have disappointed.

There are plenty of reasons cited, including a lack of export finance – now being addressed – the strong pound and weakness in the eurozone. Only one in five small and medium-sized British firms export, against the EU average of one in four, despite evidence that those that do sell overseas grow faster and are more profitable and more efficient.

The CBI published a report three years ago saying UKTI had a “Marmite effect” on the export market and had to become more commercially focused. If it has achieved that, as Lord Livingston suggests, then now it must simply be a case of jam tomorrow.

Local authorities, look out: outsourcers are backing away

 Rupert Soames made an interesting point amid the carnage of outsourcer Serco’s latest profit warning the other day. The chief executive brought in to get to grips with a company that manages a dizzying mix of prisons, RAF bases, leisure centres and rail services said it was suffering because new government contracts had succeeded in transferring a greater share of risk on to suppliers.

That is a turn-up. I thought government, local and national, was meant to be clueless at procurement, allowing Serco, G4S et al to make juicy profits on the back of public sector work. There was a feeling that the reason these contractors had run into trouble was that they had lost control of contracts, not that they had been so cannily negotiated in the first place.

It stands to reason that Mr Soames will aim to send some of that risk back in the opposite direction. This does not bode well for councils. There are so few companies – which include Capita and Interserve – that can take on the really big, complicated outsourcing projects that bargaining power will seep away if several of them suddenly become a lot choosier.

Don’t forget, many local authorities have hollowed themselves out in the dash to outsource and so can’t easily insource key services again. Maybe they will need the extra reserves they have tucked away, despite George Osborne’s austerity drive, sooner than they think.

Robots might be out of their depth doing risk modelling

Just as Deloitte published research suggesting that up to 10 million UK jobs were under threat over the next 20 years because they can be done better by computers or robots, another company shared its own anxiety over technology.

The Lloyd’s insurer Amlin has stuck its neck out to question whether the very risk modelling relied on heavily by underwriters to predict the chances of catastrophe have actually introduced their own systemic risk to the industry. It has commissioned the Future of Humanity Institute at Oxford University’s Oxford Martin School to research the subject and is appealing for its peers and regulators to join in the study.

The analogy is with motorists who drive faster and take less notice of their surroundings because they can rely on the satnav. The fear is that the same herding instinct has developed among insurers that can be seen when fund managers all dash to get out of a particular asset at the same time. At issue is the pricing of risk around “rare and extreme” events. Before the 9/11 attack on the World Trade Center, the industry thought the chance of something so awful happening was one in 3 million. Afterwards, it was one in 700.

A few things spring to mind. Experts in the field of increasing the transparency of these black-box systems, or the sophistication of how they are used, must know that is easier said than done. In addition, risk modelling has brought down the cost of capital for insurers over the last few decades. Will reviewing its usefulness inevitably drive premiums up?

And do the whizz-kid practitioners of today have the instincts required to question the machine’s readings when a black swan swims into view?