Executive Summary
National Audit Office Value for Money Report
-
UK Trade & Investment is
the Government body which provides expert advice and support to UK
based businesses wishing to trade internationally, as well as
support to businesses based overseas wishing to locate in the UK.
This report looks at the trade aspect of its work, including its
High Growth Markets Programme.
-
In 2007 UK exports totalled
£368 billion and represented 26 per cent of the UK’s Gross Domestic
Product. The United States and the European Union remained the UK’s
principal markets, together accounting for 68 per cent of total
exports. Export performance has been particularly strong in a
number of sectors, notably financial services, media and the
creative industries, and the manufacture of advanced technology
products. The emergence of high-growth markets, such as China and
India, offers an opportunity for UK businesses to increase their
international presence and thus improve the UK’s trade position.
However, they also present a challenge to many businesses and in
some of these markets the UK’s performance is lagging behind that
of other Western countries.
-
In July 2006 UK Trade &
Investment published Prosperity in a Changing World which
set out its five‑year strategy to implement Government policy.
The strategy is intended “to deliver, by 2011, measurable
improvement in the business performance of UK Trade &
Investment’s international trade customers, with an emphasis on
innovative and R&D firms; increase the contribution of foreign
direct investment to knowledge‑intensive economic activity in the
UK, including research and development; and deliver a measurable
improvement in the reputation of the UK in leading overseas markets
as the international business partner of choice.”
-
UK Trade &
Investment has set a series of output targets intended to deliver
benefit to UK businesses. It delivers these through 19 core
services. Annual targets include: to support at least 20,000
businesses in exploiting overseas opportunities, of which 12,000
businesses should be innovative, and at least 50 per cent of
supported businesses should improve their performance as a result;
to achieve quality and satisfaction ratings in excess of
80 per cent; and to increase its revenue from charging
users of its services by £2 million to £4 million in 2010-11.
-
Total expenditure in 2007-08
was £297 million, of which £218 million (74 per cent) was in
support of trade and £77 million (26 per cent) related to
encouraging inward investment. From 2005-06 to 2007‑08 the
percentage of total resources assigned to inward investment
increased from 15 per cent. Our review excludes the absorption into
UK Trade & Investment of the Defence Export Services
Organisation in April 2008 as it is too early to evaluate the
resultant Defence and Security Organisation.
-
UK Trade & Investment has
an unusual governance structure amongst government organisations:
the Chief Executive, as Accounting Officer, is responsible for
grants made to businesses and expenditure on work contracted out to
private providers. The costs of directly employed staff, together
with their overheads and accommodation, are funded by the
Department for Business, Enterprise and Regulatory Reform (BERR)
and the Foreign and Commonwealth Office (FCO) and remain the
responsibility of the Accounting Officers of
those Departments.
Key findings
-
Since 2006, UK Trade &
Investment has re-focused its resources towards 17 (out of 99)
markets it believes offer the greatest opportunity for increasing
trade,including China, India and Turkey. The
total number of staff providing trade support in these priority
markets increased by 21 per cent from 399 in July 2006 to 483 in
July 2008, representing 36 per cent of total staff overseas. The
volume of services delivered in these markets also increased. For
example, the number of commissions delivered under the Overseas
Market Introduction Service, one of the principal support services,
increased by 179 per cent in the high growth markets
compared to 92 per cent in the remaining
markets.
- UK Trade &
Investment is making good progress against its targets and has in
place a robust system of assessing delivery.
Performance data reported in December 2008, covering the 12
months to June 2008, demonstrates it has come close to, or hit,
most of its key targets:
-
The total number of businesses
supported was 19,300, some 44 per cent above the figure for the
previous 12 months although short of its target of 20,000. The
number of innovative businesses assisted increased to 16,100,
exceeding the target of 12,000 by 34 per cent.
-
Based on feedback from business,
it achieved a quality rating of 76 per cent and a satisfaction
rating of 75 per cent, against a target of 80 per cent.
-
52 per cent of businesses felt
they had improved their performance as a result of the support
received, against a target of 50 per cent.
-
Some 3,000 businesses reported an
increase of research and development activity as a result of UK
Trade & Investment support, against a target
of 1,000.
-
As at 31 December 2008,
its revenue from charging had reached £2.9 million for 2008-09,
against a target of £2.5 million, primarily through its Overseas
Market Introduction Service.
- UK Trade &
Investment has put in place extensive arrangements to obtain
regular and systematic feedback on the quality of its
services. The current arrangements have been
in place since 2005 and involve a rolling survey of businesses
using UK Trade & Investment’s services. The survey is conducted
by a contractor and provides a regular and comprehensive assessment
of client views and forms the basis for reporting against targets.
Some 70 per cent of businesses surveyed reported a qualitative
benefit as a result of the assistance received. Some of the
benefits cited include access to information, customers and
business partners not otherwise available; and gaining the
confidence to explore or expand overseas.
- UK Trade &
Investment has sought to measure the financial benefit of its
intervention. It shows that most perceive little financial benefit,
but some perceive a large benefit. UK Trade
& Investment regularly asks its users to estimate the financial
benefit arising as a result of its support: in the 12 months to
June 2008 it reported that this was £229,000, on average, per
business. This figure is used to derive the organisation’s
reported benefit to cost ratio which was 15:1 in 2007‑08.
There are, nevertheless, important caveats. The underlying survey
data shows that 29 per cent either did not know or declined to
provide an estimate, 30 per cent forecast some financial benefit
and 40 per cent forecast no financial benefit. The survey
focuses on forecast impact rather than actual financial impact
which may, in practice, be achieved some years later. There is, at
present, comparatively little information on UK Trade &
Investment’s longer term impact on business
performance.
- UK Trade &
Investment needs to set out more explicitly, on a market by market
basis, the significant market access barriers and its plans for
overcoming them. It has business plans in
place in each of the markets in which it operates and specific
activity plans for each of the priority sectors in each market. The
business plans include: overarching targets; resources; a risk
assessment; a balanced scorecard of delivery; barriers to trade;
and a marketing plan. These plans do not always set out which
barriers to trade are most significant, the potential benefits to
UK business that might accrue from overcoming them, the chances of
success and hence the priority with which they should
be tackled.
- UK Trade &
Investment lacks clarity on the objectives governing the charges it
makes for its services. UK Trade &
Investment has an annual revenue target agreed with Treasury. For
2008-09 this target is £2.5 million, to be earned through charges
to businesses for some of its services. We found a lack of clarity
in the financial objectives related to each of UK Trade &
Investment’s services, such as those that should be subsidised, and
by how much; and those which should be subject to full
cost recovery.
- UK Trade &
Investment has taken some steps to determine the unit costs of its
services, but it lacks a sufficiently robust method to enable it to
judge the efficiency with which services are
delivered. UK Trade & Investment
does not accurately calculate the costs of providing the different
services and the relative contribution made by different parts of
the organisation. It cannot therefore assess the efficiency with
which it achieves its outputs, nor the level of subsidy it is
providing to businesses and whether it is compliant with Treasury
guidelines on full economic cost recovery. A model for assessing
costs has been in place since late 2008 but it needs
significant refinement.
- Some businesses
were confused about how the services provided by UK Trade &
Investment sat alongside services provided by other
organisations. UK Trade & Investment
research shows that 17 per cent of supported businesses did not
realise that the assistance came from UK Trade & Investment.
Trade associations and some businesses we met were confused by the
variety of bodies involved in the delivery chain for trade support
services and how these fitted together – UK Trade & Investment,
the Regional Development Agencies, Business Link, as well as
various contractors. Some UK Trade & Investment staff reported
that frequent name-changes to trade-support activities over the
years have delayed the establishment of a strong brand name that
would raise awareness among UK businesses.
Conclusion on value for
money
- UK Trade & Investment is nearly three years into its
five-year strategy and is on course to spend some £1 billion on
trade support work by 2011. It collects a significant amount of
quantitative data to assess the delivery of its 19 core services.
This data indicates that it is close to achieving its targets of
assisting 20,000 businesses in a 12-month period, delivering high
quality and satisfaction ratings, and improving business
performance.
- UK Trade and Investment’s unusual organisational
structure, drawing upon the resources of two parent departments,
provides it with the flexibility to draw upon the infrastructure
and expertise of both, for example the time and influence of senior
diplomats. This structure also creates challenges. UK Trade and
Investment lacks sufficiently robust measures of the costs of
delivering specific services. It is therefore not in a position to
gauge reliably the efficiency of its different activities, the
contribution of different parts of the organisation to these
services, nor the relative costs and benefits of the different
services it provides. Without such information it is hard to show
that value for money is being optimised.
Recommendations
-
Our recommendations are
intended to increase visibility of the costs of delivering trade
support services and accelerate the process of targeting resources
where they can achieve the greatest impact, thereby securing better
value for money.
(i) Significantly improve
information on the cost of services and use it to target its
resources more effectively
1. Insufficient data
on the costs of providing each of the services, and the value
generated by various parts of the organisation, reduces UK Trade
& Investment’s ability to focus resources where they have the
highest impact. UK Trade & Investment should
improve its limited costing model to estimate the unit cost of each
of its services, and update this information periodically.
The information can be used in a number of ways:
-
to review the UK Trade
& Investment range of services and target resources on those
which are most cost effective;
-
to understand which parts
of the organisation are most productive and take action
where appropriate;
-
to make comparisons between
existing and potential delivery methods; and
-
to provide credible
data to allow UK Trade & Investment to comply with Treasury
rules on full economic cost recovery for those services where
it is applicable.
2. UK Trade &
Investment lacks clear charging policies for its
services. UK Trade & Investment should
establish clear charging policies for its various services,
distinguishing between those where there should be full‑cost
recovery, partial subsidy and those free at the point of delivery.
Where it intends to achieve full-cost recovery it should estimate
the level of current over or under recovery and put in place a
strategy for achieving full recovery.
3.UK
Trade & Investment lacks comprehensive evidence of its long
term impact on business performance. It
should put in place a rolling programme to estimate the actual
benefits accrued to businesses, reviewing, two to five years after
support is given, the impact on business performance. This could
include extending the current follow-up surveys to seek out
further, robust evidence.
(ii) Raise awareness amongst businesses that have yet to access
its services, and increase awareness of the portfolio of services
amongst businesses which have done so
4. There is limited
awareness of UK Trade & Investment as a trade support
organisation amongst individual businesses for whom it still lacks
a clear identity. UK Trade & Investment
should seek to understand better why some businesses do not take up
its trade support offerings. It should give attention to the
importance of distinctive and consistent branding in dealing with
businesses so that those considering international trade are aware
of its services.
5.
Amongst those businesses that have engaged with UK Trade &
Investment, not all understand its full range of
services.It should communicate a clear
picture to its business audience of the full range of UK Trade
& Investment’s services and the criteria governing access to
these services.
(iii) Develop a clearer strategic
view of where it wishes UK trade to be in the medium term in all
target markets
6. UK Trade &
Investment’s plans for its target markets do not always outline a
clear view of the relative benefits of overcoming barriers to
trade. UK Trade & Investment should
incorporate into all its individual market plans a prioritisation
of the most significant barriers to trade. The prioritisation
should be based on a series of criteria, for example the potential
benefits to UK businesses that might accrue from overcoming these
barriers and the chances of success.
(iv) Communicate a clearer understanding of how its services
address barriers to trade and fit with the services provided by
others
7. UK Trade
& Investment has not always communicated a clear picture of how
its services should fit alongside those provided by the private
sector and other organisations. UK Trade
& Investment should develop a more informed understanding of
how its services fit alongside the developing pattern of those
provided by private sector organisations, including trade
associations, and to use this knowledge to explain how its support
complements the private sector provision.