MT sat down with a panel of experts to debate how to get Britain growing again. On the panel were entrepreneur Clippy McKenna of jam-making business Clippy's; David Tonkin, the UK CEO of Atkins; Arup Group's board director Alan Belfield; Charlie Dawson, partner at the Foundation; Craig Boundy, the UK MD of Experian; senior casualty underwriter at Zurich Jim Wilkes; Jon Stannah, MD, Stannah Lifts; and Andrew Saunders, MT's deputy editor.
Andrew Saunders: Growth is in short supply at the moment, not just in the UK but across the whole of the eurozone. But, despite that, we need businesses to expand. So how do you find growth? And how do you mitigate the risk of growing in a market which is currently looking unstable?
Clippy McKenna: There is definitely growth to be had. I run a very small business making jams, relishes and chutneys, and I have to think outside the box. In January we decided to spread our risk by not being held to ransom by just supplying one supermarket. Another way to spread risk is to export. In China there is massive demand for British products.
David Tonkin: I'll offer a slightly different perspective. Atkins is obviously much bigger - we have about 10,000 people in the UK. And actually we are seeing cautious growth. We have 1,200 high-skilled engineering job vacancies at the moment. That compares with 500 last year. There are a number of sectors that still have money going into them. The Government has bought into the idea that developing infrastructure is important for the economy. It is sectors such as retail that are seeing a dive because of weak consumer spend.
Alan Belfield: The infrastructure projects do have the ability to create growth, there's no doubt. We just need to create the right environment to make sure the Government is brave enough to invest. Projects like high-speed rail are going ahead because the Government is trying to widen the south-east's economic output. The Government is trying to spread the London effect to the northern cities, where there are more problem areas. Infrastructure projects do change things. If those transport links make life easier for people to go to and from work, in the long term you do change those market forces.
Charlie Dawson: It is quite difficult to work out exactly what's needed. The Foundation was involved with a piece of work a few years ago that looked at how Scotland could create more companies of scale. Scotland has a mixture of good start-ups and a few enormous companies. But it doesn't have many businesses above £100m turnover. We found there were a number of factors that needed to come together. You had to be willing to expand the company beyond the point you could easily sell it and you have to want to stay in Scotland. Then there's the more practical side of things, needing the right level of skills and confidence.
Craig Boundy: There are a few common characteristics among successful companies. Experian has an index which tracks the likelihood of an SME being successful, and we found there are five indicators. One is the track record of entrepreneurial expertise in the directors. Others are SMEs' ability to export, their willingness to invest, and the building up of networks with similar companies to get support.
Jim Wilkes: There are a lot of businesses in this country that started just after the Second World War. Often, they are still family-run but have outgrown where they are. If you're looking for growth, these are the companies that have to be reorganised. On the whole, better-organised businesses that form structures work more effectively. They may not be as fast moving but they have systems which can be replicated elsewhere. The measure of a successful company in some ways is how it copes with bringing in entrepreneurs. In general, entrepreneurs don't fit in with the bureaucracy, but big companies still need them to innovate.
Clippy McKenna: More than half of GDP growth comes from SMEs. Reports suggest that if we did things like the US, we would have 900,000 SMEs - that's a 20% growth. But we are in a circle of no confidence, which doesn't do the country any favours. We need to instil confidence into the market. My issue is finding investment. Clippy's is doing something that is innovative and British manufactured. But the banks don't get it - they just see risk.
Jon Stannah: We currently service and supply lifts in all railway stations across the UK. That's carried some of our lift business through over the past three years. We know what construction is going to be likely and therefore what money is coming in. Infrastructure is probably the one area of the construction industry that has shown some growth.
Alan Belfield: Governments have to set the right environment for long-termism. Infrastructure projects have problems because they're much longer than the term of Parliament. It can take 10 years' planning before you get to the building stage.
Craig Boundy: In the late 1960s Experian was a three-man start-up. We're now a FTSE 50 plc and we grew 8% in the UK last year organically because we diversified into a consumer product. Before, we'd spent our time selling to banks and businesses, then we decided to sell to consumers with a product that people can use to manage their personal credit. That product grew by 30% year on year and it's a business worth a couple of hundred million pounds. The key is to allow people to behave like entrepreneurs. We have that because we grow inorganically - we buy companies, we bring their skills in, and we allow people to flourish.
Charlie Dawson: It's about being sufficiently outward looking and realising there is a need you can meet. It's difficult for big companies to break out of their focus and see other needs that aren't there at the moment.
David Tonkin: Yes, it sounds very easy to do but so many companies think inside-out. They think, I produce this, so our strategy must be that, rather than thinking, that's the market I serve, what does it actually require?
Andrew Saunders: What about exports and growth in new markets?
Craig Boundy: We bought a majority stake in a company called Serasa in Brazil. We saw growth of over 20% so we bought out another company in the region called Computec last year. The Latin American market is growing very well.
Andrew Saunders: You can buy your way into markets. Is that not the easy option? Some might say it is harder to start from the ground.
Craig Boundy: Both aren't easy. Growth in any of these markets is really hard. Some emerging markets you can't get into directly, like China or India.
Alan Belfield: You can but it just takes time. Arup has got 800 people in China. It's taken us 20 years.
Jon Stannah: In the past, we worked with distributors which sold our products, and we've also looked to buy small businesses in other markets and build them up ourselves. And that's how we've sustained pretty rapid growth over the past 20 years. At the moment, we have 10 overseas subsidiaries. And now we have the opportunity to invest and move into emerging markets, but there is a certain amount of nervousness. Is this the right time? We are a family business employing 1,700 people and in terms of risk appetite, we are probably slightly risk averse. We'll probably hold off and take some of the decisions that are less risky and comfortable to take on.
David Tonkin: Atkins works internationally. Sometimes you see an attractive growth market, but penetrating it can be extraordinarily difficult unless you know and understand the local customs.
Jim Wilkes: But how are you going to compete with countries that for years have had a lot of state involvement, such as South Korea? I remember Peter Mandelson admitting the UK had no industrial policy. The UK has a lot of ground to make up. I know the Foreign Office is now doing things and UKTI seems to have woken up, but it's going to take a long time. For SMEs there's lots of shuffling around but no obvious help on the horizon. What happened to Project Merlin?
Clippy McKenna: About two years ago, we went to a food show in San Francisco. Supermarkets in the UK work on a 12 to 18 month lead time, so if you miss the window of opportunity, that's it. San Francisco was amazing because they know how to do business over there, and everything is more straightforward. Since then, we started exporting in a very small way, but we got no help. We tried to speak to government bodies and UKTI, but in the end we just did it ourselves.
Alan Belfield: Arup almost sees growth as an outcome of what we're doing. It partly comes down to the ownership structure - we own ourselves. It's a bit like John Lewis; everybody is a shareholder. We don't have quarterly profits to work around so it's much easier. Nevertheless, we are a professional services firm and we do have to grow to give people opportunities. We don't grow for growth's sake. We want to employ some of the world's best and give them exciting opportunities abroad. You spread your risk by doing diverse things in diverse markets. At one time, the UK was probably two thirds of our business, now it's 40%. And that's not because the UK has shrunk, it's because the rest has grown. Growth comes about by doing a good job. If you are good, people come back to you. We've grown 15% year on year since 1946, when we were founded.
Charlie Dawson: It's cause and effect, really. It is about understanding what's going to cause growth. The doctrine in Experian's business, for example, is that focusing very strongly on numbers causes the right behaviour to grow. That's what fuels it and makes it sustainable.
Craig Boundy: Between 2010 and 2012 the numbers of businesses increased in 70% of regional areas in the UK. The only place it decreased was London and the west midlands. The volume of business has grown because people are coming up with more ideas and finding new ways to create ventures.
Jim Wilkes: I think there is a big difference in international companies - they naturally hedge because they're in different territories and possibly in different business areas. That's where the UK might be different, because we've had such a lot of good successful international companies based here. Governments have got used to revenue streams coming from companies like that. It is very, very difficult to have to rediscover typical SMEs. Our strategy is that the UK is important but there are other parts of the world that are even more important. Big international companies can take that long-term view of what is going to happen.
David Tonkin: The challenge is how do you keep on innovating and getting more for less? That's the basic priority each time. To compete, you have to find ways to do that.
Craig Boundy: It's about investment and offering good services. That's how you get round offering more for less. You can say to people, that service may be cheaper but it'll be less effective.
Clippy McKenna: I've decided to go into categories that are stagnant and where there isn't any innovation. Over the next two years, we have new products coming out that are not jam or chutney. Our first step away is the marma-chilli. Our aim is to invigorate a dying category. Marmalade is a market in decline - it shrinks 5% a year. We want bring in a new demographic, thereby offering supermarkets more customers.
Andrew Saunders: So what can big companies learn about growth from smaller ones?
Charlie Dawson: Entrepreneurs are likely to be more connected to the market and the customer and competition. A lot of small businesses are set up to meet a need they can see. The challenge of the large organisation is trying to recreate that connection, but recognising it is not practical to do it in an everyday sense. One of the things senior executives can do is perhaps spend time talking to the customer. In big organisations it's too easy to just stick to what you're currently doing.
Clippy McKenna: What can SMEs learn from corporates?
Charlie Dawson: The trick is not to keep reinventing and having ideas, to get one idea to grow bigger and bigger. Corporates probably understand what is key to reproducing that.
Jon Stannah: Modern-day Stannahs came about because my father and uncle developed the business together. My father was the entrepreneur, my uncle ran the factory and built the value core to the business. Entrepreneurs need to think about a long-term sustainable organisation which employs a lot of people. You really have to work at that entrepreneurial spirit. In our business, we have to work really hard to get people thinking creatively and innovatively. It's about stretching boundaries.