UK: IM Sounding Board - Changing views of privatisation.

UK: IM Sounding Board - Changing views of privatisation. - I started my career not in aviation but in the fiercely competitive world of high-street retailing. It never occurred to me that one day I would be running the world's largest airport retailing

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Last Updated: 31 Aug 2010

I started my career not in aviation but in the fiercely competitive world of high-street retailing. It never occurred to me that one day I would be running the world's largest airport retailing business. That's hardly surprising, because there was no such thing when our airports were one of the old nationalised industries. Having taken BAA into the private sector, we tackled the business on a commercial basis and seized the opportunity really to develop retailing as a major money-earner and important service for our customers. We have realised our ambition to become truly world-class at what we do. Other privatised industries have also been commercially successful, so why do so many of our leading companies feel they have to apologise for their success?

I think that we in the business community are sometimes too defensive about privatisation and forget the effect of state corporatism, a feature of life in post-war Britain which lasted right up until the 1980s. With the benefit of hindsight, it is easy to see why we were all caught up in the belief that the state had to run many elements of our lives. After the depression of the 1930s, nobody wanted to experience such misery again.

In post-war Britain, as across continental Europe, the power of the state was seen as the only realistic option to ensure a better life for all.

By the 1970s the need to do something about the shackles of the state and Britain's failure to compete effectively in the modern world were becoming clear to all. Prices were high, service was poor. Workers were obviously unhappy (as demonstrated by their predisposition to take industrial action) and profitability was too low. In fact, state-owned businesses were a major drain on the Exchequer in subsidies, both hidden and apparent.

Many businesses were being sheltered from the real world, in which they stood no chance of competing, by a fat cushion of public money. Remember how it was in those days? Flying the 'world's favourite airline' - one of our key customers then as now - was certainly not the most pleasurable experience for me or many others. Getting a telephone fixed or a new line put in was a major achievement in itself, and the price was exorbitant.

Freed to raise funds for investment and to manage to achieve commercial objectives, businesses which had seemed incurable bureaucracies in the public sector were able to reinvent themselves as dynamic, customer-focused world-beaters. And while some of the 'Sids' turned a quick penny by selling their shares, hundreds of thousands, in the case of every major privatised company, have remained shareholders to this day. Look at British Airways and BT now. Our leading airline has set the world standard for dedication to customer service, satisfying its employees and its new shareholders by satisfying its customers.

Slowly but surely European aviation is being opened to competition as state-owned airlines are privatised and routes are liberalised - and the deregulation of European Union airline services which has just come into force will serve to hasten this process.

Telecom prices, meanwhile, have fallen by 40% since privatisation and in a number of cases are lower now in money terms - as well as real terms - than they were before privatisation. We have come to take almost for granted a phone system that allows us such added-value services as call-waiting, last-number call-back and redial. Yet this emphasises the problems that some privatisations in particular - and the concept in general - have faced over the past decade: however successful they may be, the public image of privatisations has not been good. Some privatised utilities have managed to turn spectacular successes (domestic gas prices are down by a quarter, according to a study by consultants NERA, with industrial prices cut by almost half since privatisation) into apparent failure by a mismanagement of their public relations.

Market rates for top managers in industry are well-established and the privatised utilities are, if anything, underpaying the people who hold the top positions. We in business know this so why can't we get our message across? The successor to British Gas, now demerged into the two separate businesses of BG and Centrica, faces even more competition from the opening up of the domestic gas supply market. This will ensure that whoever is running the company will earn every pound in the years ahead.

But that is the real point of privatisation, as I have experienced it, taking part in the management of a privatised company. Not just that it brings lower prices and better standards of service, since these are efficiency gains from a relatively low base. Rather, the secret of success lies in the way privatisation has shaken up the corporate culture, and made public servants who had no incentive to serve their customers into effective managers willing to take risks in order to run their operations more efficiently or make a profit.

Feather-bedding has never worked, as the state-strangled economies of eastern Europe and the former Soviet Union are finding out through their painful transition to the mixed economy. Many of the managers in privatised companies have successfully adapted to the new disciplines and opportunities that privatisation has brought; at the same time, some have failed to come to terms with the realities of the marketplace. It may seem harsh, but the alternative would be an eternal subsidy from the poor taxpayer.

Where next? I have looked over the history of privatisation in the UK and I feel it is time to stop worrying about the origins of our leading businesses - public or private sector. The question now is: how can the public sector and private sector work together for the benefit of both?

People in business know what needs to be done. Focusing on what customers need, improving service and achieving greater efficiency are the daily bread of every successful business. Let's call an end to sterile arguments about where the boundary between public and private sectors should be and concentrate instead on creating a UK plc which is truly competitive. If we do, we can bring about a new economic era in Britain - with rewards for all.

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