Britain needs a Chinese lesson
By Martin Sorrell
Published: September 9 2008 19:15 | Last updated: September 9 2008 19:15
If there were ever doubts about China’s ascendance, they evaporated at eight minutes past eight on August 8. The confidence, originality and scale of the opening Olympic ceremony all said: “We’re here. Get used to it.”
Indeed we must. But should Britain, feeling the autumnal chill of possible recession, resign itself to a slow decline as power shifts back to the east? I do not think so. Yet significant change is needed to retain our place in the premier league of global economic powers.
We must accept that in today’s world, advanced communications mean that companies are no longer bound by national boundaries. For some, there will always be political and public relations reasons to stay in London. Others, such as Regus, Charter and Henderson, feel fewer patriotic restraints and shift to countries with more favourable tax policies. More will do so.
WPP itself is reviewing its position in the face of proposed changes to the controlled foreign companies regime, which would give HM Revenue & Customs greater power to tax earnings abroad. The Treasury is playing a shrewd game, hinting it is going to revise its plans, but changing little. It should rethink the proposals. Plenty of countries have skilled workforces and cultured capitals, as welcoming as the UK. Take the Irish Republic, with a very welcoming 12.5 per cent corporation tax against 28 per cent in Britain. That comparatively high UK rate is a turn-off to business wishing to set up shop in Britain and to those already here – as is our grindingly slow implementation of new infrastructure.
As if to remind us of its ambitions, China has announced a new target for 2012. The date is surely no coincidence. Trains on its high-speed line from Beijing to Shanghai will run at 236 miles an hour – outstripping the current generation of bullet trains by 18 miles an hour. By contrast, Heathrow’s operators have admitted that only part of the new Heathrow East terminal will be ready for the London Olympics that same year. This after the embarrassment of the Terminal Five fiasco and continued delays in approving Heathrow’s third runway. That runway is needed now, yet planning and government inaction will probably delay its construction to 2020. China is painted as a country burdened by unmoving bureaucracy, yet it gets things done – and on time. Beijing airport’s Terminal Three took four years to complete, against 20 for Heathrow’s Terminal Five, and is larger than Heathrow’s five terminals put together.
The policy treacle that slows big infrastructure projects in Britain clogs other aspects of life essential to doing business here. Housing is overpriced because the planning process blocks new developments. Equally, ways have to be found to allow universal fibre-optic wiring, a technology as umbilical to modern business as the railway network was to the Victorians.
People think of red tape as a business issue, but it also demoralises our National Health Service – so much so that senior consultants find professorships in US institutions too attractive to refuse. There are now more managers, administrators and support staff in the NHS than there are hospital beds.
British television deregulation, too, moves at a glacial pace. Take the review of public service broadcasting by the regulator Ofcom. Among a range of issues, it looks at ITV’s public service broadcasting obligations, which the network wants to relax. I have sympathy for ITV’s need to reduce the amount of regional news, within sensible constraints, and redefine the requirement to spend half its production budget outside London. It is critical that the brand leader be allowed to compete in a digital world.
Media, creative services and especially financial services are important to Britain’s future, but they are not the whole story. China has the low labour costs required for mass manufacturing, but middle-sized, specialised engineering companies in Germany, northern Italy, Japan and South Korea are displaying expansionist zeal because pricing has moved in their favour.
There are similar opportunities in Britain for specialised manufacturing, but we need the right skills. A survey by the CBI employers’ group showed a quarter of employers were unhappy with graduates’ basic literacy and 16 per cent were dissatisfied with their numeracy. That means educational competition, the pursuit of higher academic standards and, yes, elitism. Oxford, Cambridge and other top universities are supposed to be elitist. Elitism is essential to maintaining our global reputation in education in the face of competition from the US.
The other great factor that attracts and retains business in Britain is liveability – security, atmosphere and quality of life. London’s diversity and street life are attractive to any creative business but its ruinous housing costs, high crime levels and creaking public transport are not.
Britain’s image abroad is crucial to attracting foreign investment, so such perceptions are important. This year Y&R, a WPP agency, found that Britain was seen by the rest of the world as trusted, open and tolerant, but perceptions tended towards the stereotypical: traditional, prestigious, arrogant, restrained, perhaps even stuffy. There is therefore room to improve how Britain projects itself.
Fortunately, the study also showed that Britain has a reputation for innovation and there are good reasons for that, as the Olympic ceremonies demonstrate. One of the chief designers was a Briton: Mark Fisher. But he worked on China’s show – not the feeble eight-minute “hand-over” provided by Britain. Proof that British creativity and know-how are prized around the world, if not always here.
Sir Martin is chief executive of WPP
Copyright The Financial Times Limited 2008
