Event Blog - CBI Conference UK 24th Nov '08. "This is one of the most important conferences CBI has ever convened" - Prime Minister Gordon Brown
Harvey Nash (Mortimer Spink's parent company) is headline sponsor of the CBI Conference. The conference took place in London, 24th November 2008 and this Blog provides insight into what happened on the day.
09:00 The conference is just about to start and the main hall within the Hilton Park Lane is filling up. This is Harvey Nash's fourth year of being headline sponsor and this year more than any previous year, there's a sense of expectation. The economic backdrop, the Pre-Budget Report occurring on the same day and the presence of both Gordon Brown and David Cameron at the conference, is a convergence of events never seen before.
Harvey Nash's own survey of executives, conducted a few days before this conference, highlighted the challenges we are facing. Over a third of respondents said that their own companies were making cut-backs on staff, and many expressed real concerns for the future. What can businesses and the Government do about it? Today will be a unique opportunity to find out.
[You can view Harvey Nash's survey here, password "cbi"]
9:15 Martin Broughton, president CBI, opens the conference and sets out the highly apt theme for the day: Performance through Adversity.
9:20 Prime Minister Gordon Brown speaks. "This is one of the most important conferences CBI has ever convened". There's a murmur of agreement in the audience. Brown's delivery is confident. He lays out his theme; we are in the midst of a major transition to a new global economy where the shift of consumer power is heading Eastward. The UK needs to embrace these new markets and, just as importantly, inwardly invest to ensure that it has the right talent and technology infrastructure to survive in the new economy. Our future is in ideas and innovation.
He also lays out how the UK is in an ideal position to compete. We have one of the most open economies in the world, we achieved the highest productivity growth across all of the G7 countries, our national debt is lower than similar countries and we have the most flexible labour market in Europe. It will be interesting to see what David Cameron says to this; I'm guessing he's not going to agree.
9:50 Stephen Green, Group Chairman HSBC Holdings. Green states that many countries are moving into recession and that our key aim now is to avoid a depression. Whatever happens though, one thing is for sure; it will pass. And Green argues that when it does, things will be different. The world economy is already on journey, shifting from West to East, richer to poorer, and this crisis is a fundamental part of it. In the next two decades the world economy will double in size, and much of this will be outside the West.
10:20 Rt Hon David Cameron MP, Leader, Conservative Party. Cameron highlights that the UK is likely to have a more severe recession than any other comparable country. We have one of the largest budget deficits in the world, one of the highest levels of personal debt and one of the most imbalanced economies with an over-reliance on finance, housing and government-backed spending. Whilst some of our problems can be attributed to the global economy, Cameron argues that much of our problems were grown at home by our current government.
He highlighted three things we should never do again: never enter a downturn with such a high budget deficit, never let personal debt reach such heights, never let our economy be so dependent on such a small number of industries. He proposed an independent body to oversee government budgeting, and a new system to regulate personal debt levels. He also proposed high speed rail links and allowing cities to raise their own finances via bonds.
11:30 Jeroen van der Veer, Chief Executive, Royal Dutch Shell plc. Van der Veer argues that even though the economy has pushed the environment out of the news for the moment, when the financial problems are over, the environment will return as a key issue. His argument is compelling; right now we simply don't have the technology to solve the problem in an efficient way and yet, regardless, the world's population is growing rapidly.
12:00 George Buckley, Chairman, President & Chief Executive Officer, 3M. Buckley begins by saying it's pointless trying to predict the future, but he does say this "It's bad. It's going to be bad for some time. It's going to get worse before it gets better". Not too much cheer there then. However he does lay out ten practical steps (distilled here to four) that all businesses should be taking to weather the storm (1) be prepared to service your market top to bottom (2) retain / develop trust with your clients (3) invest in innovation (4) never, ever be complacent.
Buckley emphasises the importance of innovation and how, if you want to successfully innovate, sometimes there are cultural barriers to overcome. For example many people ask "What if we invest in staff training, but then our staff leave?" Buckley's response: "What happens if we don't, and they stay."
12:15 Panel Session: Weathering the storm - investing for the future
Robert Peston, Business editor BBC opens out a panel discussion. In Harvey Nash's pre conference survey we (perhaps cheekily) asked the question about whether Peston is responsible for exaggerating the crisis we are in. Of the respondents who felt in a position to comment - almost half said yes. This same question was asked of Peston directly at the conference. His response (and I paraphrase) "I'd love to think that I have the power to commission 700 billion pounds worth of global financial aid, but I don't!"
Peston moves on to set the scene for the panel discussion. He describes how he was standing on a trading floor twice the size of the hall we are in (and we are in a big, big hall) and he asked a senior manager to describe, in terms his grandmother would understand, what a "collateralised debt obligation" was. Five minutes later the senior manager hadn't yet finished answering. Peston concluded that it is almost impossible to do business if you can't describe what you are doing in a simple way. Over-complexity is at the core of our financial problems - many people simply didn't understand the risk they were taking. Of course, now they do - but it's too late.
Paul Walsh, group chief executive of drinks giant Diageo says that although we are in very, very serious times we have seen it all before. There are also a number of factors that make this different - and potentially more controllable - than previous downturns: (1) we don't at the moment have the worry of inflation (2) we don't have the worry of high interest rates (3) we don't - at the moment - have a huge unemployment problem (4) oil prices are coming down (5) the export market is strengthening due to a weak pound and (6) we have the largest, best orchestrated package of world-wide financial action ever put into place. In short, it's not doom. Maybe gloom - but certainly not doom.
Paul highlights the priorities within his own company. Agility was key. Diageo need to always be alert as to what opportunities there are in the market, whether that is in pricing (and in this environment I'm guessing we're talking downward pricing) or innovating the product itself. If change is required, it needs to take weeks not months. He also highlights just how important it is for Diageo to keep positively communicating; both with employees ('if we as a company want to be agile and creative - that can only come from our staff') and clients.
Charlie Mayfield, Chairman, John Lewis Partnership sets expectations that Christmas will be poor for retail. He lays out John Lewis' approach to the current economic situation (1) face up to the reality; some things - like the housing market - you simply don't have influence over (2) Communication with employees (who in this case are also the owners) is absolutely key (3) John Lewis is tightening, but continuing, its investment programme, especially online and within it's Waitrose stores. "If necessary we'll lean on our balance sheet to fund these initiatives". (4) continually strive for efficiency and (5) whatever happens, the recovery will come. Like many people Mayfield has a positive twist to his message.
John McDonough, Chief Executive, Carillion plc lays out just how bad it is in the housing market. House building is running at half of last year's levels and at the lowest rate since World War 2. The UK has lost over 90,000 construction jobs in the last 12 months. Carillion has undergone a transformation in the last few years that has seen it diversify outside construction.
14:30 Sir John Rose, Chief Executive, Rolls-Royce plc takes to the stage. He outlines just how important continued strength in high tech manufacturing is for the UK and along the way comes up with, perhaps, the most well received quote of the day. Pound for pound a piece of high precision engineering has a price similar to silver. Pound for pound automotive engineering has a price similar to a hamburger. He argues that the UK needs a real route map for the long term and to develop the talent of our people to place engineering at the heart of what we do.
14:45 Debate: Does the UK need an industrial route map?
Laurence Parisot, President, MEDEF (the French equivalent to the CBI) explains how industry is part of the DNA of any economy; if you lose your industry you risk losing your self confidence.
David Powell, Regional Vice-President for UK, Westinghouse argues that nuclear energy is one very good way to keep skilled people in the UK economy. A nuclear reactor takes ten years to plan and build and has a sixty year operating life; investing in nuclear power requires a skills plan that spans three generations.
Stefano Pessina, Executive Chairman, Alliance Boots agrees with Parisot - a country that has no more industry is preparing for its services to go away. He highlights how the UK is a good market to do business in. We have an open mid-set, skilled and flexible labour and the tax burden is acceptable.
16:00 Lord Mandelson, Secretary of State, Department for Business, Enterprise & Regulatory Reform highlights how no-one would have predicted the world economy to be in the position it is in. The crisis is global, but for those directly affected, the impact is very local. He highlighted how this is a time for the government to act very decisively and refers to how today's Pre-Budget Report (which is being released around the time of him speaking) will underline the government's decisiveness. He highlighted the positives (1) over the last 10 years the UK has had the best productivity increases amongst comparable nations and (2) we are ranked #6 in the world for ease of doing business (and #2 in Europe).
Mandelson details how Britain's economic future requires for better regulation in the future, but only where necessary. We need a diversified economy. He referred to how much he disliked the term "post industrial economy"; the UK is the 6th largest manufacturing economy in the world. "If you want to change the world choose a career in engineering!"
16:20 Closing remarks Richard Lambert, Director-General, CBI
Lambert highlighted his three 'take aways' from the day: (1) he's seen the biggest divide between the policies of two political parties as he can remember; Labour: monetary policy is not enough, Conservatives: monetary activism is the way forward (2) there is a need to rebalance our economy and position it differently in the changing global economy and (3) whatever anyone says, it's not all doom and gloom.
We're all in it together.
