SIR RICHARD LAMBERT | FIRST PERSON
BRITISH BUSINESS IS LEAN, MEAN AND READY FOR LIFT-OFF
SIR RICHARD LAMBERT Director-general of the CBI, 2006–2011
Two years after the CBI was set up, Rolls-Royce, a member of the FT30 blue chip club, offered its new RB211 engine to the American aircraft manufacturer Lockheed for its TriStar passenger jet. It fought off competition from General Electric and Pratt & Whitney to win a contract for 150 units but with a stronger thrust and lower price than originally planned. Within two years, the company was struggling
to meet the performance guarantees it had committed to due to a fault with a new titanium blade that threatened to double development costs. Rolls-Royce went into receivership in 1971 and was nationalised by the Conservative government of Ted Heath. After 16 years in state ownership, Margaret Thatcher privatised the company in 1987. Rolls-Royce is now a world-leading aerospace company and its Trent engine, the descendant of the RB211, is in service in Airbus A380s and several other aircraft. This story of riches to rags to riches again is a useful metaphor for the journey that British business has taken over the past 50 years. Back then, Britain was dependent on heavy industries and processing businesses.
The textiles and leather industry alone employed 810,000 workers in 1966. Many industries were owned by the state and there was little capital in the merchant banking sector available for businesses. Sleepy old companies could carry on for decades without challenge.
STRUCTURAL CHANGES The Britain of today is plainly in a far more positive state. It has a good number of world- leading industries and companies, a thriving and innovative financial services sector, even after the crash, and a strong culture of entrepreneurship and innovation. There are four structural shifts, and a gentler, more organic transformation, that explain where we are today. The first key factor is increased competition
driven by globalisation and Britain’s late entry into the Common Market. The textiles producers, for example, were swamped by the arrival of overseas low-cost importers and struggled to respond. Auto manufacturers, who had relied on a protected home market and the old Empire, were hammered by much more efficient competitors from continental Europe and Japan.
The second shift was privatisation, which
started in 1982 with the low-profile sale of National Freight Corporation but quickly caught fire with sales of major transport companies, power generators, household utilities, telecoms and, eventually, the rail industry. The CBI was a champion of this as it could see that having these industries run efficiently would give the UK a competitive advantage. The third impact was the removal of
exchange controls in 1979, which enabled the City of London to trade freely in foreign securities and British industry to buy overseas assets more easily. It was a fundamental change in the way the economy worked and was in part driven by the fourth factor – the discovery of North Sea oil and gas. This had a huge economic impact but it also provided the foundations for a large and flourishing sector, covering everything from the major oil companies, to smaller manufacturing firms, to consultancy services.
INNOVATION REVOLUTION For these same reasons, innovation has swept to the top of the agenda for smaller companies. It is not just an issue of hi-tech versus low-tech: »
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