Ever since the formation of the East India Company at midnight on December 31 1599, Britain has espoused a culture of free trade. Our history as a seafaring and trading nation underpins our formidable record in international enterprise. This bold spirit nurtured the success of world-class financial institutions in the City of London and great international companies such as BP, HSBC, Rolls-Royce, GlaxoSmithKline and Vodafone. Britain can also claim excellent middle-ranking companies and smart younger businesses as well.
But at a time when our efforts should be dedicated to staying ahead of the game, some are suggesting that boldness may be making way for timidity.
Understandably, business and financial institutions focus on short-term results. The discipline of meeting quarterly forecasts often seems more important than assuring long-term progress. An acquisition that does not pay its way in year two or where the nature of the risk is difficult to understand often appears not to be worth fighting for. There is nothing wrong per se with a short-term focus but it comes at a grave cost if it means that our businesses are not feeding the fundamental cycle of developing new products and introducing innovations, or if we are not creating an environment in which good new companies can flourish.
At the same time, foreign companies are winning control of assets we have built around the world. P&O, one of our proudest companies, was the subject of a takeover battle between government-financed institutions in Singapore and Dubai. There are many other examples of the good, and not so good, falling into foreign hands.
However, the loss of some of our well-known corporate names to foreign ownership is not in itself a cause for alarm. The UK will continue to be an attractive place to do business so long as it remains an open and flexible economy. A key element of that flexibility is a willingness to put investment in people and the search for new technology at the heart of our thinking – both in government and in our companies.
George W. Bush, US president, in his State of the Union address in January advanced an impressive agenda for spending on science. His administration is looking to double federal funding for basic research, spending an additional $50bn over 10 years. The majority of the additional funding will be in the physical sciences. Another $86bn will be available in research and development tax credits. This is in direct response to the economic threat from China and India which are themselves pouring funds into R&D.
The UK government has, during the past decade, done a lot to recognise the importance of science, technology and innovation. It increased the science budget in a series of spending reviews and has understood that this investment needs to be long term. In light of the moves made by other nations, this continued commitment is vital.
A formidable challenge remains in moving the fruits of research from institutions into society. The government could help by giving technology-based start-up companies greater traction in the marketplace. For example, the US federal government, a big buyer of technologies, is obliged to place a certain number of contracts with small and medium-sized enterprises.
How should British companies respond? Our world-class companies already know that to compete globally they have to press into service every legitimate asset they can muster. All UK companies have to be prepared to be innovative, not only in their investment in technology but in an aggressive approach to recruiting the sort of people who are going to foment change – problem-solvers who are responsive to the rapid shifts we observe in the world economy. In this respect, Britain has an inherent competitive advantage – its brainpower. Our universities produce graduates and postgraduates across all the disciplines who compare with the best the world can offer.
My challenge to British management is to make a determined effort to attract more PhDs into their businesses. As technological transfer, such recruitment is excellent value for money. Rarely will managers have the chance to do something as disruptive to their rivals as hiring a “post-doc”.
British managers should recognise that they are more than just custodians of prime assets. They hold the key to unlocking the potential of those assets and ensuring that British business stays British and continues to compete. If we get our investment in people and technology right, Britain can hold its own on the world stage with anyone.
Sir Richard Sykes, former chairman of GSK, is rector of Imperial College London