Investment in Britain

Head Table Guests

Jeremy Burman, Grade 11 Student, Northern Secondary School; Mrs. Millie Hope, Pastoral Assistant, St. Timothy's Church, Agincourt; Peter Held, CEO, BDO Dunwoody; Peter Davies, British Consul General; Robert Dechert, Partner, Gowling, Strathy & Henderson and President, The British Canadian Chamber of Trade and Commerce; William Whittaker, Partner, Lette Whittaker and an Honorary Director, The Empire Club of Canada; Sheila Ramsay, Area Director, Western Europe, Ontario International Trade Corporation; and Anthony Goodenough, British High Commissioner.

Introduction by Julie Hannaford

As one of North America's only speaking clubs of record, The Empire Club of Canada preserves and maintains a history of its recorded addresses, not only to document the insights, commentaries, and perspectives of leaders in our business and political community on issues of the day, but also to maintain a record of that which captures our imagination and concern from time to time during the year.

Today, Thursday, October 24, 1996, our meeting focuses on investment, and as such, it is particularly timely, that our guest addresses us today on investment in Britain, just after our forum on global banking.

As a generation nurtured (and some would say entirely created) by marketing, it would appear at times that our perception of "global" is actually more restricted than inclusive. As early as 10 years ago, the concept of foreign investment was restricted to investment in the European Community. Today, the concept of foreign investment reaches much further. In broadening that reach, we tend to eclipse that which in fact is closest to us, politically, historically, and economically, namely Great Britain.

Our guest today, Mr. Andrew Fraser, has very kindly agreed to provide us with that perspective, and thus equalise or balance our understanding of global business.

Mr. Fraser was appointed Chief Executive of the Invest in Britain Bureau by Michael Heseltine, the President of the Trade, in July, 1994.

Before taking on this position, Mr. Fraser was the Managing Director of cdp europe, the core advertising network in Europe for Dentsu, and before that, he was the Executive Vice-President and Director of Business Development for Saatchi & Saatchi Advertising worldwide.

Born in Kuala Lumpur, Mr. Fraser was educated in the United Kingdom, graduating from the University of Sussex School of English and American Studies. He pursued scholarship programmes at Harvard and UCLA, and joined Young & Rubicam in London in 1972 where he became an Account Director for clients such as Procter & Gamble, Heinz, and Cadbury Schweppes.

Mr. Fraser became Managing Director of McCann Erickson in Thailand in 1976, working with international and domestic clients including Coca-Cola, Phillips, Nestle, Gillette, the Thai Farmers Bank and the Thai Tourism Authority.

When he returned to the United Kingdom in 1980, he joined Saatchi & Saatchi, and worked in New York, London, and Hong Kong, and as indicated previously, Mr. Fraser became responsible for the management of international clients and the development of new business worldwide.

Mr. Fraser brings a truly international perspective to his address today.

There is no question that everyone of us is occupied and preoccupied perhaps with the day of protest which is to occur tomorrow. The news this morning was dominated by reports of those things which we could not do, and those people who were travelling to work, armed with sleeping bags, overnight essentials, and visions of sleeping on trading floors. For those of you who are here today, who plan to sojourn in the downtown area for the next 72 hours, our guest today provides you with an opportunity to look beyond Toronto, beyond Ontario, and beyond our Canadian borders, to the horizon for business in Britain.

Please welcome to The Empire Club of Canada today, Mr. Andrew Fraser.

Andrew Fraser

I am delighted to have the opportunity today to address this distinguished audience. I would understand The Empire Club has a 90-year history promoting serious discussions related to Canada and the Commonwealth. The British Canadian Chamber of Trade and Commerce too plays an important role in promoting trade and investment links between Canada and Britain.

The strength of the historical, institutional and commercial ties between Canada and the U.K., which both of your organisations have helped to promote, provide a foundation for the high levels of industrial investment in both directions. But the attractions of the U.K. as a base for Canadian companies in Europe--and of Canada as a base for British companies in North America--are not limited to historical ties or sentiment. The importance of inward investment in the bilateral trading relationship between the U.K. and Canada and in each country's economic development is growing fast.

I want to explain what this means to Britain and why the U.K. has been so successful in attracting and retaining foreign investment, including from North America, in recent years.

I always feel comfortable in Canada. It is much like home--even though we only tend to do business in just one language, rather than two as you do here.

From our side of the Atlantic we tend to think Canada's economy has a north-south emphasis--that you are part of a great North American market moving increasingly towards free trade through NAM. But one of the great traditions of Canada is that you also look west to east. If I were to fly the equivalent of a journey between Vancouver and St. John's eastwards from London, I would actually find myself in Siberia. That is quite a thought for us. Looking east from Canada brings you direct to Britain and the rest of Europe. That's our starting point.

Canadians may be surprised by the sheer scale and opportunities of the European market. These have to be considered, even from as far away as your West Coast. Everyone tends to look to Asia these days for economic development and growth but boring old Europe is actually a very interesting place to do business. When we grow at three per cent a year--as we have been doing--that adds an economy the size of Taiwan in GDP terms. The scale of the European Economic Area is sometimes underestimated. In a land mass smaller than Canada we have over 380 million pretty affluent consumers, not to mention new markets opening up to the east of us that quickly bring our total market up to something like 600 million. The European Union alone is larger than NAFTA would be even if it were a single market, and more than three times the size of Japan.

It is not just population size, either. Europe is also the access point for much of the world's state-of-the-art technology. But it is Britain that is Europe's competitive base. The evidence in investment terms speaks for itself--45 per cent of all the Canadian investment in Europe is in the U.K., no fewer than 250 companies. That compares with 14 per cent in the Irish Republic, eight per cent in Germany, six per cent in France and five per cent in the Netherlands. It's not just the Commonwealth connection either. We also have nearly 40 per cent of all the U.S. investment--4500 companies from there. We have more than 40 per cent of the Japanese investment too and even bigger shares from some of the other Asian tigers.

What's more our European partners have also been deciding that Britain is the best place to do business.

Investment flows between Britain and Germany used to be fairly even. They have been running 10 to one in our favour over the past couple of years. Over 50 German companies came to Britain in the last year and well over 100 from the rest of the EU. Overseas companies account for 40 per cent of our exports and 18 per cent of our manufacturing jobs. And 90 per cent of those investors export worldwide from their U.K. bases.

Our position at the heart of Europe is critical to this success. These investments are not in the British market but in Europe itself.

There are several reasons for this U.K. success. Not least is our world leadership in research and development across a whole host of sectors. Back in the 1980s Japan's Trade and Industry Ministry released figures showing that 55 per cent of the world's significant inventions since World War II had come from Britain. Our historic science and technology base really is a priceless asset.

Access to the state-of-the-art technology is as critical for Canadian companies as for everyone else. The brain power of the automotive industry, for example, is in Britain. All the world's Indycar design and development is done in Southern England and 15 out of 16 Formula One cars originated there with dramatic results. It's not just our Damon Hill or your Jacques Villeneuve who have benefited either. Innovations such as anti-lock braking systems have grown directly from Formula One research.

There is more biotechnology business today in Britain than in France and Germany combined and we are the world's third-largest exporter of medicines, with 12 per cent of pharmaceutical exports to more than 120 countries. In 1994 the industry spent some $3 billion on R and D. We have also had innovative work for some time on multimedia and the country is a real test bed for the future.

There are close links between industry and British universities. Toshiba is carrying out its most advanced research at Cambridge--on products that may not see the light of day before the next century. Hitachi has a major software development programme there, close to its U.K. manufacturing base. Other Japanese firms have brought in their international software development because the British are not just creative--having designed products they can produce them too. R and D in Britain is far cheaper than in Japan.

And of course these days you have to speak English in R and D to communicate across the world. The U.K. advantage here is obvious.

That's research, but there are powerful economic reasons for our success too. Investment is the greatest dynamic force for trade in the world today and as an open trading nation Britain is in the forefront of the investment trend. We actually promote both inward and outward investment. It is a win-win situation. Canadian investment stock in the U.K. was worth C$13.7 million in 1995 but British stock in Canada was actually C$16.4 million. And just as the U.S. is the largest investor in the U.K., so Britain is the largest foreign investor in the U.S.

Our macro-economy is now in great shape. We have had the fastest rise in productivity of any OECD nation. During the past decade we have attracted $150 billion in investment stock. Our inflation level is a record low at below three per cent and matched by growth. We have led Europe out of recession. Our tax base has been revolutionised with the lowest levels of all the main European economies. We have 33-per-cent corporation tax and our top personal rate has gone from 83 per cent in 1979 to just 40 per cent today. Basic rates are much lower still.

One of our industry ministers was visiting Hewlett Packard's new plant in eastern England the other day and said it straight: "The government of business is not the business of government." We have led the world in both deregulation and privatisation. British Airways, British Steel, British Telecom are now world leaders in the private sector. Bernd Pischetsrieder, the head of Germany's auto giant, BMW, has summed it up: "Structural change has made Britain by far the most attractive place to invest in Europe."

Look at telecoms. Northern Telecom and AT and T are just two of 155 operators now in the U.K. Some of our European partners have barely begun to deregulate. The results for business are apparent: our charges are the lowest in Europe.

Britain is Europe's only deregulated labour market. We work 24 hours, seven days a week, through flexible shift patterns. In the electronics and auto industries, four x 12hour shifts are normal. Four days on, four days off. The rules don't allow that in much of continental Europe. Our costs are also the lowest among our European competitors and we have the lowest level of strikes since records began in 1895. The last three years have been the lowest ever.

Services matter as much as manufacturing. Our financial services sector is especially important for companies setting up in Britain. There are more American banks in London than there are in New York and more Japanese ones than in Tokyo. We have regional centres too but London is Europe's only global capital--even the Deutschebank has moved there from Frankfurt and other banks have followed from Germany and Switzerland. Foreign exchange going through London now exceeds that in New York and Tokyo combined.

Canadian companies enjoy the benefits of all this and as well as the historic links between our two countries there is the fact that we count firms from overseas as British anyway. Bombardier is seen as an integral part of Northern Ireland because of the importance of its Shorts aircraft operation to the economy of the province. Indeed, Bombardier and Northern Telecom are among the largest employers in Northern Ireland, and Nortel is one of the biggest employers in the Devon and Cornwall region of South West England too. We have also welcomed world-famous Canadian names like Seagram, ALCAN, and McCain, not to mention Canadian financial services in the City of London, energy sector companies in the North Sea, and many smaller companies.

In many ways the Ontario economy reminds me of ours. The auto industry for example. We both have the Americans; you have one or two Asian companies--we do not. But we have Honda, Toyota, Mazda with their links with Ford, and Nissan, which has been a great story. We have seen investments from Canada like that of Magna International, which bought up most of the automotive operations of a British company, giving it six plants and access to major European auto-makers as well as Ford and General Motors. It is a global industry: companies supplied in Britain are also supplied here in Canada.

Canadians feel comfortable in Britain. They like doing business there and living there. Companies like Newbridge in Wales. That's the name of both the firm and its location but there is more to it than that. The founders came from Newbridge in Wales to set up in Canada. Having made it here, they went back to do the same there. Tell me old ties don't matter after that.

The appreciation of the meeting was expressed by Robert Dechert, Partner, Gowling, Strathy & Henderson and President, The British Canadian Chamber of Trade and Commerce.