CBI: UK must adapt its exports approach to tap into £452bn overseas procurement market
11 Apr 2014 01:09 PM
Government must get
behind public services exporters
Public procurement of goods and
services in 12 key emerging markets will almost triple to £452 billion by
2030, according to new CBI research (1). But the UK will only capture £11
billion of this growth, if its market share stays the same.
Procurement from overseas by
developing countries has historically focused on sectors with no domestic
equivalent, while other contracts have tended to go to domestic companies or
public bodies. But research suggests that public sector organisations in these
countries will rapidly increase their purchase of goods and services, driven by
the needs of ageing populations and a growing middle class.
China will lead the growth in
public procurement with its market increasing by 7.4% each year. Indonesia and
Turkey will also rapidly increase their spending by 6.2% and 6%
respectively.
The demand for services will
grow at the fastest rate, by 6.1% each year, and will be worth £110
billion in 2030
Construction will grow by 5.9%
each year and will be worth £97 billion in 2030
Manufacturing will remain by far
the largest component of demand in absolute terms, at £242 billion in
2030, growing at 5% each year.
The three fastest growing areas
of overseas procurement spend will be: health infrastructure (predicted to
increase by 351% by 2030), transport services (254%) and recycling equipment
(250%).
Among the measures the CBI is
recommending to tap into this growth are the establishment of UK Government
contracting agencies. The CBI also calls on the Government to support UK public
services firms, including through overseas trade missions, and to stop using
rhetoric which could damage the sector’s reputation.
Katja Hall, CBI Chief
Policy Director, said:
"The size of the exports
prize for public services firms in emerging markets is growing at a rate of
knots, driven by a ballooning middle class and an ageing
population.
"This is a huge opportunity
for UK businesses, which have an established track record in many key growth
areas like health, transport and recycling. But winning public contracts in
these countries is often an uphill battle, so firms need a leg
up.
"To boost opportunities for
our exporters, we want the UK Government to set up contracting agencies with
priority markets, to help them navigate the procurement maze. We also want the
EU-US trade talks to prioritise public procurement.
"Politicians must guard
against using rhetoric which could damage the reputation of the UK public
services industry overseas. I want to see Ministers championing this important
economic sector and to get to a point where CEOs of public services firms are
just as readily invited on trade missions as
manufacturers."
The CBI research shows that the
UK has a strong track record in many of these growth areas but without
Government and EU support it will miss out on market share.
The CBI is calling for
overseas public procurement markets to be open to foreign
bidders:
1. The EU should proactively
promote more ambitious commitments under the Agreement on Government
Procurement (GPA) with more trading partners
2. The EU/US free trade
negotiation should include public procurement as a priority
3. The EU should not seek to use
retaliatory measures to open procurement markets 
The benefits of overseas
public procurement markets need to be visible to UK
companies:
4. The UK government should
establish contracting agencies within priority markets
5. UKTI should closely monitor
the impact of its new sector agencies, and explore the case for extending the
model into other areas of UK exporting strength
UK companies bidding for
contracts with foreign governments need to
be competitive:
6. Government should introduce a
new markets fund for exploring overseas markets which public bodies can compete
for
7. UKTI and its sector bodies
should advise businesses on how to be successful within overseas competitive
tendering
8. The UK government should
align commercial advice with UK trade priorities, and spin-out relevant
functions where feasible
9. UKTI and FCO engagement with
foreign governments should review the promptness of payment in public
procurement
10. UK politicians should be
mindful of the impact that adversarial rhetoric can have on UK export
performance.
Notes to
editors:
A link to the CBI's public services exports report is
below.
The 12 key emerging markets
examined in this report were: Brazil, China, India, South Korea, Turkey, Saudi
Arabia, Indonesia, Mexico, Poland, United Arab Emirates, South Africa,
Nigeria.