Industrial Digitalisation – A cure for the British Economy

I am delighted and honoured to have been asked to lead a Review on Industrial Digitalisation as part of the Government’s recently published Green Paper on Industrial Strategy. Today, we held our first launch meeting with top companies from across the country, including IBM, Rolls Royce, GKN, Cisco and Accenture, along with many other business leaders. Nick Hurd, Minister for Climate Change and Industrial Strategy joined us and we are hoping that this initiative will turn into a very strong partnership between Government and Business and create significant value for the UK economy.

You will probably  have heard about the new modern Industrial Strategy, launched by the Prime Minister recently, and in this blog, I wanted to talk about this and explain what we will be doing with our review – and why it is especially important for our economic future.

The first obvious question is what is Industrial Digitalisation? It has sometimes been described as Industry 4.0 or the 4th Industrial Revolution.  And you will hear jargon such as the Internet of Things, Connected Devices and Big Data.  But at its most basic, Industrial Digitalisation, and the purpose of this Review, is to work out how UK manufacturing can increase its use of digital technology and automation to become more productive and competitive.

Of course, there is nothing new in this – the essence of manufacturing has always been about using new technologies and finding new ways of working.  But this latest technological trend –connected, smart products that collect data and communicate it to users – is sure to create new business models, service offerings and very importantly, brand new industries.

But as always there is a global race to get ahead.  So the Industrial Digitalisation review is about identifying policy interventions and support mechanisms that will encourage advanced manufacturing and broader industry in the UK to invest more in digital technologies and drive faster innovation, and automation of industrial processes.

At the same time there is a wider economic and societal imperative for doing this. It isn’t just about numbers, processes and investment strategies.

If we get  this right, there is a massive prize – creating a key lever and a cure for the British economy. Creating opportunities for many new and highly skilled and well paid jobs, and giving more people in our economy the chance to feel less like they are being left behind. This is of course a message we have been hearing loudly from many of our communities, especially outside of the South East.

Get it wrong and we will de-industrialise more, losing out on high-value, well paid jobs and relying on imports even more than we currently do.  If this happens, it is sure to be harder for the UK to balance its books and living standards would inevitably drop.

A lot of what we do, will be about assessing what sectors would benefit most from this approach and the technologies where the UK has the opportunity to be world class in the future. We’re ambitious but we are realistic too – we can be at the forefront of the industrial digital age, but we think it is a long term job with no quick solutions to such a complex set of issues.

We will also learn from the approaches of some of our international competitors, such as the USA and Germany. We will report in the summer and the intention is that its recommendations could form the basis of Industrial Digital Sector Deal, and create a very strong partnership between business and government. 

Regular readers of this blog or those who have heard me speak will know that I am incredibly passionate and optimistic about the UK’s ability to benefit and become world leaders in this area.  I would really welcome your feedback and ideas in the comments section below.

A society that works for all

 

In this blog, I reflect back on 2016. I shot a selfie- video version, to help focus my thoughts, and you can listen to that here. It’s worth a watch, just for the breathtaking scenery, which for me, makes the perfect place for some considered thought. If you prefer the written version and a little bit more behind my thinking, then please read on.

2016 was certainly an incredibly eventful year to reflect on. It made me think back to
the last time that I felt the same tense political atmosphere and where the British people were so disenfranchised with the way the economy is working for them.

This quickly took my mind to the mid-nineteen eighties. I was a student at that time in Nottingham, a region that, like many other parts of the UK, where much of the working population had developed a deep resentment towards the political leadership. The headlines were dominated by the ugly scenes of the miners strike and Thatcherism. It was a horrible and in many ways a terrifying time. People were genuinely concerned about their livelihood and their future. At that point of my education, I was clear, that I would return to Germany or Austria after my studies, where economic prospects appeared brighter.

In many ways what we have witnessed in 2016 was similar. The Brexit debate unearthed a deeper level of dissatisfaction from the British working majority, than many had appreciated. It certainly had not been as visible as it was with the angry protests and strikes of the 1980’s. It was a more subtle and quiet protest.

And in 2016 things were of course also very different in other ways to 1985. Back then, the economy was struggling to recover from the recession of the early nineteen eighties and unemployment was at record high levels.

In 2016 the economy has actually been doing rather well, recovering positively from the recession of 2009 and unemployment levels are at a record low.

So, I have reflected on why it is, that the British people feel so disenfranchised.

The answer to that question is clearly not a simple one. The Brexit debate showed how complex and how divided the nation had become.

I don’t intend to go over the issues of the debate again, as that won’t help us. The British people have decided that we will Brexit.

But one thing about the polarized debate that I think most of us will agree on, is that we have, again, like in 1985, reached a point where there is a very high disregard and mistrust of political and business leadership.

And that has certainly made me reflect; how have I become one of those business leaders that is associated with not being trusted?

That is definitely not what I hoped for when I set out on my career path. When at comprehensive school in Leeds in the early 1980’s, I was told that anyone from any background (and mine definitely wasn’t privileged) can achieve, and create a success for themselves, if we work hard enough. That spurred me and that is what I set out to do, and by the end of my studies, I was determined to stay in the UK (instead of taking what looked like an easier option of returning to Germany) and try and help make a difference to a nation that needed every help from as many youngsters that were positively motivated as possible.

So,I’ve worked hard for 30 years and I do have a nice lifestyle, but somehow, I feel I can’t be proud of that. In today’s climate it is frowned upon by many as ‘elite and greedy’. Yet I have never seen my journey as motivated by greed. My drive has been the hope of being able to make a difference; helping create a better organization, for the people who work at Siemens, supporting the broader communities, including our local suppliers and society, where we have our factories and operations. Financial reward for myself and the organisation being a positive by-product of that. And I am clear in my mind, that only an organisation that acts responsibly towards society in its broadest sense, can be a successful one. And through that it will be profitable, which in turn is required to be responsible; to allow it to invest for the long term, in skills, innovation and to support its communities. So over the long term only a profitable organisation can be a responsible one.

And when I meet with other business and political leaders, there are very few, that I meet that don’t share the same values as mine in this regard. They, like me want to make a positive difference to their organizations, they care about their people and they care about society. Of course we don’t get it right all of the time and there are some bad apples among us too, and it is those stories that we read about in the media, and that distorts our view.

So, the first thing that I really wish for as we go into 2017 is that we see a little bit more balance and we see more reflection before making our judgements. Unfortunately, that is not easy in a world where emotional and sensationalized headlines tend to define opinions, instead of a more factual and balanced debate.

And that brings me to my second wish for 2017; a nation where everyone takes more responsibility. Business leaders, to focus on delivering value for society, creating local jobs and investing in the future. That is why I have decided to support the IPPR commission on economic justice which you can read more about here. Politicians should focus less on playing the person, that we see through the very often public and personal attacks, and to play the ball, which is to make the best possible economic success out of Brexit. Getting that ball in the net is now in the common interest of us all, including our European neighbours. And the media needs to reflect too, to help us have a much more balanced and thoughtful debate, as we all work out the best way to get that ball in the net.

And for all of us – the citizens of the UK, what I would love to see for 2017, is a debate that is much less polarized. More respect, towards each other, whether we’re born in Great Britain or whether we have come here from Europe like I did to add value and create a positive life for myself in what has now become my home. Or indeed to those that came here from anywhere else in the World. I don’t mind people disagreeing with my opinions or thoughts, but I don’t expect to be called a Nazi, or a European that has no place in British society. The last time I heard such language was back in the horrible 80’s in my comprehensive school, and there is no place for such ignorance and intolerance today, that has sadly been stirred up again by the Brexit debate.

I’m wishing for a much calmer and respectful discussion about what we all want; a better economy and a fairer society that works for all. Britain will always be a highly diverse nation and only tolerance of each other and everyone taking a responsible position towards society as a whole will help us create that.

​Post-Brexit Industrial Strategy in action

We are 5 months on from the Brexit vote and the debate keeps rumbling on regarding the options for leaving the EU. I suspect it will not just be months, but years before we really get to understand what our trading and economic relationship with the EU will be, but I am extremely hopeful that beyond the rhetoric, we really can get a good deal that works for the EU and the UK. Only a deal that works for both will be good for our UK economy.

Whilst all this goes on, I have been extremely encouraged by the way business has pulled together post-Brexit to champion initiatives that provide us the confidence to keep investing in this prolonged period of Brexit uncertainty. Sometimes it takes a ‘crisis’ to bring people together and drive with a stronger purpose towards a common goal and for the good of the country.

An area where this is happening, is in us pulling together and working in a much more aligned partnership with Government to create a much stronger Industrial Strategy.

The UK is at a critical point in our industrial history. We have a fantastic heritage at the forefront of the Industrial Revolution in the 18th century, and now we have an equally exciting and dramatic opportunity to harness the next industrial revolution – the Digital Industrial revolution.  This will bring investment, innovation and skilled jobs back to the UK, powering the future economy. 

We saw the beginning of this exciting revolution happening in Hull today, as the Secretary of State for Business Greg Clark and myself officially opened the Siemens wind power blade factory there.

This is incredibly good news, already having created 700 new jobs and 96% of those recruited from within 30 miles of Hull.

The scale of what Siemens, and our partners ABP, have created is quite unbelievable and needs to be seen to be believed. The picture attached only gives a small flavour of the transformation. In under two years, this site has been transformed to become a modern high value manufacturing centre of excellence from a previous derelict, run-down port that expressed the sadness of the post industrial decline that we have seen so much of over recent decades. 

But, whilst this is exciting and positive, it must only be the beginning. We hope for the creation of many thousands more jobs within this industry over the next decade. We especially hope for the creation of the new digital industries that will be supporting offshore wind power: Drone technology, Robotics, Virtual Reality and even Artificial Intelligence. 

We actually have no option, because for us to continue to bring the cost down for off-shore wind energy and stay competitive we have to deploy such automation and digital technologies. The problem is that this will have an effect of reducing the amount of jobs required in the traditional manufacturing and servicing of wind turbine technology that we have only just created! That is the bad news. But as we can’t, and don’t, want to stop this from happening, we have to balance it.  We can do this by, at the same time, creating the jobs that will develop and supply the new digital technologies, the robots, the industrial drones, the software that will support the deployment of these technologies. The good news is that these will be the new, even higher value, jobs that will over time replace more traditional and repetitive production tasks.

Put simply, we have to create more of the digital enablement jobs that will replace the jobs this technology itself displaces. Unfortunately, making sure this happens won’t be easy. There is a global race to develop the technology that will power this new world of Industrial Digitalisation and we can only get more than our fair share of it, if we develop a clear strategy of how we will develop and grow this new industrial sector. This strategy should be based on: a much higher spend on R&D and innovation; creating stronger and better coordinated ecosystems for research collaboration between academics, large and small business; and, finally, a parallel strategy to develop the skills of the future.

In summary, this Industrial Digitalisation strategy is essential to creating the high tech, high value jobs that will power this new 4th Digital Industrial revolution and if we get it right, it will be the key to rebalancing the economy and raising living standards.  We need to move quickly, but that is for another day.  For now, I would  like to conclude by thanking all of our team at Hull and our Partners for their fantastic efforts in making all what has been achieved possible. 

Munduruku tribe and balanced debate

On Thursday last week our head office in the UK was the location for a colourful visit from members of the Munduruku tribe and Greenpeace protesters. The topic of protest, I recognise as an important debate and it is an active debate going on all over the world; How do countries build energy infrastructure to meet an ever higher demand of energy, at the same time making it affordable and with minimum adverse environmental and social impact. In this case the Munduruku tribe is very understandably concerned about the potential negative environmental impact hydroelectric dam projects in Brazil’s Amazon would have on their environment and community.

I was sorry not to be able to make the impromptu meeting with Chief Arnaldo Kabá Munduruku and Greenpeace, but receiving one days notice via an ‘open letter’ in the FT is an unusual way to request a meeting. Had I received a letter or an email I would have made a firm arrangement with them. Contrary to subsequent reports by Greenpeace, two of my senior leadership team were able to change their schedules and were on standby to welcome the visitors. The Chief was an eloquent ambassador for his people and the meeting was conducted on all sides in a very constructive, open and respectful manner.

Firstly, let me make clear that I personally and at Siemens, we very much share the same values of environmental protection and care for communities as Greenpeace and it was good that in their meeting with us they recognized and confirmed that. Sustainability is core to Siemens culture and we have been top of the Dow Jones sustainability index since its inception.

Secondly, let me also be clear that Siemens is not involved in any hydroelectric power projects in Brazil. In fact, our information is that the mega dam project in question was recently cancelled by the Brazilian Government.
For any major infrastructure project, it is always a complex balance between matching human needs for things like access to electricity, more travel and higher energy consumption with the need to protect unique habitat and prevent further pollution of our planet.

So, these difficult issues need objective debate supported by facts and scientific evidence of all the options available, enabling Governments to consult with their communities and choose the solution that matches the needs the best and causes the least harm. Unfortunately, I have never seen a major infrastructure project that matches all criteria and everyone’s wishes.

Regarding this Greenpeace organised visit I’m afraid, I have to question both the process and balance. What was the real intention of bringing this debate to Siemens in the UK? Of course we will have all identified with the potential risk and felt emotionally touched by the Munduruku tribe and their fear of being displaced. But do we now have a clear view of what the other options are? Would these create even more social displacement or negative environmental impact? Was there enough objective evidence from all sides?

We seem to be living in a new world of fast and social media that is mainly focused on sensational headlines and with complex and emotional issues like this debate we need it to be much more thoughtful, rational and fact based.

I’m personally very concerned by this trend and that we are allowing less space for experts views and balanced debate. Michael Gove’s now famous quote during his Brexit campaign of ‘Britain has had enough of experts’ a damning example of that.

I will certainly continue to listen to experts from all sides of any debate. On this particular one, I thank Greenpeace for providing me their view, but I will not be bullied into a position through headline grabbing campaigns at very short notice. If they’d like to meet me in the future – do just contact me in the normal way!

Science post Brexit


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Most of us in business and academia are trying to be positive and find a way forward through this Brexit uncertainty – to best prosper outside of the EU. Today, I spoke at the European Open Science Forum (#ESOF16) on UK Science after #Brexit.

The importance of Science must be placed as a key priority in the Brexit negotiations and today, in my speech, I focused on four priorities to help us retain confidence.

(i) We must send a very strong signal and work hard to ensure we stay part of collaborative EU science programmes like Horizon 2020. With that we should stop any pause to UK participation in these programmes, which some evidence suggests is beginning to happen (although at Siemens I’m pleased that we have not seen this happening yet).

(ii) In the Chancellor’s Autumn Statement for us to see a strong prioritisation for Science and R&D. There should be a committment to cover more than the £850m / year science funding shortfall from the EU in whatever mechanism is agreed as our EU Science participation after Brexit.

(iii) To counter balance this period of Brexit uncertainty with the creation of a plan between Government and Business to drive up gross R&D from the current 1.7% of GDP to greater than 3.0% over the next decade. This should be a key part of the new Industrial Strategy, Prime Minister Theresa May has committed us to creating.

(iv) We must send a very strong signal that scientists and engineers working and living here are welcome to stay for as long as they wish in whatever immigration system might emerge post Brexit. This is of course not the intended end point, which must allow much broader free movement of people for work, but it’s an obvious starting point given the skills shortages in this space.

My final observation was that we must send a very strong message to those Brexiteers who still think there is a battle to be won. We are now all in this together and I’d like to now see much more coming together on how we want to retain and strengthen our science, innovation and engineering base post Brexit.

And the other point we need to unite on fast, is a strong campaign to root out racism and xenophobia so that those working here, who are currently fed up of the negative Brexit rhetoric and are eying up lovely engineering and science jobs elsewhere, change their mind and stay – like most of us in Britain want them to.

I was horrified to speak to Scientists at ESOF who have been targets of this type of verbal xenophopic abuse, that the Brexit campaign sadly amplified, and we all now have a responsibility to eradicate it.


 

On U-turns and the way forward after Brexit vote

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Three weeks on from the Brexit referendum a few thoughts from myself to also help explain Siemens’ relatively high media appearance since the vote. At two points we were trending high on the BBC news website.

In a visit to the UK last week, our global CEO, Joe Kaeser, reiterated our commitment to doing business in the UK and his hope that we can grow our business here, regardless of the outcome of the vote.

Some people have expressed surprise about this, given how vocal we were during the EU referendum campaign.  But we were always clear that we were committed to the UK and while there will definitely be uncertainty ahead, my view is that there is no point looking back with regret.  Instead, I think the right and responsible thing to do is be positive and work doubly hard to make the best possible success of the new situation.

I liken it to the tough times of 2008/2009, where  businesses broke with the past and retained skilled employees to ensure they were better placed for the upturn when it came.  Significantly that period also saw a new partnership emerge between business and government, with the latter recognizing that it could, and should, use the policy levers at its disposal to improve the business environment for sectors where the UK has or could have a comparative advantage.

This new style of ‘Industrial Strategy’ again becomes massively important during this post Brexit period of uncertainty. I  therefore welcome last week’s announcement that BIS and DECC are to merge into a new government Department with an explicit remit to extend Industrial Strategy, under the leadership of Greg Clark MP. And this is one area where Siemens is keen to get involved and support the outcome.

In short, Brexit creates an even stronger imperative to get to grips with some of the issues that have been undermining the UK’s competitiveness and business environment for years. As part of this Industrial Strategy, I would like to see measures to boost productivity, as per some of the suggestions made by Sir Charlie Mayfield in his recent report on this subject. You can read more about this here

To support this, Investment in innovation and research is absolutely crucial as is creating a skills system that puts equal emphasis on high achievement in academic and vocational technical skills and through that drives a higher level of national ambition to be amongst the best in the world in our focus areas of the Industrial Strategy.

Finally, we have to end the chronic under investment and delays to infrastructure investment which have long bedeviled the UK.  It was welcome and significant that the Chancellor has recently indicated that the government may be willing to take advantage of the current low cost of borrowing to invest more in infrastructure.

So productivity, innovation and infrastructure are key.  It is my strong view that the length and depth of any Brexit fallout, will depend on how successful we are in tackling these three issues.

Dragging against these positive drivers will be the speed at which we can negotiate a new deal with the EU. At Siemens we hope a strong relationship will emerge, but we accept that it will take time. In my view, many remain far too optimistic about the speed at which this new relationship can be forged and indeed about the trading relationships with the rest of the world also. The negative and often inflammatory rhetoric against our neighbours during the campaign will take some time to heal and now requires massive diplomatic skill.

To summarise, we have to recognise and adjust to the new situation we find ourselves in, that there will be uncertainty probably for longer than many think, but we need to be optimistic that a good solution can be found, and whilst that is being worked on, we need much higher focus on driving productivity, innovation and infrastructure to help keep business confidence high. This isn’t a u-turn, it is responsible and common sense.

 

Calm after Brexit vote

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I spent some of the weekend at London Pride, a tremendous celebration of diversity and inclusion.

It was an incredibly enjoyable occasion and time to reflect after an EU debate that at times bordered on xenophobia and hatred.

We clearly now need to come together as a nation and this festival gave me hope, that xenophobic arguments can be put behind us, as we now define a future for Britain outside of the EU. For me personally, that is a pre-condition of any sensible Brexit plan and I hope the new political leadership makes that clear from the start.

And where do we go from here in terms of business?

I hear calls for a second referendum or for legal challenges against Brexit. I understand the emotion behind this, but don’t believe it’s the right way to go. It was always a one time referendum and anyone who thought it was time for protesting should learn from that and those that felt they should have voiced their opinions more positively should learn also. That is one of the positive outcomes I hope for from this referendum, that more people, especially the young, who voted in favour of remain, get more involved in politics and make sure they hold political leaders to account on delivering their Brexit promises. Including those of a stronger economy, more money spent on public services and a fair and respectful immigration system.

This is however not the time to have another lengthy debate on whether we made the right decision or not. That just creates more uncertainty, and we now need to do the opposite. Create certainty, and a plan that gives us a perspective and confidence.

I always did say, that Britain will survive outside of the EU, so I think we now need to get on and make that survival plan as strong as possible. At Siemens we will throw our weight behind this as the UK very much remains an exciting market for us.

As the wider business community, I think we now have to focus on three key things.

1. To stay calm and be a stabilising movement to help calm markets and restore confidence.

2. To work with the political group that emerges as the lead negotiatiors with the EU, and support and put pressure on getting a clear economic plan asap. Waiting for 2 years or even 6 months will slow investment levels and would not deliver on a stronger economy.

3. As business, we need to listen to the feedback and reflect on our role in society. This was clearly also a vote from communities feeling dislocated and alienated by ‘Big Business’. We therefore need to strengthen our positive impact on society and create a stronger narrative for the future of our communities. At Siemens, we take our societal role seriously and are keen to strengthen that further.

In the end, we will see how well we did, and in a couple of years time we’ll reflect again, and hopefully we will have made good progress on what Brexit looks like. If we haven’t, then maybe the next generation will have to take it in a different direction, but for now lets stay calm and do our best to make a Brexit plan work.

 

What sort of Country does the UK want to be?

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So, we have less than two weeks to go before polling day for the EU referendum. In many ways it’s been an annoying debate and I am sure, like me, most people had hoped for a calmer and more fact based discussion.

One positive thing, however, is that it has definitely got many more people interested in the topic and so our understanding as a nation of the good and the bad of the EU has risen.

I agree with many I speak to, when they say it has been difficult to trust the competing claims that have been thrown at us. In the absence of that, everyone voting will be using their own judgement on which source of information, opinion or ‘expert’ they trust most.

The big questions to reflect on include:

Can we spend much more money on the NHS if we Brexit, or will the loss of economic activity mean we end up investing less.

Will staying in the EU mean an even greater flow of migrants that are clogging up our public services, or are EU migrants an essential part of our successful and growing economy that allow us to invest more in public services and indeed to work in them.

And can we go it alone on Free Trade agreements, like we are told Switzerland, Albania and others have, or will us leaving the Single Market take us backwards and see reduced trade and economic activity.

I’m pretty sure the next few days won’t add any new killer arguments to the above, but I would like to challenge us to think more about one very fundamental question:

What sort of a country do we want to be?

One with self interest at heart, where our aim is to leave favourable trading arrangements with the EU and trade more independently with the world and try to become richer on our own.

Where we let others deal with the refugee crisis, because we are lucky that we are an island and somewhat more remote from the shores of Greece and Italy.

Where we go it on our own on matters of workers’ rights and equality as we don’t care about that further a field.

And where we close our borders to our neighbours, but expect us to continue to live, travel and work in their countries as before.

Now, even if you believe all or any of the above ‘self interest’ arguments are achievable, it certainly isn’t the Britain that made me adopt it as my home.  When I travel around the World, I am proud of the UK as the positive contributor to peace and prosperity within the EU we have always been.

I don’t want to live in a Britain  that is frowned at for having gone it alone and leaving others to sort difficult times on their own.

And even more fundamentally, I am convinced that such an isolationist approach does not work anyway. When I came to Britain in 1974 and the economy here was labelled the ‘sick man of Europe’, the solution was to open our markets and outlook more. It wasn’t to become more isolationist. Our closer integration of trade with the EU was then, and is today, a key reason for our strong economic success since the 1970’s, despite some of the challenges that always come with working in a larger union.

Moreover, collaborating in that larger union is the best way to resolve 21st century cross border issues; crime, refugees, environmental concerns, political instability and conflict. These require common regional solutions and if we leave the EU we will weaken the UK’s capacity to respond.

And we should remember that times will get better, also within the EU, and they will pay back the countries that helped most in working together to get through the tougher times. Sure, Britain can win some new friends, and try to trade more independently with countries like China. Our exports to China are however only 3% of our total, with 44% of our exports going to the EU. And speaking from personal experience trading with such economies, as interesting as they are, will not be the new honeymoon we had hoped for, and we would soon be missing the strong partnership we divorced should we Brexit.

An exciting future for UK Manufacturing inside the EU Single Market

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Yesterday,  I got together with fellow CEO’s of Airbus and GKN, Paul Kahn and Nigel Stein, for a press conference, specifically on the future of UK manufacturing in relation to the EU referendum.

We represent three very strong UK manufacturing organisations, and together employ 35,000 people directly in this sector here.

We were joined by Vince Cable, Former Secretary of State for Business, Innovation and Skills, who reminded us of the importance of UK’s manufacturing sector. Our Sector is responsible for nearly half of all of UK’s exports and two thirds of all Research & Development spend of UK Business, making manufacturing Britain’s key productivity and innovation engine.

Amber Rudd MP, Secretary of State for Energy and Climate Change, also spoke: “The future of job creation in this country, which means financial security for working people and their families, requires us to be in the single market, and yet leaving the single market is sole economic policy the Leave campaign has committee to.”

All of us speaking at this event have indeed become very concerned that the Leave campaign want to leave the single market, but believe that we can ‘retain access to it’. With our combined long term experience of operating within the Single Market, we don’t think this is realistic or achievable – and we want that message to be heard – that leaving the Single Market would be damaging for our industries future.

We however kept this conference very positive, as we want to see beyond the doom, gloom and scare stories of the current debate.

We, some of the leaders of our sector, very much look forward to a future of optimism and excitement. And let me explain why that is.

There are great things happening in manufacturing with huge opportunities in exciting technologies, like driverless cars; space technology, electric propulsion on aircraft just to mention a few.

This is where the jobs, skills and growth of the future for our industry are and we want to see more of that taking place here, in the UK.

However, the regulatory frameworks and research collaborations in these areas require scale and the big players – the EU, China and USA – are leading the way.  Outside of the EU, the UK will be less influential in those discussions and we will have to play by other people’s rules if we want to sell to them.

One such example is our brand new wind turbine factory in Hull, that will produce off-shore wind turbine blades and is creating 1000 new jobs.  We and the wider industry, are very keen to use this as a catalyst to build a much bigger industry in the Humber region and beyond. New engineering and service companies as part of our supply chain, and an innovation and skills centre creating technology of the future, that will enable the region to compete on a global stage and start exporting this technology at scale. We however can’t do this alone, we will need to collaborate with other EU countries, especially Germany and Denmark.  Inside the EU this is very easily possible.  Outside much less so.

So being very clear on this, I strongly believe that being outside the EU will count against the UK when investment decisions are made and we would miss out on these fantastic, future opportunities and the jobs and economic prosperity that will go with them.

And let me also explain why being a fully paid up member and inside the single market is so important, by using some practical examples.

Early in my career, as a factory manager, I remember the days when we used to have to put a different widget on every component that we shipped: a different one to Italy, a different one to France, a different one to Germany.

Today, working with other countries, through the Single Market, the UK plays a leading role in shaping industrial standards.  This has seen us reduce the number of standards in this area from 160,000 standards down to about 19,000 today.  In many cases 28 national and often protective regulations have been replaced with a single one.  Just imagine how this has enabled factories to become more efficient and hence bringing consumer prices down.

Creating this level playing field of standards has also had a real impact on everyday lives, but we tend to forget these.

EU Regulation and standards have massively improved the environmental impact of business and consumers here in the UK.

On a more personal level,  I remember how British beer was shut out of German markets because of the restrictive beer purity laws there.  That’s no longer the case because of Single Market rules.  I recall coming to the UK from Germany in 1974, when showers were not the norm in many British homes. I wanted to install a German made power shower but that wasn’t possible due to restrictive UK plumbing regulation.  Maybe you can remember the gravity fed hot water systems that were the British Standard back then, that meant our showers were a strong dribble at best. EU harmonisation of regulations brought power showers to the UK!

These may sound a little trivial, and sometimes amusing, but there were many, many other examples of such barriers to trade that have been systematically broken down by the Single Market.  Sure, this has created a bureaucracy, as these negotiations are complex and take a long time, and sometimes the EU has got a little too carried away with high profile examples of bananas and kettles, but we don’t hear of the 80% that have created a better and fairer EU.

To be clear I’m not advertising for lots more regulation. I have become very British and quite dislike it too, but the fact is, like it or not, it is just part of grown up responsible business.

So, my position from this event is clear: being part of the EU is good for the UK economy. We see no economic upside from leaving.  The EU is not perfect, but the benefits far outweigh the costs, and the notion that we can leave the single market but retain all of its benefits is delusional.

And in conclusion, our message yesterday was a simple one:  British manufacturing is stronger in the EU’s single market.

The truth about the EU Single Market

Communicating effectively about our EU membership is hard. It is a very complex issue, as a slight storm on my twitter account regarding the Single Market v. Free Trade Agreements (FTA’s) yesterday revealed.

I’d like to pick this issue up in more detail, which I feel is being misrepresented in this Brexit debate. The truth is that a Canada,  Albania or any other type of Free Trade Agreement is considerably inferior to the EU Single Market we are a member of. The Brexit campaign has now loudly expressed their wish to leave the latter, but has given no explanation of the risks this represents to our economy.

Allow me to explain the difference between an FTA and the Single Market using a very practical, but real example.

I came to the UK with my family from Germany in 1974. One year after the UK joined the EU and therefore the European Economic Community. Prior to this the UK, like most European and Global markets had worked to protect their markets through import tariffs and protective regulation. So there was no single market and no or very limited free trade between the UK and Europe.

We wanted to import the car we had owned in Germany, a lovely and reliable Opel Kadett. It however made no financial sense, because the import tariffs and numerous technical changes that would have needed to be made to the vehicle, would have cost more than the value of the vehicle itself. Our next option was to buy an Opel Kadett ready imported by the manufacturer to the UK. This however would also have over stretched our budget, because Opel had to pay import tariffs and the cost of carrying out all the technical modifications in their factory before exporting. So instead, we had no choice, like most British people at that time and bought a Morris Marina. As anyone who owned one of these will no doubt confirm, it was one of the worst examples of British design and innovation to come out of UK’s 1970’s industrial decline. I can remember more journeys in which the car broke down than making it without trouble to our destination. Certainly not the Opel we were used to!

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Introducing an FTA would have removed the import tariffs on the more reliable Opel we wanted. However the much larger cost both physically and from an administration point of view were the numerous required technical changes. And it is only the Single Market that can and has removed these ‘non-tariff trade barriers’. Put simply, an FTA alone, would not have allowed us import or buy the car we wanted in the UK. But the Single Market would have made that difference and today provides for that greater consumer choice at better prices.

The EU single market has successfully harmonised such regulations across the entire EU for automotive and numerous other industries. And it is still being worked on now, like the harmonisation of EU mobile phone charges recently demonstrated very visibly. Now, carrying out this harmonisation is very complex and takes a long time. Every nation naturally wanting to influence to ensure their own standards remain. But when achieved, we have the situation we largely have today. A Renault made in France is as accessible to the UK consumer as is a Toyota made in the UK. It is even now possible to buy British brewed beer in Germany that for a long time protective laws in Germany prevented. And the value for money, technology and innovation has massively improved for all in the EU, as opening, smartly regulating and standardising markets always does. Doubters at the beginning of creating this single market, were concerned it would mean the end of the last of British engineering industry. The truth is that the previous closed and protected market was killing the industry and the decline would have continued at pace, had we not joined the single market. Today, the UK’s automotive Industry can hold its head up high and we are exporting more cars than ever before – the EU and single market having been the enabler and not the barrier for this. An FTA with EU markets alone would not have achieved that.

It is true that sometimes EU regulators got carried away, we’ve all heard stories about bananas and cucumbers, and we must work to stop such nonsense, but to use those high profile yet minor issues and ignore the vast progress made over decades in breaking down thousands of protective practices, is plain irresponsible. And that is what leaving the single market would mean and no FTA can replace that.

In summary, when we are told that we can leave the Single Market but still have access and all the benefits of it, that is not true, as we would have no influence on the harmonisation of the market and we would increasingly be confronted with the non-tariff barriers as I describe above. And then there is another key reason I have not yet covered, which is that FTA’s provide no or very limited access to free trade of services. That is so for Albania’s and Canada’s FTA with the EU and even Switzerland’s very advanced deal under EFTA provides for no free trade on financial services.

The Brexit campaign arguments to leave the Single Market, simply do not stack up economically.

Business informing the Brexit debate

Tomorrow marks the start of the official referendum campaign period for remaining in, or leaving the EU.

In advance of this, we at Siemens, decided to release a formal statement on our EU position and shared this with our 14,000 employees here in the UK.

You can see this statement here.

We are not the first company that has done this and we took this decision because we had begun to get more questions  from our employees about what will happen to Siemens in the UK, if there is a leave vote.

We have in the past been criticised by the leave campaign for expressing opinions on this topic. I however find it entirely appropriate and indeed necessary for business to continue and help inform the debate as we near the referendum. Siemens is a major employer and investor in the UK and a major part of the debate on Brexit is about the economy. As ever, we have also made clear that this is a decision for the British people and hence this and other statements we have made on the issue explains what Siemens thinks about this issue, and is not telling our employees how to vote.

One of the benefits of the EU we mention, is the benefit of the UK participating in pan-EU research initiatives, which will help to shape the industries of the future. This kind of EU collaboration was the topic of a discussion I participated in with other business leaders at Downing Street this week. I described a new EU based partnership that Siemens is developing with Airbus to develop hybrid electric propulsion systems for Aircraft of the future. I’m very hopeful that a number of UK Universities will participate in this research programme – and in that way create commercial opportunities for engineering and manufacturing companies large and small to get involved in the UK – and ultimately create jobs for that exciting future industry here. I’m very sure that if a Brexit did occur, most of these jobs will be created in continental Europe and not here.

It was great to see EU based business fully aligned at this meeting and totally committed to a better and stronger EU, and wanting Britain to remain at the very centre of that.

Picture of the business team in the Number 10 gardens is attached. The team included the CBI (who organised the event) and the equivalent business representation organisations in Spain, France, Germany and the Netherlands. Together the representation organisations from these four EU countries alone have created and maintain £377bn worth of investment in the UK and represent 3.3 million companies.

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Sovereignty or Interdependence?

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As I continue to participate in many EU referendum debates, I have a strong feeling that the ‘remain’ campaign is winning the argument regarding the economy. All credible studies and facts lead you to that conclusion. The ‘leave’ campaigners’ arguments on the same are definitely lacking credibility and certainty.

The arguments around sovereignty on the other hand, seem less clear. If we are outside the EU,  Brexiteers argue with conviction, we will be able to make our own decisions, free from the interference of Brussels.  It is a very simplistic and seductive argument, especially as most of us aren’t political theorists, and when we hear the word sovereignty, we automatically think ‘independence’, which is a good thing, right?

However, as I have thought about this more and tried to find a simple way to respond, I have started to think about how this relates to our own lives. We all like the concept of being independent and free to do as we please, but we also rely on each other to make our communities work. We are interdependent.

This  ‘independence vs. interdependence’ dichotomy has been central to the EU argument since even before we joined. And while the idea of ‘taking control’ is a good slogan, I actually think that interdependence is one of the strongest arguments for staying in, because we can see how we can apply this to our own lives.

Before coming to the UK, for example, my family lived in a large block of flats in Germany. There were about 50 families in close proximity, sharing playgrounds, washing facilities, parking etc. Now it’s obvious that this kind of community requires rules, some formal, some informal, to get along, and I vividly remember that there was one family who refused to stick to the rules and were deeply unpopular, including their children, who became ‘outsiders’ when it came to activities in the playground.  This is definitely not an argument for teutonic conformity, but even at the age of seven, I  had a basic sense that people need to work together to make friends and to be an ‘insider’.

I also quickly learnt very early on in my business life at Siemens, where we have plenty of necessary and sometimes some not so smart rules, that the only way to change the latter with success, is to work yourself into a position to change them from within and for the good of the entire corporation.

Now, take these arguments and expand them to macro-level.  No country is truly independent or sovereign.  We in Britain are interdependent, with our European neighbours in particular, when it comes to dealing with 21st century challenges, like pollution, cross-border crime, financial instability and terrorism.  Therefore, we voluntarily give up some sovereignty, pooling it with others in the EU, because together we are stronger on those issues.

It’s true that sometimes we are not happy with the rules, and indeed that they are not smart, but here too, I think we can learn from our personal experiences, where it is mostly much better to work to change the rules from within, than being ignored on the outside.  And contrary to popular opinion, the UK isn’t always on the losing side in the EU.  I speak to European colleagues and people in Brussels regularly and they tell me how important, and how much success, the UK has in making the case for free trade, reducing regulation, tackling climate change and much more. I’m therefore quite astonished by the lack of confidence in the UK to believe that we can’t be an even stronger leader in the EU, changing and improving the system from within. Because we most definitely can!

And what happens if we do run away and try to set just our own rules?  Well, it’s simple, we actually lose sovereignty.  Europe is not going away and we can’t tow ourselves into the middle of the Atlantic and try to cut ourselves off from trade and political and economic system on our doorstep. We would simply have less control over the pollution drifting over our borders; the cleanliness of our seas; the standards of financial regulation affecting our economy; the consumer and trade regulations to which our exporters and importers are bound in or out of the union; the security and economic crises sending shock waves – such as extreme migration and terrorism – deep into domestic life.  We would end up being on the outside looking in, while others make decisions which affect us.  That doesn’t feel very much like sovereignty to me.

And who is it,  that would lose out if we do decide to run away and try to become more sovereign? It will  not be the Brexiteers. It will be our next generation, just like it was the children of the family living by its own rules that I described at the beginning of this blog. The parents had made their choice  to make their own rules and to live largely in isolation. But their children had not chosen to be excluded from play and lots of great experiences.

In the same way, let’s not allow self interest and isolation ruin the opportunities for generations to come. Instead, allow them to be part of a proud outward looking Britain that is helping drive equality and better chances for all in the EU. That is the Great Britain that I have adopted as my home 40 years ago and I’d like our future generation to have the same chances Britain has provided for me.

Was the 2016 Budget enough to boost productivity and exports?


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Clearly, with predictions of a slowdown in UK growth and potential headwinds in the international economy, this was always going to be a difficult Budget for the Chancellor. It appears that he has avoided loading significant costs or policy burdens on business and the reduction in Corporation Tax is going to get a broad welcome from business, although in practice it’s more of a headline grabber, than a significant boost to the economy.

There was some good news on infrastructure investment, particularly in the North of England (£300 million for improving transportation links there and the green light for HS3) and on Crossrail 2, which is all very positive.

And tucked in amongst the big announcements on education and academies was the launch of a welcome review of how to improve the study of maths for 16-18 year olds. Siemens has a major programme to promote STEM education, the Curiosity Project, which we are passionate about in supporting this important topic area.

Overall, however, I would have liked to have seen some more ideas on productivity and for boosting exports.

The OBR has identified our relative poor productivity performance as one of the largest drags on UK’s economy.

A single budget will of course never find a ‘silver bullet’ for such a complex issue, but an obvious opportunity missed was on business rates. Companies like Siemens had argued that in their review the government should have taken steps to exempt productivity boosting plant and machinery from rateable values, so I am disappointed not to see this happen. There were also no further steps to enhance either the UK’s capital allowance regime or R&D tax credits.

I guess we’ll have to work closer with Government to help deliver more support for innovation in its forthcoming National Innovation Plan.

And there is the work of the Productivity Leadership Group, led by Sir Charlie Mayfield, which I participate in, and will make proposals to government in the Summer

So, we still have opportunities to influence and develop policy and support mechanisms that brings all of the elements together into a more coherent Industrial Strategy. This budget alone hasn’t provided very much more concrete action in that direction.

Is our press providing a balanced EU debate?

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I’m finding some of the unbalanced horror stories in our tabloid press tragic relating to this EU debate. It is actually embarrassing if looked at through the eyes of people listening in from mainland Europe (and the problem is Europeans read our news, whilst most in the UK don’t read theirs!).

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The first two headlines above deserve no comment, but take the third, which spreads fear about unruly EU migrants coming to the UK. A closer analysis of the data shows that EU migrants living in the UK are about half as likely to commit a crime than a native British person. That doesn’t mean we shouldn’t deal with the very high crime rate Britain has (one of the highest in the EU), but no evidence suggests EU migration is a root cause. Furthermore, all credible reports analysing the economic impact of EU migration on the British economy value it as hugely positive, something rarely reported on.

Now let’s look at it from the other side. One of the European cities I enjoy popping by when on holiday in Austria, is Ljubljana in neighbouring Slovenia. A vibrant and pretty city and massively improved since joining the EU. On my last visit, whilst having a coffee, we observed an extremely badly behaved group of British tourists. Drunk, loud, abusive and disrespectful. You all know the sort of scene I’m describing. I am extremely proud to have adopted Britain as my home, but in these moments, I become deeply ashamed. The real point however being the local Slovenian who reads misleading headlines like the one above about his nationals living in our Country.

This important EU debate deserves so much more openess and balance and I sincerely hope the media in question begin to take their responsibility more seriously.

I have been pleased to see some of our Regional Press taking this debate on with more responsibility. Here a good example. Well done Manchester Evening News!

http://www.manchestereveningnews.co.uk/news/greater-manchester-news/things-eu-done-for-manchester-11020085

My summary of the key EU referendum arguments so far

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Our views are invariably shaped by our background and environment and I freely admit that as someone who came to the UK from Austria and Germany over 40 years ago, I have a strong emotional commitment to the idea of European countries working together for their mutual benefit.

But I am also a business person and having spent 30 years working in the UK, always across EU markets, and now as head of Siemens in the UK, there are some hard-headed business reasons, both positive and negative, why I think we are stronger in.

•  EU membership for us, makes  Britain a better place to do business, through free trade, collaboration in research and development and being able to better influence the destiny of our UK based industries.

•  UK business  is  better served by being influential in defining the future direction of the key industries in Europe. This can only be done from within. Outside, our impact and hence the potential to grow our business here in the UK will be marginalised. The future of digitalisation, which will be the foundation of the 4th Industrial revolution is a key example. We can get on the inside, drive the standards and innovation and let British industry thrive within it. Or we can leave the EU and hope that the people in the EU will set the direction in the best interest of British business. But that sounds very naive to me, and generally speaking doing business on the margins and without influence doesn’t turn out well.

•  Brexit would hit business with significant uncertainty in already extremely uncertain times. Uncertainty is always a killer for investment and jobs.

•  Free movement of people works both ways.  The majority of our Siemens UK employees (93%) are British, but we do have skills gaps which we fill with EU citizens from time-to-time (who pass these skills on to our UK employees).  As important, we often send UK employees to the EU, helping with key skills there and bringing knowledge back to the UK.

At the same time, while I respect the intentions of many in the Brexit camp, their arguments, to me, simply do not add up.

•  They have not set out an alternative model and seem to be spending more time arguing amongst themselves about whether we should follow the approach of Switzerland, Norway or somewhere else and none of the options look attractive. Nigel Farage in our BBC debate yesterday said ‘he does not want to be part of the single market’, which would definitely mean the introduction of trade restrictions, which we currently don’t have.

•  A new free trade deal would not be handed to us on a plate. Put simply, it won’t be. If it was, then many more EU countries would take an exit path, and the EU is not going to make that path appear easy. The argument that the EU has more to lose than the UK is also flawed and incorrect. The truth is that both would be significant losers and I never subscribe to a path where the only certain outcome is that everyone loses.

•  Their claim that to leave the EU is to get control of our borders back is dubious at best. All European countries outside of the EU that have this trading privilege, e.g. Switzerland, Norway, Liechtenstein  and Iceland, have to comply to free movement of EU labour. And the UK cannot have its cake and eat it on this one either. If, like Nigel Farage implies, he will sacrifice free trade in order to restrict free movement, then we should have more honesty on that and make it clear that we will pay the price of reduced trade, business investment and jobs.

•  Brexit won’t mean a bonfire of regulation.  As a business leader I have some sympathy with this.  There are areas where we need less EU regulation.   But if we follow the Swiss or the Norwegian approach, as some are suggesting, we will still have to comply with EU regulation, we just will not have a say over it.  Also common standards and rules across the EU actually reduce non-tariff barriers and in many cases improve the competitiveness and reduce the regulatory burden on business.  On balance, EU standardization has improved the productivity of our 13 factories in the UK. It is also inconceivable that a UK government would simply ditch EU rules on health and safety or working hours, for example, and not replace them with UK equivalents . Put simply, in or out of the EU, a life with no regulation from the EU is a fantasy and whilst business often doesn’t like being regulated, in a modern global world it is just grown up business.

•  We can spend our £20 billion EU budget on things like the NHS, roads and schools. This argument is really scraping the barrel.  Firstly, the figure is closer to £10bn, when you count back our various rebates, etc.   Secondly, we would spend most of this on gaining access to a free trade agreement and access to EU research programs. The little that remains would be dwarfed by the negative effect on economic growth.

•  The new deal (negotiated by David Cameron) for the UK with the EU has achieved nothing.  Put frankly, no deal would have been good enough for most anti-Europeans.   My view from observing this from both sides of the channel, is that this negotiation has been an incredibly fine line. Of course, I can see that many in Britain would have wanted more, but looking at it from the other side, we have been seen as rebels and extremely unhelpful of the greater EU good. Being a big enough rebel to bring about change and start moving the pendulum in a trajectory of a reformed EU for the benefit of all is a good thing. Being a rebel seen as only ‘out for themselves’, would have killed the negotiations from the start. I think we have done enough to get the Brussels bureaucracy pendulum swinging in the other direction, and in the end the EU will thank Britain for having started that process. Had we pushed too far, at this point, we would have started a very negative relationship with our neighbours, which potentially could have become very bitter, with negative consequences for all.

To summarise, the anti-European side has, to me, simply not set out credible arguments for leaving and their case is based on a range of uncertainties with a rather large dollop of wishful thinking – and wishful thinking is not normally the good basis of sensible business.

But I want to end where I began, with the emotional argument for Britain remaining in the EU.  To me there is a much bigger picture here. This incredibly important debate is about the future of Britain’s standing in the world and the future of Europe’s prosperity as a whole.   And whilst the UK will always be respected for its culture, professionalism, creativity and humor, I’m convinced we will gain much more influence and respect as a catalyst for a better EU rather than heading for the exit door.   After all, Britain has usually seen its national interest as being best served by being engaged with Europe and much of the modern EU agenda – the single market, enlargement, the drive for free trade and competition – has been driven by the UK.

In short, the fundamental reasons for the creation of the European project, to bring down barriers between people and create a peaceful Europe for future generations, are as strong now as they have ever been.   My view is clear; Britain is stronger in the EU and the EU is stronger with Britain as an influential member.