Commercial quandary

Britain’s diplomacy needs to help British business. The Prime Minister made this clear soon after the coalition was formed and William Hague has followed up, reorganising the Foreign Office and putting commercial diplomacy at the top of the agenda. To some, this risked making diplomats into salesmen and there was even dark talk of “mercantilism”. Both criticisms were far off the mark – there is nothing mercantilist in trying to help British businesses.

A year in, however, the policy is facing a number of other, more fundamental challenges. First, the government’s main vehicle for this policy – well-publicised, prime minister-led trade delegations – has faced criticism from a number of large companies, who feel pressured to coordinate deals with the visit for political reasons, or left out when they’re not asked to join them.

Second, many multinational companies which have UK headquarters – and so can get British support – continue to find they get more help from other countries where they may have offices, shareholders or listings. Tory ministers are keen to help but a commercial neuralgia stalks the civil service, aided and abetted by Lib Dem scepticism of getting too close to businesses. A senior executive I spoke to recently said he felt ministers and senior officials were happy to raise with foreign governments general issues – such as the need for better laws – but were often reluctant to protect them when they faced hostile government action.

Third, there seems to be doubt about how involved government should be. Many agree that governments can provide start-up financing when initial investments are too risky – as was done to develop mobile banking in parts of Africa. But how to avoid government trying to pick winners, which never works out the way left-wingers hope? On the other hand, focusing on the general business environment leaves UK firms at a disadvantage compared to their French, Italian and German rivals.

Businesses should not get everything they want. At a recent dinner I heard a well-known businessman argue that companies should break sanctions against rogue states in order to make money. Nearly everyone around the table nodded at his support for illegal behaviour. This is clearly nonsense. Instead the businesses should make the case for ending the sanctions.

Commercial diplomacy works and the government was right to prioritise this area. But many problems remain, at a time when the success of UK firms is increasingly important for the nation.