New research from Millward Brown confirms the stereotypical view of Britain as a nation of shopkeepers and accountants. Eight UK brands feature in its ranking of most valuable global brands, three of them retailers and three of them banks. That might seem to be a pretty good record, but closer analysis shows that the UK's "global" brands are growing far more slowly in value terms than those of our main competitors.
UK brands that appeared in the list both this year and last grew by 6.7 per cent in value terms, whereas the comparable figures for Germany and France, for example, are 10.5 per cent and 18.8 per cent respectively. Millward Brown suggests that one of the main reasons for the strong performance of France and Germany is their high number of luxury brands—cars in Germany and fashion, food and drink in France. Luxury brands make up one of the fastest-growing sectors by value globally, principally because luxury goods are in such demand in emerging markets.
The research firm believes the UK could be missing an opportunity to capitalise on growth in emerging markets. That may well be so, but the reason is not that we are not producing goods and services that appeal to these markets, but that we are selling them off.
This matters—although, judging by the almost imperceptible ripple foreign takeovers generate on the UK corporate pond, you might not think so. Orange and O2—which featured in Millward Brown's list of top 10 UK brands last year—recently joined a long list of UK companies passing into foreign ownership. These may have raised concern at local level by people worried about job losses but have passed largely unremarked. The general view is that foreign takeover of UK assets is all part of a healthy and dynamic free market.
Our European neighbours clearly don't agree. Vodafone's acquisition of Mannesmann in 2000 caused a hue and cry in Germany, and the mooted purchase of Danone by PepsiCo sent the French government into meltdown. Such countries take a longer-term approach to nurturing and investing in their critical industries than we do in this country, and protect them from foreign predators.
The playing field is not level. Some argue that foreign interest in UK brands is testimony to our brand-building skills. This is naïve and misguided. The interest is more to do with the fact that we can't exploit these brands once we have built them. Again, there is an argument that ownership is less important than the way brands are managed. Mini is thriving under BMW, and thriving brands create employment and wealth.
But brands create most wealth for their owners, because the closer to the marketplace you operate, the higher the margins you make. Margins in manufacturing are paper-thin. So although we have a strong car manufacturing industry here, most of the profits are expatriated to Honda and Toyota in Japan.
The problem seems to boil down to the old saw about Britain being good at invention, but poor at innovation: we have ideas, but we are poor at backing and growing them. One of the reasons is our financial orientation—the UK reputedly has more accountants per capita than any other country in the world, and accountants head up most UK companies. Young people are still encouraged to go into "a profession" rather than a "trade". It is a generalisation, but accountants are cautious, conservative and risk-averse—much better at counting beans than growing them.
Our financial strength and reputation has helped make the City a great brand. But the financial bubble is even more fragile than the dotcom bubble of the 1990s, and it could burst messily if—or when—the integrity and honesty of UK plc is brought into question.
If we are not careful, Britain could end up as private-label producer for other wealthier and more brand-savvy countries within the space of 50 years. The challenge for the government is to really understand what it takes to foster sustainable world-class businesses. The question for business leaders is whether they have the balls to market them.
