Why Brexit is So Likely (auf Deutsch)

Bob Bischof speaks about the inevitability of the ‘Brexit’ with his German-British perspective. Read the transcript here.

This is the transcript for a speech given at the prestigious Kapitalmarkt Forum of Commerzbank AG in Hamburg, October 2015. Read the English version here.

Ladies and Gentlemen, meine Damen und Herren

Es gibt eine Reihe von Gruenden dafuer, dass die Briten den Exit vorziehen koennten bzw ich moechte darstellen, wie hoch der Berg ist, den die Briten ueberwinden muesssen, um sich fuer Europa zu entscheiden oder gar zu begeistern – dann koennen Sie selbst entscheiden, wie hoch die Wahrscheinlichkeit ist.

Dazu muss man die folgenden Scenarien verstehen

  1. Das Inselparadies ist bereits uebervoelkert und ueberfremdet in vieler Briten Augen. Die Einwanderung aus den ehemaligen Kolonien wie Indien, Pakistan, Afrika und dem Karibik Raum begann schon vor Jahrzehnten und viele der Immigranten sind wenig integriert und leben in bestimmten Ballungsrauemen. Die neue Immigration aus Europa wurde zunaechst begruesst – polnische Klempner waren begehrte Fachkraefte waerend des grossen Haeuserbooms in der Vor-Rezessionszeit. Als danach die Arbeitsosigkeit und ebenfalls die Europafeindlichkeit stieg begannen Politiker wie Adolf Farage sorry der heisst Nigel mit Vornamen mit simplen Parolen wie „die nehmen uns die Arbeit weg und sind fuer die hohen Hauspreise verantwortlich“ Schlagzeilen zu machen und die Regierung unter Druck zu setzen. Seine UK Indepence Party (UKIP) gewann die Europa Wahl und Prime Minister Cameron musste sich unter Druck seines rechten, ausserordentlich euroskeptischen Fluegels auf das Referendum einlassen.

Die Immigration ist tatsaechlich ein heisses Thema besonders weil UK

– wie ich im naechsten Teil darstellen werde, ein Land ist, dass total unterstrukturiert ist – wie Deutschland vielleicht ueberstruckturiert ist. Da es keine Personalausweise –identity cards – gibt und niemand weder Fahrzeugpapiere noch einen Fuehrerschein bei sich haben muss, weiss man nicht wie viele ueberhaupt im Lande sind. Hinzu kommt, dass es nur Grenzkontrollen bei der Einreise, aber nicht bei der Ausreise gibt. Studenten kommen mit Visa nach GB und keiner kontrolliert, wann sie wieder abreisen. Great Britain ist deswegen ein bevorzugtes Einwanderland und auch weil die ganze Welt zumindest gebrochenes Englisch spricht und wie spaeter erklaert, es unskilled (ungelernte) Jobs in Huelle und Fuelle gibt.

  1. Regeln, Strukturen und Vorschriften liegen den Englaendern nicht

a. Es geht mit der Sprache los. Die Sprache hat kaum Regeln und die Grammatik besteht im wesentlichen aus Ausnahmen. Daher ist sie leicht zu lernen aber unendlich schwer zu perfektionieren. Man drueckt sich auch ungern klar aus, wie Anthropologin Kate Fox in ihrem Buch „Watching the English“ so gut beschreibt. Very interesting heisst total rubbish etc Henning Wehn, der deutsche Komiker, der in England Furore macht, beshreibt das herrlich

b. Es gibt weder eine geschriebene Konsitution noch ein BGB oder HGB – alles ist auf case law aufgebaut und damit interpretierbar – Beispiel die sogenannten „Pay Day Loans“ mit 4stelligen Zinssaetzen waeren auf dem Kontinent unmoeglich, da es Wuchergesaetze oder aehnliches gibt

c. Main Freund Prof Thomas Killinger, Korrespondent der Welt in UK hat das vortrefflich in seinem Buch „Crossroads and Roundabouts“ beschrieben – alles ist staendig im Fluss

Meine Damen und Herren – stellen Sie sich vor, was sich da abspielt, wenn so eine Gesellschaft von unseren EU Freunden in Bruessel mit Regelungen und Vorschriften ueber alles und jedes beglueckt wird…..Das passt wie die Faust aufs Auge.

  1. In der Wirtschaft steht die Flexibility im Vordergrund und Arbeiter-und Angestellten Schutzgesetze (Employment Law) passen da ueberhaupt nicht hin. Wir in Europa sind an diese Dinge wie Mitbestimmung gewoehnt, fuer die englische Wirtschaft ist das alles ein rotes Tuch. Es gibt in UK etwa 2 millionen Zero-hour contracts, bei McDonald allein etwa 100.000, d.h. man wird nur bezahlt, wenn Arbeit da ist.

Als Ausbildung wird in der Regel das „on-the-job“ training als ausreichend angesehen. Im Service Sektor ist das auch oft ausreichend im Herstellbereich nicht – aber der schrunft sich schon seit Jahren gesund und liegt inzwischen bei knapp 10% vom GDP

  1. Die Presse ist ueberwaeltigend rechts, zum Teil rechts von Tchingis Khan

a. Allen voran die Murdoch Presse mit eienm Zeitungs- und TV Empire, dass euroskeptisch ist und mit grossem Misstrauen den Kontinent betrachtet. Murdoch’s Einfluss ist so gross, das Blair und Brown jede Idee von einem Stakeholder Model a la Soziale Marktwirschaft aufgeben mussten. Am 8.1.1996 hielt Blair eine Rede in Singapore ueber die Vorteile des Stakeholder Models. Drei Wochen spaeter mussten Blair und Brown bei Murdoch antreten – das Wort stakeholder wurde danach aus jedem Labour Program gestrichen. Fast wie zu Stalin’s Zeiten, wenn ein General oder Politiker ausradiert wurde.

b. Die Daily Mail, Daily Express und Daily Telegraph sowie und ihre lokalen Ableger sind noch extremer eurofeindlich mit fast taeglichen Attacken auf Bruessel oder auch Deutschland und Frankreich

c. Man darf nicht uebersehen, wie hoch die Auflagen der Zeitungen in UK sind – etwa das zehnfache der deutschen… Die Leser werden in allen Zeitungen mit 20-40 Seiten Sportberichten gefuettert. Wie im alten Rom – Brot (minimum wage) und Spiele. Vorne eine paar Schlagzeilen, harte Kommentare wobei Information oft hinter Meinungsmache zurueckbleibt

d. Guardian und Mirror auf der linken Seite haben wenig Chancen sind aber auch klar tendenzioes ausgereichtet – nur nach links.

  1. Die Exit Befuerworter haben die simpleren Messages a. Ohne Mitglied des Euro Clubs zu sein, ist UK ohne wirkliches Mitspracherecht im Kreis der Grossen und braucht eine Sonderstellung bzw ist besser gleich draussen b. Sprachlich, politisch und kulturell ist UK naeher an USA als an Europa und muss im Zweiferlsfalle immer Amerika folgenc. Den Europaern allen voran den Franzosen kann man nicht trauend. Europa ohne Grenzen ueberschwemmt das Land mit Fremden
  1. Die City hat einen ebenso grossen Anteil am GDP wie der Manufacturing Sektor; die einen brauchen Volatility die anderen Stabilitaet. Vorschriften aus Bruessel werden oft als Unterwanderungsabsicht der Kontinentaleuropaer gegen die Vormachtstellung der City in allen Finanzangelegenheiten dargestellt. Freiwillige Ueberwachung hat zwar in der Vergangenheit nicht funktioniert aber wir nach wie vor bevorzugt. Die Meinung in der City ist jedoch sehr geteilt was das Referendum angeht, aber ueberwiegend pro EU Verbeib – allerdings sie war immer anti Euro, da der Euro bedeutet, dass man nicht mehr mit Waehrungen von 19 Laendern spielen kann, sondern nur noch mit dem Euro.
  1. Was sagt die verarbeitende Wirtschaft dazu?

Ueberwaeltigend dafuer in der EU zu bleiben, aber moeglichst mit einer „reformierten EU“ – weniger Regeln, mehr Subsidiarity, Einspruchsrecht (Veto) im Arbeitsrecht und Finanz- und Steuerangelegenheiten etc

Als Deutscher moechte ich die Briten klar in der EU behalten – mit meinem englischen Hut auf, sehe ich das allerdings nicht unbedingt so eindeutig.

Nebenbei, je mehr sich die deutschen Politiker um UK bemuehen, um sie in der EU zu halten, desto mehr erscheint es den Insulanern, dass die Europaer das nur aus Eigennutz befuerworten zum Nachteil der Englaender. Es bedarf also grosses politisches Fingerspitzengefuehl, hier den rechten Ton zu finden. Sentimentalitaet ist wenig angebracht oder gefragt. Die Anglos waren schon immer von Mars und die Europaer eher von Venus (selbst die Deutschen zur allgemeinen Verwirrung neuerdings).

Mae West Zitat – “When she was good, she was very very good, but when she was bad, she was …. magnificent”. Leicht abgewandelt auf Deutschland bezogen wuerde das heissen

When the Germans are bad, they are awful, but when they are good …. they are even more annoying.

Ce la vie!

Werden die Briten austreten? Die Schotten waren nahe daran, die UK zu verlassen und ein sozial-demokatisches Land zu bilden und haben geschworen, dass wenn Grossbritannien insgesamt mit „out“ waehlt und die Schotten mit „in“, dann wird es ein neues Referendum in Schottland geben und die Schotten wuerden die UK eventuell dann verlassen. Die Scottish National Party, die eine grosse Mehrheit hat, ist nebenbei am weitesten links (im englischen Sinne) – sie nennt sich „progressiv“ und befuerwortet das Model der sozialen Marktwirtschaft a la Germany.

Die neue Labour Opposition unter Jeremy Corbyn ist ein natuerlicher Verbuendeter der SNP, steht allerdings auf sehr fragwuerdigen politischen Positionen wie Verstaatlichung der Bahn und Energiewirtschaft, ist allerdings pro-Europa.

Vieles haengt natuerlich davon ab, wie Europa sich bis zum Wahltag darstellt. Falls die Eurozone sich positiv entwickelt, ist den Austretern schon ein wenig Wind aus den Segeln genommen. Falls nicht und falls sich das Immigrationsthema noch schlimmer entwickelt, wollen viele Englaender den Tunnel wieder zuschuetten …

Bob Bischof – September 2015

Eurozone Membership

This letter was published 24 July 2015 in the Financial Times here

This letter was published 24 July 2015 in the Financial Times: click here to view

Sir,

Although I can go along with Ed Balls’ general comments of Britain in Europe (“The risk of fumbling the Europe poll”, July 22), I don’t agree with his and the general British public’s belief that it is such a godsend for Britain not being in the euro. It certainly isn’t for exporters!

Bob Bischof letter in the FT July 2015
The eurozone is good for exporters

Just like the other “independent minded” nations’ currencies, sterling has been revalued over the past 18 months by around 30 per cent and is nearly 40 per cent higher than at its low point in 2008-09. British exports to Europe and the rest of the world are suffering and importers are gaining market share with disastrous effects on the balance of payments, which is heading for a record deficit of about 6 per cent of gross domestic product. At the same time, the eurozone is heading for a balance of payment surplus in 2015 of about €200bn. It shows that currency markets don’t follow the real economy but interest rate expectations, and that individual countries’ currencies become a plaything for the markets.

UK manufacturers don’t just suffer from the overvalued currency, but also have to bear the cost of currency exchange and hedging. Germany and the other eurozone members can trade without the volatility and uncertainty of currencies in a market of 350m people — a huge advantage! The “March of the Manufacturers” has been blocked one more time.

Bob Bischof

Vice-President, German British Chamber of Industry & Commerce; Chairman, German British Forum

R3 Business Recovery Conference 2015

R3 Conference 2015 - The Winds of Change
Click to see the conference introduction

Bob Bischof was a speaker at the R3 conference 2015.

Here is an extract from the programme:

The insolvency and restructuring profession must overcome significant challenges as we face up to the threat of unprecedented change.
new legislation in the UK, the drive for ‘harmonisation’ in Europe, the perceived attraction of US style Chapter 11 concepts, and much decreased levels of formal insolvency present the profession with real and present challenges. The nature of insolvency inherently dictates that the insolvency profession is frequently ‘under the spotlight’.

Although our profession is highly regulated, and the UK’s regime is one of the best in the world, we need always to bear in mind that we are under constant scrutiny from politicians, press and the public. The UK insolvency profession does an excellent job in delivering the best results for creditors and debtors, and we have got much better at communicating our value to those all-important stakeholders.

But there is more we can do. To achieve the status of a trusted profession we must demonstrate integrity in all we do. Adherence to the principles behind the rules is as important as adhering to the rules themselves. In the same way that company directors’ responsibilities have widened, insolvency practitioners should always remember that trust and confidence in the insolvency profession depends on their actions and behaviour, passing continually higher tests of performance.

All of these issues and much more will be discussed at the r3 annual conference
Phillip Sykes, Baker Tilly
r3 President (April 2015)

Sterling at €1.34 is a threat: Britain, the EU and the price of independence

At the heart of the British argument against closer ties with Europe has always been many UK citizens’ fear of losing control over the country’s affairs in general and in economics in particular.

This article originally appeared on OMFIF’s website here

At the heart of the British argument against closer ties with Europe has always been many UK citizens’ fear of losing control over the country’s affairs in general and in economics in particular. For many in Britain, the euro project is not a basket of former independent currencies, rather a basket case. Doubts about the wisdom of so-called ‘German-backed austerity policies’ or about the ability of Greece and others to stay in the single currency have strengthened this belief in many British minds.

The ‘in-out’ referendum on Britain’s membership of the European Union which could take place in 2017, depending on the outcome of the May general election, will further focus attention on this point. Latest opinion polls indicate a majority in favour of departing.

The big question for a relatively small country like Britain is what ‘independence’ means in a globalised world. Being on your own, in monetary affairs as well as politically, can be damaging. Against its €1.04 low point in 2009, sterling has appreciated by 30% to around €1.34. This may be good news for Britons holidaying abroad, but the pound’s rise will hammer British manufacturing exports.

Switzerland, which has just abandoned its currency peg against the euro, has a current account surplus and high-value manufacturing goods, helping the Swiss absorb the shock of the latest 20% Swiss franc revaluation. Britain, on the other hand, has a large and growing current account deficit. It desperately needs to rebalance its economy away from services to manufacturing.

Although the UK’s coalition government has declared it wishes to further the ‘march of the manufacturers’, it has made little progress. Britain’s external performance will get worse. All this spells future trouble for sterling, especially if an inconclusive May election result brings political uncertainty.

Against this sobering background, Britain’s power over monetary and fiscal policy – setting interest rates, deciding quantitative easing and calibrating fiscal expansion or contraction – is well short of being an unmitigated benefit.

Germany has been doing well within the euro area because it benefits from the weak euro for its non-European exports, and even more from the stability, or lack of volatility, that emanates from membership of a large club. Germany still runs a substantial trade surplus with the rest of the euro area, but it has fallen sharply in recent years, making up less than 25% of Germany’s overall external surplus, against 40% in 2011.

If Britain wants to be serious about rebalancing the economy, it has to give its manufacturers a solid base, particularly in foreign trade. Currency hedging is expensive, the more so when volatility is high. The euro bloc encompasses most of the UK’s largest trade partners. Every transaction to another currency – whether one is buying or selling – costs money.

With so much of British industry in foreign ownership, there is an additional danger. When the foreign owners see developments they don’t like, they will first stop investing and then look elsewhere. At the German-British Chamber of Commerce and Industry we hear many worried comments from the over 1200 German-owned companies in the UK. The grumbling is getting louder.

And it’s not confined to the Germans. British business is overwhelmingly in favour of the UK staying in the EU, as a recent poll by the EEF manufacturers association showed. Britain can hardly be expected to join the euro in the foreseeable future. But as the election approaches, the issue of UK EU membership will start increasingly to occupy business people’s minds. Some might even support Labour as a potential party of government that will not brook a referendum on the matter – and could bring a weaker currency as well.

OMFIF

The Official Monetary and Financial Institutions Forum is an independent research and advisory group and a platform for confidential exchanges of views between official institutions and private sector counterparties.

The overriding aim is to enable the private and public sector to learn from each other in different ways, promoting better understanding of the world economy and higher across-the-board standards.

All developments regarding OMFIF can be followed at www.omfif.org and www.twitter.com/OMFIF.

Bob Bischof is a member of the OMFIF Advisory Board.

Foreign Takeovers and Nationalism – BBC World Service

With takeovers like the AstraZeneca – Pfizer bid much in the news, Bob Bischof joins a panel of industry experts for the BBC World Service programme ‘In the Balance’ to discuss foreign takeovers and the national interest.

Bob Bischof on 'In the Balance'With takeovers like the AstraZeneca – Pfizer bid much in the news, Bob Bischof joins a panel of other business experts for the BBC World Service programme  ‘In the Balance‘ to discuss foreign takeovers and the national interest.

You can listen to the half-hour programme here: http://www.bbc.co.uk/programmes/p01y0sb9

 

Britain Could and Should Do Better

Can Britain catch Germany? Can pigs fly? But why even think in these terms? It would make a lot more sense to examine ways of stopping the widening of the gap.

This article first appeared in the Mail Online, 20 January 2014

The think tank CEBR reckons Britain will not only overtake its old rival France soon but also that the UK stands a good chance of narrowing the gap with Germany by 2020 and leaping ahead of Europe’s economic powerhouse by 2030.

Now, economic forecasting is not an exact science and it is mighty difficult to predict even a year ahead. The CEBR found that out when they finished 37th out of 40 economic forecasters for the year 2013, according to the Sunday Times’ league table.

Are the predictions about Britain v Germany any more credible? As a German living in this country, perhaps I am biased, but I think not.

The 2013 figures show Germany at $3.65trillion, France at $2.65trillion and the UK with $ 2.45trillion of output. To catch up with France within the next four years, Britain would need around $50bn in additional output per annum, or a roughly 2 per cent higher growth rate. That could be on the cards, given the woes of the French economy.

As for narrowing the gap with Germany by the year 2020 that looks a bit tougher. German GDP is 45 per cent higher than Britain’s; not surprisingly as Germany has a 33 per cent larger workforce (40m vs 30m) and productivity is more than 10 per cent higher.

The CEBR argues a weak euro will make it harder for Germany to stay ahead, though most analysts believe the opposite, as a weak currency helps the country’s thriving export industry.

Even a chronically low birth rate in Germany is unlikely to have much effect. It has always relied on an influx of Gastarbeiter, or guest workers from abroad, to bolster the labour market. It is doing so now after having successfully integrated 22m newcomers after the fall of the Berlin Wall in 1989.

Can Britain catch Germany? Can pigs fly? But why even think in these terms? It would make a lot more sense to examine ways of stopping the widening of the gap.

The danger with selling illusions about the future is that it can breed complacency among businessmen and politicians alike.

Britain could easily do better and should do so. But it has to be realistic about its position in the world and the huge effort it needs to turn around its growing balance of payments deficit, to increase business investment, to make sure its youngsters have the right education and skills, to improve its infrastructure, to raise productivity and not to rely on rising house prices to fuel another consumption-led boom.

All that needs to be tackled at a time when the Government is trying to get the deficit down, whilst Germany will have a balanced budget in 2014.

Could it be done? I believe it can, but it needs a shift towards long-term strategies in business and government.

Selling British businesses and assets for short term shareholder value and calling it “Inward Investment” is not the answer.

Mergers and acquisitions are no match for organic growth strategies; neither is paying the largest dividends as a percentage of profits of all developed economies.

The UK has an abundance of entrepreneurs but cannot emulate the Mittelstand – the small and medium businesses that are the backbone of the German economy.

All too often starved of adequate bank finance, those that make it over the first hurdles are soon driven into the arms of private equity or the stock market and too many are swallowed up and disappear.

Lord Bamford, who chairs JCB, his family firm, said to me not long ago: ‘If my Dad or I had gone to the stock market for money, we would not be here any more.’

His words should haunt British politicians. If the UK wants to reduce its dependence on the City and get properly into the international race and not with an arm tied behind its back, it should do something about growing more SMEs into JCBs. It’s the real economy, stupid.

Interview: European Trade Protectionism

Bob Bischof, vice president of the German British Chamber of Industry & Commerce, talks with Charles Powell, member of the U.K. House of Lords, about European trade protectionism, U.K. inward investment and growth, in an interview with Francine Lacqua and Guy Johnson on Bloomberg Television’s “The Pulse.” (Source: Bloomberg)

Watch the interview here

Bob Bischof discusses European protectionism on Bloomberg TV
Bob Bischof discusses European protectionism on Bloomberg TV

Invensys Sale: UK Manufacturing On the Fast Track to Oblivion?

This article was published in the Daily Mail on 7 August 2013

The sale of Invensys, one of the last remaining substantial engineering companies in the UK, to the French industrial giant Schneider Electric simply beggars belief.

The declared aim of this Government is to rebalance the economy towards manufacturing. In reality short-term shareholder value rules and the Brits will sell anything and everything to please the City.

As a German living in this country, I am aghast at this. Germany’s manufacturing prowess is founded on a much more long-termist approach. But Invensys is, sadly, a typical British industrial story.

The company was created out of the merger of two engineering companies Siebe and BTR in 1999. The new company was debt-laden and poorly managed, going through a £2.7billion debt restructuring exercise in 2004. In 2005 the board appointed Ulf Henriksson as chief executive, who restored the company to financial health. Enter Sir Nigel Rudd as new chairman.

Opinion in Daily Mail: Sale of InvensysIn March 2011 he fired Henriksson, an engineer, because ‘he could not see the big picture’ and replaced him with the chief financial officer Wayne Edmunds. The share price subsequently halved in 2012 because of technical problems. It only bounced back when the break-up of the company was announced and set in motion with the sale of the signalling business to Siemens.

The rest is now on its way to being swallowed by a French company for £3.4billion – well done, Sir Nigel. Does anybody get the message that these deals are a sure way to manufacturing oblivion in the UK?

My own experience bears this out. I arrived in the UK 40 years ago to set up a UK subsidiary of a German lift truck maker. Our main European rival was the British company Lansing Bagnall, based in Basingstoke. Their market share in the UK was around 45 per cent and they exported 60 per cent of their production worldwide. They were the envy of the industry.

Some 20 years later a large German industrial conglomerate bought them. A few years later they were sold on with the rest of the lift truck division to private equity, who closed the Basingstoke factory and moved the production to Germany and France.

In 1994 my company bought the last remaining British lift truck manufacturer Lancer Boss, invested huge sums for a while, but then had to give up, close the plant in Leighton Buzzard and moved the production to Germany.

One of the reasons was that they could no longer get cold-rolled steel sections for the lift masts of their trucks in the UK, as the Corus plant in the North East was ‘restructured’ – the other was that there was a cyclical downturn in the sector.

There are dozens of industries and companies where the same or similar happened. Mergers, acquisitions, de-mergers and break-ups of companies are a favourite game in the UK to enhance so-called shareholder value. It promises faster returns for shareholders and bonuses for the board members rather than following the slower path of growing their companies organically. They would rather ‘return cash to the shareholders’ by share buy-back programmes and high dividends than invest in the future of their businesses and the prosperity of UK Plc.

What is the Government doing to change this pattern? The slogan needs to change from ‘It’s the economy, stupid’ to ‘It’s the real economy, stupid.’

Britain Has Much to Learn from German Firms

Daily Mail March 2013A new German word has entered the English language after ‘Rucksack’, ‘Kindergarten’ and the phrase ‘Vorsprung durch Technik’, namely Mittelstand.

It means different, yet related things – it describes a medium-sized company, but it also means doing business in a very German way.

Mittelstand companies are family owned, in 95 per cent of cases, and 85 per cent are owner-managed. They are oriented towards customers, employees and communities rather than just obsessed with shareholder value.

They are typically embedded into a region, where they take their responsibilities seriously. Often, they are strong exporters, world leaders in their chosen field of operation like Brita Water Filters, which has raked up around £7billion annual turnover in 2012 from very humble beginnings.

Although the official definition of a Mittelstand company is up to €50million turnover and 500 employees, many have outgrown these numbers by far – including my former company, the €2.2billion turnover fork-lift truck maker Jungheinrich AG. But culturally, they retain the Mittelstand outlook.

Staying with the narrower definition, Germany has 3.5 million Mittelstand companies, representing 52 per cent of total economic output, 61 per cent of employment and €200billion of exports from Germany. Of these, 1,300 rank as so-called ‘hidden champions’ – world market leaders in their niche, against 67 in the UK and 366 in the US.

These companies are regarded as the backbone of German manufacturing, giving it a resilience that has stood the economy in good stead in the economic turmoil.

That leads to an inevitable question. Why can’t the UK create a Mittelstand of its own? Britain has brilliant inventors and entrepreneurs, but is not so successful at evolving their ideas into the creation of sustainable businesses, which can grow in to the world-leaders of tomorrow. The likes of Sir James Dyson and the Bamford family of JCB fame are the exception, not the rule.

The talent is there, but it seems to be driven too early into the wrong direction. 
Entrepreneurs cash in, either through a trade sale, to private equity, or by floating on the stock market. It may bring personal rewards, but getting into the short-term profit race can be detrimental to developing new products and markets.

I believe that the key difference between our two countries lies largely in the financing of these companies, and the role of banks.

Typically, Mittelstand firms finance themselves from retained profits, with bank debt and equity funding playing a smaller role. Germany has around 3,000 independent banks with excellent regional coverage, while the UK has not even a dozen business banks. Although they have many branches, they no longer have bank managers who can make local lending decisions based on a thorough knowledge of customers.

The manager of a small or medium-sized regional Sparkasse, Volksbank or Raiffeisenbank in Bavaria or Lower Saxony knows the businesses in his area and probably plays tennis or golf with the owners. Their kids attend the same school. During their last few years at school children make frequent trips to companies in the area and the companies make presentations to get the best candidates for apprenticeships.

Universities and colleges also work closely with the companies in their region.

Here, we have an opportunity right under our nose. Around 1,000 branches of Lloyds and RBS are up for sale. Rather than selling them to a City conglomerate which no doubt would offer a similar centralised structure, they should be offered in small clusters to regional institutions or individuals with the right background.

In co-operation with the Local Enterprise Partnerships they could be part of the ‘business bank’ structure for small and medium firms, which the Government is trying to get off the ground. Lord Heseltine has pointed the way in this direction.

The UK could make a start in following this model and building a unique and successful Brit-elstand right now.

This article was published in the Daily Mail, 24 March 2013