The captain of industry who says the UK needs to be more like Asia

Allister Heath
FROM the CBI’s offices on the second floor of the Centre Point tower, you get a great view of the construction site that will eventually become the Tottenham Court Road Crossrail station. It is fitting that the CBI, which was one of the railway’s biggest supporters, is so close to the action, and a reminder that the business lobby has real clout. Indeed, as the government desperately searches for policies to boost growth, its ideas and opinions are in demand more than ever before.

Sir Roger Carr, the organisation’s president and one of Britain’s most respected captains of industry, strikes a contrast to its airy, modernised offices. Dressed in a sombre navy suit, a sober tie and a white shirt with gold cufflinks, he seems more suited to the panelled boardrooms of yore; his stylish rimless glasses offer the only hint of modernity. Despite the old-school impression, however, Carr is clear that times have changed.

Although he accepts that “the economy is challenging” and the “Eurozone is intensifying the difficulties”, he says the real problem is that the “balance of power in the world has shifted” from west to east.

“The UK and Europe are coming to the end of a very long period where there was a sense of entitlement. We had wealth, we had an ever-increasing standard of living, and we expected the standard of our children’s lives to be better than our own. That’s the experience of my, very fortunate, generation.”

“We looked to other parts of the world, where people didn’t earn very much but saved a lot, and saw their savings as fuel for our debt. Now suddenly that’s stopped, the brake’s gone on. Just because you were born in a certain part of the world does not entitle you to a certain standard of living.”

To survive in the new world, Britain, Europe and the US must “adopt the principles of the emerging economies,” says Carr. “You learn, you apply yourself, you work hard, and you earn”. He cautions the transformation will be “very painful” and “very socially disturbing”, pointing to the groundswell of protest in Greece and Italy as a portent of things to come.

Although Carr says the outlook for domestically-focused companies will be “challenging” for the foreseeable future, he is not all doom and gloom. He reels off a list of large companies, including Burberry, Jaguar Land Rover, and Rolls Royce, as well as Cambridge-based tech firms such as Autonomy and Arm, who are “performing well”.

These companies all share “a real competitive edge” and – crucially – “distribution into high-growth, emerging” markets, says Carr. Smaller businesses who also try to “harvest new markets”, such as Tyrells crisps and Nichols, the maker of Vimto drinks, are also posting record profits and building strong balance sheets, he says.

“The difficulty is converting the balance sheet strength into the next round of investment, which is about confidence and certainty. That is the thing that hinders the positive companies. It sits like a blanket over the entire economy.”

For Carr, this is where the government needs to do more. He offers warm praise for the coalition’s actions thus far, citing corporation tax cuts, apprenticeships and – most importantly – the deficit reduction plan as important achievements. Yet he says the government still isn’t doing enough to boost growth and cut red tape.

“There is a recognition at the highest level of government that regulation must be reduced. The direction of travel is right but the pace is not adequate,” he says.

He calls on the chancellor to “liberate cash” from the current budget by involving the private sector more fully in the delivery of public services, and to spend the proceeds on “shovel-ready road projects”, “toll roads” and “boosting the housing market”. “Roads and housing are the two things that can impact employment most rapidly,” he says.

Carr hit the headlines when he was appointed CBI president last year, by appearing to suggest he supported the 50p rate on high earners. Friends say his quotes were used out of context, but at any rate he is far less equivocal in our interview. Although he says he is “sympathetic with the timing”, he is clear that the 50p rate “needs to come down because effort – and reward – must be encouraged”.

On executive pay, he defends business less emphatically than some might expect, arguing that firms must overhaul their remuneration structures to make them fairer and more transparent. “We have to make sure that the way we behave, the way we pay and govern ourselves, warrants the respect of the general public. Any reward for failure is completely unacceptable. Good principles and transparency – you need both those things to win back public trust.”

He is adamant that “you can only change public opinion by demonstrating you are a force for good, by not doing things that provide opportunity for criticism”. In turn, government, the opposition and regulators must stop “demonising” unpopular companies such as banks and energy firms.

As chairman of Centrica, Carr knows more than most about the deteriorating image of energy firms, who have become even less popular than banks after they passed rising wholesale energy costs onto customers. “The energy companies have been demonised by all commentators in a way that does not reflect the position of the businesses. Nobody profiteers because it’s different to make anything other than a very modest margin.”

Energy companies are an easy target for politicians, because the rising price of their products is contributing to the increasing cost of living. But Carr is sanguine about the risks posed by overall inflation, which has remained high, insisting the “drivers are well understood”. “They have been commodity based, and things like VAT, one offs that in the passage of time simply come out of the maths. I think it’s reasonable to say looking forward we will see more tolerable increases in inflation. And we have not seen an uptick in wage claims. I think one should never be complacent – but the real issue is finding growth.”

Before Centrica, Carr gained notoriety as Cadbury chairman during the 2009 Kraft-Cadbury takeover battle. Although the American company eventually took over Cadbury, it was forced to pay a 50 per cent premium, in large part due to Carr’s spirited defence. Subsequently, he was instrumental in changing the takeover code in favour of bid targets.

Would Cadbury have been taken over under today’s code? “It would be much more difficult,” says Carr. “The process would have been more challenging because we suffered a six month attack, which wouldn’t be allowed under the rules of the new scheme. They would have had to have funds in place. All of that would have changed the dynamic, though it may not have changed the outcome.”

As Cadbury chair, it fell to Carr to explain to an angry public why it was right to sell to an American buyer. Now as Centrica chair, he is a lightning rod for anger over soaring energy bills. As CBI president, his message for government, business and the public is just as hard to swallow. “The world has changed, and we must too.”

Age: 64

Current: President of the CBI; chairman of Centrica; deputy chairman and senior independent director of the Court of the Bank of England; senior adviser to Kohlberg Kravis Roberts.

Previous: Chief executive of Williams; chairman of Chubb; chairman of Thames Water; chairman of Mitchells & Butlers; chairman of Cadbury.

Other: Fellow of the Royal Society for the encouragement of the Arts, Manufacturers and Commerce; visiting fellow at Said Business School, Oxford; companion of the Institute of Management; knighted in the 2011 New Year Honours for services to business.