Can Gerry Robinson Fix Ireland?
INTERVIEW:In advance of the Global Irish Economic Forum, one of our most successful and interesting businessmen Gerry Robinsonshares his thoughts on Nama, civil servants, the perils of raising taxes and why he’s sorry he didn’t buy bank shares when they reached rock bottom
LATER THIS month, Donegal native Gerry Robinson will participate in the Global Irish Economic Forum alongside 175 other Irish leaders in business, sport and culture aiming to harness their collective commercial ingenuity and shape our economic recovery. Perhaps better known in recent years for his TV programmes – Gerry’s Big Decision, I’ll Show Them Who’s Boss and Can Gerry Robinson Fix the NHS – his portrayal of business has been less confrontational and more educational than The Apprentice and Dragon’s Den, and his approach to managing people has more in common with that of a psychologist than a corporate boss.
Working his way up the corporate ladder – joining Matchbox Toys’ parent company after leaving school – he qualified as an accountant and rose to financial director level at car leasing firm, Lex Services. In the early 1980s he turned around Coca-Cola’s UK business at its parent firm Grand Metropolitan, converting a £7 million (¤7.9 million) loss into a £17 million (¤19.3 million) profit,
before leading a £163 million (¤185.7 million) management buyout of its loss-making contract services and catering business in 1987. He has also chaired Allied Domecq PLC, Granada television, ITN and BSkyB.
Currently dividing his time between Donegal and the UK, where he’s filming two new programmes for BBC2, Robinson also advises Macquarie Capital, a London-based division of the Australian investment bank and chairs motorway services firm, Moto Hospitality.
Q How did Ireland get into its current economic mess?
AI think internationally we’re all in the same boat. In any sense, we’re a tiny economy. We’re kidding ourselves if we think we influenced or caused this crisis. It was an international banking crisis that was led mainly from the US.The difference is that we in Ireland had a very long run of good times, and we got into a coasting mode when property became the focus of the economy. It’s going to very interesting to see which response to the crisis is going to work best. The UK has taken a “throw money at it” approach, which I worry about. Personally, I favour the Irish approach, which is to take a pretty hard line on costs. But I don’t think the Government has been hard enough in terms of cutting back.
They’ll be raising taxation, which is also dangerous because it stops attracting entrepreneurs and the new businesses that they would start up, and these pay the employment and corporation taxes.
Governments can only do one thing when it comes to business. They can either make it attractive for them to be here, or unattractive. The rest is just all noise. That’s really about corporate and personal tax systems.
Chief executives will be heavily influenced by their own tax position when they’re deciding where their company is going to be based. The idea that all we have to do is increase tax rates and it will be all right is very dangerous. I think in the end you have to cut your cloth, but I have a feeling that the Government won’t do that adequately. Politicians are the wrong people to sort out these problems.
Q How entrepreneurial do you think Nama should be?
ANama is fundamentally a good idea because it’s looking for ways to allow the banks to get back into normal activity. But I hate the thought of all those assets floating around within an organisation run by a group of civil servants. There’s no question that there will be lots of assets that they’ll absolutely get taken to the cleaners on, but also lots of assets where the opposite will happen. An intelligent use of that portfolio is vital. I wouldn’t let a civil servant near it. I’d make absolutely sure that you set up a board of commercial people.
Think about what needs to happen: avoid flooding the market at the wrong time; being selective about what you sell; managing it better; getting it into a better shape before you sell it. All of those things mean you’ll get lousy value if it’s poorly run, but very good value from a
government point of view if it’s well run.
Q Do the bank rescues go against the principles of capitalism? Should more have been left to fail?
AIt’s all very well when we’ve sailed the ship into calmer waters to say we should’ve done it a bit more cleverly. There were no real choices and, if anything, the Irish Government responded more smartly and more quickly than most and actually took the correct view that they had no choice in it. I’m not sure that we were that far from anarchy in a world sense. The Government was smart and fast in terms of the bank guarantee.
It’s wrong in one sense to punish the bankers, because it was a problem of regulation and the likes of Santander are in good shape because they had strong regulation. That’s because they cocked it up 15 years ago and they decided some rules might help, unlike the US and UK. I wish I had been brave enough to buy some shares in the Irish banks when they were at rock bottom. They were always going to come back. It’s a question of timing.
You would’ve made a killing.
Q If you were in charge of Government policy, what would you do?
AI would really resist higher taxation because if you had to ask why Ireland has been successful, it’s because we’re brilliant at playing the tax incentive game and attracting companies to locate here. Looking at personal and corporate tax rates and related schemes, it’s such an easy and popular win to slam up tax rates for the better off, and especially on the corporate sector and through business rates.
It doesn’t grow the size of the cake. We may get a fairer share, but of a much smaller cake, so we’d probably end up worse off. I think we’ve been quite cowardly in terms of attacking the cost base as opposed to finding different ways of raising revenue. We need to make very clear distinctions between the long-term spending that adds real value and everyday wastefulness. Good transport infrastructure and communications are vital.That’s where we should be spending now.
Firstly, they create jobs rather than just giving the money away. Secondly, you’ll get better value right now, and thirdly, it’ll pay dividends when we get out of this. Again I wonder how intelligently those decisions are made. It’s quite a delicate balancing act between giving the money away in unemployment benefits and spending it on a valuable asset, but it can be done.
Q Are there strengths that Ireland can play to, and weaknesses that we need to address?
AThere are opportunities for Ireland. The internet provides new ways of being the middleman. You’re simply the business through which things are bought, like Amazon. I heard a radio programme about Liam Casey of PCH International and his business in China. You or I can set up a business without owning the stock or the delivery mechanism, just doing the invoicing and collection.
That adds a fascinating new and more competitive dimension to business.But in the end, it’s all about tax. Grants generally produce unusual, rather than helpful behaviour. You get a Fruit of the Loom experience like we’ve seen here in the northwest. You need to be careful about the commercial awareness of the people making those grants. Companies are in business to make money. They all make the right noises about social behaviour and everything else, but the thing that really influences what they do is the financial consequences of that decision. Therefore the financial consequences of being in Ireland versus being in Romania will be what determine it. Governments need to learn that mantra over and over again. It’s what has worked for us in the past.
AIf you compare Ireland and the UK, I think in the UK they’ve created a set of circumstances that have bounced them too early. I have a feeling that Ireland’s economy is in a better position to be U-shaped, than W-shaped. At least here, decisions have been taken on hard financial reality. Although they’ve addressed the wrong areas, the financial caution has been greater.
Q Are banks working for businesses at the moment?
AI feel genuinely sorry for people who were encouraged to take risks, particularly those who were starting out in business.
Businesses without an immaculate record are having problems borrowing money, whereas before this crisis hit, the banks were literally trying to stuff money in your pockets. Somehow a balance has to be found.
There are plenty of good little businesses who just need a bit of help to get through a bad patch.
Before making our programme on Channel 4, we were inundated with businesses wanting to be featured. It showed us the number of very good businesses out there, which after all, are the backbone of the economy and are the biggest employers. Many are finding it impossible to get funding.
If you’re a risk assessor in a bank, and there’s nothing in it for you to take a chance by lending to one of these small businesses, then you’re going to take the safe option every time aren’t you?
There’s a perception that everyone in business is living the high life, they’re all fat cats driving around in big cars. But it’s not like that at all.
Small business owners are taking risks, they’ve given personal guarantees, they have sleepless nights and their homes are on the line. It’s bloody hard; it can be terrifying. The level of gearing that was available, that kind of leveraging won’t be seen for a very long time. So the capacity for people to make the kinds of deals and buyouts that were being made means it’s going to be very difficult to get the non-geared financing to go along with it.
Banks do have money available and I understand that a lot of it is going to very safe places. Now the really strong can gather assets in really quite cheaply. I don’t know how much longer that’ll go on for. Probably the best has gone by now.
Q Should Ireland privatise the likes of ESB, Bord Gais, the DAA, CIE?
AYou have to distinguish between well-run and privatised. I think sometimes people confuse those two. People often think if you privatise something, it runs properly and that solves all the problems.
It does have a tendency to make things run better when they’re privately owned. But a bigger mistake is failing to have the right people running it. That means paying for the right person.
It’s like the case of the HSE, which seems very like the NHS. We get a doctor and pay them a large salary, but it doesn’t work. If you want State industries to run brilliantly, you have to match the salaries of the private sector.
Some things are better being State-owned, such as power generation and transport. There’s an idea that everything is a market: well everything isn’t a market. I also believe in State healthcare.
There are some things that genuinely need to be owned by the people. But you can’t avoid the fact that you need brilliant people running it. We accept, don’t we that “oh well, it’s State-owned, so it’s never going to run very well.” But I don’t think that’s true.
Part of the difficulty comes from the fact that most politicians have never run anything in their lives. Most politicians are the exact opposite of entrepreneurial.
Therefore the idea that you might pay someone €2 million a year to run the HSE and €3 million if they do a fantastic job is somehow alien to us. But actually, you probably spend that in a day, maybe even an hour. Getting a sense of perspective is quite hard and the political system isn’t designed to do that very well.
Q Do you think Private Public Partnerships (PPPs) are good ideas?
AThey’re absolutely terrible, because you have relatively naïve State-owned operations up against some pretty smart, sharp-eyed commercial operators.
One of two things usually happens. Either they get absolutely taken to the cleaners or they make it just impossible for somebody to make money.
State-owned things should be financed by the State and run properly by the State. You either privatise the whole thing, or you run it yourself. These half-assed things don’t work. The things that would already succeed with a bit of management get funded and the things that would never work, no matter what you do, don’t get funded. So you’re left with the State funding the rubbish and the private sector funding the things that would have been good and worked well anyway.
Q Your recent TV programme demonstrated that in small businesses, the human dynamic was central to the problems they were experiencing. Are similar issues at the core of problems in public sector organisations?
AWe think of these organisations as starting from a logical base, but the culture of an organisation is a phenomenal thing and in small businesses, the culture is often a family culture, which somehow permeates the way the business operates.
Government-led organisations work from the premise that this is how we do things, it takes a long time, and you have to go through a certain procedure. They’re the opposite of nimble, and stodgy in terms of their capacity to move.
When times are tough that’s not a good attribute. Doing the same thing properly and doggedly over the years can be enormously beneficial, but when it stops working for external reasons, you need to be capable of changing the way you do things, thinking about how you make things happen more quickly and more effectively.
Q Are there any measures you would take so people can set up a business more easily?
AThe difference between making it possible, for the people that can do it, and throwing money at people who under any circumstances wouldn’t have the slightest chance is very difficult to get right.
In the normal run of things, if you have a good idea and it’s well thought through, you can nearly always get it funded.Giving grants is all about a whole rigmarole of box ticking and being risk averse. You end up with people who know how to play that system and so get the money. That ability is the exact opposite of being entrepreneurial.
Q Does manufacturing have a future in Ireland, do you think?
AIn our heads, we’re still manufacturing machinery aren’t we? There’s this idea that it has to be your product, you have to run things and control it. That’s an old idea, and in that sense we haven’t moved too far from the mill.But it doesn’t have to be like that any more.
We can’t manufacture here, not in any serious way apart from the high margin end of things. Any normal competitive manufacturing though, we’re out of it.
Our minimum wage is off the wall. It’s such an emotive thing, it’s difficult to discuss because if you do, you’re somehow taking something from people.But the reality is that if the minimum wage is wrong, you just don’t get the work.
Until you get to the position to where the market has found its place and the economy starts to rise again, real economic reward comes from that demand, not from some artificially protected wage level.
Doing something about that is going to be a deeply unpopular thing for any politician, very difficult. Politicians are faced with the conflict between the motivation to get elected, or to stay in power, and the other motivation, which is to make something work. They often don’t gel.
Q Are there any particular areas where you see Irish firms being at the cutting edge of innovation and technology within the next 10 years?
AWe have a style about us that makes us approachable. We ought to concentrate on what we can sell. You don’t have to own it any more. We should be better placed than most countries in Europe because of English, because of that ease, because of that friendly feeling.We ought to be selling insurance, all kinds of services, tracing your roots, financial advice. That whole service arena, based on being the central core for delivery of things, ought to be something we focus on.
There’s a huge market for Ireland in the US. People have all kinds of connections there and we need to be smarter in the way we do that. There’s an opening for all kinds of cottage industries that sell to international customers.We ought to be brilliant at that, but I doubt whether we’ve got it in our sights in a big enough way. We need to be at the forefront of inventiveness in electronics as well, because that’s something at which we should excel. I’m not talking about making things here, but their design and how they can be used.
Q Should Irish businesses take more radical moves to focus on emerging markets?
AWe think of the emerging markets as places for getting things made, but China and India are going to be huge. A bit of intelligent thought about what they might be looking for in the next 10 or 15 years is what’s needed.
ROBINSON ON FINDING WORK
Be flexible. Get yourself a job and into a position where opportunities arise.
School and university are about preparing you for life. But then you need a more realistic approach about how the world really works. Being rigid in your outlook, especially at the moment, could limit your choices.
We should make it easier to get rid of a bad teacher. I found when I was younger that the quality of a teacher determines how well you understand a subject. Sometimes it’s not necessarily about how well they know their subject, but how they go about teaching it.
WHY ITS EASIER TO RUN A BIG FIRM THAN A SMALL ONE
You have all the resources to do it. The complications of getting things to work are bigger in a large business, but you have a much larger pool of people that you can choose from. Therefore, you’re more likely to be successful at whatever you’2re doing.
MAKING MONEY IN THE MEDIA
If you look at Sky’s subscription model, they’ve got the combination of sport and movies that people value and it works exceptionally well. Its even managing to increase its customer base at the moment as people have a cheap night in front of the box.
The money seems to be either in making programmes or in Sky’s pay TV model. There’s also money in new media. A game related to TV or a movie can make a lot of money.
CHARGING FOR ONLINE NEWS
Given that Sky’s pricing model works, it seems the key is what you price and how you price it.
I have a stock portfolio, but someone looks after it for me. I’m not more likely to be successful at managing it than anyone else.
HIS CURRENT BUSINESS INTERESTS
I also work as an advisor to Macquarie Capital in London, looking at projects with them and giving my advice. I’m also involved with Moto, a company that runs motorway service stations in the UK.
THE SMALL FIRMS HE HAS INVESTED IN RECENTLY
My 31 year-old son will be looking after the businesses I invested in on Channel 4 and I think it’ll be a very good learning experience for him. He’s currently busy learning about the beer and pie businesses. There are worse things he could be doing.
PHOTOGRAPHS BY TREVOR MCBRIDE