Go into a local market with a local partner, and you are responsible for what it does – even if the boss is the minister of justice’s brother-in-law
Corruption is standard practice in much of the world. It ranges from “commissions” to named individuals that are written into the contract, to cheques physically handed by chief executives to government ministers, to low level facilitation, or “grease” payments, without which utility connections are not made and phone calls are not returned. So it’s not surprising that the Bribery Act’s rapid passage through parliament has set nerves jangling among construction firms (page 15).
On the face of it, this is yet another example of the government’s right hand not working with its left. What’s the point of urging firms to compete abroad while at the same time enacting anti-corruption measures that will ensure they can’t? But, looked at from another angle, the act might actually prove to be a good thing for business. The UK’s anti-corruption laws were last revised in the early 20th century, when foreign work was likely to be handed out by a colonial bureaucrat. This fact has not escaped the Organisation for Economic Co-operation and Development, which has warned the UK that its firms risked losing their competitiveness. The World Bank, the European Bank for Reconstruction and Development, the IMF and an increasing number of US firms will not work with companies that cannot prove they are tough on corruption. And those outdated laws meant that British organisations attracted much more costly vetting than those from countries such as the US where anti-bribery legislation is tougher. Well, this won’t be a problem anymore: our new laws are now tougher than the States’, which turn a blind eye to grease payments. Another factor is that the Serious Fraud Office has already been increasing its scrutiny of construction – as shown by the probe into Balfour Beatty’s Alexandria Library contract, which led the contractor to pay £2.25m – and the law should at least clarify what firms should do to avoid its attention.
Of course, companies will still want to win business in emerging markets. Transparency International’s league table of countries ranked by the integrity of their public sectors places key markets such as Libya, Nigeria and Egypt in the bottom half. Firms hoping to win work in Iraq and Haiti are looking at the
bottom 10. There is an argument that UK firms may win work in very corrupt countries purely through their superior expertise (assuming that matters to officials mainly interested in buying houses in Cap Antibes). But even firms staffed by paragons of virtue are not safe. Go into a market with a local partner, and you are responsible for what it does, even if the boss is the minister of justice’s brother-in-law. And remember, many of the OFT fines were triggered by decisions made by commercial managers in branch offices. If you can’t control what your people do in Liverpool, what chance have you in Libya? Firms in that position face a tough decision, and many may conclude that it’s safer to stay at home.
With the election campaigns officially under way, our view of the parties is getting slightly clearer. The Tories are championing society against the state, and proposing more spending cuts and a lower tax increase than Labour – based no doubt on the calculation that people applaud public spending but vote for private wealth. As we’ve come to expect, detailed policy, particularly on cuts, remains elusive; in its place we have vague statements that could be used to justify all kinds of policies later on. So, Labour says it will make “savings in regeneration funding” (page 20), which could mean anything. This has set alarm bells ringing in sections of the industry, particularly given the fact that Labour is seen as the more restrained cutter. In this case, the devil is not in the detail; he’s going to show up after the election is won.
Sarah Richardson, deputy editor