Interview with Sir Mike Rake, Chairman of BT, from the World Economic Forum 2017

Following are excerpts from a CNBC interview with Sir Mike Rake, Chairman of BT, from the World Economic Forum 2017 with Geoff Cutmore and Steve Sedgwick.

SS: Do you know, I quite like the language from Philip Hammond the other day, where he was saying, 'Look, we're just going to do whatever we've got to do. We've got to just dust ourselves down, and we will become competitive globally,' and actually our next guest, Sir Mike Rake, is pretty much saying the same thing. You've been saying to business, 'Stop whining, it doesn't matter what side of the fence you were on, let's just get on with this now and show people what is the best of British.'

MR: Yes, no, I think that's true. I think all of us, those of us in the campaign to Remain, taken that we are going to leave, we have to address the facts as they are, and move forward.

SS: What are the benefits from leaving, do you think?

MR: Well, you know, I-,

SS: As a remainer.

MR: No, as a remainer, look, I think we're in-, even the leave group were very clear that we'll have a significant period of adjustment to our economy, after 40 years of integration with Europe, in supply chains, in need to develop new trading arrangements around the world. Obviously this is going to take time, and have an impact. It will give us, I think, some flexibility on industrial policy, on industrial strategy, the state aid rules won't apply to the same extent, and we're going to have to be very fast on our feet to deal with some of the issues that are going to arise from the complexity of the separation.

SS: Sure, but I mean, it does unleash British business to just go out there and not have to abide by a whole set of rules, doesn't it? Or actually are we still going to have to abide by all those rules?

MR: Well, no, no, look, for a considerable period of time, we're going to have to live with the rules that we've got, and negotiate new rules for the new world, and that's going to require a lot of effort, a lot of, you know, really effective negotiation and consultation and compromise, over the next few years, to get us to where we need to be, post-Brexit.

SS: Is it going to be acrimonious?

MR: I hope not. I mean, I think we're in a difficult situation at the moment, obviously there are elections coming in Europe, in France, in Germany and Holland, which are critical, and it's a very difficult time for Europe, where it's very critical for all of us, that Europe succeeds, that the Eurozone succeeds, 45% of our exports go there, it's 500 million people, it's critical that that is successful and that we, you know, as many have said, remain partners, allies of Europe and trade closely with them. We're completely integrated in supply chains right across Europe, small businesses, big businesses and non-tariff barriers to trade are just as important as tariffs.

GC: Theresa May has made it pretty clear that taking back control of borders is non-negotiable.

MR: Yes.

GC: Does that mean that it is inevitable today that we learn from her that single market access is really off the table now?

MR: Yes, I mean, in my view it's very clear. If the European Union have the position that you cannot be in the single market unless you have free movement of labor, and our position is we don't want that, then it's absolutely clear that if that's the basis, you're not going to be in the single market. It gives you the option to remain in the customs union, but that restricts some of your ability to do other trade treaties. So that's what I think is still being looked at, can you be partially in the customs union or not, but there are some benefits to doing that, at least in the transitional period.

GC: How encouraged are you by the messages coming out of the Trump administration with regard to a very quick trade deal for the UK?

MR: Well, look, obviously it's very positive that the President's said that, but we need to be extremely realistic in our planning. Technically you can't any of those negotiations till we've left, so that's two years and a couple of months away. Inevitably there will be complex negotiations, even in the areas of TTIP, which would be a parallel, sort of, discussion between us, there will be areas of difference about financial services, for example, so none of these things are straightforward and simple, and that's why generally they take several years to negotiate.

SS: Mike, you've been at BT for ten years, and you're stepping down this year. You're going to keep many other hats, as well. Do you leave BT in a lot better place than you joined it, as well? Do you think Gavin and the team have got a very clear focus in a Brexit world?

MR: Yes, no, I think Ian Livingston, Gavin Patterson have done a great job for the shareholders of the company, and I think the company's been reinvented. The launch of broadband fiber, the fastest ever laid out in the world, 90% of the country covered, 95% next year. The acquisition of EE, we're now a much stronger British company, able to invest, complete the investment in fiber, that people so much want, and we're in a strong position to do that.

SS: And yet the regulators are really very aggressive about trying to force a legal separation of Openreach from the rest of BT, as well. Is that one of the biggest blots on the horizon, potentially?

MR: Well, that's something we obviously want to resolve, we're very optimistic. We absolutely agree, and are happy to have a much more open, transparent Openreach. We've already said that we'll have an independent Chairman, independent directors, they'll have more freedom to spend, there'll be more private engagement, so we believe by doing that, we'll improve the transparency. But let's face it, you know, Openreach has done a very good job in terms of rollout of fiber. Have we got issues to complete it, because everyone wants it today, faster, now. You do, I do, everybody does, and we have to do a better job on customer service, which we've repeatedly said, and we're working on that, and I think we'll achieve that, we'll see significant rollout in the next two to three years.

SS: Sorry to jump in, but, globalization, and you've talked about customer service, a lot of the problems come because you offshored so many jobs and people are very unhappy about that. You're onshore again now. Is this another example of the end of globalization, in some aspects? In fact, localization is a new buzzword.

MR: Well, I think sometimes, a lot of companies, and maybe including ourselves, outsource too quickly, you know, and I think you have to be very careful when you offshore and outsource, and there's absolutely no doubt that many companies, ourselves included, went too fast, but we've moved quickly, I mean, our mobile EE company, 100% is now done in the UK, and we'll get there within a year or so for BT as a whole. So yes, those kind of things, it's where's the best place to get the service that people respond to, and that clearly is, you know, increasingly onshore for these kind of call centers.

GC: Mike, much of the conversation we've had this morning has been about trust and suspicion-,

MR: Yes.

GC: And we've had Richard Edelman up here talking about-,

MR: Yes.

GC: Confidence in CEOs has plunged-,

MR: Yes.

GC: We heard from PwC, you know, they're talking about how there's a lack of trust-,

MR: Yes.

GC: The wage disparity between CEOs and workers.

MR: Yes.

GC: You know, in spite of some of the optimism around growth going forward for the world, there does seem to be

greater concern now that there is a mismatch in people's expectations and reality, at a working level.

MR: Absolutely, but of course as Edelman said, it isn't just business CEOs, it's you the media, it's NGOs, it's government, as well, and politicians. None of us are trusted. So virtually everyone here at Davos is not trusted. So we have a job to do, because clearly we haven't communicated those things that are important about the benefits of globalization, of the benefits of technology, and we have to address the issue that there are people who feel, and have been, left behind, you know, and we in business, working with politicians and others, have to do a better job with the education and skills level so people can move into new jobs and recognize the huge progress it's made, lifting hundreds of millions of people around the world out of poverty.

GC: So it's a communication issue?

MR: I think it's more than communication, I think it is communication but I think it's also sensitivity, it's listening, and it is around working. You know, we're just expanding our call center in Merthyr Tydfil, an old coal mine, you know, most of the people we're recruiting are third generation unemployed, and that's something that we shouldn't let happen, you know, and that's something where I think there's a responsibility to local government, national governments, business, to really look at that as to how you skill people, how you invest, how you avoid some of the gaps and voids that get left as the steel industry and the coal industry collapse.

SS: And I thought the only call centers I ever spoke to had Geordie accents at the other end, which is a lovely accent, as well.

MR: Well, you'll get those, you'll get the Welsh too.

SS: Sir Mike, it's lovely to see you.

MR: Thank you.

SS: Thank you very much for your time. Sir Mike Rake, who is the Chairman of BT.