What the Welsh economy has been waiting for
Wales Business — By Duncan Higgitt on July 5, 2010 2:00 pm
Wales has businesses with bright futures like Corus, but now the Welsh Government wants to provide companies with the backing to grow
THE past three years have proved to be frustrating times for the Welsh Government’s economic department. Faced with ongoing criticisms from business that it is big in size and expenditure but sometimes short on delivery, it has instead been compelled to engage in organised fire fighting as the recession bit Wales hard, and it was tipped into a rush to save jobs and businesses here.
Frustrating too, for Ieuan Wyn Jones who, as far back as the inception of the One Wales agreement, when he was handed the posts of Deputy First Minister and Minister for the Economy and Transport, has been planning a switch in focus on economic development delivery away from process and towards performance.
It is, after all, what the private sector has been clamouring for. Perhaps unaware that the department still faced organisational challenges that stemmed from the bringing in of the Welsh Development Agency into the Welsh Government, businesses have complained that business support was convoluted and impenetrable, that school leavers couldn’t put together a job application let alone take on any responsibilities in the workplace, that assistance was arbitrary and mystifying, with – for example – bright new buildings springing up in areas or sectors where it was hard to see a successful outcome for such strategies.
Today, Mr Jones aims to sweep all of those issues away with Economic Renewal: A New Direction. With its pared down strategic format, he runs the risk of having the Welsh media concentrate on what is being taken away rather than the back-to-the-drawing-board approach of asking what is really needed and where support should be targeted.
However, businesses will most likely welcome the new focus on tackling systemic issues within the Welsh economy, such as investing in infrastructure, research and development, and seeking to improve the economic conditions in which businesses operate. And so they should – much of this strategy came out of the Tell Us and Tell Us More consultations conducted by the Welsh Government that included business, academics, trade unions, the public sector and even public polling.
The programme begins by addressing the elephant in the room. The new strategy will reduce the level of direct business support, including the closure of the Single Investment Fund, with half of the money previously available here going to the funding of infrastructure projects. The remainder will be provided to businesses as loans.
Critics are most likely to target their concerns in this area. However Mr Jones and his officials will counter that it does away with two great criticisms made by the private sector: support through grants did little to encourage businesses to adopt a stand-on-your-own-feet commercial attitude; and that support was piecemeal and micro-managed.
This last point marks the fundamental shift. But Mr Jones says: “It is not our role to get involved in the day-to-day running of business. But we do have a significant part to play in creating the right environment to encourage entrepreneurship and allow our private sector to grow and flourish.
“The culture of direct business support through grants has run its course. Our aim will be to encourage a stronger culture of investment and therefore the finance we provide will be through repayable investments administered in a swift and responsive service.”
The role of enabler of growth rather than direct deliverer of services shifts the emphasis to infrastructure, so that investors and indigenous businesses can trust Wales to provide the communications, transport and energy requirements – among others – that they will have. The first part of this approach was launched on Saturday, with the announcement of funding to do away with broadband not spots. However, Mr Jones has committed the Welsh Government to enabling every business in Wales to have access to next generation broadband by the middle of 2016, along with major improvements in the provision of mobile phone coverage. Given Wales’ challenging topography, it represents a significant promise.
Resources that were committed to the Single Investment Fund will be switched to supporting the industry-led development of six rather than the 14 sectors that the Welsh Government currently focuses upon. They are: creative industries; ICT; energy and environment; advanced material and manufacturing; life sciences; and financial and professional services. Again, this seems sensible, as Dr Richard Greville, Director of the Association of the British Pharmaceutical Industry Wales recently pointed out on this site, skills sets are available for businesses involved in high end, often R&D-led production.
However, the new strategy includes plans to broaden and deepen the skills base in Wales, with a greater focus on science, technology, engineering and maths – the STEM subjects. There will also be an extended apprenticeships programme and a new Basic Skills Employer Pledge, to ensure that schools leavers are ready, with the right attitudes as well as skills, for the workplace. A continuation of the removal of barriers between business and learning will involve R&D (which will also see an increase in investment itself), with Welsh universities expected to join in greater efforts to build an international reputation for Welsh research and development.
Along with aiming to encourage more blue chip internationals to Wales, the new strategy will give start-ups and indigenous SMEs the wherewithal to grow and ably compete in bigger markets. To help here, there will be an increased supply of business premises in areas of demand, a more responsive and efficient planning system (with reforms to assist business), and the Welsh Government is to take a fresh look at regulations that impact on the private sector.
A reduction in bureaucracy and a more level playing field will also be seen in public sector procurement, including a single national procurement website where businesses of all sizes can bid. The Flexible Support for Business brand will also disappear.
Foreign Direct Investment teams will be integrated into the six new sectors, and International Business Wales will cease to exist as a separate function. As a consequence of all of the changes, there is expected to be job reductions within the Welsh Government, although it will announce any once consultations with staff are completed.
Mr Jones said: “The strategic restructuring will lead to difficult decisions being made in the short term … The aim is to ensure that the necessary changes will be in place by the end of 2010.”
However, he has argued that while the new strategy is shaped by the current climate, it has also presented a chance to look at the work of the Welsh Government’s economic department.
“The Economic Renewable Programme is a radical re-think of the way the way the Welsh Government supports economic development. We recognise that, over the long term, the performance of the Welsh economy has not met expectations.
“In the current economic climate our investment needs to be smarter. We must concentrate our efforts and our resources on areas where we have the greatest degree of control and where their impact will be most widely felt.
“We are realistic – the Economic Renewal Programme will not yield immediate results. This is a long term approach taking precedence over short term headlines. It is a vision that requires a whole-government approach.”
Tags: business grants, economic renewal, entrepreneurship, Ieuan Wyn Jones, research and development, Welsh Assembly Government, Welsh economy
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9 Comments
Question?
How long before we hear executives from large companies discussing how they moved their back office operation to a low cost country and instead of India, China, Poland or Chile, they choose Wales because the skills were better, the customer experience improved, it took less of their time to manage and overall cost was comparative. 10 years?
Of course ideally, Wales would be home to lots of high quality, well paid, innovative and creative technology jobs, but being able to walk in the IT service sector is a good start and a spring board to moving up the value chain.
I would love to heard of any examples where offshore meant over the Severn Bridge.
Of course this is not an overnight solution, that much is admitted in the final paragraph. Are there better ways of achieving a successful economy and Welsh Government aims?
CBI Wales has published this response to the Economic Renewal Programme this morning:
“It is clear from reading ‘economic renewal: a new direction’ that the Welsh Assembly Government have listened to the concerns of CBI Wales members. The CBI strongly welcomes the Assembly Government’s change of approach. The overall Assembly Government’s response was very much in-line with the CBI’s consultation response.
“As Wales’ economic recovery will be led by private sector growth, we are greatly encouraged by the ambitious whole government response. Growing the private sector must now be the Assembly Government’s overarching goal.
“Yesterday’s announcement is encouraging but delivery, as ever, is everything. We look forward to working with the Assembly Government to bring these proposals to life. I am sure as we read the detail the CBI will have questions- especially on detail and delivery.
“Delivering Next Generation Broadband to the majority of Welsh businesses is excellent news. This ambitious project has real potential to give Wales a competitive advantage and support future economic growth in a number of sectors. The sooner this project begins, the better.
“Planning is a major enabler of economic growth. A supportive planning system would better position us in the race for low-carbon growth. Businesses need more certainty and consistency within the planning process. The new Planning Policy Statement on Economic Renewal has the potential to deliver this if it is sufficiently robust. We look forward to working with the Assembly Government to deliver this.
“We fully support the new National Infrastructure Plan for Wales. This is something the CBI have strongly called for. A framework for delivering important infrastructure is exactly what is needed. The plan will need to send the right signals to the private sector which will be key to delivering the plan. Both scale and pace will be important here.
“The CBI has devoted a considerable amount of time making the case for a better, smarter, approach to regulation from the Assembly. We are delighted that they have committed to assess the impact of legislation on businesses at the earliest possible time.
“The focused support for the on-going role for inward investment has struck the right balance.”
The full report can be read here: http://www.cbi.org.uk/pdf/20100607-cbi-wales-delivering-public-sector-growth.pdf
This is definitely worth a read, too:
http://www.clickonwales.org/2010/07/economic-renewal-%e2%80%93-cheers-come-later/
This is a very good analysis by Mr.Higgitt of the new WAG economic policy document, and as we have commented before on our blog, the document is a fine example of writing and government-speak.
Although, the new policy document contains the good things outlined above and some overdue admissions of public sector error, it is still fundamentally flawed in that it doesn’t properly address the biggest ‘elephant in the room’ and that is business finance and the banking crisis.
Without control and reform of the current banking system, then any other economic or social reform cannot be achieved.
Point well made, CP. In his CoW piece, Geraint Talfan Davies points out that: “If success … requires a whole government approach, perhaps we should not forget that that also involves the UK, who hold by far the most important levers.”
On a personal level, and having worked in the private sector where gripes about Welsh Government assistance were most frequently made, this document represents a significant step change in economic development thinking by this administration. But we all know that it is only the first step in turning a huge ship (if I can mix metaphors). It is 97 years since coal production in Wales peaked and, while this country has had its economic ups as well as its downs, that means almost a century of (sometimes managed) decline. To me, that shows the scale of the issue.
I don’t think anybody is fooled by the size of the task. But the Welsh Government is facing the right way and at least we are all facing up to it. Equally as important as beginning the journey is beginning the debate surrounding it. Dylan Jones Evans, for example, makes some interesting points about SMEs here:
http://dylanje.blogspot.com/
And can I please commend Seth Thomas’ excellent piece posted this morning on here about using the strategy to sell Wales abroad? Let’s keep this going.
http://plaidpanteg.blogspot.com/2010/07/economic-renewal-once-again-needs-more.html
To me though the ‘delivery’ aspect swings both ways. Surely the business interests that demanded this change are now as responsible for delivery as the WAG? Some of the demands about planning are as old as time, the reason we have such planning is often do to corporate misuse and mistakes. Ask any local community currently fighting against some business being built near them. The planning rules are not perfect, but you sense that some of these business voices just want the keys to do what they want.
Now I think this strategy is bang on the money, give or take a few minor gripes I have, but it is very much one that involved taking business demands on whole sale.
So all those siren voices who demanded this better start taking accountability for it, especially those academic types who seem to paid per word to whinge.
“To me though the ‘delivery’ aspect swings both ways. Surely the business interests that demanded this change are now as responsible for delivery as the WAG?”
Spot on, Marcus. What you might call a public-private partnership.
Duncan,
I’m not shocked that the CBI welcome it. The ERP simply ignored SMEs and have shifted the focus on large businesses…IWJ is ignoring 99% of businesses in Wales and is taking support from Welsh firms and giving it on a plate to CBI members who have been less than suppportive of the Welsh Government. The business organisations representing SMEs have not welcomed the report and are being very cautious!
Another problem is that the lack of consultation. WAG like to say that they have have the biggest consultation excersise, but this is a front. The reasons why:
1) The consultation document did not ask for specific policy questions regarding the re-organisation of the DE&T. I’m shocked to see the changes after reading the inital consultation document. The ERP answers questions that were simply not asked in the consultation process.
2) For such big changes within the department, why wasn’t there an on-going dialogue with the major players? One consultation response is not enough for such a major restructure. I dont think that the business community expected such changes, and this is poor engagement. Quality not quantity of consultation is the key.
3) The ERP as it stands now should be going out to consultation. There is no formal way to respond, and no period of consultation. Such major change, such as scrapping FS4B, IBW, SIF, should go out to consultation.
4) Where was the consultation when choosing the sectors? The ministerial advisory group seems to work in a silo away from the other players. Where was the engagement with the wider business community when choosing the sectors which will benefit from the ERP.
5) Does the wider business community suppport the new strategy?
6) Where are the details so we can debate the document and reply?
7) Is there a detailed list of what will and wont be changed in DE&T?
The list could go on…
Indeed this is only pointing out some of the failings in the consultation process. As I said, for changes so vast to the DE&T, just to offer a consultation document and no real further engagement is a shambles and a kick in the teeth for all those businesses who will be hit. One consultation document does not make up for the changes that are being made.
I have not got the time to write further or I would comment on the actual document itself. I will be doing this by the end of the week when I’ve finished digesting the document. My main point is this…..SMEs are ignored. To take support away from supporting SMEs is shocking. They new approach from WAG is to support big business and hope they drag indigenous Welsh businesses with them. Making larger companies the driver in Wales when they only account for less than 1% of businesses here.