Saturday, July 17, 2010


Over the next month, this blog will look very carefully at some of the new policies developed as part of the Economic Renewal Programme (ERP) launched by the Welsh Assembly Government (WAG) last week.

Hopefully, it will help to start a debate on whether this is the right approach to turn around the Welsh economy and to drag us from the bottom of the UK’s prosperity league table.

I will start by examining the decision to abolish International Business Wales (IBW), the Assembly’s overseas investment arm that was responsible for attracting business into Wales as well as promoting Welsh business abroad.

Some will say that this decision to close down the last remnant of the old Welsh Development Agency was justified by the outcomes of last October’s review of IBW by Glenn Massey, the former inward investment specialist. However, if you bother reading the Massey report in detail, it actually has little evidence to suggest that the division was doing badly.

If we examine IBW’s record on new jobs being brought into Wales in 2009 as compared to 2005, then the numbers are approximately the same, and equates to 6.2 per cent of the UK figure, which is higher than the proportion Wales would be expected to bring in as a region. More importantly, it did this job with roughly a third less of the resources than it had five years ago

Does this look like failure?

Actually, IBW has done exactly what would be expected of it under such conditions, namely deliver the same results with a vastly reduced budget. Whilst it was suggested that “IBW has left Wales at the bottom of the 12 UK regions when it comes to safeguarding jobs”, the report stated that made the point that “IBW has no direct responsibility for reinvestment by foreign owned companies in Wales.

Indeed, if you read Massey’s comments very carefully, it shows that the primary reason for issues such as the lack of branding, a silo approach across the Department of Economy and Transport (DE&T) and the focus on RSA as a tool for inward investment, were not due to operational issues within IBW itself but were failures in strategy that are decided at the highest levels of government.

To put it simply, it would seem that a lack of strategic direction at the top, rather than IBW, was essentially the reason as to why there was little care and attention given to the reinvestment needs of over 500 foreign owned companies in Wales, a situation that may have cost tens of thousands of jobs in Wales during the recession.

In fact, the potent mix of myopia and entropy that exists at the highest levels of the civil service is perfectly exemplified by this decision to scrap IBW and its functions.

Let’s take for example, its role in inward investment. Whether you agree with grants to large foreign companies (and I don’t), the real question is whether there is a role for an agency such as IBW to act as marketers for the Welsh economy, and to sell everything that is good about this nation to potential investors?

Consider this one recent change in the business environment that seems to have passed WAG officials by.

The new Westminster Government is gearing up the UK to be the most attractive place for inward investors with a reduction in corporation tax to 24 per cent over the next four years, the lowest level in Europe with the exception of Ireland.

Not only that, they have done the Welsh economy a massive favour as compared to the English regions by essentially wiping out ‘the opposition’ through their decision to abolish the regional development agencies that have been battling it out with IBW to attract the best companies.

Imagine if you were a business given such a golden opportunity?

With your main competitors closed down and the field wide open, would you have followed their lead and shut down the part of your firm that is marketing your goods to the rest of the World? Of course not - you would have taken full advantage of the situation presented to your business.

Maybe WAG doesn’t think that Wales can sell itself at a global level. If that is the case, what about IBW’s other role, namely the provision of support the internationalisation activities of Welsh businesses?

Does anyone seriously think that Welsh firms do not help with accessing overseas markets when the total value of exports for Welsh business for the last 12 months fell by 16.8 per cent to £8.8 billion. In contrast, Scottish exports rose by 3.5 per cent to £14.8 billion. Given this dismal performance, it is not surprising to find that Wales, with only 1264 exporting firms in 2010, accounts for only 2.7 per cent of the total number of exporters in the UK.

Would you, if you were in charge of the Welsh economy, therefore close down the body responsible for helping Welsh firms to increase their export activity or would you empower them, through your new economic renewal programme, to double that figure over the next decade, and ensure that Wales, at the very least, punches at its weight in terms of international performance?

The more one reads the Economic Renewal programme (and believe me, I have read it several times), the more one begins to wonder how WAG will deal with the 131,000 people currently out of work in Wales, with an employment rate that is lower than any other part of the UK apart from Northern Ireland.

If we don’t encourage entrepreneurship, help small businesses to grow, assist firms to internationalise and attract the best global businesses, then how are we going create jobs and wealth across all parts of our nation?

The business community can only hope someone within WAG has the answer to that conundrum.