Monday, July 12, 2010


It would seem that my article in the Western Mail on Saturday regarding the Economic Renewal Programme has ruffled a few feathers down at WAG, so much so that the press officeDeputy First Minister has written a letter to the paper to remonstrate about my audacity in challenging the grand plan.

As it is considered bad form for columnists to respond to a critique by writing a letter back to the Western Mail, I therefore thought I would let you have my thoughts by replicating the letter on this blog.

Dear Sir/Madam,

It seems Dylan Jones–Evans must have not read the details of our new policy ‘Economic Renewal: A New Direction’ (‘WAG takes big risk by withdrawing support from smaller firms Sat 10th July).

If that is the case, how come I had spotted that officials couldn’t even spell entrepreneurship in one section of the report (page 45, first paragraph, for your information). The sad fact that I had read the whole report three or four times and still can't fathom how such a strategy could have been written as a solution to the problems of the Welsh economy.

From now on we will focus our resources on targeting the systemic issues within the Welsh economy and Small to Medium Enterprises (SMEs) are at the heart of this new approach. We will be investing in infrastructure, research and development and improving the conditions within which businesses operate.

The main concern for all small businesses at this moment in time is access to finance. Only today, a study by the IOD shows that whilst 39 per cent of company directors had applied for finance in the first six months of the year, one in three were turned down. If DET had reformed their grant system to focus on repayable loans for the whole of the SME sector in Wales (rather than just six sectors), then it would have been universally welcomed. Unfortunately, it didn’t.

Our focus on infrastructure – such as all businesses in Wales having next generation broadband by the middle of 2016 - is fairer and better for SMEs. It is not our role to run businesses, but we can and will concentrate on interventions that will benefit all businesses. The idea that we are to ‘scrap the support system for small businesses’ is alarmist and wrong.

What evidence is there that all businesses in Wales need next generation broadband? It is the equivalent of government buying every business a Ferrari when for the vast majority, a Ford Focus will do quite nicely. Also, which firm is going to get the contract to deliver this broadband across Wales at the cost of tens of millions of pounds - I guarantee it won't be an SME! Can WAG also explain exactly what support they are going to be offering existing indigenous businesses in Wales? As far as I am aware there will be nothing offered to existing businesses post start-up as FS4B is scrapped apart from support to help with implementing a diversity strategy

We will now be focussing our support on six sectors. Each of the six sectors has a different mix of business types, both large and small. SMEs will be fully involved in making sure we deliver on our commitments.

How many SMEs are actually within these six sectors in Wales? Far fewer than is needed to make a real impact on employment growth I am sure, which is why this is such a high risk approach.

Mr Jones-Evans writes that ‘this…signals the end of any type of entrepreneurship policy in Wales’. Again this is incorrect. We are placing an increased focus on high-potential start-ups that are of high quality in terms of jobs and incomes.

Errr, hold on. WAG suggests earlier on that it is not their “role to run businesses” and yet they want to focus on high potential start-ups. Bit of a mixed message there isn’t there. Surely it isn’t the role of government to ‘pick winners’ as it is something that not even highly trained venture capitalists can do without losing 80 per cent of the businesses they invest in. Juts look at the total failure of their last attempt at a high growth start0up programme, when the business agency Entrepreneur Action went bust as a result. Wouldn’t it be a better policy of “backing winners” and supporting those existing companies that already been through the early growth stages, had secured a customer base, were expanding rapidly, and needed finance and support to make serious inroads nationally and internationally?

Our policy is to create a greater awareness of the opportunities and benefits of entrepreneurship in order to encourage more people to start businesses, as well as assisting established entrepreneurs.

Yes, and WAG's success in doing so since it abolished the private sector led Entrepreneurship Action Plan speaks volumes - whilst the average decline in the number of new business births across the UK as a whole between 2004 and 2008 was 3.5 per cent, in Wales it was 19.4 per cent - the worst performance of any region of the UK

The support services we provide are changing, not disappearing. All the finance we provide will be through repayable investments. These will be administered in a fast, responsive service.

So why not ensure that the fast responsive service for repayable loans is made to all growing businesses in all sectors? Why focus only on six sectors which every other region in the world is, in some way or another, focusing on as well?

Our new approach has been welcomed by representatives from businesses large and small.

You mean the CBI, who even had the cojones to state in their press release that “It is clear from reading Economic renewal: a new direction the Welsh Assembly Government has listened to the concerns of our members….The overall Assembly Government's response was very much in-line with our consultation response." You couldn't get a better endorsement.

Our focus now is delivering this change.

We wait with bated breath, especially as the same senior team within DE&T has failed to deliver the previous government’s programme, as Andrew Davies pointed out recently.

Simply put, WAG expected everyone to simply accept, with comment or criticism, a strategy that, in my opinion, is inherently flawed. There is increasing concern amongst the small business community that this strategy has been accepted as a fait accompli, with no chance to respond properly to these plans.

Well, DE&T's communications team should wake up to the fact that, fortunately, we live in a democracy where comment and critique is not only allowed, but welcomed.

If their public relations team wasn't going to let me ask a question at the ERP launch despite having my hand up for five minutes (yes, the rumours are true), did they really think that I wasn't going to write anything the following week questioning the strategy?

Interestingly, one of the comments on the ERP on a previous posting on this blog has suggested that the civil service has "set up" the Minister by making him sign up to an abandonment of his party's prior support for the small firm sector in Wales.

That is probably conjecture but is is worth noting that since Plaid has entered into coalition with Labour, they have abandoned their pledge to abolish business rates for 50,000 Welsh firms, forgot about their manifesto commitment to create a Deputy Minister for Enterprise, and have now created a bonfire of business support that made Rhodri Morgan's look like a Swan Vesta match.