IS WAYNE DAVID RIGHT ON DEPRIVATION?

Yesterday, the Welsh Index of Multiple Deprivation for 2011 was published.

This is the official measure of relative deprivation for small areas in Wales and was developed as a tool to identify and understand deprivation so that funding, policy and programmes can be effectively focussed on the most disadvantaged communities.

It is an extremely useful document for both policymakers and academics – I have recently had a paper accepted for the Entrepreneurship Research Journal that uses the data to examine entrepreneurship within the deprived areas of Wales.

Yet, like all datasets, it takes time to collate, analyse and write up.

As a result, most of the indicators used tend to lag considerably. In fact, the only 2010-2011 indicator available relates to fire incidence, with the majority relating to the period 2008-2010 (full details can be found in annex A of the report).

Given this, you would have thought that Labour politicians would have been careful not to rush out any comments on the results of the index. Yet, it would seem that Wayne David, the MP for Caerphilly, has done the complete opposite.

In the Western Mail this morning, he states that he was “extremely concerned” that two areas within his constituency now rank among the most deprived parts of the country.

Worst of all, he then tries to link the WIMD results to current UK Government policy by stating “We are starting to see the impact of central (UK) Government cuts and it’s having a disproportionate effect on the poorer members of society and a number of extremely deprived pockets of Caerphilly,”

Unfortunately for Mr David, the current data has little to do with the current UK Coalition Government. However, most of it does relate directly to a period in which he served the Parliamentary Under Secretary of State in the Wales Office between October 2008 and May 2010.

Does that demonstrate the failure of the UK Labour Government and the Labour-led Assembly Government to deal with deprivation in Wales since 1999? Perhaps the Western Mail should ask Mr David that question next time there is an article on deprivation in Wales.

SCIENCE AND THE WELSH ECONOMY

WESTERN MAIL COLUMN 28TH AUGUST 2011

Earlier this week, the Welsh Government’s chief scientific adviser produced his excellent report on a strategic agenda for science in Wales.

Long overdue, Professor John Harries pointed out some of weaknesses that prevail in Wales and promised that science would be planned and led more effectively for the benefit of all of us.

To achieve this, the agenda would strive to increase the quality and reputation of Welsh universities as powerhouses of the ideas world, to teach and carry out top class research. It would also create an environment in which the business, academic and public sector worlds work ever closer, encouraging innovation and cooperation, to translate excellent research into good business.

Finally, and perhaps most importantly, it would aim to increase the number and quality of jobs in industry, commerce, education, research, and innovation.

Indeed, one of the main driving forces throughout his report is that a more effective and coherent university sector, with a well-planned process of collaborating and growing skills and expertise, would help to grow the Welsh economy.

It has certainly rekindled the debate about the role of higher education in developing the prosperity of the nation although some will argue that the thrust of the current higher education strategy will do little to help in this respect i.e. all four of the main research-based universities – Cardiff, Swansea, Bangor and Aberystwyth – are remaining autonomous institutions for the foreseeable future, with only the less research intensive colleges being encouraged to merge.

But is Professor Harries stating anything new?

Back in November 2002, I produced a report for the National Assembly’s Economic Development Committee on the state of research and development in Wales.

Even then, it pointed out that Welsh Universities were only receiving only 3.6 per cent of total UK research council income for higher education, just slightly higher than the 3.3 per cent reported for 2010.
Therefore, nearly nine years later, the research funding situation has hardly changed at all.

Of course, the “elephant in the room” is whether research council funding, like other higher education budgets, should be devolved to the Welsh Government. Having raised the issue with senior individuals within the Welsh university sector, there seems to be a general reluctance to do this because of unfounded fears on the levels of quality.

Yet, if this could be addressed properly, then it would secure an additional £28 million per year for Welsh academic research. Certainly, with a potential of £140 million of additional research funds that could be made available over the term of the Assembly, it should be a debate that our politicians should be leading when they reconvene next month.

But it is not the funding alone.

As I pointed out in the 2002 report, what was needed than, and now, was a clear strategic vision for the development of science, technology and innovation policy and its impact on government, industry, higher education and society. Until now, that has been sadly missing in Wales since devolution began.

Contrast that with what has been happening across the Irish Sea.

Over a decade ago, the Irish Government created an organisation called Science Foundation Ireland that committed hundreds of millions of pounds to establish a strong research capability in Ireland. More importantly, it had already adopted one of the Harries recommendations and scoured the world’s universities to attract the best scientists and their research teams to Ireland to build up critical areas such as biosciences.

Having worked in the sector for over twenty years, I sincerely believe that we have the knowledge and expertise within our university sector to make a real difference to the technological capability of the Welsh economy. However, what is needed is for the Welsh Government to help fight the corner for fair research funding for Wales and, more critically, for the higher education to work together as a unit to develop a coherent strategy for Wales.

Government could start with addressing the fallacy that sees the so-called ‘golden triangle’ of the South East of England, London and the East of England getting 60 per cent of central government research funding as compared to 1 per cent for Wales. This means that, if we apply the Barnett formula to this public money as it should be, a further £96 million in funding is lost to Wales every year.

That is simply unacceptable in this day and age and our politicians must look, as the Swedish Government did in the 1970s with spectacular results, to spread the wealth outside of the more prosperous regions and to use research as the basis for economic renewal.

Certainly, I don’t expect another nine years to go by without action to secure a proper research and innovation policy that not only takes devolution into account, but finally helps to transform Wales into a small clever country.

ECONOMIC INACTIVITY - THE CURSE OF A LOST GENERATION

WESTERN MAIL COLUMN 20TH AUGUST

Earlier this week, the labour market data for Wales was released, showing that unemployment had increased by 10,000, leaving Wales with the highest jobless rate (8.4%) of the four “home nations” with 122,000 people out of work.

However, there is a deeper issue here that both the press and politicians seem to conveniently ignore every time the data is released, namely that of economic inactivity.

These are the group of individuals who are not in work, but who do not satisfy all the criteria for unemployment (wanting a job, seeking in the last four weeks and available to start in the next two).

It also includes students, those in retirement and those who are not actively seeking work.

Currently, there are 520,000 economically inactive people in Wales, which account for just of a quarter of all working age adults. To put that into perspective, it is equivalent to seven times the number of Welsh fans that were packed into the Millennium Stadium to watch the rugby match against England last week.

But we mustn’t just look at the headline figure in isolation, as a cursory glance at the latest data shows some interesting facts on those who are classed as economically inactive.

For example, 30 per cent are aged between 24 and 49 with 61 per cent being women. In addition, 23 per cent are students with a further 30 per cent are classed as long term sick, and 20 per cent are looking after family or the home. Therefore, the majority are not in a position to work or simply do not want to.

However, a quarter of those who are economically inactive class themselves as wanting a job, which is approximately 130,000 people, and at a time when employment opportunities are few and far between.

Now those of you who are politically inclined could pass comment on this. For example, some will blame the current UK Coalition government for doing little to grow the economy, whilst others will accuse Labour of doing little to address this problem whilst being in office for thirteen years.

Yet, if we look at the long-term trend of economic inactivity in Wales, it is an issue that has been a problem for a generation and is probably one of the key issues for the continuing underperformance of the economy.

For example, in May 1992, the number of economically inactive in Wales was 500,000. Fast forward to May 2011, and the number of economically inactive in Wales was 483,000. However, the numbers employed in Wales during the same period has increased from 1.16 million to 1.29 million, an increase of 139,000.

Simply put, there has been a failure during the last two decades to address the high economic inactivity rates across the country when job opportunities were increasing as a result of a growing economy.

So who has filled these jobs? It would seem that a significant proportion have been filled by workers from outside the UK, a fact gleefully seized upon by some newspapers as one of the reason for youth unemployment and a spark for the riots across the cities of Britain.

Yet, if you speak to many business owners, they admit that they are more than happy to employ well-educated, hard working and polite individuals from overseas who value their jobs.

Given the alternative, many employers are left with little option but to employ non-UK staff because they simply cannot get the same standard of skilled and motivated local people to take up these jobs. Given this, it is surprising that the level of economic inactivity in Wales has stayed roughly the same for two decades?

During the last 20 years, successive governments have, through a combination of apathy and bad policy-making, created an underclass of individuals who will not get on the job ladder within their adult lives, with all the serious social and economic implications for this country that are already becoming evident in the events of the last few weeks.

If the economy is to grow, then the Welsh Government, in partnership with the current Coalition Government, will need to change the policies of the last two decades, take the bull by the horns and finally start to address the issue of long-term economic inactivity within the economy.

As the Welsh economy hopefully begins to recover from the recession, politicians must prioritise the reduction of the unacceptably high numbers of economically inactive people in this country's potential workforce.

Most importantly, there must be radical changes to upskill and motivate the thousands of young people who leave school with little prospects and to assist them onto the first rungs of the employment ladder. If we do not, then this ‘lost generation’ of workers will continue to haunt the statistics for years to come.

HOW TO BECOME A SOCIAL MEDIA ROCK STAR!

Vital lessons for Welsh business in the fast expanding arena of social media

THE REGIONAL LEVEL OF IMPLEMENTATION OF INNOVATION POLICIES

Nearly ten years ago, I presented a paper at a special workshop organised by the European Union. It brought together a range of projects under the Targeted Socio-Economic Research initiative to present their scientific and policy findings, to debate and exchange views with some users and policy-makers and to provide some policy guidance on the regional dimension of innovation.

What these projects had in common was an analysis from different perspectives of the role and new prospects of innovation and education policies to promoting the appropriate environment for SME’s at local level.

At least three different levels of analysis were addressed namely:

• A group of projects has investigated the organisation of the linkages between education systems, namely universities, and the private sector.


• A second group of projects has analysed the networking and clustering activities of SME’s at regional and local level.


• A third group of projects tried to identify the different factors influencing the innovative capacity and competitiveness of firms at local level.

One of the major conclusions reached by all projects was that the regional and local dimension of the innovation policies is of major importance. However their effectiveness depends upon the strengthening of local and regional infrastructures, which is normally supported mainly by national and EU schemes.

The project that I co-ordinated, and which was part of the first TSER initiative, was UNITTS - Universities, technology transfer and spin-off activities : academic entrepreneurship on the periphery of Europe. The paper presented at this event formed part of the final report of the conference and was entitled "Entrepreneurial Universities Cases From The Periphery". Included is a short vignette of Graduate Placement Scheme being managed within Wales in the late 1990s. The greatest pity is that we never submitted the paper for formal publication, given the scarcity of data on this subject.

Perhaps it is time to revisit this whole area again and see whether things have changed over the last decade when it come to encouraging innovation within peripheral regions.

CREATING AN ENTREPRENEURIAL WALES - REVISITED

WESTERN MAIL ARTICLE AUGUST 13TH 2011

During the summer, the new Minister for Business will be considering her policies very carefully in terms of what government can do to grow the Welsh economy over the next five years. In one of the rare statements made since her appointment, the Minister has hinted at continuing the efforts of her predecessor and focusing government funding on a number of key sectors in the economy.

Yet as the economy continues to stutter, should there be a different approach taken by the Welsh Government?

Certainly, there are those who believe that the no-brainer solution to kick starting the economy, both regionally and nationally, is to target policies at the small number of businesses that have the potential to grow and create jobs.

For example, the National Endowment for Science, Technology and the Arts (Nesta) has argued that high-growth businesses – those with 10 or more employees which experience employment growth averaging 20 per cent or more per year over a three year period – are the ones to be supported given they create real wealth and employment in the economy.  A major study they commissioned showed that whilst such high growth firms make up only six per cent of all firms in the UK, they generated 49 per cent of all new jobs in the UK economy during the recession.

Yet policymakers have seemed reluctant to develop specific policies to help develop this small, but highly effective group of companies.

A decade ago, I wrote a paper for the Institute of Welsh Affairs – Creating an Entrepreneurial Wales - which argued that policies should be focused on supporting the small proportion of Welsh small and medium sized enterprises that have the potential to grow.

It argued that the vast majority of firms remain small and, individually, will contribute little to the economy beyond providing a living for their owner-managers. This is because many of the business owner-managers within the SME sector in the Wales, three quarters of whom do not employ anyone else, do not see the growth of their business as an objective. Despite the range of government assistance available, and regardless of the markets in which they operate, these ‘lifestyle’ businesses will resist the option of taking on new employees. For example, research has shown that even during times of favourable macro-economic conditions, the majority of firms have no aspirations to grow, with only a small proportion of small firms looking to expand further.

Of course, the overall contribution of microfirms employing less than 10 people should not be underestimated as they make up the vast majority of businesses in Wales, employ 191,000 people and generate £21 million for the economy annually.

Yet, if the focus of policymakers is on developing the economy over the next few years, especially with a reduced amount of public funding, then the focus must be on supporting businesses that have the potential for growth and employment.

Indeed, one can see why the limited resources within the new Department for Business makes the targeting of support to specific sectors very attractive and civil servants seem keen to continue to push the case to build up a number of companies working in the same sectors and markets. Yet, much of the research evidence suggests that growth can occur in almost any type of business, especially operating in mature markets that would attract very little public support.

So should the Welsh Government focus its efforts only on supporting those small to medium sized companies that have the potential for growth and what would be the impact for Wales?

Let’s update the data I first presented in 2001 and assume, for example, that the vast majority of businesses employing between 10-249 employees in Wales could, if provided with the right financial and business support, make a significant contribution to the Welsh economy.

According to the latest data available, there are currently about 8,000 such firms in Wales, employing around 236,000 people (an average of 30 employees per firm) and having a collective annual turnover of £24 billion. Clearly, a significant majority of such firms have the capability to grow further, even if incrementally, and make a significant contribution to the Welsh economy.

For example, let us assume that we could grow these companies by only an average of 4 per cent per annum over the next five years, well below what is expected of moderately growing businesses. The return to the Welsh economy by 2015 would be an additional 50,000 new jobs and an increase in turnover of £5 billion (or around 10 per cent of GDP), much of which would spent locally. That is a very attractive proposition for any government to consider.

Some would argue that this should not necessarily be the only approach but it is certainly one that has been missing from the minds of politicians and policymakers in Wales since devolution began. In fact, I would suggest that there is also a critical need to encourage greater entrepreneurship, especially amongst our young people, and improve innovation capacity. And the cluster-based approach could be focused specifically on this latter policy, and utilising the talent and technology that exists within higher education to improve key sectors such as creative industries, life sciences and clean technologies.

During the next 12 months, the debate on further borrowing powers for the Welsh Government will continue but given the current devolution settlement, there is nothing politicians in Cardiff Bay will be able to do about macro-economic policies such as interest rates or corporation tax.

However, devolution for economic development has given our leaders the opportunity to reconsider their slavish adherence to a cluster approach and instead put into place the best policies and structures to identify, support and grow those indigenous businesses within Wales, from any sector, that can create jobs and make a real difference to the prosperity of our nation.

THE ART OF THE START

For those beginning on their entrepreneurial journey, this is a simple but highly effective presentation on how to build an effective and successful new business.

Some don't like the "mystic" style of the author Guy Kawasaki but I love it!

THE UK ECONOMY: A QUESTION OF CONFIDENCE?

Western Mail article 6th August.

Last week’s crash in global stock markets was, according to some observers, inevitable given the financial mess in the eurozone that has yet to hit rock bottom and the recent political wranglings in Washington that have embarrassed the World’s largest economy.

But what of the UK economy?

Given the way that the media have been painting a general picture of doom and gloom over the last few months, do we also have reasons to worry?

There have rightly been concerns that the UK economy is not hitting its targets, growing by a disappointing 0.2 per cent in the second quarter of 2011, as compared to 0.5 per cent in the first three months of the year. However, the Office for National Statistics were keen to point out that a number of special events, including the additional April bank holiday, the royal wedding and the after effects of the Japanese tsunami, could have had a net downward effect of as much as 0.5 per cent.

Hopefully, this will mean that there will be higher growth in the third quarter of this year.
But what of other indivators?

Last week, the monthly report from the Purchasing Managers Index (PMI), suggested that the UK manufacturing sector had contracted in July for the first time in two years, with job losses also reported amongst the companies surveyed.

On first examination, this seemed like exceptionally worrying news as the recent economic recovery had been largely driven by the performance of manufacturing business, especially in the export market. As a result, the doom and gloom pundits were out in force across our newspapers and television channels, decrying the policies of the government and screaming wildly for Plan B’s

Yet is the economy really in the state portrayed by the media during the silly season of August?

A couple of days later, another PMI report showed an unexpected rise in the service industry as new orders and expectations for future business improved. This was being driven by sectors such as IT and business services whilst consumer-based sectors, such as hotels and restaurants, were still having problems.

At the same time, it was demonstrated that there had been a solid increase in performance within the construction industry, especially in commercial construction and civil engineering.

Given the size of the services sector, which accounts for around 70 per cent of the UK economy and now dwarfs the manufacturing industry, this growth should have been greeted with enthusiasm by economic commentators, and yet there was a muted reaction in the media, with a grudging acceptance that this could be better than suggested.

Of course, in the good old days, economists would be concerned not with the views of purchasing managers but of two main trends, namely inflation and unemployment.

Again, the news on these two indicators is contrary to the picture painted in the media.

With regard to the former, there was an unexpected drop in June when UK inflation was recorded at 4.2 per cent, as compared to the May figure of 4.5 per cent, although this remains well above the Bank of England’s target of 2 per cent.

More positively for the economy, the National Institute of Economic and Social Research said it expects inflation to fall to 1.9 per cent, which will ease pressures to raise interest rates.

In terms of unemployment, a number of leading commentators had predicted that the number out of work would have hit 3 million by now. Yet the latest statistics for April 2011 show that unemployment was 2.43 million, an actual reduction of 57,000 over the year. More encouragingly, the number of those in employment has increased by 309,000 in the last twelve months with a tenth of these jobs being created here in Wales. In fact, we have had a growth in employment rate that was double that of London and the South East of England combined.


Change in employment (March-May 2010-2011) 000s

North East -21
North West -16
Yorkshire/Humber -37
East Midlands 48
West Midlands -13
East of England 99
London 82
South East 47
South West 5
Wales 31
Scotland 55
Northern Ireland 29
United Kingdom 309


Source:ONS

Therefore, despite the constant stream of bad news stories in the media, the UK economy is not in the state which some suggest, certainly compared to where it was eighteen months ago under the last Government.

It is also likely that we will retain our triple AAA credit rating status for the foreseeable future given that, unlike the USA, there is market confidence in the deficit reduction plans of the Coalition Government. That means that the interest on the money that the Government borrowed will remain at low levels compared to our competitors.

Whilst the control of government debt is critical for the economy, we mustn’t also forget about the real wealth creators in the economy, and the good news is that the private sector is in better shape than many expected.

For example, it is estimated that large companies in the UK are currently sitting on around £65 billion of cash within their balance sheets and, sooner or later, shareholders will be demanding to have that money invested, either in new projects or acquisitions. The question, of course, is when will they have the confidence to spend that money in the economy.

In addition, there is growing pressure that the UK economy should be given a bigger boost through specific tax cuts, including reducing fuel duty, lowering corporation taxes for small business and increasing tax thresholds to lift the lowest paid out of the income tax system.

Of course, if the turmoil on the global markets continues, then there may be little that this or any government can do to stop further decline, given the interdependence between economies.
But in the meantime, it must ensure that it does everything in its power to improve confidence amongst businesses and get British industry reinvesting in the economy.

ANITA RODDICK - SADLY MISSED

A great interview with Anita Roddick about the origins of the the Body Shop.

She was not only a great entrepreneur, but a woman so ahead of her time in her attitude to business in particular. Anita Roddick is sadly missed but at least this video shows the creativity, enthusiasm and honesty that made her the success that she was, and Body Shop continues to be.

ARE WE FALLING BEHIND IN MAXIMISING EUROPEAN FUNDS FOR IMPROVING ECONOMIC PERFORMANCE?

Western Mail column July 30th 2011

Last week, the Welsh Government, through European Structural funding, provided a grant to help develop tidal power in West Wales.

The provision of direct funding to the private company Tidal Energy will enable the new £11 million “DeltaStream” device to be manufactured, a development that will generate clean tidal power in West Wales by 2012.

There have been various commitments, over the years, by the Welsh Government to develop this vital part of the clean energy industry, yet despite the rhetoric, there has been little real action.

Therefore, the funding for this vital innovation should be broadly welcomed, although it should be of some concern that it has taken the Welsh European Funding Office (WEFO), which manages the European Structural programmes in Wales, over eighteen months to finally approve the project since the company first submitted an application back in December 2009.

Despite this, the fact that a private sector organisation is being directly supported is a step in the right direction, especially as around a billion pounds has previously been awarded to projects sponsored either by the Welsh Government or local authorities. In contrast, private sector sponsors had received only £7 million of grants for six projects prior to this announcement.

Ministers are to be congratulated on ensuring that businesses are finally being allowed into this vital funding stream, especially as there have been indications that some within the Welsh Government have been reluctant to fund projects where those involved actually gain directly from the projects they successfully develop.

Frankly, such an approach is nonsensical, as it would be fantastic if Tidal Energy became exceptionally profitable on the back of this grant and ensured that the technology created prosperity and employment in West Wales.

There now needs to be greater private sector involvement in the allocation of what is left of European funding over the next couple of years, especially given that recent evidence provided by the Welsh Conservatives has shown that the main Convergence Fund is considerably behind its targets for developing the poorest parts of Wales.

According to WEFO’s own data, there have been only 4,849 jobs created against a target for May 2011 of 7,348 jobs, 4,195 enterprises assisted against a target of 6,317 and, worst of all for efforts to develop an entrepreneurial economy, only 1,105 new enterprises created against a target of 3,019.

In training and education programmes, 154,138 individuals have participated in training programmes against a target of 197,837 and, out of this, only 25,282 young people assisted against a target of 37,782.

Clearly, there should be real worries over this poor performance and whilst I am sure that a number of projects will finally catch up with their individual targets, the fact that the main European convergence programmes are behind in terms of jobs created, new enterprises started and businesses assisted is something that should be an issue for those responsible for economic policy in Wales.

In particular, the shocking statistic that 12,500 fewer young people than expected are being trained through the European Social Fund programme should ring alarm bells in the corridors of power, especially as this is something that has been highlighted by various Ministers as being a key policy priority for Wales as the economy tries to emerge out of recession.

The individual who actually highlighted these facts as Shadow Business Minister has now become the leader of the opposition within the National Assembly and it will be interesting to note how Andrew RT Davies will take these concerns directly to the Welsh Government.

Certainly, his recent press release, which was ignored by the mainstream media in Wales, made the point that there has been too much “bureaucracy when it comes to managing European funding, with an obsession with process rather than outcomes”.

More relevantly, he suggested that, at a time when there is a need to ensure that every penny from Europe is supporting the Welsh economy, there should be an independent review of WEFO’s activities by the Welsh Audit Office.

Whether the new Conservative Party leader in Wales prioritises this issue will, no doubt, be something that he and his advisers will consider carefully over the next couple of months. But whether or not a formal investigation takes place, it is still critical that the Ministers responsible for the business and education portfolios review whether the projects sponsored by their individual departments are hitting the targets they have been set by WEFO.

In fact, those projects that are successfully achieving their objectives should be highlighted as best practice for others to follow their lead, especially as creating jobs, developing new businesses and upskilling the workforce is the most important aspect of any programme to support the Welsh economy.

Certainly, if the Welsh economy is to catch up with the rest of the UK, especially at a time when every job is critical, then full advantage must be taken of the billions of pounds of European funding available to Wales to ensure that the projects funded make the maximum contribution they can to create wealth and prosperity within the poorest communities.