Monday, December 24, 2012


As the dulcet tones of Noddy Holder singing “Merry Christmas Everyone” blares out for the umpteenth time on radio stations all over Britain, it is easy to forget that as we look forward to a few days of overindulgence and TV specials, this particular holiday season has become critical for many parts of the UK economy.

Nowhere is this more so than in the agricultural and food sector, which has been in the doldrums in recent years. According to statistics from the National Farmers Union, 10 million turkeys are consumed every Christmas along with 25 million Christmas puddings, washed down with 250 million pints of beer and 35 million bottles of wine.

In addition, over 8500 tonnes of carrots are sold in the week running up to Christmas with 3000 hectares of land utilised to grow the Brussels sprouts that go onto your Christmas dinner plate.

And it is not only on the dinner table where farmers are benefiting.

As you look at your festive decorations tonight, consider the fact that there are 6 million Christmas trees sold every year, with some having been grown for 20 years or more before they are chopped down for living rooms across the land.

Another key sector to get a major boost from consumers at this time of year is the retail industry. For shops and up and down the land, December’s sales can account for half of the annual pre-tax profits of non-food retailers and, for grocers, equates to about an extra month of sales. The stand out performer was again John Lewis, which reported record receipts for the second consecutive week in December, with sales increasing by 11 per cent as compared to the same time in 2011.

And the good news is that last weekend, it was estimated that Christmas shoppers have spent up to £2billion on present buying with the extra December trading weekend before New Year also promising record sales.

But the High Street is not the only place which is benefiting from increased consumer confidence. Online retail spending has increased by 10 per cent in 2012 and is estimated, by 2016, to accounts for a quarter of total retail spending in the UK. Incredibly, Amazon reports that even on Christmas Day itself, people are busy buying on the internet, with an increase of 263 per cent in online shopping on December 25 over the past five years.

For those of you with young children, have you ever stopped to consider how, every year, you are supporting the biggest toy market in Europe? Toys are worth around £3 billion to the economy with a third of this income being generated at Christmas, equivalent to an incredible 110 million toys that will be unwrapped on 25 December.

Christmas is also the time when companies show their appreciation to their staff through bonuses. Certainly, staff at JCB in Wrexham will be delighted at the announcement last week that all of the manufacturer’s UK employees would receive a £500 Christmas bonus payment. I am sure that others up and down the land will be rewarding their staff for working hard through what has been a difficult year for many firms.

The Christmas Party is also an opportunity for employers to reward staff for all their hard work throughout the year with one night of festive fun. It is also a major boost to the trade of local pubs, clubs and restaurants, and it is estimated that as much as £1 billion is spent every year on these corporate get-togethers. However, recent research has also suggested that hangovers from such parties cost the UK economy as much as £260 million in lost man hours, as a quarter of employees work for fewer than four hours the day after the annual Christmas party because they are suffering ill-effects from the night before, while around a fifth call in sick or show up late.

Despite this, Christmas parties are also providing a boost to both the retail and personal services industry as everyone tries to outdo each other in the office fashion stakes. In fact, research by George at Asda found that 45 per cent of women spend an average of £100 getting ready for the annual office Christmas party, with some spending much as much as £210 on outfits, shoes, make-up and tanning in preparation for their night out.

Therefore, Christmas is not only a time for celebration but is also a critical time for many parts of the UK economy. But let us not forget that the economic benefits of Christmas should not be exclusively for the big department stores, supermarkets and Amazon.
Certainly, if you have yet to finish off your shopping, consider whether you can buy gifts for your loved ones and friends in local shops, thus giving your local High Street the boost it deserves at this time of year.

Nadolig Llawen! Merry Christmas!

Friday, December 21, 2012


An article in the Daily Post last month reported that of the £552m in goods and services procured by local councils last year, just £155m was spent in North Wales.

At a time when the local business sector needs to be fully supported as it struggles to emerge out of recession, the finding that 72 per cent of local authority procurement is obtained from outside of the region is a shameful figure.

In fact, when you consider that even if only half of the goods and services that councils buy were purchased from local firms, this would bring an additional £121m into the North Wales economy, generating thousands of jobs.

Of course, it is not only councils that should be under the spotlight and I would also like to see health boards, universities, colleges and the Welsh Government itself release similar data for the region.

Certainly, it is an issue I have been writing about since on a regular basis 2004 and I am glad that this is finally getting some of the attention it deserves by politicians across all political parties.

But local procurement is not an issue only for North Wales. Recent research from Europe showing that small to medium sized firms (SMEs) won less than third of all contracts above £5million. Micro-businesses, which employ less than ten people, got only 6 per cent of the total market of contracts in terms of value.

It has been suggested that this situation is exacerbated by the tendency to issue large single contracts, which seem to benefit bigger companies. Instead, critics have suggested that public authorities should promote the practice of breaking down tenders into smaller lots, a move that would increase the probability of smaller local firms becoming successful.

One of the recommendations I made as Chairman of the Welsh Conservatives’ Economic Commission was for the Welsh Government to promote is the imposition of targets for spending public budgets with local small firms, as is the case in the USA where the Office of Government

Contracting works to create an environment for maximum participation by small businesses in federal government contract awards. With the US government spending billions of dollars in purchasing goods and services from private firms every year, targets have been set for every government department as to the proportion of expenditure that will go to SMEs. More importantly, legislation in the USA ensures that the public sector must conduct a variety of procurements that are reserved exclusively for SMEs.

Those who defend the status quo in Wales suggest that it will be the taxpayer that will lose out if we favour smaller local firms over larger and, allegedly, more efficient, companies. There is simply no evidence for such a supposition.

I recently met with a group of North Wales construction companies who had expressed serious concerns over the new framework agreements for public sector construction in North Wales. These, they suggested, had been designed specifically to keep local companies out of consideration by a process that favoured larger national businesses.

Certainly, those public servants in charge of putting together these contracts, which are worth hundreds of millions of pounds, need to answer such concerns. However, when I asked the companies concerned about competition is that they said they would welcome it, as long as they weren’t excluded and given the opportunity to compete.

Indeed, as one of the owners of these firms stated quite firmly, “I have never lost a business contract to a large company and I am not about to start now”. Clearly, the evidence shows that the public sector in Wales needs to consider its policies towards supporting local firms through procurement.

However, it could start to address this issue immediately by ensuring that as a matter of course, every local business that wants to compete for a public sector contract is given the opportunity to do so.

And on such a level playing field, I would certainly back our companies to win these contracts every time.

Wednesday, December 19, 2012


Every year, the release of the regional GVA (Gross Value Added) data gives politicians and policymakers the strongest indication of the prosperity of Wales relative to the rest of the UK economy.

And whilst some have been quick to dismiss GVA as the main measurement of the wealth of the economy, it is still seen as the gold standard by which the majority of economists view the relative affluence of nations and regions. Indeed, the European Union will soon use it to decide whether the poorest parts of Wales will, for potentially the third time, receive billions of pounds in additional funding for economic and community development.

So what has been the performance of the Welsh economy in 2011?

In terms of relative GVA/head of population, it would seem that the Welsh economy (1.9 per cent growth) has expanded at a higher rate than the UK (1.4 per cent growth), with only South East England and Northern Ireland growing at a faster rate in the period 2010-2011. However, despite this improved performance, Wales remains the poorest part of the UK although it may well overtake the North East of England within the next few years.

Whilst there is scope for optimism in these new economic figures, this growth is not uniform across Wales. For example, the poorest part of the economy - West Wales and the Valleys - has grown at a slightly faster rate than the more prosperous East Wales (which includes Cardiff and the Vale of Glamorgan, Newport and Monmouthshire, Wrexham and Flintshire, and Powys).

This could suggest that the various European Structural Funding programmes are finally beginning to have an effect on the poorer parts of Wales, although this does vary across the region.

For example, if we look at the relative growth across Wales since the highest levels of European funding was granted to Wales in 2000, only three counties – Anglesey, South West Wales and Bridgend/Neath Port Talbot – have grown at a faster rate than the UK economy over those eleven years. Indeed, whilst the Welsh economy has grown at an average of 48 per cent during this period, areas such as the South Wales Valleys have grown at a far lower rate despite having access to additional funds for economic development.

However, the biggest disappointment for both politicians and policymakers must be the decline in relative growth of the more prosperous parts of the economy since 1999. Whilst GVA/head has decreased by 1.4 per cent for the whole of Wales, it has actually gone down by 5 per cent for East Wales since the birth of the National Assembly for Wales.

Some would argue that by focusing resources predominantly on the less wealthy parts of Wales, economic development policies have neglected those parts of the economy that could have the greatest potential and capacity for growth. Certainly, some parts of East Wales have shown a dramatic decline in economic fortunes over the last thirteen years. In particular, the mid-Wales county of Powys has seen a fall of over 10 per cent in its GVA/head to a level that would, if the Welsh Government wanted to make the case, make it eligible for inclusion in the next round of European Convergence Funding for the poorest parts of Wales.

There has been much discussion of late about the potential role of cities as the economic drivers for the future Welsh economy. Analysis of the GVA data suggests that, to date, that role has yet to be realised and, contrary to expectation, the main urban areas of Wales – Cardiff, Swansea and Newport - have only grown at an average of 1.6 per cent as compared to 2.2 per cent for the rest of Wales between 2010 and 2011. Indeed, their growth rate since 1999 is also lower than the average for Wales.

Certainly, if their performance could be improved considerably over the next few years, then there could be a significant impact on the Welsh economy. In fact, some would argue that the city regions approach to economic development recently proposed by the Welsh Government needs urgent action if the full potential of Wales’ three cities are fully realised for the economy.

And what about North Wales?

Since the creation of the National Assembly for Wales in 1999, the Welsh economy has grown by 54 per cent. In contrast, the economy of North Wales has had a growth rate of only 51 per cent This is disappointing, given that there have been concerns that the region has not been receiving the necessary funding required to help build up its economy.

But this figure actually hides a more worrying statistic over the relative wealth of both parts of the region.

For example, the poorest four counties – Anglesey, Conwy, Denbighshire and Gwynedd have grown by 59 per cent during this period, which is higher than the Welsh average. In contrast, the two counties of Flintshire and Wrexham have only experienced a growth of 43 per cent since 1999. Indeed, whilst GVA/head has decreased by 1.4 per cent for the whole of Wales, it has actually gone down by 6 per cent for North East Wales since the birth of the National Assembly for Wales.

Some would argue that by focusing resources on the less wealthy parts of Wales such as those in receipt of European funding, economic development policies have neglected those parts of the economy that could have had the greatest potential and capacity for growth.

Certainly, in the light of the decision not to recommend a city region for North East Wales, many will be asking when the Welsh Government will start to consider how it should address the relative decline in the prosperity of Wrexham and Flintshire.

Therefore, I would imagine that most politicians and policymakers in Wales are heaving a quiet sigh over relief over the headline figures for the relative prosperity of the Welsh economy, especially given the uncertainty that has been caused by recent recessions. However, more detailed analysis shows that there are still challenges that remain in certain parts of Wales, not only in terms of raising prosperity but in using the resources available to drive forward in economy in those areas that have the highest potential for growth.

Thursday, December 13, 2012


Just over halfway through the current Coalition Government's term of office, there was a strange mix of anticipation and trepidation over the latest Autumn Statement from the Chancellor of the Exchequer, especially as the UK economy remains fragile.

Given this, George Osborne must have been relieved that, despite disputes about economic and fiscal policies on the front pages, there was a broad welcome from the business community for most of the main measures announced.

The £5.5 billion package to develop the UK's infrastructure was largely in response to pressure from business groups, with the Welsh Government receiving £227 million to spend on key capital projects via its Barnetised share of this funding. In addition, the decision to reduce the main rate of corporation tax to 21 per cent by 2014 is seen as not only supporting British businesses but also makes the UK a very attractive option for overseas investors.

And whilst unexpected, the ten fold increase in the Annual Investment Allowance for small to medium sized firms (SMEs) should act as a catalyst to get entrepreneurs investing their cash in developing their businesses over the next two years. However, whilst those were some of the headlines from the Autumn Statement, the more interesting new policies that have potential for the Welsh economy have to be found by reading carefully through the ninety three page document. For example, the UK Government has extended the temporary doubling of the Small Business Rate Relief, a move which has been automatically replicated by the Welsh Government in previous years.

Whilst politicians in Cardiff Bay could improve on such an offering, this is unlikely to happen until the business rates review is completed. It is great news for Newport that it has been chosen as one of only twelve cities to benefit from the second wave of the Government’s Urban Broadband Fund to help build one of the fastest and best connected communications networks in Europe. With Sir Terry Matthews' Alacrity Foundation also based in Wales' third city, this could give the local economy a massive kickstart after years of decline.

The announcement that Ebbw Vale and Haven Waterway Enterprise Zones in Wales will join Deeside in getting enhanced capital allowances will also help the development of key projects in both areas. A more controversial issue is that of shale gas, which is seen by some as the panacea to the growing energy problems of the UK economy.

Given the way that the USA is looking to become self sufficient through natural gas resources, it is not surprising that the UK Government is taking the first steps towards examining such potential through establishing an Office for Unconventional Gas to manage this relatively new industry. With South Wales having the potential to become one of the main areas for shale gas extraction, what seems like a minor policy change could have a big impact on both the local economy and the environment.

The recent thawing of relations between the Welsh Government and UKTI (the UK Government's trade body) is timely given the increased focus on exports and the announcement that UKTI's annual budget will be increased by £70 million to deliver more services to SMEs. Certainly, one would like to see Welsh firms take greater advantage of these exporting services in the near future. Indeed, the closer co-operation that has been established with UK Export Finance should ensure that Welsh firms are in a strong position to tale advantage of the new scheme to provide up to £1.5 billion of loans for the purchase of UK exports.

In supporting science and innovation, the UK Government announced that it will be investing £600 million in research infrastructure and facilities for applied R&D. If this was fairly distributed, Wales would be getting around £30m to support the development of innovative technologies. However, with Wales having access to additional money via European Structural Funding, then both the Welsh Government and the Wales Office should be making the case that the UK could get more bang for its bucks if facilities to support high quality research were built in Wales.

An announcement was also made that the Prime Minister will soon be setting out the next steps to support the UK Life Sciences sector. Again, with the Welsh Government showing the way to other regions through its £100m life sciences fund, we cannot be left behind other favoured regions, such as Aberdeen, Cambridge, Dundee, London and Oxford, as this vital high technology industry is developed further.

Another policy development that should be of relevance to Welsh firms the decision to provide £120 million for two additional rounds of the Advanced Manufacturing Supply Chain Initiative. This will support R&D, skills training and capital investment to help UK supply chains achieve world-class standards and encourage major new suppliers to locate in the UK. With Wales remaining one of the major manufacturing regions of the UK, I hope that our best companies, such as Airbus, Ford, Toyota and Tata, are linked into this programme. I would also expect that this initiative can be used to support new developments, such as the nuclear programme at Wylfa, to ensure that local firms take full advantage of major projects.

Therefore, as with every statement from the Chancellor of the Exchequer, there are policy changes that could have positive impact on Welsh business. The challenge now is to ensure that the Welsh Government work alongside their counterparts in Westminster to ensure that the economy of Wales takes full advantage of such opportunities over the next twelve months.

Monday, December 3, 2012


Following the global financial crisis of 2008, one of the more interesting debates that took place was over the role of business schools in training the so-called "Masters of the Universe" graduates who were at the helm of failing companies such as Lehman Brothers.

As a result of the various banking scandals, and the general breakdown of trust in business that followed, those in management education began to question their overall strategic approach, the content of their flagship Master of Business Administration (MBA) programme and, more importantly, how they should develop the managers of the future.

Some of the external criticisms that business schools have faced during the last few years include failing to provide the ethical direction needed by managers, having a curriculum that is too narrow and specialised which ignores leadership and entrepreneurial skills; and undertaking research that is motivated only by academic rigour and not practical value.

There has also been concern expressed by those working within business schools that they have lost their way because they are increasingly perceived as cash cows for universities to subsidise other loss-making academic departments, with quality and relevance becoming victims of financial imperatives.

As a result, there continues to be an increasing amount of soul searching by some of the leaders of business schools as to the way forward for their organisations.

One of the more interesting critiques is to be found in "The Learning Curve" by Santiago Iniguez de Onzono of the IE Business School in Madrid. As Dean of one of the best business schools in the World, he creates a marvellous journey into the changes that he believes will influence management education over the next decade.

In particular, he notes the importance of ensuring that MBA students learn more than just management skills as part of their training and emphasises the importance of connecting with the outside world, encouraging the recruitment of both academics and practitioners as faculty members.

An interview with Santiago is shown below.


Another review, this time by Professor David Wilson of Warwick University, suggests that business schools should broaden their focus of research and teaching towards the bigger public and private sector debates in work, employment and society. He argues that this should be done by being less insular and engaging more with other departments across the University.

Indeed, he goes on to propose that business schools could, and should, become a critical part of the knowledge transfer process by helping in the commercialisation process of science and technology from higher education institutions, something that is sadly missing within the majority of universities in the UK.

There is also some debate as to whether the MBA programme, which drives most business school activity, is fit for purpose. For example, a recent survey by the Association for MBAs  (AMBA) suggests that there is likely to be increased specialisation over the next few years to reflect the needs of global business and society, especially in areas such as sustainable development, health and energy. In addition, an increasing number of MBA graduates are opting to start their own businesses rather than work for other organisations as entrepreneurship becomes more popular globally.

Another key development is that of online learning, which some believe poses a major threat to the traditional campus-based MBA programmes which dominate the US and European business education markets, especially as serious players such as MIT, Harvard and Stanford are entering the market.

Therefore, whilst there are major global challenges facing business schools in an increasingly competitive marketplace, little attention has been paid to their role and relevance to the local business community. Given the importance of strategic leadership and business skills to the growth of companies, there is surely a greater role to be played in ensuring that the competitive advantage of local businesses are maximised through improved management development?

The CBI has recently suggested that there should be a focus on improving the performance of medium-sized firms in Wales. Yet apart from the occasional European funded management programme, the focus of nearly every business school in Wales is on attracting high fee paying overseas students rather than on developing the competences of indigenous businesses so that they gain the strategic, operational and entrepreneurial skills necessary to grow and develop.

It has been argued that this is because there is a lack of demand from Welsh firms but I simply don't believe that is the case, especially given the tens of millions of pounds of support that is available through the Welsh Government for workforce development, much of which is currently spent on low level training.

Whilst creating an internationally oriented business school may be the primary imperative for many universities,  I still passionately believe that there is a need for an organisation that focuses predominantly on creating a more entrepreneurial business community that will help make the local economy more competitive by training those leaders and managers within the public and private sectors that can make a real difference to their organisations.

More importantly, if a university in Wales was prepared to take up this challenge, I am sure there would be widespread and positive support from politicians and the business community alike for such a development.

Friday, November 30, 2012


Another great sketchbook on entrepreneurship from the Kauffman Foundation


Monday, November 26, 2012


This week, the Office for National Statistics released the latest UK business R&D expenditure data a few days ago and this gives us the opportunity to benchmark the UK against the Global Innovation 1000 report discussed in an earlier article.

The good news is that, as with the overall global data, spending on innovation is increasing within the UK.

According to these statistics, spending on industrial R&D by British companies had actually increased by eight per cent in 2011 to £17.4 billion, which is a higher growth rate than for Europe as a whole.

As demonstrated in the Global Innovation 1000 report, the sectors that had grown the most were computer and information service activities, motor vehicles and parts and the pharmaceuticals industry. Collectively, these three industries had increased their R&D expenditure in the UK by £750m in the last twelve months.

And whilst large firms remain the big spenders, the proportion of expenditure by SMEs has actually grown from 14 per cent in 2006 to 23 per cent in 2011, showing the growing impact of entrepreneurial firms on innovation.

For Wales, the data provided a mixed picture.

Whilst business spending on R&D has increased by 77 per cent since 2000 (as compared to 51 per cent for the UK), growth has been relatively flat over the last few years (see graph below). Indeed, Welsh companies provide less than 1.5 per cent of the total amount of business R&D undertake within the UK, well below what would be expected proportionally. This demonstrates how dependent the Welsh economy has become on its university sector as the main source of research and how important it is to get the mechanisms right to get new products and processes from the laboratory into the marketplace.

More relevantly, the Welsh Government’s aim of having business R&D as one per cent of the economy remains a distant target, with the data suggesting that firms would have to spend an additional £200m per annum to reach this target.

Of course, politicians can only do so much to support innovation within the business community and firms themselves need to develop new ways of exploiting research findings and transferring them into the marketplace. And that is where some of the more detailed findings of the Global Innovation 1000 study may prove useful.

Through detailed interviews with major innovators, one of the most important (and perhaps more obvious) findings from the survey is that there seems to be no long term correlation between the amount of money a company spends on its innovation efforts and its overall financial performance.

What is more important is how businesses use that money and the quality of their talent, processes, and decision-making. Therefore whilst Welsh businesses spend comparatively less than firms in other regions on R&D, this does not necessarily mean that they are not using those funds productively.
Another key finding is that over half of those innovative companies interviewed said that they actually weren’t very good at it. In fact, only a quarter of the firms believed that they generated ideas effectively and, at the same times, converted those ideas into new product development projects.

But what is important about these firms is that they have a consistent set of principles and processes to turn ideas into potential commercial projects and, crucially, any company in any industry to get the most out of the money they spend on innovation can use these tools.

For example, the most common method for coming up with new ideas was “direct observations of customers”. In addition, the main internal mechanism that companies used to support commercialisation was the employment of “innovation champions” within organisations, namely employees who are assigned to coordinate the capture, development, and promotion of new ideas.

I wonder how many Welsh organisations have such individuals employed to boost innovation internally?

One of the more interesting findings is that major companies use open innovation in idea generation sparingly. This is unexpected given that this has been a major source of discussion as the new paradigm for accessing new ideas. However, the fact that a small but growing number of firms are seeking out new ideas from a variety of sources outside their conventional domains, including innovation contests and social networking, does offer opportunities for Welsh companies, especially if the whole concept of open innovation can be adopted by senior managers within these firms.

Therefore, whilst R&D expenditure by private companies in Wales has slowed down in recent years, there are certainly lessons that can be learnt from other businesses to make the most of the money spent on innovation. In particular, there needs to be a greater emphasis on the development of innovation skills that, ironically, no Welsh university currently offers to the business community.

There are certainly plenty of opportunities for Welsh firms to make the most of innovation as a competitive tool and hopefully, through its new innovation policy, the Welsh Government will be able to provide the support necessary to access these opportunities wherever possible.

Tuesday, November 20, 2012


Innovation is key to the competitiveness of nations, which is why the recent Global Innovation 1000 study by the strategy consultants Booz and Company into corporate research and development (R&D) spending is a critical indicator as to how the world economy is emerging from the worst recession since the First World War.

And contrary to the doom and gloom peddled by some on the future prospects for the global economy, the encouraging news from this report is that the world’s most innovative businesses are again beginning to invest in research that will lead to new products and services.

According to the study, R&D spending by the Global Innovation 1000 increased 9.6 percent to £380 billion in 2011. Whilst this may have been expected after the slowdown in spending that occurred during the global recession, this recovery is, contrary to expectations, actually stronger than that following the last major economic downturn after the crash back in 2000.

For example, expenditure on R&D in the first three years after that global shock increased by an average of 3.5 per cent as compared to 9.5 per cent between 2009 and 2011.

In fact, three quarters of the companies surveyed actually increased their R&D spending in 2011, with only 19 per cent spending less.

It is worth noting that  R&D is increasingly focused within a small number of companies globally, with 10 per cent of the Global Innovation 1000 accounting for two thirds of the total expenditure of R&D in 2011 and half of the increase in R&D spending.

There is also a concentration in terms of R&D intensive sectors, with computing and electronics, automotive and healthcare being responsible for two thirds of all spending in 2011.

Of these three key sectors, computing and electronics continues to dominate innovation, spending £105 billion on R&D in 2011 (or 28 per cent of the global total).

Interestingly, it was not an American firm that led the way in this expenditure. Instead, it was Samsung, driven by its mission to overtake Apple within the smartphone industry sector, that increased its spending by almost 14 percent to £5.7 billion.

And with advances such as cloud computing changing the way that consumers will be accessing and using their electronic devices in the future, it is not surprising that even traditional players such as Hewlett Packard, Sony and Texas Instruments have increased their R&D intensity over the last year in order to keep up with newer companies on the block.

However, it is not only emerging technologies which are R&D intensive and many analysts remain surprised by the Lazarean recovery of the automotive sector during the last four years and its renewed enthusiasm for innovation.

Indeed, the increase of 15 per cent in R&D expenditure contrasts with the 14 per cent decrease experienced in 2009, and has been led by companies such as Volkswagen, Daimler, General Motors and Honda, with Toyota becoming the largest corporate R&D spender in the World in 2011.

In contrast, the healthcare sector seems to be treading water in terms of research investment, with major companies instead choosing to return money to shareholders.

And whilst companies such as Roche, Pfizer and Merck remain in the top ten R&D companies in the World, they have all reduced spending in the last 12 months as regulatory uncertainty means that they are reluctant to invest in R&D without a clearer path to market

In terms of expenditure by region, the data continues to have some bad news for Europe, especially relative to other parts of the World.

For example, the largest overall increase in absolute spending continues to be experienced in North America, where R&D spending grew by ten per cent in 2011, thanks to companies such as Microsoft, Intel, Merck, Pfizer and General Motors which, between them, spent £27 billion on R&D.

In contrast, R&D spending in Europe increased by only five per cent in 2011, well below the average seven per cent increase experienced during the previous five years. This is despite having two companies – Novartis and Roche – in the top three corporate R&D spenders in the World.

And given that the European Union has targeted increased research and innovation as a key part of its growth strategy over the next few years, much remains to be done in terms of ensuring that we keep up with the rest of the World, never mind overtake it.

In fact, the emerging economies of China and India posted an impressive 27 per cent growth in 2011, although this was from a low base and their overall contribution to global R&D remains low at less than three per cent of the total.

And worryingly for the West, this does indicate that those developing countries previously seen as sources for cheap manufacturing are now beginning to move the value chain by investing in innovation.

Therefore, the report shows that the overall global picture for innovation seems to be one of recovery and renewal, which would have been the last thing anyone would have expected four years ago.

However, the question for European policymakers and corporate leaders is whether they will be able to close the growing gap in R&D spending with the rest of the World and, more importantly, develop new innovations that will have a real impact in the marketplace?

Wednesday, November 14, 2012


Due to its failure to win a majority at the last Assembly election, the current Welsh Government has to make a deal, around this time every year, with one of the other parties in order to pass its budget.

This time, Labour has agreed a compromise with Plaid Cymru which, in exchange for passing its financial plans, will result in thousands of additional apprenticeships and a new science park involving Bangor and Aberystwyth universities.

Given the way that the new Secretary of State for Wales has hit the ground running with his announcements on Wylfa and rail electrification in North Wales, it is not surprising that Plaid has made an effort to demonstrate that the region remains important to them electorally.

Indeed, the unexpected announcement that £10 million of capital funding is to be committed to the science park has enormous potential for the economic development of the region if managed properly.

Of course, there have already been earlier attempts to connect both universities with the business community through the Technium programme that, to be blunt, failed badly.

Both the CAST building on Parc Menai and Aberystwyth Technium, which cost the Welsh taxpayer over £30million to build and operate, were closed down by Ieuan Wyn Jones when economic development minister, having generated considerable debts and having had very little impact on the local economy.

Despite this, I think that the new science park can work if its leadership and location are prioritised.
First of all, it is fortuitous that Bangor has a Vice Chancellor with an excellent record in linking industry and academia from his time in Ireland. Certainly, if he takes the lead on this project and drives it forward, then the chances of success are increased considerably.

The second issue is that of location, which may be slightly trickier. Indeed, some may argue that a largely rural area such as North West Wales is the wrong place for a successful science park.

However, my own experience of working with colleagues at Linkoping in Sweden disproves that theory.

With only 105,000 inhabitants, this former market town currently has the largest science park in Northern Europe, being the base for 250 firms employing more than 6,000 people, with the majority of those generated from the local university.

But the real question is where will this new science park be located, given that Aberystwyth and Bangor universities are eighty seven miles apart?

In my opinion, it is unlikely to be based around Aberystwyth so will it be based around Bangor itself building on current developments such as Parc Menai?

Alternatively, will Lord Elis Thomas use his considerable powers of persuasion to get his University, and his Plaid colleagues, to put it into Trawsfynydd which is diplomatically half way between Bangor and Aberystwyth but which also has the added attraction of recently being granted enterprise zone status?

However, in my opinion, there is only one viable location that will make this project a success.
The recent announcement that a new power station at Wylfa B is likely to go ahead gives Anglesey a once in a lifetime opportunity to maximise the economic benefits for the region.

If the ‘energy island’ also had a science park, then it could become one of main centres for sustainable energy in Europe, attracting companies in the sector to the region, creating hundreds of well-paid jobs and taking real advantage of the academic expertise within the local university sector.

I am also convinced that this development could attract considerable additional funding from the science and technology budget of the UK Government.

Hopefully, such joined up thinking in taking advantage of a major infrastructure and energy project could, and should, add real value to the local economy and ensure that North West Wales has a bright economic future.

Monday, November 12, 2012


Earlier this year, I was delighted to work with the OECD on a project to examine the state of entrepreneurship education in Tunisia.

It was an intensive but enjoyable experience that enabled the international team to examine the strategies adopted by Tunisian universities to encourage greater entrepreneurial activities, as well as the start-up support offered within enterprise centres and incubators.

As expected, the main conclusions from the research showed that the key to success in developing greater number of new businesses depends on increasing the intensity of entrepreneurship support for those students who have the motivation, ideas and capabilities to make a success of entrepreneurship.

However, in various focus group meetings with other students, it was clear that the main concern of those graduating was not always whether they could start a business, but whether they could actually get a job within an existing small firm.

Indeed, one of the key issues identified in a number of universities was the gap between the theoretical competence that students acquire in class and the competences needed within the workplace, particularly in the private sector.

In particular, higher education institutions in Tunisia have been functioning without any real medium-term plan for how to manage this issue and there was clear lack of appreciation, from the university sector, that the majority of SMEs in Tunisia are family-owned enterprises and have very little understanding of the benefits that graduates can bring to their businesses.

This gap in knowledge between universities and industry is clearly not limited to Tunisia and there have been various initiatives developed to try and close this gap across the World so that students can learn and appreciate the competences required by industry.

One of the more successful, and one that I recommended as an exemplar to the Tunisian Government, is the Graduate Opportunities (GO) programme.

It’s not often that initiatives that originated in Wales are seen as best practice but, in my opinion, this is a successful intervention that could be easily adapted for the encouragement of greater links between industry and universities in Tunisia or any other developing country.

So what is GO Wales?

Simply put, it is a scheme run by the Higher Education Funding Council for Wales that makes it possible for students and graduates to develop their careers in Wales through quality work experience and training opportunities with businesses.

The project contributes significantly to the development of a knowledge economy in Wales enabling businesses to have access to higher-level skills and fresh ideas to support growth and development.

The flagship programme - Work Placements for Employers - offers businesses the opportunity to employ someone with a degree (or studying for a degree) to complete a project while working for a company for around 10 weeks. Placements are primarily aimed at SMEs, as they often do not have the time or resources to develop ideas and new projects and, more relevantly, often do not have the necessary specialist skills to complete a specific task. By hosting a placement, each business receives a choice of subsidised high quality students and graduates with specific knowledge and skills that can add value to the business during a 6-10 week project.

It sounds an excellent scheme but more importantly, it works.

For example, a recent evaluation of GO Wales by the consultants DTZ found that all of the identified objectives for the project are either being achieved or have been achieved. In terms of hard impacts, it has created 1,071 jobs, £2.7 million in wage premiums and £42.4 million of business turnover in Wales over the period 2009-2011.

It has also helped to bring about changes in the perception of the owners of small firms regarding the role of graduates in their business that could create the potential for further benefits in the future. There are more positive attitudes from small firms towards employing graduates, working within SMEs, undertaking further training and development activity, and engaging with universities. And given that more than a third of participating businesses utilising work placements had never previously employed a graduate, this is an excellent outcome for the programme.

However, the one problem identified by DTZ is that not all universities had used the programme effectively to support local businesses. Whilst Cardiff and Swansea Universities had exceeded their targets, other higher education institutions were behind the curve when it came to placing graduates into businesses via GO Wales.

As a result, there still remain some challenges in hitting the output indicators set by sponsors such as European Structural Funds. However, feedback from participants and delivery staff in respect of the operation of the project has generally been very positive and it seems to be making a real difference to those companies that get the opportunity to participate in the scheme.

So will Tunisia adopt this excellent programme?

Well, the final report has been submitted and we had a wide-ranging discussion with government officials and academic leaders in September on how best to create a culture of entrepreneurship amongst young people and small businesses.

Certainly, they could do worse than to adapt a programme from Wales that brings tangible benefits to both groups.

Thursday, November 8, 2012


During the last couple of months, I have had the opportunity to speak to Welsh entrepreneurs about the challenges facing their businesses over the next few years.

Many are heartened by the fact that inflation is falling, employment is increasing and consumer confidence is returning.

In fact, the recent economic doldrums faced by the UK economy have not dampened the opportunities for such firms in an increasingly globalised market place.

Yet, there remains a large dark cloud on the horizon that could prevent them from taking full advantage of such opportunities, namely access to capital.

Even the best businesses in Wales with enviable track records of growth and success are finding it difficult to get finance from their high street bank.

As one owner manager told me, it's like having a truck loaded up with goods to go to market and suddenly finding that your local garage won't sell you the petrol to get there, despite having an excellent credit record.

And such experiences seem to be the norm for small firms across the UK, despite recent initiatives such as the British Business Bank, which was recently launched by Vince Cable to provide up to £10 billion of finance for companies.

The Ernst and Young ITEM Club, an independent economic forecasting group, predicted earlier this week that lending to businesses will continue to decline and, by the end of this year, will have fallen to its lowest level since 2006. In fact, the levels of lending may not be back to pre-recession levels for another three years.

And the anecdotal evidence from small firms of the reluctance of banks to lend to business is supported by research which suggests that loan rejection rates from banks have increased to 38 per cent in 2012 as compared to the 11 per cent experienced between 2005 and 2008.

Given this, it is likely that the finance gap between the aspirations of growth firms and the willingness of banks to lend to them will continue to grow over the next few years.

It is estimated that the new British Business Bank will take at least 18 months to get going and even then, according to the ITEM Club, will only be able to provide half the funding required by the small to medium sized enterprise (SME) sector across the UK.

Indeed, whilst the new British Business Bank will operate at arms-length from Government and be professionally run and commercially focused, it will only provide loans through existing providers such as the high street banks.

The question is, of course, whether such access to government-backed finance will change the attitude of lenders who remain reluctant to support small firms, especially as it has been suggested that much of the new lending recorded by banks to business is merely a renegotiation of existing credit with companies.

Even small business lending programmes such as the Enterprise Finance Guarantee (ECG) scheme, where the Government guarantees up to 75 per cent of the loan, are not having the impact expected.

For example, a recent analysis of loans to small construction firms via ECG showed that only £3.5m was lent during the second quarter of 2012 as compared to £25m during the same period in 2008.

So where does this leave Welsh businesses?

Is there a better solution to enable Wales to get better funding in place for its SMEs?

I believe there is.

After creating the Welsh Enterprise Institute at the University of Glamorgan in the late 1990s, I was approached by the Federation of Small Businesses (FSB) to see whether we could put together a policy case for a Development Bank for Wales which would provide loans and financial support for small firms.

One of my colleagues at the time, Dr Helena Snee, produced an excellent paper which set out a clear case for an organisation along the lines of the Business Development Bank for Canada, which is mandated by the Canadian Government to promote entrepreneurship, focus on the needs of SMEs and maximise financing alternatives for businesses.

And whilst the first Welsh Government, along with the Welsh Development Agency, did not take all the recommendations from the paper on board, it did, thanks to sufficient pressure from the FSB, bring together all of the different financing schemes it managed to create Finance Wales which, of course, has gone from strength to strength since its inception.

With small firms across Wales continuing to complain of lack of access to funding to develop their businesses and having to wait until 2014 for the British Business Bank to be set up properly, will the Minister be minded to consider a Welsh solution to this issue?

In fact, should Finance Wales take the next step in its evolution to become a fully fledged Business Development Bank for Wales, along the Canadian model, and provide those companies with the ability to grow with the capital they badly require?

It would certainly be a bold move but as one that could make a real and positive difference to the potential of the Welsh business sector to grow, it is probably long overdue.

Tuesday, October 30, 2012


Walking through many towns in Wales, one cannot help noticing the increasing number of shops that have closed as the economic recession and low consumer confidence has taken its toll.

And such perceptions are borne out by the latest statistics on occupancy rates within retail centres, with the proportion of vacant shops across Welsh high streets now rising to 18.5 per cent, one of the worse vacancy rates in the UK along with the North West of England and the Midlands.

Whilst the growth of out of town shopping centres and the massive expansion in online retailing has helped to fuel such decline, it is also clear that politicians and policymakers at a national and local level have largely ignored the high street as a key driver of economic prosperity.

Given such challenges, it was timely that the Welsh Conservatives launched a new policy review last week which examined how the fortunes of town centres across Wales could be revived.

Entitled “A Vision for the Welsh High Street”, its aim is to focus attention on how town centres can provide a stimulus to local economies whilst acting as a catalyst for community engagement. Welsh Conservative leader Andrew RT Davies discusses the report below.

As far as I am aware, this is the first time that a political party in Wales has focused on developing specific policies in this area, although it does follow on from a recent report by the National Assembly’s Enterprise and Business Committee into the regeneration of town centres. Of course, there was also the highly publicised Portas Review in 2011 which provided a real wake up call to the UK Government but, unfortunately, its recommendations have only been applied in England.

As such, such a policy document is long overdue in ensuring that we have a proper debate on how the High Street in Wales should be developed in the future.

One of the more radical recommendations from the review is the proposal for splitting the business rates regime in Wales into one that targets small and large businesses separately.

Currently, the multiplier which is used to calculate business rates is the same for all firms, regardless of their size. This is in contrast to both Scotland and England where a higher multiplier exists for bigger companies with the difference being paid used to support lower rates for small firms.

As a result, Wales has the most competitive business rates in the UK for major superstores, but the least competitive rates in the UK for small businesses.

And whilst the supermarket lobby will, no doubt, resist such a move, it is an issue that will hopefully be considered carefully by the Welsh Government within its ongoing review of business rates.

Another key proposal is ensuring that town centres are at the heart of successful engagement with local communities. This will be done through the formation of high street teams involving local businesses, Councils and residents that will act as a focus for engagement and drive participation on the high street.

On a higher political level, the Welsh Conservatives have also called for the Welsh Government to have one Minister or Deputy Minister with ‘named’ responsibility for the high street so as to improve coordination across different departments.

One of the key recommendations of the Portas Review was that local areas should implement free controlled parking schemes so that they can compete directly with out-of-town developments.

Building on this, the report suggests that high streets need to have a “flexible, well communicated parking offer”, using the example of Newport Council which, for the last two years, has operated a two hours free parking scheme within the city centre.

It also reflects the views of the Federation of Small Businesses, which recently noted that small market towns and their outlying rural communities are hit particularly hard by the imposition of parking charges and that in such car dependent communities, free access to the town centre is essential not only for the purposes of shopping but also for social interaction.

Therefore, the debate has started on the future of the High Street in Wales and whilst partisan politics may prevent some of these ideas from being taken forward by the Welsh Government, I would hope the paper will at least get politicians and policymakers talking. Certainly, it is time that the regeneration of our town centres should be seen as one of the key catalysts in reviving local economies and a catalyst in reviving the high street as a focus for the community across Wales.

Tuesday, October 23, 2012


One of the most important books on entrepreneurship written in the last two decades is “Start-Up Nation”, which describes the way that Israel transformed itself into an economic powerhouse through the development of a vibrant and entrepreneurial high technology sector.

According to the book’s authors, a key factor in the success of this innovation hotspot has been that, at the age of 18, Israelis must serve in their country’s defence forces for at least two years, with many young people therefore being directly exposed to utilising technologies at the cutting edge of areas such as telecommunications and information technology.

And with the nature of the Israeli Armed Forces valuing improvisation and, despite their military focus, having an anti-hierarchical structure, potential entrepreneurs emerge not only with skills in teamwork and leadership, but also with experience of technologies that are the base for many new innovative sectors of the economy.

However, the entrepreneurial potential of those who have served their country in the Armed Forces should not be surprising.

Recent research suggests that previous military service has one of the largest marginal effects on self-employment, with “veterans” being 45 per cent more likely to be self-employed than non-veterans.

One of the countries which values its veterans and their potential contribution to developing an entrepreneurial economy is perhaps unsurprisingly the United States of America, where it is estimated that there are over 2.4 million businesses owned by veterans, equivalent to around 9 per cent of the total business population.

Unlike many countries, the US Government provides specific and targeted support for military veterans to start and develop their own business. This is largely driven by its national enterprise agency, the Small Business Administration (SBA), which has established an Office of Veterans Business Development for this purpose. Its mission is to maximise the availability, applicability and usability of all existing small business programmes for veterans and reservists as well as their dependents or survivors.

These include Veterans Business Outreach Centres, which are organisations set up to specifically provide entrepreneurial development services for eligible veterans owning or considering starting a small business.

There are also training programmes, such as the “Boots to Business” initiative, that have been introduced by the Obama Administration to train service members who are moving from military life to business ownership through courses focused on creating a feasible business plan.

Most importantly, the SBA has a range of small business loan programmes that are specifically targeted towards supporting veterans who wish to start up their own business.  For example, the Patriot Express Loan Initiative for veterans and members of the military community wanting to establish or expand small businesses gives a decision on loan applications within thirty six hours and on the lowest interest rates available from the SBA.

Therefore these programmes, in addition to many others at state and local level, mean that those leaving military service are given the backing they need to set up their own businesses after serving their country.

But what about the UK? What support is provided to British veterans when they leave the Army, Navy or Air Force?

Last year, the UK Government published an Armed Forces Covenant that sets out the relationship between the Nation, the State and the Armed Forces.

Long overdue, the Covenant recognises that the whole nation has a moral obligation to members of the Armed Forces and their families and establishes how they should expect to be treated.

Yet, despite the introduction of actions such as improved council tax relief, the establishment of a veterans card for commercial discounts and a pupil premium for service children, there seems to be no specific support, as found in the USA, for those who leave the Armed Forces to set up their own business.

And with the Ministry of Defence aiming to cut 29,000 military and 25,000 civilian posts by 2015, it is critical that the UK Government, along with the devolved administrations, puts into place the relevant backing to help with training, education and business support for those UK veterans who wish to undertake the transition into self-employment.

The US model shows how this can be done and, more importantly, how veterans can be helped when they return to civilian life. Certainly, there is no reason why those who have served our nation bravely should not get all the backing needed to make a real and sustainable contribution to their local economy.

Thursday, October 18, 2012


Next month,the Global Entrepreneurship Week will take place in 125 countries between November 12th and November 18th.

What is it about?

Fortunately, the team at the Kauffman Foundation, who are organising the event, have made a short sketchbook to demonstrate why this event is happening.


Monday, October 15, 2012


A few years ago, I was asked by the then Vice Chancellor of Cardiff University to come up with a business plan for a new entrepreneurship centre.

Unfortunately, he decided not to invest in such a development at that time, which was a great shame given the latent entrepreneurial potential that exists within Wales’ best university and, more importantly, the impact it could have on the economy of the capital city.

Nevertheless, the exercise did give me the opportunity to undertake some detailed research into what was happening around the World in terms of enterprise development and benchmark Cardiff against the best globally.

Naturally, programmes at the Massachusetts Institute of Technology and Stanford University were identified as world class, along with the courses offered at the most entrepreneurial higher education institution in the USA, namely Babson College.

But the biggest surprise, at least at that time, was the growing reputation of the University of Colorado in Boulder as a driver of entrepreneurship.

Nestled at the foot of the Rocky Mountains, this town of just 100,000 people seems the most unlikely place for an entrepreneurial revolution and yet during the last few years, it has become recognised as one of the most enterprising places not only in the USA, but in the World.

And a major driver in supporting new start-ups was the university through initiatives such as the Cleantech New Venture Challenge, which offers a $100,000 prize annually for the most innovative green idea that can be turned into a successful businesses.

Indeed, the whole state of Colorado now sells the message that is it is “entrepreneurial by nature” and, as a result, has not only becoming one of the most popular centres for new businesses but is also, because of this reputation, attracting firms to relocate to the state. But how does a small city is the middle of America turn itself into a rival for established hotspots such as Silicon Valley?

Some of the possible answers to that question is explained within an excellent new book by Brad Feld, a start-up founder, blogger and venture capitalist from Boulder.

“Start-Up Communities” is the story of how entrepreneurs within his community have created a new type of ecosystem where they, and not large companies or government, are driving the local economic agenda through a whole range of projects.

And, as Feld explains in the wonderful sketchbook below from the Kauffman Institute, there are essentially four lessons to be learnt from Boulder’s experiences.

First of all, there are two types of people within entrepreneurial communities namely leaders (entrepreneurs) and feeders (people who support startups, such as government agencies, funders, service providers and universities). However, any new developments must be led by entrepreneurs and supported by the other actors within the local business community who feed into the system.

Secondly, a successful entrepreneurial community cannot be built overnight and there must be a long view and commitment to enabling this to happen over a period of at least twenty years embracing, over time, both success and failure.

Thirdly, there must be an environment of inclusivity where anyone with an interest in entrepreneurship is welcome to contribute to the process.

And finally, there must be various substantive activities that engage the entire business community to help start ups to develop. These include the Boulder Open Coffee Club, which brings together a group of people who are interested in entrepreneurship and technology to have coffee every other week before work and to discuss issues related to start-ups. And Startup Weekend, which started in Boulder to bring together a group of developers, business managers, start-up supporters, marketing gurus and graphic artists to create new companies and is now replicated in cities around the world.

Of course, another key driver in cementing the reputation of the city as a location for technology start-ups has been Techstars, co-founded by Feld. I would argue that it is probably the most successful start-up accelerator programme in the World, having funded eighty seven companies that have received $194 million of investment and created 841 jobs.

Clearly, this entrepreneurial ecosystem not only helps develop new businesses but, more importantly, is a key economic influencer on the economy of the whole city. Indeed, Feld’s description of an entrepreneur-led cluster of start-ups is in contrast to the many examples of top down government-managed programmes to support economic development found elsewhere.

In the book, he notes that whilst entrepreneurs work in a bottom-up networked world, governments remain ensconced in a command and control culture. Whilst governments take time to implement new ideas, entrepreneurs want immediate action.

And certainly, rather than waiting for government to act, entrepreneurs like Brad Feld have taken the initiative to turn this sleepy Rocky Mountains city into an entrepreneurial powerhouse that is the envy of much larger metropolitan areas around the World.

But to me, the most important statement from the book is about how the entrepreneurs of Boulder are proud of their achievements and see themselves as cheerleaders for the success of their businesses and the city.

As Feld notes “These cheerleaders are both the leaders and the feeders as everyone in the community should be proud of what they are doing and shout it from the rooftops. This cheerleading can be via a community website…or it can be regular, steady blogging, writing and talking that we have in Boulder by the individual leaders and feeders. Regardless – be proud of what you are doing in your community, and make noise about it to the world.”

That is certainly a key message for entrepreneurs in Wales and if cities like Cardiff and Swansea are to emulate the success of a small city like Boulder, then celebrating entrepreneurship wouldn’t be a bad place to start.

Monday, October 8, 2012


Last week, I attended a conference organised by the Massachusetts Institute of Technology (MIT) to examine the future of manufacturing.

It was a timely event, as I am currently undertaking research into the development of advanced manufacturing in Finland during the last thirty lessons and the lessons that other small economies can take from this experience.

We heard from a range of experts in the field, including Professor Martin Schmidt of MIT, who has been advising President Obama on a new emphasis on manufacturing within the US economy.

The report from his review is fascinating, mainly because of the differences in the philosophy regarding economic development as compared to most parts of Europe. In fact, the conclusions to the report to ensure American leadership in advanced manufacturing comprehensively rejected a picking winners policy, either in terms of individual companies or specific sectors. Instead, it proposed pursuing an innovation policy for advanced manufacturing that would provide the best environment in which to do business, ensure that the most powerful new technologies are developed in the USA and that technology-based enterprises have the infrastructure required to flourish.

Given the way that manufacturing in the USA and many other advanced countries has been ignored in the last decade as financial services became the favoured sector and there has been rush to move production to low cost countries such as China, this report is long overdue.

Yet, during the two days in Brussels discussing the future of advanced manufacturing, there seems to be little appreciation of an example within Europe that could also act as a model for developing more innovative and competitive economy.

During the last fifty years, Finland has changed itself from an economy that was based largely on primary production and an unskilled agrarian workforce to one that is recognized as one of the most competitive in the World, particularly in the field of high technology manufacturing within key sectors such as information communications and telecommunications (ICT).

Most of this change took place during the early 1990s when the Finnish economy endured a major economic recession that included a major banking crisis, unemployment rates of 15 percent and high levels of government debt.

In response to these issues, the Finnish Government took a bold long-term view to focus its strategy on innovation and promoting, in particular, facilitating the development of high technology sectors such as ICT. Since 1995, the Finnish economy has been one of the fastest growing in the developed world, with an average growth rate of 3.5 per cent. Unlike other rapidly growing economies, most of the growth within Finland has been generated by the development of domestic companies.

Therefore, through indigenous growth in a number of key sectors, Finland has become recognised as one of the most innovative and competitive nations in the World and the World Economic Forum’s Global Competitiveness Report 2012-2013, which assesses the competitiveness landscape of 144 economies, ranked Finland third in the World in terms of a range of different factors driving productivity and prosperity.

And one of the main driving forces behind this success has been a specific government body that has driven and developed innovation throughout the Finnish economy.

Established in 1983, TEKES is responsible for administering public support for private and public sector R&D and innovation in Finland. Its mission is to promote the development of industry and services by means of technology and innovations. Its impact has been tremendous, being responsible for supporting more than half of Finnish innovations during the last thirty years. The latest report on its impact on innovation is shown below.

Whilst its programmes have been focused very much on supporting technology within companies and public institutions, there have been additional positive effects such as increased networking between companies and R&D organisations in targeted clusters and increased collaboration between researchers across different disciplines. Simply put, the focus on the innovation policy that the US Government now recognises as being critical to its own manufacturing sector has been one of the key successes in turning a small peripheral nation into one of the most competitive economies in the World.

And there are certainly lessons for Wales from this experience.

Indeed, whilst there are those who still hanker for the return of the Welsh Development Agency, it is clear that during its existence, its focus on attracting large foreign direct investment did little to support the long-term innovation performance of our nation. Its subsequent integration into the Welsh Government has also had a minimal impact on ensuring that Wales becomes the “small clever nation” which politicians have been calling for since the advent of the National Assembly.

As the Minister for Business is currently examining the development of an innovation strategy for Wales, one option in creating a more competitive Welsh economy would be to consider establishing a Welsh TEKES that would be an arms length organisation that would focus on developing the innovative potential that exists within this nation.

If we were to get only a fraction of the success that the Finnish economy has enjoyed during the last three decades, then it would be one of the more astute policy decisions that the Welsh Government will have made in developing the economy.

Monday, October 1, 2012


Since the current UK Government assumed power in 2011, much of the effort of Whitehall departments has been on reducing public expenditure to deal with the financial deficit.

Yet, focusing simply on saving money in public services is alone not sufficient as it simply fails to take into account the overriding problem with much of the public sector in the UK, namely that it is not only inefficient but is generally unwilling to participate in any meaningful innovation. As a result, the public sector is caricatured as being risk-averse, unentrepreneurial and focused more on managing processes than outcomes.

And yet according to the Kennedy School of Government at Harvard University, there are plenty of examples of the public sector adopting a more enterprising approach to delivering services. Last week, its Ash Centre for Democratic Governance and Innovation recognised 111 innovative government initiatives under the Bright Ideas initiative.

Taking examples from all levels of government - from school districts to the US Government itself - it recognised public innovation in a wide range of areas including rural regeneration, environmental problems and, topically, the academic achievement of students.

In crime, a bright idea from Baltimore collects and analyses data to determine hot spots in high crime and traffic incidents to deploy high visibility officers in those areas and curb future crime. Similarly, Pennsylvania uses new technology to analyse data and identify non-custodial parents not likely to pay child support and offer them increased support. In dealing with the legacy of the economic downturn, several public bodies have developed new approaches that are making a real difference to the regeneration of their local areas.

In New Orleans, the Mayor’s office has developed a tool that measures and tracks the city’s performance towards reducing the number of decaying and abandoned properties whilst a Michigan initiative known as Project Green House recycles upwards of 95 percent of abandoned home building materials. The City of Newtown in North Carolina has developed a free, outdoor Wi-Fi network to attract more customers to the downtown business district, city facilities, and parks whilst the e2 Business Programme in Salt Lake City provides local businesses with the knowledge and support necessary to implement sustainable business models.

There are also several projects that focus on reinvigorating school curricula and encouraging interest in science and mathematics. For example, NASA’s Explorer Schools provides teachers with interactive lesson plans and classroom activities around mathematics, science, technology, and engineering. Ohio’s Science and Math Moving On program provides its seventeen school districts with the latest in 21st century, high-technology learning tools to invigorate traditional lesson plans and enhance learning among students.

With regard to environmental protection and conservation, the MassGrown and Fresher initiative in Massachusetts connects consumers to local agriculture, whilst Hawaii’s Maui Nui Seabird Colony Champions engages the local community in the protection of endangered seabird colonies.

And there are many more examples of how the public sector in America, through its ingenuity and inventiveness, is making a real difference to local communities. In fact, what really hits home when you read through the list of projects is the clear evidence that direct intervention from all levels of government does not require endless resources and large budgets.

Most important of all, the innovations recognised by the 2012 Bright Idea list demonstrates that there can be a reduction in the size of the public sector whilst serving citizens more efficiently and effectively. Surely, it is this philosophy that should be at the heart of government in Wales where nearly two thirds of the economic output of this nation is dependent on the public sector.

Rather than complaining that higher quality in health, education and economic development can no longer be afforded, those working in the public sector should take heart from the experiences of other bodies globally to ensure that there is greater innovation within their organisations to deliver services more efficiently and effectively.

This will, inevitable, require a more entrepreneurial approach that, even with the best will in the world, is anathema to many civil servants. That has to change and if we are going to deliver the best level of public services with a reduced budget, then the Welsh Government and other public bodies need to encourage and support their own employees to come up with their own bright ideas to ensure that we have can not only have the best public sector in the World, but also the most innovative and cost-efficient.

Saturday, September 22, 2012


The pictures of the companies, winners and guests at the 2012 Fast Growth 50 award dinner

Thursday, September 20, 2012


The Global Entrepreneurship Monitor (GEM) research consortium has been measuring entrepreneurial activity and attitudes of working age adults across a wide range of countries in a comparable way since 1998.

Undoubtedly, it has been the main source of information on entrepreneurship across the World for more than a decade and its global report, published every January, is eagerly awaited by academics and policymakers.

Individual reports from the 54 countries participating in the study are published shortly after the main report is released and last week, the the 2011 GEM report for the UK was launched.

The main headlines from the research showed that more people in the UK were thinking of setting up in business in 2011 than in the previous ten years, with a fifth of adult Britons either already running a business or expecting to run one in the next three years.

It also noted a rise in female entrepreneurs, with 49 per cent of adults in the early stages of setting up a business being female, up from 44 per cent in 2010.

But what about the situation in Wales?

Annually, the Welsh Government spends tens of thousands of pounds on supporting this research project and yet, seven months after the Global GEM report was published, there is still no detailed report on the state of entrepreneurship in Wales. This is despite the fact that a separate Scottish report was published in July by the UK GEM team.

Fortunately, there are some sections of the UK report which examine entrepreneurship in the UK nations and give some idea of how entrepreneurship has developed in Wales in 2011. So what are the main headlines for Wales?

In terms of entrepreneurial attitudes, a significantly lower proportion of Welsh adults not currently involved in any entrepreneurial activity (18 per cent) reported that there were good start-up opportunities than for England (29 per cent) and Scotland (25 per cent).

In addition, there were significantly lower numbers of Welsh respondents who answered positively to the item “I personally know someone who has started a business in the last two years”. This may reflect a lower level of new business start-up in a nation as well as a lower level of networking by individuals in a nation.

It was also noted, and this may be an important finding for the Western Mail and its sister papers, that the proportion of non-entrepreneurial individuals who agreed that they often see stories about people starting successful new businesses in the media was significantly lower in Wales (38 per cent) than in the other home nations (44 per cent). Despite these poor results, the proportion of people who expected to start a business in the next three years (intention rate) rose significantly in Wales in 2011.

For the second year running entrepreneurial activity amongst 18-24 year olds was relatively strong in Wales, rising from 3.5 per cent in 2002 to 10.2 per cent in 2011 although no explanation is offered as to why this may have happened, especially during the last two years. The report also shows that the biggest difference between youth and older (55-64 years of age) entrepreneurship is to be found in Wales, which has clear implications for the role of organisations such as Prime Cymru, although again no details are given as to the reasons for this.

Finally, whilst there were small variations in the early-stage entrepreneurial activity by women, none of these differences are statistically significant, although Wales did have the highest ratio of female to male entrepreneurial activity rate (at 60 per cent), something which Chwarae Teg may find of interest. As usual, the GEM results have provided critical information on the state of entrepreneurship in the UK.

However, it is enormously disappointing that, despite accounting for nearly 30 per cent of the sample size, and presumably a proportion of the costs of the overall UK study, there has been no separate analysis on entrepreneurial activity for Wales eight months after the Global GEM report was published. Certainly, the Scottish report presents a detailed longitudinal analysis that not only examines overall entrepreneurial activity and attitudes but also looks at specific areas such entrepreneurship and multiple deprivation, start-up challenges, and entrepreneurship policy in Scotland.

The question is why a similar report has not yet been published for Wales? Good policymaking, especially in areas such as enterprise policy, needs accurate and up to date information on which to base its conclusions.

The analysis of data related to areas such as youth, female and older entrepreneurship has clear implications for business support organisations such as the Prince's Trust, Chwarae Teg and Prime Cymru, all of which have clear responsibilities within this area and are also partly funded by the Welsh Government.

Therefore, one can only hope that the 2011 GEM report for Wales will be published imminently and will be comparable in detail to both the UK and Scottish reports. With entrepreneurship becoming more critical to the revival of the Welsh economy, I fully expect that its conclusions and analysis will be shared widely amongst politicians, policymakers and those organisations on the ground who are trying to develop a more entrepreneurial business community which is so vital to the future prosperity of Wales.

Wednesday, September 19, 2012


Today, the 14th annual list of the fastest growing firms in Wales is launched.

At a time when the Welsh economy badly needs a boost, the firms featured in this year’s Fast Growth 50 supplement demonstrate, yet again, the entrepreneurial and innovative potential that exists within our business community.

And despite trading within an economy that has been struggling to grow since the recession, this year’s list shows a record increase in turnover, demonstrating that even within difficult economic times, Welsh business can be competitive in an increasingly turbulent global environment.

Thanks to their wealth and employment creating potential, such high impact firms are now becoming the focus of policymakers around the World. And whilst entrepreneurship remains a key goal for developing local economies, there is an appreciation that as many firms will never grow beyond providing a local service and therefore there needs to be an increasing focus on those businesses that have the potential to grow further and create jobs.

National and regional governments around the World are now realising that focusing on high growth businesses, or so-called ‘gazelles’, can give them more “bang for their bucks” in ensuring that public sector business support is targeted towards those that can create jobs in the economy.

In fact, we can see that the impact of a small group of high growth firms can be tremendous within a small economy such as Wales. Since 1999, 440 firms have appeared on the fourteen lists published in the Western Mail. These have created over 22,000 jobs and generate over £12 billion of additional turnover annually into the Welsh economy, much of which is spent on local goods and services.

The 2012 Fast Growth 50 list is the most successful to date, generating a turnover of over £3billion and creating over 3000 jobs.

This is, in part, due to one of Wales’ most successful businesses, Admiral Group PLC, which appears on the list for the second year in succession, doubling its turnover between 2009 and 2011. In fact, larger firms with a turnover of greater than £20 million make up 20 per cent of this year’s list, demonstrating that growth is not only limited to smaller businesses.

Yet, even if Admiral is excluded, the performance of the other forty-nine is an incredible achievement, generating over £815 million in sales in 2011 at an average growth rate of 86%, and generating an additional £377 million for the economy during the period 2009-2011. These firms also created approximately 2000 jobs,  far higher than the number generated by inward investment into Wales during the same period

In terms of location, Cardiff remains the main centre for fast growth firms, with thirteen businesses being based in the capital city, the same as 2011. Other urban centres are also magnets for growing firms including Bridgend (six firms), Swansea (five firms), Newport (four firms) and Wrexham (three firms). The other stand-out town in Wales is the area around Welshpool in Powys, which has three significant manufacturing firms that are showing considerable growth.

This year, North Wales has only six companies, although their collective growth is considerably higher than the Welsh average. Two  counties - Anglesey, Conwy - have no fast growth businesses within their boundaries for the fourth year in a row. They are joined as Fast Growth 50 free zones in 2012 by Blaenau Gwent, Carmarthenshire, Ceredigion, Denbighshire, and Merthyr Tydfil.

As in 2011, the average age of the growth company in Wales is twelve years old, suggesting yet again that it takes time for such businesses to establish themselves in their marketplaces. The oldest business this year is Wynnstay PLC, which was established in 1918, whilst there are thirteen fast growth start-ups (five years old or less).

There are twenty seven businesses that appear for the first time on the Fast Growth 50 list whilst four companies – Kids@Play, Professional Driver Services, Smart Solutions and Trojan Electronics - return for a third time in succession. In fact, this is the second time that Trojan has made it a “hat trick”, having appeared ion the fast growth 50 lists in 2005, 2006 and 2007.

Two businesses have demonstrated four years of continuous growth, both of which made their debuts on the list in 2009. Machynlleth based Dulas had a turnover of £21.5 million in 2011, whilst Biotec Services International has grown to sales of £9.2 million over the same period.

Finally, congratulations to Glyndwr Innovations for becoming the fastest growing firm in wales in 2012.

Universities are often criticised for not engaging properly with business so the success of this university company from Wrexham is great news for the Welsh economy.

One can only hope that their success will spur on other higher education institutions to follow in their footsteps over the next few years.