NORTH WALES AND RAILWAY INFRASTRUCTURE

Last week, the UK Government made its long awaited announcement on the future of the railway infrastructure.

Describing it as the biggest investment in the railways since Victorian Times, it committed £9billion to upgrade transport links across the country.

For Wales, the main Great Western line between London Paddington and Swansea is to be electrified, cutting 20 minutes off the journey. 

There is also going to be electrification of the South Wales Valleys lines, ensuring quicker access from some of the most economically deprived areas in the UK. And, more importantly, both of these investments complement the Welsh Government’s decision to award city region status to Cardiff and Swansea as a catalyst for attracting investment. 

Whilst this is great news for the Welsh economy as a whole, those living in North Wales must wonder what they need to do to attract similar attention from Westminster and Cardiff Bay.

The good news is that the Secretary of State for Wales has made it absolutely clear that she will now be focusing on upgrading key routes in the North, including those to conurbations in North West England which, according to the latest census have arrested decades of decline and are actually growing again.

For example, Liverpool has recorded a 6 per cent growth in its population in the past decade, whilst Manchester recorded an increase of 19 per cent. Connecting North Wales to these growing urban areas are vital in getting both individuals and businesses to markets and job opportunities.

However, the holy grail in terms of attracting real investment remains the link to London. The fact that it takes the same time to travel between Bangor and Crewe on a diesel train as it does on the electrified route between Crewe and Euston, despite the former being only half the distance of the latter, speaks volumes for what can be done.

So how do we ensure that transport in North Wales is fully upgraded in the future?

One of the highlights of the campaign for electrification of the railways in South Wales was the way in which businesses, civic groups and politicians of all persuasions came together to make a strong case for the upgrading of the transport links. However, I would argue that this joined up approach in lobbying the Welsh and UK Governments for further investment has yet to happen in North Wales. 

And while some may argue that we have missed the boat on obtaining significant funding for transport, I still believe that there remain various opportunities to obtain the estimated £300m needed to upgrade the railway infrastructure in North Wales.

For example, it is likely that the poorest parts of Wales, including Anglesey, Conwy, Denbighshire and Gwynedd, will qualify again for the highest level of European Structural Funding. Under such circumstances, and given the fact that the UK Government is picking up the tab for rail improvements in South Wales, one would hope that the Welsh Government will prioritise these funds to pay for a large proportion of the transport links needed in North Wales, thus ensuring a lasting legacy from the billions of pounds of European funding allocated to the region.

And by working closely with the Irish Government, it must also make sure that those road and rail links across North Wales, and that form part of the transport network that connects Dublin to mainland Europe, get their fair share of the £50bn that will be allocated by the European Union to core transport routes in 2014.

So, the hard work begins now and it is critical that the local business, political and civic communities across North Wales come together to make a strong case, as happened in South Wales, for the region to get the attention and funding it deserves in terms of transport infrastructure improvements. (Daily Post column, 23rd July 2012)

WALES, REGIONAL ECONOMIES AND LEARNING FROM THE USA

Last week, a major economic study was released in the USA that received very little publicity on this side of the Atlantic.

And it came from a very unexpected source, namely the group that represents the governors of all fifty American States, namely the National Governors Association (NGA).

With national governments focusing largely on issues regarding the global economy and how to emerge from the financial mess that has engulfed much of the Western world over the last five years, administrations at a state, regional and local level are looking to take greater responsibility for economic development, especially in encouraging their local indigenous business base to grow.

The study, entitled “Growing State Economies”, provides ideas and options to help states to develop those policies that can encourage entrepreneurship and innovation. Drawing on evidence from academics, research foundations and, most importantly, the business community, it develops a framework to help the private sector to expand and create employment.

The report is the brainchild of Governor Dave Heinemann of Nebraska, who last year challenged the other forty nine states wishing to promote entrepreneurial activity and business growth to identify the innovation and industrial assets of their region; determine the best policy strategies to take advantage of their assets and strengths; facilitate relationships between groups such research institutions, investment funds, industry associations and professional networks as sources of ideas, funding and advice; and provide the education and training needed to prepare the next generation of entrepreneurs and business leaders.

To do so, it looks to exemplars of practical policies that have made a difference to each state economy. This includes tax credits offered by Arizona and Nebraska to investors in new businesses that produce medical devices, renewable energy and other high-tech innovations; a commission in New Jersey aimed at eliminating red tape; state-funded research labs in Oregon; and how small businesses in North Carolina and Washington could be helped in expanding into the international market. But this is only is this a report that builds upon best practice from each individual state, from Washington to Florida.

It also provides a set of policy guidelines that should be of interest to devolved governments and city regions within the UK. And being authored from the World’s largest economy, you would not be surprised to learn that it sees the key to economic growth as having as many innovative, productive and globally competitive businesses and workers as possible within each state’s borders. To achieve this, the report examines how governments at a sub-national level can help more start-ups launch and grow, assist firms to gain access to skilled labour, finance and international markets, and encourage new ideas and new technologies to gain acceptance in the marketplace, especially through the development of regional clusters.

As I am sure many of you will agree, none of this is rocket science but what the NGA has managed to accomplish, which many other public bodies have failed to undertake across the World, is to articulate a clear and simple vision of how public policy can support these different priorities that can generate and support economic growth.

It also demonstrates, with Republican and Democrat governors coming together to support this initiative, that there are lessons to be learnt by the different administrations in the UK on putting economic pragmatism above political differences, especially at this time in the global economic cycle.

There is much to learn from this report and, during the next few weeks, I will be focusing on some of the main policy conclusions and their potential impact on the economy. Indeed, with the Welsh government promoting the concept of city-regions and North Wales looking for greater economic co-operation across the six local authorities in the region, there may be much to learn from what is happening at a state and local level across the Atlantic.

NORTH WALES AND CITY-REGIONS

Last week, the major announcement from the Welsh Government concerned the report of a special taskforce that had been commissioned into looking into the potential of city regions as drivers for economic growth.

Essentially, city regions are exactly what they say on the tin – they are those areas surrounding a major urban location that, as academic research has shown, are major drivers of economic growth and employment.

Normally, they consist of areas that collectively have a minimum population of 500,000 residents, thus creating the critical mass needed for economic growth and enables policies on issues such as transportation to be effectively utilised towards maximising the potential of the city region. Given Wales’ demographics and geography, it is not surprising that the Task Force recommended that only two city regions should be created.

The first, with a population of 1.4 million would be in South East Wales and centred on Cardiff and taking in Newport, Bridgend and the Valleys. The second, to be known as Swansea Bay and with almost 700,000 residents, would consist of Swansea, Neath, Port Talbot, Llanelli and Carmarthen. In my opinion, such developments are long overdue and if this signals the beginning of the end of tribalism and parochialism within our industrialised areas, then it can only be good for the Welsh economy as a whole.

But what implications will this have for North Wales? The task force was also asked to look at whether there was scope for a city-region based on Wrexham and Flintshire, especially given the importance of manufacturing within the region through companies such as Airbus and Toyota and the recent announcement of an enterprise zone on Deeside.

Unfortunately, it recommended that even if this city-region was extended across the border into Cheshire, it did not have the necessary population to guarantee success. Instead, it suggested that the Mersey Dee Alliance, which has been critical in building cross-border links, should become a regional strategic body with powers for economic development, although this would mean that the Welsh and UK Governments should consider giving this body the additional powers to enable it to undertake successful interventions in the local economy.

I am sure that many in North Wales will be disappointed that, yet again, the impression given is that the focus of the Welsh Government has been on South Wales and that the task force did not consider, even within its specific remit, ways in which the rest of Wales, especially the rural areas, could benefit from having a more joined up approach to economic development.

Perhaps that is something for the Welsh Government to consider in the future because, as we have seen recently with the furore over milk prices, there remains a fragility within many parts of the rural economy that needs to be addressed urgently. However, I am heartened by the fact that the North Wales Economic Forum is already ahead of the game when it comes to collaboration on economic matters between public bodies.

Only last month, it announced the creation of the Economic Ambition Board, a partnership between the six local authorities that has the aim of attracting inward investment and boosting job growth across the region. It may not have the title of a city region but this development certainly has the potential to make as much of a difference if real collaboration can take place between the councils involved.

I would hope that the Welsh Government considers carefully the level of resources it will direct, from its own coffers and European funding towards the two city regions in South Wales. At the very least, North Wales politicians and policymakers will need to make a strong case that the region gets an equitable amount towards its own economic plans for the future.

WILL WE SEE A RISE OF THE CREATIVE CLASS IN WALES?

The American academic Richard Florida, whose work should be compulsory reading for every economic policymaker in Wales, stated in his seminal book “The Rise of the Creative Class” that “access to talented and creative people is to modern business what access to coal and iron ore was to steel-making.”

Given this, you have to wonder why politicians and policymakers are not doing more to encourage greater creativity in the economy. Indeed, that was the subject of research released last week by the software company Adobe.

The “State of Create” report was commissioned not only to get a handle on how important creativity is to the UK economy but, more importantly, how its affects people in their everyday lives.

The main finding is that whilst a high percentage of people in the UK agree that creativity is the key to driving economic growth, we are not living up to our creative potential as a nation i.e. 63 per cent of adults consider themselves to be someone who is creative but only a third feel they are living up to this potential. And what are the main reasons for this perception? 


Four out of five believe that there is an increased pressure in work on being productive rather than creative. In addition, risk aversion is seen as a barrier with ‘playing it safe’ being the strategy usually adopted by organisations which results in those who are innovative and entrepreneurial having their ideas stifled by those who are less creative. They also feel that there was a lack of time to create new things and that they cannot afford to be creative. Indeed, a third of adults wanted more time in the workplace to think creatively and to be trained to use different creativity tools. 

And for those companies that have encouraged such thinking, there has been commercial payback. Take, for example, the policy of internet giant Google which lets its employees spend one day each work week focusing on their own projects and which has resulted in creating half of the company's new products and services. 


Nearly two thirds of the respondents also believed that creativity was being stifled by the UK education system and whilst young people are seen to be more creative than those over the age of 35, they need to be given the opportunity to develop creative skills even within a formal educational environment, especially through greater use of social media tools. Several prominent commentators have supported this view on the limitations that education places on the encouragement of creativity. 


For example, the educationalist Sir Ken Robinson, in his now famous 2007 TED lecture, pointed out the many ways in which our schools fail to recognise, much less cultivate, the talents of many brilliant people, arguing that “We are educating people out of their creativity."





A more recent article by Richard Florida also raised similar concerns. Arguing that the current system of primary and secondary education remains an obsolete 19th Century model that was created to churn out workers for factories, he proposed that we need to pay much more attention to early childhood learning as these are the most critical years when creative abilities are shaped. Indeed, it raises an important issue regarding the debate over whether rote learning and test preparation is stifling the future creativity of our young people. 


But it is not only education that it critical to encouraging greater creativity in the economy. Florida also argues that it is cities that are the main economic and social organising units of the so-called Creative Age, as they “speed the metabolism of daily life, accelerating the combinations and recombinations of people that spur innovation, business formation, job creation, and economic growth”. 


Such a view is timely, given that a Welsh Government taskforce this week proposed the creation of two large city-regions centred on Cardiff and Swansea, a development that could, if managed properly, potentially encourage a greater level of creativity in Wales that could make a real difference to our economy. 


Certainly, this new economic approach should ensure a more joined-up approach to sub-regional economic development. However, if it is to succeed, then such a strategy must not only focus on infrastructure developments alone but on ensuring that enterprise, innovation and, most important of all, creativity, are the key drivers that can reboot the Welsh economy over the next decade and beyond.

IMMIGRANT ENTREPRENEURS - CHALLENGES AND ISSUES

Research from the Kauffman Foundation has previously shown that immigrants start companies in the United States at greater rates than native-born Americans do, and are disproportionately successful in starting high-tech firms.

This is not surprising to many of us, with studies such as AnnaLee Saxenian's seminal "The New Argonauts" demonstrating that immigrants have driven the boom in high technology companies in areas such as Silicon Valley for the last three decades

However, a report released this week by the National Foundation for American Policy shows the advantage that the USA has with regard to immigrant entrepreneurs is likely to deteriorate dramatically if legislators do not radically change their policies.

It shows that visa wait times are likely to increase in employment-based immigration categories and such backlogs, according to Kauffman, means that foreign nationals with the skills and abilities to start high-growth companies will have to return to their home countries and likely start companies there rather than in the United States.

To demonstrate the importance of immigrant entrepreneurs, Kauffman has produced this video in which the case for supporting and attracting immigrant entrepreneurs is strongly made.




Bob Litan, vice president for Research and Policy at the Kauffman Foundation, also makes a strong case in this recent article from the Washington Post.

However what applies in the USA equally applies here in the UK.

We need to be at the forefront of attracting the best entrepreneurial minds into Britain to help grow our economy and the Coalition Government will need to look very carefully at its own immigration policies to ensure that this happens. Certainly, it must examine whether the current rules and regulations are fit for purpose or whether they are dissuading individuals from bringing their business ideas to the UK.

More on this subject soon.

THE GLOBAL INNOVATION INDEX AND THE UK ECONOMY

Politicians and policy makers are always wary of league tables produced by independent organisations or academic bodies as they can have a major effect on the way that governments, and their policies, are perceived by the outside world.

For example, PISA - the Programme for International Student Assessment - has become the leading international benchmark for educational achievements.

As a result, education ministers await the results of these tests, which are carried out every three years, with all the nervous trepidation of an A-level student picking up their marks from school in August.

Given this, it is surprising that UK Ministers were not jumping up and down in joy at the latest results from the 2012 Global Innovation Index. Produced by INSEAD, one of the World’s top business schools, and the World Intellectual Property Organization (WIPO), the report ranks 141 economies on the basis of their innovation capabilities and results.

Whilst smaller countries such as Switzerland, Sweden, Singapore and Sweden led the world in overall innovation performance, the UK managed fifth place, ahead of other major economies such as the United States, Germany and Canada. Below is a comparison of the UK's performance on nine key indicators with Sweden and Singapore.

According to the index, the UK is No 1 in indicators such as the cost of redundancy dismissal, ease of getting credit and areas of online creativity. And at a time when our financial institutions are facing considerable difficulties due to issues such as the Libor scandal, it must be noted that they are vital to developing a strong innovative economy – the UK is ranked first on credit and third on investment with regard to financial markets.

There is also evidence that the commercialisation of knowledge is working well with high rankings for not only the creation of knowledge through patenting and scientific research, but also for the economic impact of these activities in the economy.

However, policymakers concerned with the internationalisation of British goods and services will be worried by the 57th global ranking in trade and competition. Certainly, there are lessons to be learnt from countries such as Singapore – ranked first in the World under this measure - that have always prioritised the exports of goods and services as a critical part of their economic and innovation policy.

In a wider context, the report shows worrying trends for the development of the World economy. For example, whilst it is generally accepted that investing in innovation during recessions is essential for enabling quick recovery, research and development expenditures in most leading nations has fallen by an average of 1.6 per cent since 2009. But whilst governments have continued to support investment in higher education research as part of their recovery strategies, the business community has cut back its expenditure in R and D by almost five per cent over the same period.

Going forward, the concern for policymakers is that unless there are changes to political imperatives, the public sector will no longer be able to keep up the same level of research funding to universities, especially if austerity measures continue to bite. As a result, it is critical that the private sector is supported in funding new technologies, products and services over the next few years to make up for any potential shortfall.

The issue of a two track Europe, which has attracted considerable commentary over the last year, also seems to apply in terms of innovation. Indeed, the  study suggests the emergence of a group of innovation leaders in Northern Europe (Sweden, Finland, the United Kingdom, the Netherlands, Denmark) as well as a second group of innovation laggards in southern Europe, including Spain (29th), Portugal (35th), Italy (36th) and Greece (66th).

The question for policymakers in Brussels is whether these four nations, given the state of their public finances, will ever be in a position again to develop their innovation potential and, more importantly, whether the European Commission should continue to spend large amounts of its vast R and D budget on these economies rather than on those economies, such as Finland and the UK, which can achieve far more in terms of their innovation potential.

But it is not only the poorer parts of Europe that are facing issues with innovation.

As economists continue to write volumes on the market potential of the so-called BRIC economies, the report suggests that a lack of investment in innovation could lead to a slowdown in their growth over time. For example, whilst China’s performance in terms of knowledge and technology is amongst the best in the World, there remain considerable weaknesses in the development of a strong innovation infrastructure, an issue that is also prevalent in India, Russia and Brazil.

Therefore, one can conclude that the Global Innovation Index is good news for the UK economy.
It shows that we are doing well on a number of indicators whilst demonstrating that there is a need to do far better in terms of export-related activities. It also suggests the UK has the potential to be a major player in terms of driving forward European innovation policy and, more crucially, remains ahead of the game when it comes to competing with BRIC nations.

However, it also demonstrates, unequivocally that politicians and policymakers should not rest on their laurels. Certainly, any hard earned gains made in innovation in the UK during the last few years can be easily lost if government, because of fiscal pressures, fails to incentivise business to invest in R and D or cuts its own budget to support innovation in the economy.

WORKING TOGETHER FOR THE BENEFIT OF WALES

When the great American politician Benjamin Franklin famously said that “We must, indeed, all hang together, or assuredly we shall all hang separately”, I am sure that the future of small businesses never even entered his mind.

Yet, in an economic future where savings and efficiencies seem to be driving the strategies of many firms, it would seem that one option that should be seriously considered by smaller businesses is to work together to create new opportunities and bring down costs.

One way of doing this, as highlighted this week by the Wales Co-operative Centre, is through the establishment of a co-operative consortium. This is a co-operative that is owned and controlled by a group of people or organisations that then enables those involved to come together to share costs, services or a common facility to help members improve their business performance. As a result, businesses can share experiences and risk, increase buying power, share the costs of ‘backroom’ services such as bookkeeping, work together on joint marketing campaigns, and ultimately reduce costs.

Within Wales, most of the focus on co-operative consortia has focused on specific business sectors and this has enabled business working in the same industry to work together to achieve objectives that cannot be achieved by working in isolation. One sector that has been at the forefront of such consortia for decades is the food and drink sector, especially through agriculturally based co-operatives that have brought farm producers together, especially in industries such as dairy and meat. However, the Welsh Co-operative Centre has helped companies in smaller niche areas to come together for mutual benefit.

For example, the Welsh Perry and Cider Society is a consortium of businesses that have come together to promote the manufacture and consumption of one the fastest growing drinks segments in the UK. With over thirty cider producers in Wales, the consortia has employed a development officer to provide technical support on the management of orchards and harvesting, quality control, encouraging collaborative and co-operative working practices. She is also adding value to the orchard owners and growers through marketing and branding initiatives that benefit all the members. Tourism is also a sector where groups such as hoteliers’ associations have long been in existence within traditional holiday areas throughout Wales. But with the move towards more specialised tourism offerings with consumers demanding something different, a co-operative set up in mid-Wales has shown how a small town can put itself on the world map by getting the community to work together.

In the small town of Llanwrtyd Wells, a group of businesses calling themselves Green Events have developed a new approach to tourism with the aim of differentiate the area from other destinations. This has been largely achieved by creating a number of distinct events that have put the town on the map, including the world famous Man vs Horse Marathon and the World Bog Snorkelling Championships, as well as stone skimming championships and mountain biking competitions. As a result, the consortium, has succeeded in creating a strong global brand for this small spa town and local businesses and volunteers who are part of the group now run all the events. Certainly it is a model that many other towns in Wales should consider replicating to boost their own local economies. However, it is not only traditional sectors that are benefiting from this business model.

In the creative industries sector, one of the best examples of this is Craft in the Bay, established by the Makers Guild in Wales. This is a highly successful retail gallery situated in Cardiff Bay that has been running as a co-operative venture since 1997. It brings together seventy members, many individual craftspeople, who get the opportunity to display their work within the gallery. They also spend an agreed number of hours working there each year to reduce running costs and so benefiting all those within the consortium. Therefore, there are plenty of opportunities for many small businesses and the self-employed to come together to benefit from working together. 

For example, recruitment agencies that specialise in certain sectors or occupations could co-operate in providing workers for larger firms with differing needs. Or a consortia of electricians and plumbers could work together to provide a one-stop shop approach to services to the home or for other businesses.

Certainly, the possibilities for getting businesses to work in Wales are endless if only entrepreneurs would stop looking as every other business in their sector as a competitor but as a potential partner in a consortium where the sum of the parts is potentially greater than the whole.