Wednesday, August 15, 2012
To be published in a special supplement in the Western Mail on September 19th, the list will show, yet again, that Wales has a number of excellent entrepreneurial and innovative businesses that have considerable potential to achieve further growth.
Indeed, the data on the fifty firms featured will show a record increase in turnover during the period 2009 and 2011, 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. Indeed, 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, there needs to be increasing focus on those businesses that have the potential to grow further and create jobs.
Not every business wants to grow - recent research by Gallup in the USA found that 75 per cent of small business owners in the USA did not want their companies to grow, preferring to remain small. Whilst these companies are important to their local economies, they should not be confused with the other 25 per cent that want to expand to create companies that are of real added value to the regional and national economy. In fact, national and regional governments around the World are now realising that focusing on high growth businesses, or the 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.
The “Growing State Economies” report from the National Governors Association representing the fifty individual states in the USA, and which I have been discussing for the last three weeks, is unequivocal in its support for such businesses. Its author, Governor Heinemann of Nebraska, emphasised that high growth businesses are the primary source of job creation, prosperity, and economic competitiveness, and that public policy should be focused on growing them into large employers. But it is not only in the USA where there is an increasing policy focus on growth firms.
Across the border, their Canadian neighbours have finally appreciated that its economy is failing to develop enough gazelle firms, despite leading world-class research and development at universities, a highly educated population, and a favourable business climate. The proposed solution is to create a comprehensive “National Strategy for High-Growth Entrepreneurship” to address the key impediments to the success of high growth Canadian firms, ensuring that key actors such as national and provincial governments, the private sector and universities all take some responsibility for implementing such a plan.
Across the Atlantic, European nations have also been focusing on how to develop the conditions for further growth.
In Sweden, one of the few EU countries to avoid a major recession, they have created an Agency for Growth Policy Analysis. This is charged by the Swedish Government to shed light on the areas most significant to growth, strengthen Swedish competitiveness and create the conditions for more jobs and growing companies throughout the country.
Its Nordic cousin Finland has also recently announced that it will be focusing its government services on targeting growing firms, with the aim of becoming a European centre for growth companies in technology sectors. These include the “Funding of Young Innovative Growth Companies” initiative, which can provide financial support of up to one million euros per enterprise. It has also developed the ‘Vigo Accelerators” initiative, which uses selected independent companies, run by internationally proven entrepreneurs and executives, to help the best and the brightest start-ups to grow faster, smarter, and safer into the global market. The mentor entrepreneurs also co-invest in the companies they support.
In South Korea, there has been a policy focus on transforming traditional companies to high-growth firms, mainly through a Global Stars programme in which 100 SMEs are selected for a comprehensive support package in terms of technology, financing, and exporting. A similar programme has been set up in Singapore which assists promising local businesses with funding, management development, technology and innovation enhancement, and internationalisation.
Therefore, with governments across the world developing new co-ordinated approaches to ensuring that those companies with potential are given every opportunity to grow, there are certainly lessons to be learnt in terms of policy development by both the UK and Welsh Governments.
Certainly, if Wales is to emerge from the current economic downturn, then it will only do so by maximising the potential of its business community, particularly those who want to grow and create wealth and employment.
Monday, August 13, 2012
Like millions across the UK, I recently succumbed to Olympicitis, a recurring condition which I first contracted back in 1976 when, on a small black and white portable TV, I saw Brendan Foster win the Bronze medal in the 10,000m final at the Montreal Games.
Fortunately, it is an ailment that has brought feelings of elation and joy during the wonderful two weeks of the 2012 Olympics.
Not only did we see the nearest equivalent to a sporting Superman in the shape of Usain Bolt in the sprint races, but we cried along with Sir Chris Hoy when he became our most successful Olympian ever and burst with pride when the multi-talented Jessica Ennis lived up to the massive pressure of being the Games’ golden girl.
And who will ever forget the look on the face of Mo Farah as he crossed the line twice as gold medal winner to cement his place as a legend in World athletics.
We also saw two of the best in North Wales – Jade Jones and Tom James – become champions in their respective sports whilst Deiniolen’s Dave Railsford masterminded the continuing British dominance in cycling, carrying on seamlessly from his incredible feat with Bradley Wiggins in the Tour De France.
It is safe to say that Team GB has defied its own wildest expectations with third place in the medals table behind the USA and China.
In fact, with the record number of gold medals won in a modern Olympics, it is easy to forget how far we have come from the one win gained in Atlanta by Steve Redgrave and Matthew Pinsent in 1996.
And whilst two thirds of the medals by the USA were in athletics and swimming, the range of golds won by Team GB has been incredible, justifying the money given by the Lottery Commission in supporting less popular sports such as canoeing, shooting, sailing and women’s boxing.
Indeed, who would have thought that you could get excited at the sight of a horse dancing to the theme from “The Great Escape”, but that’s what millions did during the dressage competition when Charlotte Dujardin, on her horse Valegro, produced the nearest equivalent to equine ballet we will ever see.
But the 2012 Olympics have not only been a sporting triumph for Team GB.
Ever since Bangor graduate Danny Boyle launched his incredible opening ceremony on an unsuspecting world, an audience of billions were reminded that this small island nation created the industrial revolution, the NHS, the Beatles, Harry Potter and the worldwide web.
And the singer Dizzy Rascal, born a stone’s throw from the Olympic village, was spot on last week when he said that the London Games will not only inspire millions of young people in the future, but will also make many proud of being British again.
Those cynics who were vociferous in their condemnation of the event, its costs, security and management have thankfully been silenced as everything progressed smoothly to create probably the greatest Olympics of recent times. Even the notorious British summer weather gave way to glorious sunshine during the outdoor events.
Therefore, one can safely say that the 2012 Olympics has been a triumph all round for Britain in so many different ways and it is vital that all of this success is not wasted as we go forward.
In fact, our leaders in politics, business and sports must now work harder than ever to ensure that we continue to get economic, sporting and social benefits from the Games and, more importantly, that this legacy lasts a generation and not just a fortnight.
Saturday, August 11, 2012
Last week, I spent four days camping with my family on a site just outside Barmouth which, to put it mildly, was a complete change from last year’s holiday on an Indonesian tropical island.
Apart from the fact that I haven’t been camping since my days with the Pwllheli Sea Scouts over thirty years ago, I have previously failed to see any attraction in these outdoor vacations, preferring the comfort of a hotel room to the frontier excitement of a caravan site.
Yet, despite my trepidations about the whole trip, I have to admit that I had a brilliant time, despite the changing weather we had.
And while the road to Barmouth may not have been as life changing as the road travelled by Saul to Damascus, I can admit that I am now a convert to this type of holidaying.
Part of the attraction was the fact that we had hired a classic 1967 VW Camper Van from a Mold-based company, Split the Difference.
Yes, it was a tight squeeze for two adults and two children but it made the whole holiday more worthwhile travelling around in a van that got more admiring glances than an international supermodel.
More importantly, thanks to the tight space and the absence of any internet for the kids, we actually got to spend some quality time together, which, with increasingly busy lives, is difficult to do.
But what really amazed me, when I actually had the time to look around me, was how stunningly beautiful Wales is, even in the driving rain.
Our campsite, on the side of a hill in Arthog, overlooked the magnificent Mawddach estuary and had a view that was as good as any you will find in the world, especially as the sun set over the Llyn Peninsula.
With such natural advantages, how is the tourism industry doing overall in Wales?
The latest statistics show that it remains a critical industry, generating an annual spend of £1.7billion in 2011 from 9.7 million overnight trips. North Wales continues to attract the largest share of overnight UK tourists on a holiday.
This represented an increase of 12 per cent on 2010, demonstrating that more people are holidaying at home rather than going abroad during the economic downturn.
In fact, Welsh tourism accounts for 7.5% of all British trips, well above what would be expected of us.
But could we be doing better?
For example, there remain questions over whether Wales has really taken advantage of the Olympics as an opportunity to publicise the country not only as a location for tourists but also as a place for businesses to relocate.
Certainly, whilst the Scots have moved staff into a temporary venue set up on London's Pall Mall to showcase Scottish industries and promote investment, little seems to have been done by the Welsh Government to promote Wales in a similar vein.
But all is not lost. The tourism body VisitBritain has indicated that, during the next four years, an extra 4.4 million overseas visitors will come to the UK, spending an extra £2.3bn in the process.
The challenge for Wales will be to ensure that a significant proportion of these come over the border and experience the best of Welsh hospitality.Certainly, if they enjoy their holiday in Wales half as much as I did, then the tourism industry has a very bright future
Friday, August 10, 2012
In a wide ranging assault on the destructive nature of red-tape in the economy, he suggested that many of the regulations were nonsensical and overly-bureaucratic, such as requiring a £35 poisons licence to sell toilet descaler or ant killer and needing an alcohol licence to sell chocolate liqueurs.
He also noted that there were barriers to getting businesses off the ground and creating jobs. For example, whilst opening a new warehouse in Germany took only four months, he claimed that the delay in Britain could be as long as 18 months, thus disincentivising potential investors.
Whilst some in government circles dismissed his comments, they will not be a surprise to many businesspeople and lobbying groups. Recent surveys from the Federation of Small Businesses (FSB) have suggested that small firms spend as much as two days per week dealing with compliance and legislation, whilst a report from the British Chambers of Commerce concluded that the perception of many small firms was that they were being increasingly choked by government regulation.
The result, of course, is that this burden of excessive red tape can often affect the potential job creating ability of many firms, with entrepreneurs spending a disproportionate amount of their time dealing with paperwork rather then creating wealth and employment in the economy by seeking new customers, developing new products or services and growing their business. With politicians looking to kick start the economy, it is surprising that reducing and streamlining the regulatory process is not as much of a priority as it could be.
To be fair to the UK Government, it has begun to address this issue although many will argue that the process is still taking too long and is not filtering through to other levels of government, especially at a local and regional level.
That is why, as I argued last week, there are lessons to be learnt from the way in which the fifty state legislatures in the USA are looking to support their regional economies. Whilst they have developed specific programmes to boost the levels of entrepreneurial activity, they are also looking to find ways of reducing the amount of paperwork that local businesses have to undertake, with a significant number of US governors introducing legislation that are focused on reducing the burden on local business.
Of course, the legislative and taxation powers of the Welsh Government are somewhat different to what is found within individual states in the USA but it must be remembered that Cardiff Bay did gain extra powers in a number of areas last year, powers which those of us who supported the Yes campaign were hopeful could be used to create a more vibrant Welsh economy.
Yet, nearly eighteen months on, there is little indication that any new legislation will be introduced soon that will have any significant effect on the Welsh economy or will be used to boost the competitiveness of Welsh business. Compare this situation with the examples highlighted in the “Growing State Economies” report, where individual states are rushing out new pro-business laws to help their local business communities.
For example, North Carolina has completed a statewide examination of its regulations, getting rid of nine hundred rules that were deemed unnecessary or expensive. Similarly, Colorado has begun a rigorous review to identify unnecessary regulation and eliminate red tape in the near future.
In New Jersey, a law was recently passed requiring state legislators to consider the economic impact of new regulations. They would have to ensure that rules that exceed national standards would be prohibited, thus ensuring that local businesses were in no way disadvantaged by local regulation.
I am sure that businesspeople across Wales will be envious of such developments and would be delighted if our policymakers undertook similar exercises to not only identify where regulations could be reduced, but also to determine whether these are currently negatively affecting small businesses.
Of course, the Welsh Government has indicated that it will have a comprehensive legislative programme over the next four years in various areas. But whilst new laws on organ donations and mental health may be worthy, it is equally important, at this time more than ever, that these new additional powers are used to help create a more competitive environment for the Welsh business community.
It is surprising that business groups such as the CBI, IOD and FSB have not been pressing for a detailed review to be undertaken to examine where unnecessary regulation can be cut back within the Welsh Government and other public bodies.
But this shouldn't have to be an exercise for external lobbying groups alone, especially as politicians are so keen to call small firms 'the backbone of the economy' at any available opportunity. Given this, shouldn't at least one Assembly Member, with unanimous cross-party support, prioritise the introduction of a bill that would help reduce the legislative burden on tens of thousands of small businesses and help them move from pushing paper to creating jobs?
At the very least, it would demonstrate that our elected representatives in Cardiff Bay, regardless of political affiliations, can work together to help the Welsh economy and get people back to work within a small business sector that wants to create jobs if it was allowed to do so.
Wednesday, August 8, 2012
Having had the opportunity this week to fully digest the “Growing State Economies” report which sets out the priorities for such a strategy, it was heartening to note that the message was clear to those involved in economic development at a state level that they should stop competing against each other to attract investment from larger companies and move towards a more bottom-up approach to start and develop their own local businesses.
This is not going to be easy.
Data shows that individual states are, on average, still looking to spend twenty seven per cent more next year on strategic business attraction. And this is despite statistics that demonstrate that only two per cent of annual job gains across the individual states can be attributed to business relocations. Fortunately, for those keen to promote entrepreneurship at a local level in the USA, the message is slowly getting through to politicians and policymakers.
Indeed, the evidence suggests that in addition to attracting firms to a region, there is also an increasing focus by state policymakers on launching new companies and supporting existing businesses, with a growing appreciation that helping entrepreneurs start, grow, and renew businesses is one of the most important things a state or regional government can do to create jobs and raise living standards. In fact, funds for entrepreneurial development programmes by individual states will have grown by almost thirty per cent between 2012 and 2013 and, in the last year alone, over a third of US governors have introduced legislation or started specific programmes that are focused on boosting the numbers of startup companies.
So are there other lessons from the report for regional governments on this side of the Atlantic?
Are there key questions that need to be asked in relation to developing a clear policy agenda towards creating an entrepreneurially led economic recovery?
First of all, policymakers need to ask themselves whether their resources and attention are focused towards bringing in firms from elsewhere or towards growing their own entrepreneurs? Of course, this is a debate that has been going on for at least twenty years in Wales and yet we are no closer to the answer when it comes understanding the priorities of our Government.
For example, has the new office recently opened in London been established as a location to attract in new investment into Wales or as a place where Welsh firms can link in with potential clients based in one of the most prosperous and dynamic cities in the World?
Secondly, do policymakers have an agreed view of what they define as entrepreneurship and, more importantly, do they distinguish between the various types of entrepreneurs that can contribute to the economy? It is generally recognised that working with startups, where the focus is on developing products and finding customers, is very different to working with growing firms that struggle with quite different issues such as such as strategic planning, market diversification, and operational efficiencies. Yet, there is generally a lack of appreciation by policymakers of the different needs of business as they grow and develop with a more generalised approach to business support being the norm.
Thirdly, do politicians and their civil servants make use of insights gained directly from entrepreneurs and those who work with them? This is the one area in which it could be argued that Wales has made great strides recently with the creation of various industry panels to advise the Minister on key sectoral developments, as well as specific groups to develop policies in areas such as microbusinesses, business rates and city regions. Yet whilst such strategies are important, the real value is when they are put into action and that, as policymakers in the US have discovered, is not as simple as it sounds given that the imperatives of entrepreneurs may be in contrast to those of government officials.
Finally, do all the economic initiatives developed to support entrepreneurs take advantage of the complementarities between policies? This is a particular challenge for Wales where, historically, we have seen a very tribal approach to economic and business development, driven by a silo mentality where individuals “protect their patch” in terms of policy developments.
For example, we have a range of different programmes to support innovative businesses across Wales and to link them into the university sector. Yet, there seems to be little co-ordination between these programmes, resulting in the unacceptable situation where organisations are competing with each other for clients using the same pot of public funding.
Therefore, as the report from the governors of the different American states has shown, there are key challenges in developing a coherent policy framework to support entrepreneurship. One can only hope that regional governments in the UK, and indeed Europe, are up to this challenge in creating a more enterprise focused approached to economic development.