GO WALES HAS POTENTIAL TO SUPPORT GREATER UNIVERSITY-INDUSTRY LINKS

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.

A NEW DEVELOPMENT BANK FOR WALES?

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.