Fast Growth 50 & The Economic Renewal Plan

Professor Dylan Jones-Evans' Fast Growth 50 list was unveiled on Wednesday in association with the Western Mail. As the name suggests it's a list of the 50 fastest growing companies in Wales that's been produced annually for several years.

My personal opinion is that lists like the FG50, Hot 100 and Top 300 are absolutely invaluable in measuring the true success of the Welsh private sector. It's utter nonsense that Wales isn't home to a successful entrepreneurial ,or that all our enterprises result in failure, foreign takeover or relocation. We don't sing their praises enough.

The onus on our politicians should be to fuel the growth of indigenous businesses - like those listed in the FG50 - listen to their concerns and create an environment that might encourage some of the rapidly expanding firms to take a risk every now and again. They also need to end the ridiculous ideological "battle" between the public and private sector.

The turnovers of this years FG50 range from £1.6billion for insurer Admiral Group to £505k at Caerphilly-based ventilation experts SCS Aftercare. However, as the saying goes "turnover is vanity, profit is sanity".

What I want to look at in this post, is the impact of the Economic Renewal Plan. Prof. Jones-Evans has been one of the more vocal critics of Ieuan Wyn Jones's strategy for the Welsh economy and, more importantly, business assistance.

The ERP adopts a controversial "sectoral approach", with a panel (headed by an outside expert in the relevant field) appointed to oversee business support, and target it at the six sectors it's believed add "the most value".

• Life Sciences
• Creative Industries
• Financial & Professional Services
• Advanced Manufacturing
• Energy & Environment
• Information Technology/ICT

One of the major concerns - and a perfectly legitimate one - is that growth can come from any company, in any sector, at any time. The #1 company in the 2011 FG50 was a laundry company - not the most glamorous of industries by any means. By "picking winners", the ERP excludes many good companies that don't have the "right face".

So, what's the trend?

I've looked back at the last 10 years of the FG50 to see how many companies would fall into the ERP's sectors listed above, I'm calling them "ERP-compliant" businesses. I've also included "questionable" companies that may or may not fit into one of the sectors – for example, would a training company be classed as "financial & professional services"?

I've included these "questionables" in the final percentage of ERP-compliant companies, on the basis that in reality, the definitions of the six sectors are going to be very broad and likely include them.

A look at ERP-compliant companies since 2001 (Click to Enlarge)

What did I find?

• That the number of ERP-compliant companies in the FG50 average around 60-65% of the list every year and 2011 has seen the highest number for the last 10 years - but also included a large number of "questionable" companies. The numbers of ERP-compliant companies generally increase year on year.
• The majority of fast growing companies wouldn't miss out because of the ERP. However, ERP-compliant companies have only made up a majority of the FG50's top ten in three years (2001, 2002, 2010) and top twenty in 2001, 2008, 2009 and 2011.
• Life Sciences are straggling as a sector, with Bridgend-based clinical trials company Biotec Services International being the sole company present consistently over the last three years.
• Financial/Professional Services (especially the recruitment industry) and ICT are the only consistent good performers of the six ERP sectors. The vast bulk of "questionable" companies would probably fall into the Financial & Professional Services sector.
• Creative Industries, Environment & Energy and Advanced Manufacturing have had many single "top 10" performers but the sectors as a whole don't add a great deal of numbers. Creative Industries and Advanced Manufacturing might have been hit particularly hard by the recession.
• Many of the companies (possibly even a majority) appear in the FG50 over multiple years. There are very few "new" companies making the list.
• The biggest "excluded" sectors include : Construction, General Manufacturing, Logistics and in the earlier years, Tourism & Hospitality.

Suggested Improvements

It's far too early to judge the success or failure of the ERP - it's only been going for 18 months or so. However, that doesn't mean that some of the trends highlighted by the FG50 couldn't be worked into a review of the ERP in the near future.

1. Merge Life Sciences and Advanced Manufacturing into a "Science & Technology" sector. Considering the small number of life science companies regularly making the FG50 list it makes some sense to consolidate. Special focus in this sector could include IP protection, attracting more R&D funding from central (and private) sources and university spin-outs (regardless of sector).

2. Subsequently replace life sciences with a "Construction & General Manufacturing" sector. This would probably result in 80-90% of the FG50 being ERP-compliant companies in future years and cast the net much wider.

3. The Welsh Government should give a clear definition of what business specialisms fall into each sector as soon as possible.

4. Help for entrepreneurs/start ups and inward investment arms should be completely separate from the ERP functions. There should also be specific/ring-fenced/additional help for fast-growing companies with large turnovers ("small nation stars"), companies with the potential of franchises (i.e. Retail) and social enterprises.