Strengths
"Secure"
resources
Industry requires copious amounts of both energy and
water. Wales will have both long into the future - as long as the
existing resources are not squandered or poorly managed.
I've
put "secure" in quotation marks, because fuels like gas
(Part I) will need to be supplanted at some point. To paraphrase what
MH has said recently on the subject, we need to "use gas more cleverly".
"Secure" also means "safe".
Wales is unlikely (but not completely so) to be a target for an act
of terrorism, has relatively low crime rates and is in one of the
strategically safest places in Europe - if not globally. That could
attract some contentious employment – defence research for example,
or yes, even nuclear weapons.
An office-based business can
base itself anywhere, but this is one of the few trump cards Wales
holds over London & SE England. For product development and
manufacturing, Wales should be towards the top of many lists, seeing
as we have the fundamentals in place. The question now is, what are
the other reasons for us not being so?
Relatively high levels
of graduates
As I pointed out in Part IV, Wales has a high
(by EU standards) percentage of the working age population who have
higher education qualifications (though this is still behind the UK
average). It's quite likely that many of these are going to be public
sector workers, in particular those working in health service
professions that require degree-level qualifications (nurses,
physiotherapists, radiologists etc.).
 |
Numbers of graduates are likely to have been boosted by
healthcare professions like nursing becoming degree-level jobs.
How can we turn more graduates towards business?
(Pic : BBC Wales) |
What this suggests, is
that a chunk of Welsh population have a love of learning. What the
Welsh Government need to do, is ensure that people are encouraged to
aim higher academically for our future economy.
That doesn't
mean pushing everybody into the sciences. It also means : better
qualified lawyers to scrutinise devolved legislation, better business
managers, professionalising the "third sector" (Masters of
Social Business Administration), qualified coaches for sport,
teachers with higher-level qualifications (Welsh Labour wanted to
make teaching a "Master's Level" profession in their 2011
manifesto) and improving skills in the civil service.
I
believe that people should learn for its own sake. Although some
courses might be "questionable", and going to university
shouldn't be seen as a "must", we need to see graduates as
a resource. They need to be used effectively in the private sector
and not expect the vast bulk of them to go into the public
sector.
Cardiff & Deeside
In Cardiff and Deeside,
Wales has two significant urban areas which continue to attract
significant investment, perhaps for differing reasons. That's not a
suggestion that we "put all our eggs in two baskets". We
shouldn't ignore the fact that amongst all the doom and gloom, Wales
has two well-performing areas economically, even compared to the rest
of the UK.
Swansea could easily catch up with the right
investment in its city centre, in addition to the university
development mentioned in Part IV. There's a strong hub of IT-related
companies developing in the Newport/Cwmbran area while Bridgend &
Neath Port Talbot have always been major manufacturing centres.
Providing better links between the likes of Aberystwyth and Bangor
universities and their environs will no doubt boost economies too.
There's hope yet.
Good business survival rates
One of
the big myths I hoped to bust with this series is the belief that the
Welsh are "not entrepreneurial" or "not
business-minded". I think we are in a "be your own boss"
sense, but Wales doesn't have a big money, individualist, "corporate
culture". That can be a good thing, or a bad thing.
 |
Business survival rates might reflect lack of competition
due to fewer enterprises overall, but Welsh survival rates are competitive
at a UK level, and Welsh youngsters are increasingly entrepreneurial.
(Pic : The Guardian) |
Although
enterprise birth rates in Wales were amongst the lowest in the UK in 2010, enterprise deaths, five-year survival rates and one-year
survival rates were either at the UK average or exceeded it.
Recently, it's been revealed that young Welsh adults were the most entrepreneurial in the UK.
Maybe this is just because of the
plethora of grant and business support schemes offered by the Welsh
Government. However, if you start a business in Wales, compared to
the vast bulk of the UK, you're more likely to see it last longer and
more likely to have your peers starting them too. Add this to the
successes in university spin outs (Part IV) and it's safe to say that
"failed in Wales" no longer applies.
Strong export
record (in goods)
I hate treading old ground, but as I said in
Part V if this is a strength of the Welsh economy, then we grasp
every opportunity to guide and shape it with both hands.
The
only downsides are that many up-and-coming Welsh SME's seem reluctant
to look for opportunities beyond the UK, while goods exports are
conglomerating in larger groups, becoming less diverse (a point
raised in Offa's Gap). These are serious problems that needs
addressing, but it's still overall good news.
It's important
to note that this is in goods only – physical "things",
not services. Wales will need to develop more balance between goods
and services if the economy, as a whole, is to function
better.
Weaknesses
Financial services "blind
spot"
Bankers aren't the flavour of the month, but
high-end financial services do provide high levels of GVA growth and,
more crucially in the independence debate, high levels of tax income
(when they pay them). First things first, I'm not advocating a "Welsh
RBS". But is it so ridiculous a suggestion to have Welsh banks –
based in Wales, investing both here (perhaps in energy projects) and
around the world and providing highly paid jobs in Wales?
Wales
does have a big success story in Admiral Group, but was it a fluke?
Wales needs five or six "Admirals" to close the gap with
the rest of the UK. The easy option would be to "bribe" one
of the London companies to move to Cardiff. That would be a stop gap.
Wales has to play the game (developing new financial service
companies) instead of carrying the refreshments (branch
functions).
I think insurance is one area Wales could look to
build a critical mass in. It's less controversial than banking, we
have success stories already, there's guaranteed markets (car
insurance is compulsory) and in some cases it's fairly lucrative.
Recruitment and training services, as well as niche consumer services
like price-comparison websites, are other areas of potential.
Poor
infrastructure, poor priorities
This has been done to death,
but it needs attention drawing to it again. Wales is probably 20
years away from losing our only major airport if passenger figures continue to slide the way they are. We only have around 75 miles of
motorway (though much more is "motorway standard"). We've
had to wait God knows how long to have rail electrification put on
the agenda. If you can't get goods, people and ideas to major markets
quickly and efficiently, you end up being neither heard nor seen.
That can even happen within the UK market itself.
 |
The Welsh Government do invest in things like roads
and railways, but are they prioritising things correctly?
(Pic : Abayoflife) |
I'm not
convinced the UK or Welsh Governments take Welsh infrastructure
anywhere near as seriously as they have to. I'm not restricting that
to the "obvious things" like roads and railways. It
includes all the hidden stuff, like a north-south inter-connector for
electricity, 3G/4G coverage (now being addressed by the Welsh Government and the private sector - thumbs up) and even things like
the structure and functioning of the civil service.
The Welsh
Government's Infrastructure Investment Plan was a damp squib that
prioritised waste management ahead of new transport links and energy.
Using borrowing powers to fill pot holes/cover revenue spending is
also rather silly. Their task in the face of swingeing capital
spending cuts isn't easy, I'll acknowledge that, but there's no need
to make things worse through their own lack of ideas.
Demographic
shift to the economically inactive
This isn't just a case of
pensionable-age "incomers" moving to rural Wales. It's also
a case of younger people moving out of Wales because that's the only
way to provide financial security for themselves. Lose the young,
keep the old and immobile, top them up with migrant retirees.
Pensioners, "good-lifers" etc. might well bring their
savings with them - and they should have the right to move anywhere
they choose - but they also have an ongoing cost that wouldn't be
there otherwise. Wales can't afford to become a care home
colony.
I'm willing to bet, per person in employment,
productivity in Wales will be near enough the same as most parts of
the UK (outside London and SE England).
If the Welsh
Government really wants to improve Welsh economic output, they're
going to have to come up with ways to retain talented people under 30
to balance things out a little – especially in rural areas. More
people producing, production figures improve – simple.
Wales
needs to become "noisier", and subtly discourage people
from moving to Wales to seek a "quiet life." One way to do
that is ensure there are enough well-paid jobs , social opportunities
and affordable housing. And yes, we also have to target the levels of
chronic long-term limiting illnesses in some Welsh local authorities
– but that's more a health and social justice
matter.
Over-reliance on "big branch employers" &
lack of innovation
Business demographics statistics (2011),
show that while 98% of all enterprises in Wales were in the micro and
small band (employ under 50 people), 72% of national business
turnover (£68.04billion) came from medium and large companies, with
£56.1billion of that coming from just 1,580 large (250+ employees)
businesses.
I'm guessing that many of those will be a remnant
of the WDA glory days. Well, they're not going to be here forever.
With every closure of a big grey box on a valleys industrial estate,
a large chunk of GVA and national turnover is going to go with
it.
Are these jobs worth it? We don't do very much research
and development here. We don't do enough to protect and patent
innovations here. I think politicians concentrate on reducing
unemployment figures, see someone promising to bring 1,000 jobs -
while not considering what those jobs entail or what they are paid –
and roll out the carpet. Then they leave a few years later for the
next sucker economic region whose production costs can increase the
margins for HQ .
Wales needs to come up with the products,
patent them/licence them, manufacture them and do all the marketing
and back-office/HQ functions. That's the recipe for good GVA growth.
In terms of independence, it means loyal Welsh "brands"
paying healthy amounts of business and corporation taxes into the
national coffers. Saying this is easy, doing it is much harder.
Skills shortages
It's another "old chestnut"
– "Employees lacking the prerequisite skills necessary for the
modern workplace blah blah blah." I don't think the situation is
as bad as it has been – the numbers of school leavers leaving with
no qualifications are falling, the numbers of apprenticeships are
rising and as mentioned above Wales has a relatively high proportion
of people with advanced qualifications. The issue, is whether all
these bits of paper are actually worth anything.
It applies
just as much to employers. How many Welsh business people have the
requisite skills to expand their companies? Do they have the ambition
to do so? How many Welsh business people speak a foreign language? Do
they have good management skills?
If the business community
are stuck thinking in a dull, "numbers on the balance sheet",
conservative way, then the whole of the Welsh economy lacks "spark".
I think this can improve - and the Welsh Government are taking steps towards that - but it might be too little, too late. It
should've been done in the 1980s and 1990s - the moment Conservative and Labour UK Governments decided heavy industries (coal, then steel) had no future. That's the lasting legacy Maggie, John
and Tony left us. Gordon left us the bill and Dave moves everything
back to square one, ready to repeat
itself.
Opportunities
Universities playing a greater
economic role
Universities shouldn't become castles for
academia in small towns, they should play an active role in
developing the economy of those places in more ways than bringing in
student money. The Republic of Ireland managed to build its economy
based off a steady stream of graduates coming out of a large number
of higher education institutions with technical qualifications.
Does Wales need to bring back the polytechnics? Do we need a "Welsh
MIT"? Could industrial estates in university towns be used as
enterprise zones for spin-outs?
That leads me nicely
into....
Harnessing and developing niche specialisms
The
Welsh Government, universities and the Welsh business community need
to try and identify areas where Wales can develop a European, or
world-leading, specialism based on what we have currently. I don't
think this is about backing certain businesses or certain sectors. As
highlighted on many occasions, successful individual companies can
come from anywhere.
 |
What technologies and innovations will
Wales be helping to develop in the future?
(Pic : Autoevolution.com) |
I think this is about taking a long-term
view about what products Wales can develop over the next thirty
years, and whether we can get there before other parts of the world
do, or try to stake a claim with other nations – for example pan-EU
initiatives.
What could those
specialisms be? Wales already plays a leading role in aerospace and
automotives that could be expanded (and enhanced at the likes of the
new Swansea University campus). There's materials sciences –
looking for environmentally friendly building materials and "smart
materials". Energy research is another obvious one. Whoever
finds a way to store and produce hydrogen safely as a fuel, without
as much energy intensity, is going to become very rich too, I'd
imagine.
There are still plenty of options on the table
There
are plenty of things the Welsh Government could do, within months
even, and without requiring the devolution of further powers.
They
could turn Finance Wales into an investment bank or a sovereign
wealth fund (though they wouldn't be able to regulate it). They could
create a regional exchange to help pump capital into SMEs as a
stepping stone to the FTSE.
They could turn
Communities First clusters into social enterprises,
while professionalising them and (hopefully) reducing corruption due
to increased financial scrutiny as a result. There are other things
mentioned further down.
Admittedly, none of that would
provide a solution by itself. It's still going to have to come down
to ambition within the private sector and classic entrepreneurship.
But, as we all know, the Welsh Government and civil service like to
do things a "certain way".
The co-operative sector
providing public services
How do you provide key public
services - in particular things like health and social care - in
sparsely populated areas with dwindling public funds? One solution
might be to enact some of the recommendations in The Collective Entrepreneur report and have some services ran by co-operatives and
not-for-profits.
I mentioned above that Communities First
projects could become community social enterprises. It's a mooted
model for the Welsh railways. You could even go as far as spin the
NHS out on the Glas Cymru model.
 |
There have been calls for a "not for profit" company to
run Welsh railways, but does this Glas Cymru model
need to stop at transport and utilities?
(Pic : BBC Wales) |
There would be clear
advantages and disadvantages. It might bring a business-minded
approach to providing services (in terms of competition and waste),
with those services remaining free/subsidised at the point of access
– but it would still be a privatisation. It could lead to smaller
hospitals and care homes being being kept open – but there's always
the risk that they could close if they don't cover their costs. It
would almost certainly lead to the creation of large companies that
can compete on a European level to provide services, but is that what
you want public services companies to do?
This would probably
be too controversial to consider in the short term. However, if
public spending is going to be squeezed, maybe it should be kept on
the back burner until more detailed studies are carried out.
Fiscal
sovereignty
You'd expect me to list this, wouldn't you? Can
you can improve the economy within the current arrangements? The
evidence over the last twenty years suggests this is going to be an
uphill struggle, and Wales is going to need a significant change of
tact. Or, do you need all the tools to create the conditions
necessary to improve the economy? There's no guarantee that would
work, but at least you'll be able to work to strengths and react
quicker to shocks.
These two pieces by Russell Lawson over at
the Walesbusiness blog (Wales' way out of the economic mire &
Small is beautiful), list : accommodative monetary policy, fiscal
policy focused on medium-term consolidation, tight grip on public
debt, capital buffers, prudential bank lending policies, regulatory
quality, enhanced liquidity in Europe and easing personal debt.
Hardly any of which Wales would be able to do without fiscal
sovereignty or Independence – perhaps a separate currency
too.
Threats
A continuing spiral of peripheral
neglect
It's too risky for the UK Government to spend public
money when there are no guaranteed of "returns". So instead
of investing to provide jobs in Wales, they provide job replacements
in the form of JSA and incapacity benefit – then some have the
cheek to remind us that we're not pulling our weight.
The
Welsh Government in turn acts like a palliative care nurse –
focusing on quality of life – accepting that things are never
going to improve dramatically economy wise.
 |
Wales needs it, London gets it. It's a familiar story, but
you can't blame the UK Government for wanting returns on
big investments.
(Pic : The Guardian) |
Preventing Wales
falling into destitution is seen as "better for us" than
having a fully functioning economy that can stand on its own legs -
even within the UK. It's about stopping things from becoming worse,
rather than taking risks (or responsibility) needed to create
something better
Despite spending more per head on economic
development than other parts of the UK, Wales shows no sign of
rising off the bottom of varying "league tables". The
likelihood is that it's being spent badly, on the wrong things, for
the wrong reasons. I'm no longer convinced it's a money issue
anymore, but down to a case of poor economic policy - and that goes
for all parties, not just Welsh Labour.
It's always "someone
else's problem", and we don't want to take the harder path
because we don't know if it'll work or not. That's toxic.
Inward
investment drying up
In 2011-12, only 23 inward investment
projects, out of 1,406 in the UK, took place in Wales – just over
1.6%. Although these projects seem to be pretty big,
protecting/creating some 2,800 jobs (remember what I just said about
big employers).
We need a desperate change of tact here.
We're so used to "someone else doing it", that we've become
timid about going out to other markets, or obsessed with the internal
market within the UK. Welsh businesses are probably going to have to
do more outward investment, or target new export markets, than expect
inward investment to travel very far down the M4 from Heathrow.
Our
competitor isn't England, but all those small nations who can take
extra steps to attract investment. In the future, we'll need to
measure success by looking to Welsh companies taking over
English/wherever companies - not the other way round. The question
is, are Welsh businesses up to the scale of that challenge? I don't
know.
"Mad" economic policy
Economic policy
in Wales can be boiled down to a few simple tenets:
- More jobs,
regardless of how well they are paid, highly-skilled or what the job
entails, is better than no jobs.
- It's better to play a bit-part
(making components) instead of coming up with new products and
IP-protecting them.
- Everything has to be led by the government
because the private sector is too small/can't be trusted.
- See
what England is doing. Ignore what the rest of Europe or the world is
doing. Try to copy what England is doing because you have no ideas of
your own/it's obviously the "right way". Hilarity
ensues.
- Come up with fantastic new strategies and plans, then when
they don't work, rearrange the words slightly.
- "Insert sector
of the economy here" is the future! Then don't look at
qualifications, case studies, necessary infrastructure, long-term
projections, competition at home and abroad, fast growth businesses
within Wales in the sector, constitutional powers, fiscal
powers....it'll "just happen"! (Yes, I've probably just done that too.)
- Trying the same thing
over and over again and expecting a different result.
Desperation,
short-termism and pessimism
Let's say you were the CEO of a foreign business
looking to invest in two areas.
The first has good
international links, a fairly decent ratio of public spending to GVA
and a reasonable level of public sector workers. They have major
centres of renown and an ambitious government that presents
themselves with confidence. They assure you that you can find
everything you need (if you want it). They have established companies
is high-value added sectors and have a good track record in economic
theory and promoting themselves abroad.
 |
Scotland has managed to become successful within the UK,
and not entirely down to oil. Perhaps we should be asking
questions as to why Wales hasn't?
(Behance.net) |
The other has no solid
international links, has as much spent on it by the government as it
produces each year and has low numbers of jobs created overall. They
have a government either practically begging you to set up there -
almost suffocating you with the amount of support or grants – or
they hardly make any effort. You're not entirely convinced the
government are serious, as they seem just as keen to promote links with other places, than concentrate on their own unique selling
points.
One looks like an up and coming, business-friendly
destination. The other looks as it it doesn't have any economic mojo
at all. Now call them "Scotland" and "Wales".
I'm
going to contradict myself, but equally damaging is the belief that
we can't do anything right, and that there's something inherently
wrong about the Welsh. Anecdotally, that's an incredibly depressing
and commonly held belief within Wales – even if the evidence says
differently. Talk about a colonial mindset.
Fiscal
sovereignty
Having full economic powers is a double-edged
sword. I mentioned earlier there would be opportunities, there would
also be significant, potentially disastrous, risks too.
Fiscal
sovereignty doesn't mean independence. But, with public spending as
such cripplingly high levels, any measures that could see a reduction
in the amount of pork heading our way would be opposed (see Mike
Hedges recent comments on tax devolution).
Quality of life could well sharply fall (i.e. harsh reductions in
public spending). Though we wouldn't fall into the abyss - as the
economy as a whole would likely remain exactly where it is. Public
spending isn't the same thing as production.
The risk is this.
Wales will have all these wonderful new powers, but then wouldn't use
them "correctly". We might create more barriers to
business, increase the amount of red tape, screw up business rates
reforms or general business taxes (or even shy away from using them)
and carries on micromanaging little schemes that they can't bear to
put down because they don't want to be seen to be "wrong".
The gap between east and west Wales doesn't narrow,
businesses lose confidence in economic prospects as well as the Welsh
government, Welsh public policy and our civil service remain stuck in
a nepotistic and innovation less-time warp and our economic figures
fall through the floor.
It might even go the opposite way and
become embroiled in a neo-liberal race to the bottom. It's not too
ridiculous a suggestion - considering some of the things that go on here already - that we could end up with a Welsh Charles Haughey or
Bertie Ahern.
Theoretically speaking, if that happened
post-independence, people like me swing from lampposts or get put up
against walls and shot.
Now read that dystopian economic
commentary again.
If we wouldn't tolerate it
post-independence or under devo-max, why have we tolerated it for the
last thirty years?
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I hope you've enjoyed this series of blogs. What I wanted to show was that the Welsh economy certainly has weaknesses, but they are not all attributable to the Welsh as a people. We also have many success stories, but we really need to get a grip on these wider issues if Wales is to succeed economically.
That might mean taking more fiscal responsibility for ourselves, it might come down to one person having a brilliant business idea and having the assistance to take it forward.
At some point early in 2013, I'll look at local government and independence, which I was originally going to do so this time around.
