EARLIER this month, the UK Competitiveness Index - published by Welsh consultancy firm Robert Huggins Associates - suggested that the north-south economic divide in the UK is beginning to close.
The data presented in the report suggested that the traditionally least competitive regions of Northern Ireland, Yorkshire, Wales and the north east of England had made the biggest improvements in competitive performance, although the "big three" regions of London, south east England and the eastern English region still remain the only regions performing above the average level of UK competitiveness. Indeed, Wales, despite some improvements in key areas of competitiveness, remains in 11th place in the index, just above the north east of England.
Given that Wales is trying, like many other regions, to build a knowledge-based economy, it may be most pertinent to examine the data within the study relating to the development of the knowledge-based sector in Wales to assess the relative competitive advantage in terms of key areas such as R&D and innovation.
At the regional level, while Yorkshire and the Humber and the north east of England have increased their proportion of knowledge-based businesses, Wales has seen no improvement and remains at the bottom of the table. This reflects some of the analysis of the performance of the innovation element of the Objective One programme, which has seriously underperformed in terms of its targets for the creation of new knowledge-based firms.
Another way of measuring the generation of new ideas is by the numbers of patent applications, as it is arguably the nearest proxy to direct indicators of knowledge formation and knowledge creation. Therefore, the number of patents can be used to indicate how successful a region is in converting knowledge into potentially commercially valuable products and processes. In terms of regional patent applications per million inhabitants in 2004 and 2005, Wales actually showed a decrease while other similar areas such as Yorkshire and Humber, the north east of England and Northern Ireland increased their patent applications. This is surprising, given that Wales actually has a specific programme - IP Wales - to help businesses with their intellectual property.
However, it is also important not only to measure the input to any economy, but also the outputs from any innovative efforts. An important part of that is trade competitiveness or the proportion of exporting companies within a region. In terms of the proportion of exporting companies in UK regions in 2003 and 2005, those regions with the highest proportion of exporting companies are the West Midlands, London, the East Midlands, and south east England. The lowest proportion of exporting companies are to be found in Wales (12th), Scotland (11th) and the South West (10th), with Wales having a proportion of exporting companies that is only one-half of the proportion located in the West Midlands or London. Again, this is a surprising result, given the amount of funding spent by organisations such as Wales Trade International during this period to improve the export potential of Welsh firms.
There are also other important indicators of where Wales seems to be losing out in terms of ensuring a more entrepreneurial innovative economy for the future. For example, Wales is bottom of the regional league table in terms of early stage venture capital investment in the UK, which is an important factor in ensuring that growth firms receive the funding required to grow further, especially as the study shows a strong correlation between regional competitiveness and the supply of venture capital. On the other hand, the results for skills development are encouraging - especially in terms of higher level qualifications - although much more needs to be done in terms of ensuring that the number of students who leave school with five or more GCSEs is increased still further, given that the relative improvement in Wales between 2002 and 2004 lags behind most other regions in the UK.
All in all, the UK Competitiveness Index provides some interesting guidelines as to what needs to be done in Wales to improve its chances of future economic success. I hope that policymakers will examine this work in further detail as there is certainly room for improvement across a number of key areas, such as knowledge generation and internationalisation, that needs some attention
The data presented in the report suggested that the traditionally least competitive regions of Northern Ireland, Yorkshire, Wales and the north east of England had made the biggest improvements in competitive performance, although the "big three" regions of London, south east England and the eastern English region still remain the only regions performing above the average level of UK competitiveness. Indeed, Wales, despite some improvements in key areas of competitiveness, remains in 11th place in the index, just above the north east of England.
Given that Wales is trying, like many other regions, to build a knowledge-based economy, it may be most pertinent to examine the data within the study relating to the development of the knowledge-based sector in Wales to assess the relative competitive advantage in terms of key areas such as R&D and innovation.
At the regional level, while Yorkshire and the Humber and the north east of England have increased their proportion of knowledge-based businesses, Wales has seen no improvement and remains at the bottom of the table. This reflects some of the analysis of the performance of the innovation element of the Objective One programme, which has seriously underperformed in terms of its targets for the creation of new knowledge-based firms.
Another way of measuring the generation of new ideas is by the numbers of patent applications, as it is arguably the nearest proxy to direct indicators of knowledge formation and knowledge creation. Therefore, the number of patents can be used to indicate how successful a region is in converting knowledge into potentially commercially valuable products and processes. In terms of regional patent applications per million inhabitants in 2004 and 2005, Wales actually showed a decrease while other similar areas such as Yorkshire and Humber, the north east of England and Northern Ireland increased their patent applications. This is surprising, given that Wales actually has a specific programme - IP Wales - to help businesses with their intellectual property.
However, it is also important not only to measure the input to any economy, but also the outputs from any innovative efforts. An important part of that is trade competitiveness or the proportion of exporting companies within a region. In terms of the proportion of exporting companies in UK regions in 2003 and 2005, those regions with the highest proportion of exporting companies are the West Midlands, London, the East Midlands, and south east England. The lowest proportion of exporting companies are to be found in Wales (12th), Scotland (11th) and the South West (10th), with Wales having a proportion of exporting companies that is only one-half of the proportion located in the West Midlands or London. Again, this is a surprising result, given the amount of funding spent by organisations such as Wales Trade International during this period to improve the export potential of Welsh firms.
There are also other important indicators of where Wales seems to be losing out in terms of ensuring a more entrepreneurial innovative economy for the future. For example, Wales is bottom of the regional league table in terms of early stage venture capital investment in the UK, which is an important factor in ensuring that growth firms receive the funding required to grow further, especially as the study shows a strong correlation between regional competitiveness and the supply of venture capital. On the other hand, the results for skills development are encouraging - especially in terms of higher level qualifications - although much more needs to be done in terms of ensuring that the number of students who leave school with five or more GCSEs is increased still further, given that the relative improvement in Wales between 2002 and 2004 lags behind most other regions in the UK.
All in all, the UK Competitiveness Index provides some interesting guidelines as to what needs to be done in Wales to improve its chances of future economic success. I hope that policymakers will examine this work in further detail as there is certainly room for improvement across a number of key areas, such as knowledge generation and internationalisation, that needs some attention
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