The Assembly and saving the Welsh economy

Valleys Mam has challenged me to respond to the current economic crisis. So, breaking my silence, here is my article which appeared in the Western Mail on Saturday which really says it all.

"The turbulent events over the past fortnight have been unprecedented and who would have guessed, even a few days ago, that the UK Government would have to bail out our high street banks, as it did on Wednesday.

Given that the situation has gone from bad to disastrous in a matter of weeks, where does such high level economic decision- making leave Wales? Does this mean we cannot influence the economy as some of our senior politicians have noted?

Of course not, especially as responsibility for economic development and supporting businesses is a devolved matter and, despite the suggestions from Ministers that the situation is out of their control, there are a number of immediate measures that can be taken.

Firstly, the Assembly should re-examine the funding being made available to support enterprise and business. It is now clear to everyone that we are in for a recession that may well last up to two years. In such a situation, it is critical that businesses in Wales are given the full support necessary. Yet, according to the Assembly’s own data, it would seem that the Department for Economy and Transport’s budget is to be cut by 2.3% in real terms.

In my opinion, this needs to be re-examined urgently and, at the very least, funding should be restored to previous levels. Now is not the time to cut off vital support for businesses to start, grow and internationalise, especially when devolution gives us the opportunity to develop a competitive advantage as we come out of recession.

While the Assembly does not have the power to cut business taxes, it does actually have the power to cut business rates.

However, the recent £7 million business rate relief is a pitiful response to the financial crisis facing many businesses, especially when it remains ungenerous as compared to that enjoyed by firms in England and Scotland and well below what Plaid Cymru promised in their Assembly election manifesto.

Again, I would urge the Assembly to reconsider this decision, especially in relation to using this instrument in supporting our tourism industry, which is likely to be hit hard by this summer’s awful weather and the effects of the recession.

For many firms, the biggest issue is cashflow, and even our fastest growing businesses are telling me that money is increasingly hard to come by as banks make their terms harder and withdraw overdraft facilities. We know that good businesses don’t turn into bad ones overnight because a bank manager has decided to lower their exposure to the business

While European leaders squabble over what package to offer small businesses, Wales could actually take the lead in this matter. It is easy to forget that the Welsh Assembly Government actually owns its own business “bank”, namely Finance Wales, and could use some of its reserves to get this body to guarantee cheap and accessible loans to help the thousands of Welsh businesses through the credit crisis that many are currently facing.

The Assembly could also, as this column has emphasised time and time again, get in contact with our major employers to ascertain what their current position is and whether the Assembly is in a position to help. There is no point in shutting the stable door after the horse has bolted and there is a danger, unless there is dialogue between business and government, for overseas investors and thousands of jobs, to flee these shores.

One of the sectors that has been hardest hit is construction, which has been responsible for many of the new jobs in Wales over the last few years. Again, the Assembly could intervene directly here, given that the One Wales Agreement has promised 6,500 additional affordable homes. Surely, isn’t this the opportunity to call in the building companies and, to use the business vernacular, “do a deal” so that jobs can be safeguarded in the industry and a major policy commitment is met? I can assure you that the Assembly Government will get a far better return on their investment than they would have had a year ago.

The Assembly could also, as a major purchaser of goods and services, cut its payment terms from 60 days to 30 days (or even to 10 days), thus ensuring that the thousands of firms that are waiting for payments get paid on time and improving cashflow in one fell swoop. It could also encourage other public bodies in Wales to do the same.

Nine months ago, this column highlighted the potential problems facing the Welsh economy and suggested that that the Minister for Economy & Transport should call an urgent summit as soon as possible to bring businesspeople, bankers and economic thinkers together to come up with a Welsh solution for this situation. I am glad that the Assembly has finally agreed to organise such a summit for next week but, realistically, it should have happened months ago.

Bringing new perspectives to economic thinking in Wales could, even in this time of financial crisis, give new potential strategies to ensure we survive this crisis and, more importantly, show how to use our devolved powers to ensure that we start coming out of it more quickly than any other region of the UK.

However, if the Assembly fails to act on any recommendations from this summit, continues to adopt its “steady as she goes” approach and sits on its hands while Welsh firms fail, then there will be future political consequences as people across our business sector quite rightly ask why it should be granted any more powers in the future".

Popular posts from this blog

THE IMPORTANCE OF FRANCHISING

THE IMPORTANT IMPACT OF STARTUPS ON THE WELSH ECONOMY

UNIVERSITIES NEED TO BE AT THE HEART OF THE ECONOMIC RENAISSANCE OF THE WELSH ECONOMY