THE SECOND RECESSION?

Last week, the unemployment figures in Wales resumed their upward trend after two months of a ‘statistical blip’ in which the numbers fell.

According to the Office for National Statistics, unemployment rose by 7,000 over the three months to July, bringing the total to 116,000. This has left Wales with 32 per cent of working age adults either unemployed or economically inactive, a rise of 54,000 since the same period last year.

Whilst there are encouraging signs that the economy may finally be recovering, the revelation that the current UK government has been planning cuts in expenditure of nearly 10 per cent could have a disproportional effect on the Welsh economy, given the high dependence on the public sector which some economists have suggested to be as much as two thirds of the wealth generated in Wales.

As for the private sector, it remains my belief that Wales entered the recession earlier than the rest of the UK. That is not to say that we will emerge out of this earlier than other regions as there are still dangers that large overseas employers could, if influenced by the domestic situation back in their home countries, make the decision to cut and run. The recent example of Bosch, with 900 jobs hanging in the balance, is testament to the uncertainty that remains in the global economy.

Therefore, we could be looking at a worst case scenario where there could be up to 50,000 Welsh job losses as a result of the proposed reductions in public sector expenditure by the Treasury. Whilst many may see this as a threat to the prosperity of Wales, others will see it as a golden opportunity to rebalance the economy away from dependence on the public sector and in developing a vibrant and sustainable private sector.

How do we do this?

The biggest problem with the seven economic summits organised by WAG is that, at least according to the pronouncement of government politicians, they have essentially achieved only one tangible outcome, namely the ProAct scheme.

This was a programme that was first suggested in this column last November and, as I said at the time, "Rather than watching impotently as firms lay off key workers, why doesn’t the Assembly Government set up a multi-million pound key fund which enables businesses to temporarily move their workers, during the current economic crisis, onto skills training courses? Not only would this enable businesses to retain their skilled workers through government support over the next 12 months, but it would provide opportunities for upskilling and, critically, enable firms to be in a more competitive position when we emerge from recession.”

Clearly ProAct has had an effect, with 6,200 people having taken up training places through the scheme since it started. However, it is now time to look beyond such defensive measures and develop new ways of thinking that can deal effectively with public sector expenditure cuts whilst trying to grow the Welsh economy through the private sector?

Who should do this?

Certainly, I would argue that we need to step up a gear from the economic summits that have taken place to date and which have essentially been meetings of business organisations and civil servants. If we need innovative new ideas and entrepreneurial plans to grow the economy during the next few years, then we must bring together entrepreneurs and innovators to achieve this.

As Valleys Mam noted, one answer can be found across the Irish Sea where, last weekend, an extraordinary meeting took place in Dublin when the Irish Government brought together its most talented diaspora to develop solutions to help it out of the worst economic crises that Ireland has ever experienced. The Global Irish Economic Forum gathered 180 of the top Irish brains in the business and creative worlds together in one place to harness ideas and talent for the recovery of the economy.

Given such a great idea, many people in Wales would think it is such a shame that we haven’t done the same although this blog, back in December 2006, did suggest that:

“the First Minister should urgently convene a summit of our leading businesspeople and entrepreneurs - such as Sir Terry Matthews, Sir Christopher Evans and Henry Engelhardt - to get their views on what is needed to kick start the Welsh economy.”

With the First Minister looking set to announce his retirement from frontline politics next week, it would be a fitting send-off if he would issue an immediate call to arms to the Welsh diaspora, including people such as Sir Howard Stringer of Sony and Martin Coles, President of Starbucks, to come together to develop a way forward for the future of the Welsh economy.

Certainly, bringing the experience and expertise of wealth creation should help the Assembly Government to develop the strategies needed to turn around our fortunes and ensure that Wales emerges from the recession on the right path to a balanced, innovative and entrepreneurial economy.