MIT Day 5

Too knackered to blog much today except that my team will be up until after midnight preparing for our 'elevator pitch' and business plan presentation tomorrow, after which I fly back to Wales.

It has been an amazing experience and it has given me a whole new perspective on a range of issues. More importantly, it has refired my enthusiasm to make a difference which, of late, ahd been waning a bit.

watch this space....

MIT Day 4

Walked out at 7am this morning into a blizzard, which is par for the course this time of year in this part of the world.

Fortunately, the Cambridge Innovation Centre, which we visited this morning was only a short walk away.

Whilst people may have an image of high technology incubators, they would have been surprised by this building which was essentially serviced offices, albeit in the heart of one of the most innovative parts of the World.

Appearances can be deceiving, because this nondescript building houses over 175 firms and, since inception, the resident firms have raised over $825M in venture capital since 2001. It is also a private sector business that gets no subsidy whatsoever.

The main lesson is that Boston has a highly developed and sophisticated support system for innovative firms which is largely non-existent in the majority of European regions such as Wales.

It also has, on its doorstep, one of the greatest universities in the world – MIT – where starting a business is second nature for the thousands of bright students attending.

What are the lessons for Wales from all of this?

First of all, there needs to be a better pipeline of ideas from the university sector than currently exists. The current system of enterprise education is, frankly, inefficient and ineffectual, and we need a Rolls Royce programme – like the EDP I am currently attending - to help get the best ideas out of Welsh higher education every year.

Secondly, we need better access to venture capital (and I don’t mean Finance Wales) to fund these new businesses properly. If this means creating a virtual showcase for getting the best of European and US venture capital to Wales, then let’s get on with it.

Thirdly, there needs to be a stronger infrastructure in supporting these businesses, from experienced mentors to intellectual property specialists. Of course, this is an integral part of the MIT environment after 30 years of starting successful businesses. Nevertheless, we do need to gain access to a range of different services and again, this could initially be done virtually.

Ironically, in the techniums we have a physical incubator space that is vastly superior to what is going on here in MIT.

Unfortunately, we don’t have the companies because the cash and support they need to succeed is missing.

That is the challenge currently faced by Wales if it is really serious about developing a knowledge-based economy.

MIT Day 3

Day 3 began at 7am with breakfast to discuss our business plan. The international team of eight is gelling well and we think we may have a winner on our hands in terms of the business plan, although that has to be tested in the crucible of MIT’s business plan panellists on Friday.

At 8am, we then started the first of our company visits this week, to a software firm called hubspot.

It was fascinating to do a Q&A with someone who expected his company to grow to the next Microsoft, although it was noteworthy that he was turned down by Sequoia Capital headed by the Cardiffian Michael Moritz. Some great lessons though and shows that many companies achieve success in Boston.

We then started a series of lectures on a range of topics, ranging from organisational design to choosing an entrepreneurial team to factors for success for high technology start-ups, which eventually finished at 7pm, twelve hours later!

The lectures by Professor Diane Burton were slightly off the wall but totally fascinating and used some original concepts to explain some quite difficult concepts.

This was followed by a short reception with the Canadian High Commission which then led to another two hours of the business plan before getting back to the hotel room a few minutes ago.

It is becoming enjoyably tiring but the breadth and depth of the lectures and learning experience are everything I expected, and I believe everyone else in the classroom is of the same opinion. Innovative welsh firms would love this learning environment as it would change the way they do business and add enormous value to the company.

p.s. I am bloody knackered and we start at 630am tomorrow!

MIT Day 2

Day 2 started at 8am and finished at around 10pm (and that is a light day apparently!) The day was mostly an introduction to MIT and its success story in creating high technology entrepreneurs.

The statistics are startling

MIT students, alumni and faculty have founded over 5,000 companies. Approximately 150 new MIT-related companies are founded each year. These companies now account for employment of over 1.1 million and annual sales of more than £200 billion.

We have already been put into a multinational team and have to do a 55 second ‘elevator pitch’ and a 5 minute business plan presentation at the end of the week. Dragon’s Den here I come!

Apart from lectures, we had a number of business owner-managers come in and speak to us. For example, one of the entrepreneurs we spoke to yesterday had just raised $140 million for a medical devices company with projected valuation of $1 billion.

It is an amazing place and with news from over the pond of the hundreds of jobs being lost at Corus shows that we also need to try and get more entrepreneurship, especially of the high value technological type, in Wales. Certainly, this course has fired me up to do something about this when I get back.

MIT Day 1

Have arrived at MIT for Entrepreneurship Programme following a four hour rail trip from New York this morning.

The course began with a four hour networking event where we had to try and meet as many people as possible and create a team of eight for the business plan and elevator pitch competition at the end of the week. Met a great group of people from countries as diverse as Dominican Republic, Saudi Arabia, Canada and Ireland.

Interesting to note that Scottish Enterprise had paid for eighteen participants from Scots high tech firms but there were no representatives from Welsh organisations apart from yours truly. That is a great disappointment as we need Welsh-based entrepreneurs to attend such high quality courses on a regular basis.

Hopefully, I can get some onto the next strategic MIT course to be held in be Edinburgh in March.

Letter from America I

Having been here in New York since Thursday, I literally have had no time to sit down and write a blog entry as it has been meeting after meeting from first thing in the morning.

Following Obama’s inauguration earlier this week, the big story has moved quickly to his bailout plan for the USA economy.

This involves spending $825 billion to create or save more than three million jobs through a combination of spending and tax breaks.

Of course, there are already debates on the make-up of the rescue package but there has been a broad welcome for this move, especially in terms of providing tax incentives to business, something which the UK Government has singularly failed to do.

For example, there is a provision in Obama's plan that would allow businesses to carry back their losses into taxes filed for the previous five years, which would put cash very quickly in the hands of businesses.

Despite the doom and gloom, there remain business opportunities here in the USA as some firms are taking a longer term view on the economy. For example, at 830pm on Friday evening, I took a call from the director of strategy of a business in California that is looking to invest in Wales and was very keen to work alongside the University to do so.

Later today, I am taking the train to Boston to undertake a five day intensive course at MIT. It will be the first time I will have been on the wrong side of the classroom for nearly twenty years.

However, as the only participant from Wales, and with another 50 people from over all over the world attending, it should be a fantastic experience.

I promise to tray and blog a little bit more often, despite the fifteen hour average daily commitment required for the programme, which starts at 7am every day and finishes at 10pm!

Global Entrepreneurship Monitor 2008

With the credit crunch hitting every business sector, little attention has been paid by politicians and policymakers to entrepreneurship and the role it can play in revitalising economies.

That is why the results from this year’s Global Entrepreneurship Monitor study are important in examining how the wealth creators are performing around the world.

The GEM programme is an annual assessment of the national level of entrepreneurial activity. Started in 1999 with 10 countries, the GEM 2008 study conducted research in 43 countries.

Released last week, the 2008 report – which surveyed 150,000 adults just before the economic slowdown last summer – shows that, even then, there were reduced opportunities to start a business among non-entrepreneurs and, more critically, more were afraid of starting a business in case it might fail.

At that stage, this fear of failure had yet to affect the rate of new start-ups globally, which had stayed at approximately the same level as last year.

Of course, as the authors of the report point out, recessions may not necessarily slow down entrepreneurial activity and, in some case, may increase it as resources tend to be cheaper and, apart from bank loans, more available.

There may also be increasing opportunities for smaller firms as large competitors are weakened and more focused on survival. Indeed, the report suggests that economic successes of the next decade may well be driven by those entrepreneurs who started their businesses at this time.
More generally, there were very few surprises from this year’s GEM study.

Yet again, the USA had nearly twice the start-up rate found in the UK and was higher than all participating European countries. The detailed analysis also showed that most new entrepreneurs expect no or limited job creation from their ventures and that it is a small number of new entrepreneurs that are responsible for a high share of total expected job creation.

However, for the first time, the research examined the impact of enterprise education across the participating countries.

As expected, it found that the relationship between training in starting a business and entrepreneurial attitudes, aspirations, and activity is generally positive, and that training undertaken voluntarily results in more entrepreneurial activity than compulsory training, ie those who have ever engaged in voluntary training are two-and-a-half times as likely to be early-stage entrepreneurs as those who have not.

So what is the impact of these global results for Wales?

Certainly, entrepreneurship continues to be an important economic driver across the world, although the GEM report seems to suggest that there is a perception of reduced opportunities which, in turn, could lead to fewer people wanting to start a business in 2009.

The question for Assembly officials is whether more needs to be done to generate further interest in enterprise as a buffer towards job losses elsewhere in the economy.

However, if policymakers are serious about the development of new businesses to stimulate the economy, then it is clear that the provision of enterprise education can be a major factor in boosting entrepreneurial activity and should be given long-term support by the Assembly Government.

Finally, and perhaps most importantly, politicians need to establish a continuous dialogue with successful entrepreneurs and draw on their knowledge and experience to support economic development policies.

One of the most notable aspects of the recent economic summits was the absence of any entrepreneurs from the discussion. Yes, business organisations were represented but, as far as I am aware, no successful owner manager was given the opportunity to sit around the table and provide some real life wisdom on the real life problems facing many businesses.

At a time when studies such as the GEM report are suggesting a potential slow down in entrepreneurial activity over the next couple of years, it is critical to develop specific policies that entrepreneurs themselves have indicated are important in ensuring the creation of new and viable companies which can emerge from the current crisis and make a real difference to the Welsh economy.

Prof in the USA

I am over in New York and Boston for the next ten days.

The visit to the Big Apple is to look for new business opportunities which are still out there if you look hard enough.

However, in Boston, I will be taking part on a taught course for the firt time in 20 years, albeit at MIT.

Will try and blog as much a spossible on what is going on over here.

The decline of Welsh Manufacturing

Yesterday, I published some new figures on the decline of manufacturing in Wales during the last eleven years of a Labour Government, which showed that the sector contracted by over five per cent between 1997 and 2006, the last year for which figures are available.

In contrast (and surprisingly for some), under the last Conservative government, the sector grew by 31 per cent between 1989 and 1997.

The research also reveals that:

• 57,400 manufacturing jobs have been lost in Wales since 1997, at a time of a massive increase in the number of employees in the public sector.
  
• Manufacturing in Wales was responsible for 28 per cent of GVA (the index which tracks prosperity levels) in 1997 but had fallen to 18 per cent by 2006, the same as business services
  
• Key sectors such as hotels and restaurants, so vital to the tourism industry, have also stalled under Labour. During the period 1989-1997, this sector grew by 82 per cent but only by 50 per cent for the period 1997-2006 and their overall contribution to the Welsh economy has remained the same since 1997.
  
• The utilities sector in Wales has also declined under Labour. During the period 1989-1997, electricity gas and water supply grew by 32.3 per cent but have declined by 5.6 per cent since 1997.
  
• Agriculture has also slumped by 36 per cent during the period 1997-2006, following a small decline during the period 1989-1997.

After much rhetoric, these figures highlight in the starkest possible terms the decline of manufacturing in Wales over the last decade.

I am sure that the usual suspects will hark back to the 1980s and blame the Conservatives for the decline of Welsh manufacturing. However it was during the 1980s and early 1990s that the manufacturing industry, supported by the WDA, encouraged a range of successful inward investments and the establishment of a strong indigenous supply chain to become the envy of other UK regions.

Despite billions of pounds of additional funding for the Welsh business sector being made available from the Treasury and Europe since 1997, the manufacturing sector has received little proper support from governments in London or Cardiff during the last decade.

The warning signs have been there for years - it's just that politicians have conveniently chosen to ignore them.

If Wales is to emerge from the current recession, then the Assembly Government needs to reverse this decline and provide more support for research and development, skills and new process technologies within our manufacturing industry.

If a world-class economy is to be created in Wales, then increased support must be provided to tackle the productivity gap with our global competitors and ensure a high technology, high skills manufacturing industry in Wales.

Digby Jones - was he right?

Last week’s decision by Anglesey Aluminium to stop smelting at their plant in Holyhead, with the loss of 500 jobs, will have been met by enormous disappointment by everyone on the island, which is already the poorest county in the UK.

However, many will be shocked that we have reached this situation, despite considerable warnings over the last two years that this would happen if the plant did not get access to an energy source.

Incredibly, this is probably the only company in the UK that is not shedding jobs because of the current credit crisis but because of a power issue that has been flagged up by the company to politicians on numerous occasions. Yet little seems to have been done to deal with this problem and Anglesey faces the disaster of losing millions of pounds more to the local economy.

So what has gone wrong?

Surely you would have expected politicians and officials, within both the Assembly and the British Governments, to have come up with a plan to ensure that a major employer such as Anglesey Aluminium would continue to operate, especially during a recession where every job is vital for the local economy.

Part of the answer can probably be found in the response by Lord Digby Jones last week to MPs on the Public Administration Committee.

Recently replaced by Wales’ greatest living banker, Merfyn Davies, the former Trade Minister did not pull his punches. In his own inimitable style, said that the civil service had fostered a culture where officials were obsessed by box-ticking and looking after their own jobs.

"So many people in the civil service are far more interested in process than they are in outcome. They pay lip service to outcome because they have targets to meet, boxes to tick”. In a forthright statement, he said that when he worked with civil servants who were not up to the job, "they were just moved sideways and they would go off to another department. That is something that the taxpayer does not deserve".

As expected, these claims have been vehemently denied by the civil service unions and given his rumbustious style, perhaps Lord Jones was not the best person to point these issues out.

As with all things, the truth probably falls between two stools. Whilst I have come across many civil servants whose obsession for detail and micromanagement and would turn Job into a raving lunatic, I have also had the privilege of knowing those who passionately believe in Wales and will go the extra mile to ensure the best for Welsh business.

You have to wonder whether the situation could be improved, especially during the current recession.

Perhaps the most constructive thing that Assembly Ministers can do is to have a quiet word with those who are slowing down the whole process. They should guarantee that support and funding is provided to businesses as quickly and efficiently as possible, especially as there is increasing evidence that this just isn’t happening.

For example, you have to wonder why a number of major projects in North Wales that were submitted for millions of pounds of European funding nearly fourteen months ago are still nowhere near being approved and at a time when it is critical we spend the money.

Over the next few months, safeguarding every job is vital and taxpayers have a right to expect that their hard earned money is used efficiently and effectively for the benefit of the nation.

They should also expect that governments, and their civil servants, do everything possible to ensure that, during the current recession, businesses are fully supported and vital jobs are safeguarded, especially within the poorest parts of this nation.

The Economy - where do we go from here?

Last week was probably one of the worst in living memory for the UK economy.

While one government minister was seeing mirages of green shoots, the rest of the country was being battered by economic statistics that indicated the depth of our economic problems.

An economic survey from the British Chambers of Commerce showed that key indicators in both the manufacturing and service sectors had recently plunged to record lows, leading to predictions that the recession would be “worse than the early 1990s”.

Although the decrease in the value of the pound has made exporting more attractive, the bad news is that the slump in manufacturing is accelerating, with output plummeting at its fastest annual rate since 1981.

According to official statistics, manufacturing output fell by 2.9% in November 2008, the steepest monthly fall since June 1985 and, more tellingly, the trade gap with countries outside the European Union widened to £5.3bn in November, the worst performance on record.

Other sectors have also suffered. Despite the cut in the rate of VAT and pre-Christmas sales, UK retailers suffered their worst month on record in December, according to the British Retail Consortium (BRC). In addition, a study by the CBI and the accountants PWC showed that the profitability and income of financial services firms fell at a record rate in the last quarter of 2008.
As many have predicted, those that had resisted job cuts before the holiday season are now letting their employees go as prospects for the economy worsen.

Top of the list is Barclays Bank with 4,200 jobs being lost, followed by other financial firms including the Spanish bank Santander (owner of Abbey, Alliance & Leicester and Bradford & Bingley), which is cutting 1,900 and Cattles – the loan company, which is losing 1,000 employees due to the effects of the credit crunch.

However, it is not only financial services which are being hit hard. In manufacturing, Jaguar Land Rover is shedding 450 workers and JCB is losing around 700 jobs. Well-known names such as Waterford Wedgwood and Findus have gone into administration, with 780 going immediately. In retailing, Land of Leather also called in the receivers, threatening 1,060 jobs, while bookseller Waterstone’s,cut 200 jobs. Zavvi, the DVD and games retailer, has lost 353 jobs with the closure of 18 UK stores last weeks.

Most worrying is that, contrary to initial predictions, the public sector is also beginning to be hit hard by the recession. According to the Local Government Association, one in seven councils have recently axed jobs and about 40 councils said they were planning some 7,000 redundancies.

That is the current situation in the UK economy but what about the immediate future? Some of the statistics paint a grim story. For example, according to Ernst and Young, the number of profit warnings by UK-listed companies hit a seven-year high in 2008 and the accountants predicted that the situation in 2009 would probably be just as bad, if not worse.

Some forecasters – such as the National Institute of Economic and Social Research (NIESR) – believe that the UK economy is already deep into recession, and is heading for the worst downturn seen in any advanced economy since the Second World War.

The question for many is whether the UK economy can batten down the hatches and survive this economic storm of the century? Certainly, with unemployment always being the last indicator to grow within a recession, the spectre of having three million workers without jobs by the end of this year is a frightening prospect.

With politicians unsure what to do next, some are arguing that the £20bn of loans being offered by the UK Government is too little and too late.

Indeed, as the recent job losses show, many firms have already decided to make employees redundant as the only option for survival as banks bleed them of cash.

Given the disastrous statistics that emerged last week and will continue to emerge over the next few months, one can only hope, rather than expect, for banks to finally get money out to the business community and for the whole commercial system to kick-start itself into activity once more.

Let us pray that it does happen as, short of printing more money, this is probably the last throw of the dice for the current Government and may be the only financial instrument that is able to save the UK economy from a prolonged recession.

Heathrow

The press is reporting that, as expected, the Prime Minister will bypass Parliament to unilaterally give permission for a third runway at Heathrow.

I will not focus on the environmental arguments here but one has to ask why London is again receiving a £9 billion boost?

Surely, it would cost far less to upgrade regional airports around the country and, if need be, link them into London City Airport if this is about getting financiers into the country.

Alternatively, how about spreading the wealth in terms of a new build, as I have discussed previously.

Despite their sustainability agenda, the Assembly Government is supporting this development, saying that the high speed rail links to Heathrow will benefit Wales.

Shame, therefore, that the rail link to his own national airport remains incomplete and passengers are left stranded a mile from the Cardiff Airport terminal.

Get real on the state of the Welsh economy

Regular readers of this blog and my newspaper columns will have noted a number of pieces on statistics related to the Welsh economy over the years.

Just before Christmas, the latest GVA data (which track the prosperity levels of the various nations and regions of the UK) was released by the UK Statistics Authority and over the last weekend, I finally got some time to examine them in more detail.

Perhaps the most shocking finding was that an extra £4.2 billion would have been generated in if the Welsh economy had growth kept pace with the UK average over the last decade.

The analysis of Gross Value Added (GVA) rates between 1997 and 2007 also reveals that the gap between London and other parts of the UK has widened, with Wales among the hardest hit. The average annual GVA growth rates for all regions apart from London was higher between 1989 and 1997 than over the last 10 years.

In 2007, the GVA per head for London was 152 per cent of the UK average, with Wales at 75 per cent and bottom of the UK prosperity league table. In contrast, London was at 138 per cent of average prosperity of the UK in 1997 whilst Wales stood at 80 per cent.

During the period 1997-2007, the London economy grew in overall terms by 91 per cent as compared to a growth of only 54 per cent for Wales. The UK economy grew by 69 per cent.

Remember this is before the current downturn took hold and, yes, these figures are utterly shocking, especially given the billions extra that have been made available to support business through Europe and the Treasury.

However, even worse is the fact that successive Assembly Governments have been in a constant state of denial about the declining state of the Welsh economy for years.

I remember reading this 2003 piece with a mixture of disbelief and incredulity and this response has set the pattern for Assembly responses ever since. If you don't believe me, read Rhodri Morgan's response to the figures in today's Western Mail.

As a result, there has been a general inability to grasp the deep rooted structural problems within the Welsh economy and, more importantly, developing strategies to address them. Clearly, if you believe that it ain't broke, then why should you fix it. This is despite warnings for a number if years from academics such as Professor Phil Cooke, who warned about this at the beginning of the century.

Is is time for a new economic reality and to develop a new approach to managing the Welsh economy?

Of course, it is unlikely that politicians will do anything, as noted previously, but watching the video below may well help them to take the first step.

Economic statistics

The latest economic data does not make pleasant reading:

• 'Frightening' deterioration in UK economy
• Thousands of UK jobs go in bleak day for economy
• Profits warnings at seven year high
• UK 'set for worst downturn since Second World War'
• Output from UK factories hits fastest rate of decline for 28 years
• The labour market isn't working
• Worst December ever for retailers
• UK trade deficit balloons to a record
• Financial services gloom deepens
• Tesco results add to UK economic gloom

Certainly, any hopes that the recession will end in the second half of this year have all but disappeared.

Neutering the Assembly

Last year, this blog discussed proposals by the Welsh Assembly Government to introduce legislation to suspend the ‘right to buy’ for council house tenants in Wales.

This was to be one of the first ‘Legislative Competence Orders’ which would, under the 2006 Government of Wales Act, essentially give Wales the power to pass its own laws, albeit after seeking permission from the House of Commons and its all-party Welsh Select Committee.

Given the emotive content of the legislation, commentators had suggested that politicians in Cardiff Bay should have chosen something that would have been passed with little opposition, thus embedding the legislative process for subsequent laws.

By focusing on housing laws in this way, some thought that the Assembly was ‘picking a fight’ with its bigger relative in St Stephen’s Green as it was clear that there would be difficulties with this issue from the start.

Indeed, as the Labour Party, in its wisdom, has set up a process whereby the UK Parliament could discuss and vote on the legislation being put forward by the Assembly, then MPs cannot be blamed for expressing their democratic right, as they are elected by the people to represent their views.

How on earth did we end up with this constitutional mess?

Some have suggested that this was a cunning plan to ensure greater backing for full Welsh law making powers and to show that MPs in Westminster could not be trusted with passing Welsh laws.

If there is any grain of truth in that rumour, then the stakes have suddenly been raised by the announcement at the end of last week that the Secretary of State for Wales would now essentially have a veto over laws put forward by the democratically elected members of the National Assembly.

So, as we approach the tenth anniversary of devolution in Wales, the Labour Government – which was content to let Scotland have full law making powers – has given control of Welsh legislation directly to a politician outside the National Assembly.

With a few exceptions, there has been a deafening silence from politicians and the media over this matter although bloggers such as Glyn Davies and the three Dewis on Politics Cymru have written on the issue in detail.

One can only imagine the howls of protests from the usual suspects if it had been a Conservative Government at Westminster that had given the Secretary of State for Wales a veto over the Assembly’s legislation.

Those who support further powers for Wales will see this as a retrograde step that allows Westminster to directly interfere in devolved matters. There is a small minority who believes that this is the impetus needed to ensure that there is a stronger case made for direct law-making powers for the Assembly with little intervention by Westminster.

However, this is a high risk strategy that could backfire during a recession in which the vast majority of Welsh people see the UK Parliament as the only aspect of government with the powers to make a difference to their lives in these troubling times.

It may also give fresh ammunition to critics who will argue that this whole process has emasculated the Assembly and reduced it to a glorified county council that deserves no further powers.

In my opinion, the whole point of having a National Assembly, voted for by the people of Wales, is that once matters are devolved, they should become the responsibility of the Assembly Members without any interference from London.

In now allowing the Welsh Office to essentially decide which laws can be enacted, politicians have allowed process to get in the way of demonstrating that devolution can make a real difference to the everyday lives of the people of Wales, leaving us with a legislative halfway house that does little credit to this nation or its political masters.

Do something - three ways to help Welsh firms now

There are still those who believe that the Welsh Assembly Government can do very little to help the Welsh economy which, given the way that the current lot in power seem to have given up on devolved powers, is not surprising.

However, as pro-devolutionist and an optimist, here are three suggestions as to how the Welsh Assembly Government could help the business sector tomorrow if they so wished to:

Business Rates

First, it must urgently re-assess the current business rate regime and reduce the burden on small firms across Wales.

It seems to me that, while the Assembly currently has devolved responsibility for this form of taxation, it has yet to realise that it is exactly the worst sort of tax during a recession. This is because, unlike other forms of taxation on firms, business rates remain the same regardless of the performance of the business as it is based on the property occupied by the business and not on turnover or profitability.

To many businesses it is a fixed cost that must be paid regardless of the success of the business and is one that becomes disproportionately higher for many small firms as their income reduces. I would therefore suggest that if the Assembly Government wants to ensure that owner-managers remain solvent during the current crisis, it should examine whether it could suspend business rates for our smallest firms during the next twelve months.

While a couple of thousand pounds of rate relief may not seem much to a civil servant, it could mean the difference between survival and failure, especially for many small shops up and down our high streets

European funding

Second, we need to start spending European funds quickly and get them out to businesses. As many of you are aware, Wales qualified for an additional £1.5bn of European funding in 2006 and, as the Western Mail has pointed out during the past few weeks, there are fears being expressed by business groups there is very little spend being undertaken on the business sector and, more critically, projects to help develop businesses across Wales are being swamped under through an over-exuberance of unnecessary bureaucracy.

Of course, the governance and accountability of the use of such funds is important but even more critical is the need to get this funding, which other UK regions do not have, out to businesses, universities and communities.

Certainly, if this situation does not improve in the next couple of months, then there may well be a danger that the Welsh business sector may not be in the position to provide the necessary matched funding to support key projects with the consequence that these projects will fail and, worst of all, the funding will need to be returned to Europe.

Welsh Loan Guarantee Scheme

Finally, and most importantly, is the need to get cash flowing within businesses again and I reiterate my call again the establishment of a Welsh National Loan Guarantee Scheme which, by working alongside banks, would be used to underwrite a significant percentage of new loans to business, particularly on short-term credit lines, overdrafts and trade credit.

Whether this funding comes from the Assembly itself or from European funds is irrelevant. What is critical for Welsh businesses is that they can secure their cash position during the next few months and this must be something that Welsh ministers should consider urgently as probably the most effective way of ensuring that funding flows into the small firm sector.

The beginning of the end?

According to the Daily Telegraph, there are rumours that Alistair Darling is "considering emergency plans to print more money".

If true, this suggests that the UK Government's strategy for dealing with the current crisis have largely failed and that the only approach left is to adopt third world economic development policies.

The Weimar Republic anyone?

Pensioners

One hundred years ago, the first UK citizens received their pensions from the British Government.

At that time, women did not even have the vote, and it was only available to men of ‘good character’ over the age of 70 who had not been in the workhouse.

Since then, all of us have become eligible for a state pension when we reach retirement age but are our older generation better off?

Ironically, perhaps, the five shillings paid out in 1909 was, according to pensioners support groups, equivalent to 25 per cent of the average earnings, as compared to the current situation where the average pension is equivalent to only 15 per cent of an individual’s average pay.

Given the data, it is not surprising that a survey by the insurance group Friends Provident indicated that the vast majority of respondents believe that the state pension is an inadequate benefit that is insufficient for their needs.

Information released by the National Pensioners Convention shows that the number of pensioners living below the poverty line of £151 per week has risen by 300,000 in the past year to 2.5 million. Most worryingly, those living in severe poverty have increased their numbers by 600,000 since 1997, and around 45 per cent of all single pensioners have an annual income of £10,000 or less.

Shamefully for those in power, two thirds of those living in poverty are women, many of whom who do not qualify for a full state pension because they were caring for their families and could not pay the full national insurance contributions.

For those who have managed to put some money aside for their retirement, the recent fall in interest rates will be especially punitive as it will reduce the amount they are able to live on despite a lifetime of hard work and prudence. For those who still manage to gain some income from the money they have put aside for their twilight years, the Government takes its share in taxes instead of providing an incentive for those who have savings.

With such little money coming into many pensioner households, is it really surprising that many are facing a difficult choice between going hungry and keeping warm, resulting in greater incidences of cold-related illnesses?

Given that we live in a civilised advanced economy, how can it be that there were 22,400 excess winter deaths of older people in the UK in 2007-2008, higher than in any other European country? One can only imagine the horror of the figures that will be released after the bitterly cold winter we are currently experiencing.

At the very least, this Government should ensure that every pensioner should have the basic human right to heating and food. How on earth can we all stand by and allow our senior citizens, many of whom have served this country with distinction, to die needless deaths because they could not afford the few pounds every day to heat their home?

It is time that the politicians stopped spouting the usual empty rhetoric about the importance of looking after the older generation in our society and actually acted to do something positive that will improve the standard of living of those who need it the most.

I cannot believe that any politician would disregard the fact that thousands of pensioners die because they simply cannot afford to live and yet, every year, we have a political class that conveniently ignores these dire statistics and fails to improve the lives of those in greatest need.

Indeed, if it is said that any society is judged on the basis of how it treats its weakest members, then we in Britain should hang our heads in shame over the way we have treated our pensioners during the last three decades.

Another one bites the dust

This time it is Waterford Wedgwood - the glassware and china manufacturer - which is entering administration 250 years after it was founded.

The firm employs 1,900 people in the UK, mainly at its manufacturing operation at Barlaston, Stoke-on-Trent, and at retail stores and offices. It also has 800 staff in Ireland.

Many of those manufacturing jobs are highly skilled the likes of which we may never see again. The design and manufacture of glass remains one in which individuals have to go undergo years of training and having visited the factory in Waterford a few years ago, I saw, at first hand, the experience and expertise the glassmakers had developed.

Clearly, it can be argued that this is exactly the type of creative destruction that is the hallmark of recessions and that companies that can no longer compete shoul;d be put out of their misery.

However, I remain saddened that the legacy of Josiah Wedgwood, one of the world's greatest innovators, will now be lost.

For those who are interested in hearing more about this great man's achievement and the revolutionary way in which he changed enterprise industry forever, listen to this podcast here.

Get the money out to small firms

“Happy New Year!” was the refrain across the land as the clocks struck midnight on Wednesday night.

However, many economists would suggest that “happy” would be the last adjective they would use to describe 2009 and that it looks like being one of the worst years in living memory for the business sector.

Certainly, the reality of the situation is beginning to hit home with the man and woman in the street. A recent survey showed that less than 20% believe the Chancellor of Exchequer’s prediction that the recession would end this year.

The latest economic data makes grim reading for even the most optimistic observer. The British Chambers of Commerce believe that there will be a fall of nearly 3% in economic growth during the next year, worse even than the 1990s recession. It has also predicted unemployment hitting three million (or 10% of the workforce) over the next two years which, if translated to Wales, will mean around 150,000 out of work.

In terms of the housing sector, little seems to be happening despite the record cut in interest rates. Mortgage lending rates in November were at their worst for nine years and there are real fears that, contrary to government expectations, banks will lend less in 2009 to both consumers and businesses. Worse still, house prices are forecast to fall even further depreciating the only real asset that many people have at a time when the rates for savers have worryingly declined.

Insolvencies are set to rise to record levels and, following the demise of high street names such as Woolworths, MFI and Adams, it would seem that retail is set to bear the brunt of this recession, meaning that the pain will be felt in every town in the UK.

According to the market research company Experian, over 1,600 British retailers will go out of business in 2009 among the worst trading conditions in 30 years. This will result in thousands of job losses not only in the shops themselves but also in suppliers, manufacturing firms and service companies. Worst of all, it will leave 10% of shops empty, thus depressing consumer perceptions even further.

While the record falls for the pound against the euro and the dollar should be boosting exports, there seems to be little evidence yet of this potential benefit feeding through into the manufacturing sector.

The latest data from the CIPS survey of interest rates showed that December was the worst month for manufacturing since 1992. With firms shedding jobs at a record rate, it would seem that depressed global demand is not helping our factories. This is a significant worry for the Welsh economy as we are more dependent on the manufacturing sector than other regions in the UK.

So what can be done amongst all this gloom and doom? It all comes down, in the end, to common sense approaches.

I shall discuss the Welsh approach next week as I believe we have some unique opportunities which, if utilised properly could see us limiting the damage to the economy of Wales. However, at a wider UK level, the Government should stop tinkering with devices such as a 2.5% cut in VAT which has done nothing to boost retail confidence at a time when goods are being cut in price by 50% or more in almost all shops.

The real issue is to get the banks to adopt a sensible lending policy to our beleaguered business sector which does not involve cutting overdraft limits, withdrawing short term loans and increasing administrative fees for small firms.

If this involves government partly guaranteeing loans and overdrafts to small firms, then this needs to be the way forward to ensure that jobs are safeguarded and businesses survive.

If this is not done quickly, then my worry is that thousands of well managed businesses will go to the wall because of short-term cashflow problems brought about through no fault of their own, such as the collapse of a major customer and funding restrictions from banks.

The onus is now on ministers to act before it is too late and I remain convinced that if one of the banks in which the Government has a major stake – such as RBS – were to do this, then the other financial institutions would have very little option but to follow suit.

If we can get cash flowing to the business community once again, then the recession may be shallower than many of the economic forecasters have predicted.

European Convergence Funding

It would seem that all is not well with European funding in Wales.

As the Western Mail reports here and here, there are real issues emerging not only with the old Objective 1 programme that ran from 2000-2006, but also with the new Convergence fund programme.

Ministers and their spinmeisters will, as usual, dismiss this but it must be remembered that it was the whole subject of Objective 1 which brought down Alun Michael.

If the Assembly, at a time of economic crisis, is squandering opportunities to give Wales a real competitive advantage, then there should be a full investigation by the appropriate Assembly committee and censure for the relevant politicians and civil servants.

Whatever people say about the Western Mail, this type of story does show the paper's reporters at their best and shows the need for proper accountability within our public services.

There have been numerous warning signs about the increased bureaucracy and micromanagement of the latest round of European funds and yet little has been done to address this.

Ironically, I have also heard that WAG staff are frustrated that even their efforts at getting projects out are being blocked by red tape and nit-picking by their own colleagues in WEFO (the body managing the scheme).

If that is the case, then God help the private sector and other bodies applying for funding. Indeed, it seems that it is not unusual for projects to be taking twelve months from submission to approval.

More on this soon.