END OF A DECADE

The last decade has been an interesting one to say the least.

With regard to my job, I started it off as a professor at the University of Glamorgan and ended it as a professor at the University of Wales.

At the turn of the century, I lived in Newport but now am happily ensconced in my dream home in Cardiff.

In 2000, my main focus was solely on writing academic papers and developing research projects in entrepreneurship with not a political bone in my body.

How things have changed!

I have a fantastic wife who, in 2000, had no interest in politics but who is now standing as parliamentary candidate in next year's Westminster elections.

I had a wonderful one year old son at the beginning of the decade and, ten years later, I have a wonderful eleven year old son and a wonderful eight year old son who make my day, every day.

Most importantly, I am ten years older and wiser. Indeed, as the noughties end, perhaps the most critical lesson of all from the last ten years is not to take life too seriously, as I have been tempted to do on occasions.

Luckily, I have a group of friends, such as Sion Barry and Wil Williams, who will not hesitate to bring me down to earth when I become a bit too serious, as the photograph above shows.

Don't ask me where they got a the fake moustache but it serves me right for doing the usual ridiculous poses demanded by the Western Mail's photographers (well at least I hope it's a fake moustache!)

Here's to the next, more relaxed decade!

UNIVERSITY CUTS FOR WALES?

Last week, Lord Mandelson announced a spending cut of £533 million for universities in England which, not surprisingly, has sent shock waves throughout the higher education sector.

In his remit letter to the Higher Education Funding Council for England, he declared that the budget for English universities would be cut from £7.81 billion in 2010 to £7.29 billion in 2011.

As yet, it has not been confirmed whether this is on top of the £600 million of efficiency savings identified for the university sector in the Pre-Budget report.

At a time when youth unemployment has increased to record levels, many are finding it difficult to understand the logic of this announcement. Earlier this month, the number of 16 to 24 year-olds out of work in the UK increased to 952,000 for the three months to October 2009, the highest figure since records began in 1992.

Not surprisingly, this issue is becoming a hot political potato.

Only recently, the Prime Minister personally assured young jobseekers that new measures would bring down unemployment in the coming year. However, the main problem for the UK Government’s approach is that if you ask companies about vacancies, they will tell you that the jobs are simply not there as Britain struggles to emerge out of recession.

This is because businesses, in order to cope with the economic downturn, have shortened their employees’ working week and therefore any recovery will naturally benefit those existing workers on shorter hours rather than any new recruits. Indeed, there are worries that, unlike previous recoveries from a recessionary period, the growth in the economy will be not be led by a massive growth in employment, at least in the short term.

Until companies do begin to hire again, it is imperative that the government does not create a lost generation of young people who have no job prospects.

Ensuring that, in the absence of employment, they have access to educational opportunities to upskill themselves for a competitive knowledge-based economy is crucial during a downturn. That is why many have seen this decision to cut funding to the English university sector as potentially damaging to the UK’s economic future.

As higher education is a devolved matter, the question for Wales is whether the Assembly Government will follow Lord Mandelson’s lead?

Certainly, the new First Minister Carwyn Jones has made it clear said that he will protect education spending in Wales during the coming year. However, it is worth noting that Alistair Darling did the same in his pre-budget report but the caveat from the Chancellor of the Exchequer was that when it came to education, it was schools that were to be given immunity from any spending cuts and not universities.

If similar cuts to higher education were to take place in Wales, then it would mean that the sector would lose around £30 million in 2011.

Given that the vast majority of institutional spending is on staff, then can we expect universities to begin to prepare for a round of hundreds of redundancies in the early spring? I sincerely hope not as this will not only damage teaching in the lecture rooms, but could impact on the involvement of universities within a range of critical economic projects, most notably those funded through European Structural Funds.

As this column has pointed out time and time again, if we are to create the small clever nation that politicians eulogise about and, more importantly, Wales is to recover quickly from the recession, then the Welsh Assembly Government must continue to invest in high skills, technology and innovation. With private sector research expenditure in Wales continuing to be the lowest in the UK, our reliance on universities as the engines for innovation, skills and growth is higher than for any other region.

Nelson Mandela once said that education is the most powerful weapon which you can use to change the world.

Certainly, if we are to change the future of the Welsh economy, then we must continue to invest in those institutions which are responsible for the education of our young people and create a world class economy that is based on their knowledge and skills.

LABOUR IN A MESS OVER FAMILY POLICIES

“Families come in all shapes and sizes. We don’t favour one way of family life over another. We don’t dictate one family model as the right sort of family, because no one wants to be told how to run their family life by politicians. Dictating family structures makes those not in the traditional two parent family feel that they are being blamed and their children feel they are being told ‘there is something wrong with your family and so there is something wrong with you’.”

Harriet Harman, Dec 8th 2009

“One of the big signifiers of whether children do well is if there are strong adult relationships in the home. We want to look at what more we need to do to support and nurture family relationships.”

Ed Balls, Dec 27th 2009

So who is right? Is it the Deputy Leader of the Labour Party or the new de facto deputy to Gordon Brown?

That is up to voters to decide but they expect a consistent line from a Government that has spent the last twelve years slagging off the Conservative Party's support for the family.

I doubt if many will believe that Ed Balls has finally agreed with Tory policy five months before a general election. Indeed, all this shows is that, yet again, the Labour Party are in a complete mess about yet another key policy issue.

Given the rumours about a coup by senior members of the Cabinet led by Jack Straw and the briefings from the higher echelons of the Labour Party against the class war favoured by Brown and Balls, is this really the type of leadership this country needs or deserves at a time of deep economic crisis?

I think we all know the answer to that.

RHODRI MORGAN AND THE FIVE MILLION ALREADY LOOKING FOR WORK

Lying in bed with a dose of Christmas flu and feeling generally sorry for myself as men are wont to do, I decided to have a look online at the Western Mail today despite promising not to look at any newspapers.

Most prominent was the interview with Rhodri Morgan on the potential state of the UK economy who suggested that there would be over five million out of work if the Conservatives were to come to power next year.

Well, I am afraid to say that the former First Minister is already behind the times as this has already happened under the current Labour Government.

As a recent article in the Times stated, if we take the official number of UK unemployed at 2.49 million, add the half a million who would like to move from part-time to full-time, and then finally the 2.26 million people who are economically inactive who would like a job, then we already have 5.76 million people who would like to work more - about 15 per cent of the working-age population.

I am sure that Rhodri Morgan, as he did in the Western Mail's letters pages on Christmas Eve, will quibble over definitions and semantics but let's keep things simple for the sake of everything else - these figures show that mass unemployment has arrived under Labour and has probably been here for several years.

Given that the economic record of Wales has been the worse of all the UK regions during the last decade, it is both sad and regrettable that the man at the helm of three Assembly Governments that have been responsible for this decline now believes he can give lessons to the rest of the country on economic matters.

NADOLIG LLAWEN

A Merry Xmas to all those who have bothered to come onto this website during the last year, especially the media team at the Welsh Assembly Government.

Nadolig Llawen to you all!

UK SLUMP WORSE THAN THE 1980S

Despite a range of economists stating otherwise, the UK economy remains in recession.

According to the Office for National Statistics, the British economy shrank by 0.2 per cent in the third quarter, making this one of the worse recessions in history.

Indeed, it is now worse than that of the early 1980s when the decimation of manufacturing resulted in a 6 per decline in output.

This leaves the UK isolated as one of the few economies not to emerge out of recession in the third quarter.

For example, America, China, Japan, France and Germany all returned to positive growth in the third quarter. Even Ireland, which suffered what amounted to a depression, has grown by 0.3 per cent.

This seriously undermines the Labour Government's claim that Britain will be in a good position when we eventually emerge out of the recession. Not only are our leading competitors growing but they will be well ahead of us for many years to come unless we come up with a strategy that is pro-enterprise, pro-innovation and gets the manufacturing sector back on its feet quickly.

THE WELSH ECONOMY - MYTHS, FABLES AND FAIRYTALES

When Labour was swept into power in 1997, its leaders promised that a new era of prosperity and equality would sweep through the land.

However, twelve years later, what is the reality of the situation?

Well, The truth is somewhat different to the political fables that Wales is doing as well as other parts of the UK.
Since 1997, Wales has experienced the lowest increase in average full time weekly earnings of any UK region. Whilst UK workers have had an increase in their earnings of 58 per cent, it has only grown by 51 per cent in Wales.

As a result, the gap between earnings in Wales and the rest of the UK has actually increased. In 1997, Welsh workers were earning approximately £1800 per year less than the average for the UK in 1997.

By 2009, this gap had grown to £4200 per year.

Given this, it isn’t surprising that in terms of the overall economy, Wales remains the worst performing region, declining from 80 per cent of the UK’s prosperity in 1997 to 74 per cent in 2008.

More shockingly, four of the five poorest areas in the UK are now based in Wales, with the Central Valleys, Gwent Valleys and Anglesey recently being joined by Conwy and Denbighshire.

However, the most damning statistic regards the state of the manufacturing sector, which should be the engine room of any modern economy.

Contrary to the myths that are peddled about how the Conservative Party destroyed the manufacturing sector in Wales, the statistics show that the relative importance of manufacturing to the Welsh economy actually rose from 27 per cent to 28 per cent during the last Conservative administration between 1992 and 1997.

In contrast, it has declined to 18 per cent of the nation’s economic output since Labour came to power in 1997. That is probably the most damning indictment of Labour’s economic and industrial policies in Wales during the last twelve years.

The reality is that, under the last Conservative Government, manufacturing grew by 31 per cent in the five years between 1992 and 1997. In contrast, it has shrunk under the three consecutive Labour Governments we have had since.

Yes, let me say that again - manufacturing in Wales actually grew under the last Conservative administration and contrary to the fables that are thrown around in the Assembly Chamber by both Plaid Cymru and Labour AMs, it is during the last twelve years that we have experienced the largest decline in manufacturing in Wales (and that is before the effects of the current recession are picked up by the statistics office).

Of course, it is not the only sector to have suffered under Labour. Whereas agriculture was generating £634 million for the Welsh economy in 1997, this had fallen to £202 million by 2007.

Wales needs these sectors to thrive and yet the government’s own statistics show that vital parts of our economy have declined under Labour. Yet there seems to be a general acceptance, as if there has been a collective loss of memory by the majority of the commenteriat, that everything was bad under the last Conservative administration and yet the statistics show a very different picture.

Is it because there is an anti-Tory (or anti-Thatcher) consensus amongst journalists or have they simply not tried to find out what really happened in the early 1990s?

Certainly, politicians such as Peter Hain seem to get away with fairytales on Conservatives' economic record without any serious scrutiny.

At the end of a year which has seen tens of thousands of jobs lost in the Welsh economy, it is clear that a new approach is needed to encourage enterprise, invest in innovation and get this country’s economy back to work. Rather than attacking what the Conservatives might do if elected, the Labour Party should focus its efforts on what it, as the party in power, is doing to get the Welsh economy growing again.

Sadly, given its record in ensuring that Wales is the poorest part of the UK, we won’t holding our breath.

RESEARCH SPENDING FALLS FURTHER BEHIND IN WALES

A new set of economic statistics was quietly slipped out last week with little comment from either the press or politicians.

The latest national statistics on business enterprise research and development (BERD) expenditure for the UK is the basic measure of how well we are doing as an innovative nation.

So what were the results for Wales?

In cash terms, BERD expenditure for Wales in 2008 was £243m, slightly down on the £244m recorded in 2007. In contrast, BERD expenditure in the UK increased by 1.7% to £15.9bn. However, the results varied across the UK – BERD expenditure increased in cash terms in all but five of the 12 UK regions between 2007 and 2008, with the largest percentage increase in the North West of England (up 11.4%) and the largest reduction in the West Midlands (down 13%).

These statistics emphasised, yet again, that Wales remains a small player in the private sector R&D stakes, accounting for roughly 1.5% of the UK total. In contrast, the UK regions with the largest R&D expenditure were all in England: the East of England accounted for 26% of the total expenditure; the South East accounted for 22% and the North West accounted for 14%.

More worryingly for the Welsh Assembly Government, their target of private sector research and development expenditure equating to 1% of the total economy by 2010 looks even further away than ever.

In 2008, BERD accounted for 0.5% of GVA, down from the 0.8% recorded in 2004. This means that, assuming a 3% growth in GVA for 2009 and 2010, R&D expenditure in Welsh businesses would have to increase by £240m over this two-year period.

Some will say that this target was never achievable and there will be very little change in R&D expenditure in the short term. There is support for this argument, given that a quarter of the R&D performed in the UK is within the pharmaceutical sector, a sector in which we have not been traditionally strong.

The next biggest spender is the aerospace sector, which accounted for £1.7bn of R&D expenditure in 2008 or 11% of the UK total.

Given the presence of Airbus in Wales, then increased focus on this sector could reap dividends for the Welsh economy over the longer term, especially with recent investments in composite technologies, R&D should hopefully increase expenditure in this area, although it is worrying that the sector did spend £326m less on R&D in 2008, a drop of 16%.

Despite these structural and geographical differences, it must be remembered that Wales, unlike the majority of UK regions, has been given additional funding to support R&D spending and innovation within the private sector through European funding such as the Objective One programme. Indeed, between 2003 and 2008, £131m of European funding was allocated, predominantly to the university sector and government programmes, to help boost commercialisation and develop the R&D capability of Welsh business.

The results of this exercise are hardly encouraging. Despite projects worth over a quarter-of-a-billion pounds being undertaken through the programme (if we include the matched funding from academia, government and, in some cases, the private sector), the total amount of annual private sector R&D expenditure across the whole of Wales has only increased from £200m in 2003 to £244m in 2008.

As the Objective One area accounts for only two-thirds of the Wales economy then, broadly speaking, approximately £100m of additional research and development expenditure has been undertaken within the Objective 1 area in Wales during the six-year period from 2003 to 2008. In effect, the Welsh economy is making a loss on its spending to support innovation.

It could be argued that BERD is a crude measurement of innovation activities, yet if high value innovation activities had been successfully developed by the private sector during this period, then we would have seen a boost in the prosperity of Wales. Yet the growth in the Welsh economy between 1998 and 2003 was actually higher than the growth between 2003 and 2008 when these programmes were running.

The most worrying aspect about all this is that there seems to be very little impetus to change the direction of travel with regard to innovation policy in Wales. Indeed, many of the initiatives that were supported under the original Objective One programme are being funded for a second time under the £2bn convergence fund, with little attempt to scrutinise whether we have the right approach to making Wales a more innovative and prosperous nation.

One can only hope that with a new broom in Cardiff Bay, the recently-elected First Minister will abandon the status quo mentality within WAG and order a root-and-branch review of innovation policy to maximise the return on investment from supporting research and development within Welsh businesses and boost the prosperity of the economy of Wales.

RECESSION DENIERS

I remain disappointed at how the BBC seems to continue its meek acceptance of the line from the Welsh Assembly Government about the economy recovering every time unemployment figures are released.

Yesterday, the headline was that:'Unemployment in Wales rises by 9,000 to 125,000, but the economy minister says there are "encouraging signs"'.

I don't know which branch of SpecSavers the BBC buy their rose-tinted glasses from, but I would hardly describe the fact that nearly half of the UK increase in unemployment has come from Wales as "encouraging signs".

In fact, it is an absolute disaster for the economy.

Worst of all, it shows that ProAct - the only instrument which WAG seems to have at its disposal - has had little effect on unemployment figures in Wales, contrary to the line peddled by WAG and supported by the BBC on every occasion.

For example, a cursory glance at unemployment statistics at the other parts of the UK that do not have such programmes - such as the North West of England, the West Midlands, Northern Ireland and Scotland - shows that their unemployment rate actually decreased during the last quarter.

At best, ProAct has subsidised workers who would otherwise have gone on shorter time flexible working and there is no evidence whatsoever that any of those supported by the scheme would have been laid off without this support.

The case of Corus taking £1.1 million from the programme when it admitted there was no redundancy threat should have set off alarms in the BBC and yet there seems to be very little attempt to actually question the value of this particular scheme?

>Did anybody bother talking to JCB to ask why they didn't take it up?

Has anybody bothered querying why two thirds of the funding has gone to large companies when the European Convergence Fund (which paid for ProAct) is there to be focused on SMEs?

Has anyone questioned why some areas, such as the North West of Wales, have been given almost no funding under this scheme?

Of course not.

The line from the BBC is to accept whatever Ieuan Wyn Jones' press office or special advisers throws their way.

They seem happy to accept how the Deputy First Minister and his press office now cast doubt on official labour force statistics that his government was more than ready to support a few months ago when they showed a drop in the unemployment rate. As he said yesterday,

"However, we remain cautious in over-interpreting the latest figures, especially the quarterly ILO [International Labour Organisation] data, which has proved highly volatile during the year".

We all remember the scramble by Plaid AMs during the summer to say that the recession was over when the same statistics showed that unemployment had fallen slightly. Now that they show unemployment is rising, the data is described as 'highly volatile', despite the fact that they have been showing constantly rising unemployment since the summer.

Instead of accepting these internationally verified statistics, the Minister for Economy and Transport implores us to examine the JobSeekers Allowance (JSA) figures which are actually declining, albeit by 500 individuals in Wales between October and November.

What the Minister conveniently omits from his press release is the fact that JSA doesn't actually cover everyone who is looking for work at this present time. For example, contribution-based Jobseeker's Allowance is only paid for 182 days and excludes the self-employed whilst income-based Jobseeker's Allowance is based on income and savings and is only for those on a low income.

Therefore, it is clear that the JSA will miss out a significant proportion of those looking for a job who, for various reasons, will not qualify. Read this and this for two simple examples of the problems with JSA.

In addition, it is clear that after six months, the chances are that you will no longer qualify for JSA support and will fall off the register. The statistics for November seem to bear this out with the fall being accounted for not by those who are claiming JSA for six months but a fall for those claiming between 6 and 12 months.

For the Minister to read anything into such figures is ridiculous in the extreme and is in danger of casting even further doubt on the credibility of an Assembly Government that buried its head in the sand over the state of the Welsh economy.

The facts are clear for all to see.

Wales remains at the bottom of the economic league table in the UK, has the lowest gross weekly wage in the UK, has the lowest level of private sector R&D in the UK, has seen its tourist industry decline dramatically in the last three years, has had the largest fall in export performance in the UK during the last twelve months and has seen its manufacturing sector collapse since the Assembly was established in 1999. Of course, it also has the worst performance of any UK region in terms of unemployment during the last three months.

The saddest thing is that, like the rest of the Welsh establishment, the BBC seems to be happy to go along with this line rather than doing what its real job should be, which is to report the facts as they stand without the usual Government spin and, more importantly, to investigate what is really going on in the Welsh economy.

FOUR IN TEN OF THE UK UNEMPLOYED ARE FROM WALES

Whilst Peter Hain goes on one of his fantasy rants about what could theoretically happen under a future Conservative Administration, the reality of what is actually happening in Wales under this current Labour Government is clear for all to see.

Today's jobs figures show that for the period Aug-Oct 2009, the numbers unemployed increased by 9,000 as compared to the last quarter.

Given that the total number of unemployed in the UK increased by only 21,000, this meant that Wales was responsible for OVER 40 PER CENT of the increase in those of out of work during this period.

Since Aug-Oct 2007, 56,000 more people are unemployed in Wales, demonstrating that the Labour-Plaid administration have totally failed to get to grips with the economy.

Following on from the recent GVA figures that show that Wales remains bottom of the UK's economic league tables, this is a shameful indictment of the way that Labour's policies have failed Wales not only during the last twelve months, but also during the last twelve years.

SURRENDERING THE ECONOMIC INITIATIVE

Last week, I was sent a Plaid Cymru leaflet from an anonymous source in North Wales which highlighted the ‘achievements’ of the party in helping to “persuade the Welsh Government to limit the damage caused by the recent business rate revaluation”.

Does this mean part of the Welsh Assembly Government (WAG) has finally admitted that its policies have damaged local economies throughout Wales?

If so, it is about time, given that, for the last two and a half years, Plaid Cymru has not come up with one meaningful policy to help small business and has slavishly followed the Labour Party’s failed approach to the economy of Wales.

Indeed, the abject surrender to the policies pursued under labour during 2003-2007 has meant that the Welsh economy has continued its spiral of decline.

Nowhere is this more apparent than in the policy over business rates.

The truth over business rates is that simply has not been any meaningful poliyc development. Instead of examining the impact of business rates on Welsh firms during a recession, WAG has merely copied the UK Government's position in England. Consequently, there has actually been no additional support from WAG for any reductions, which are simply a result of a UK government requirement to ensure that the re-evaluation exercise was cost neutral.

This means that the decrease in business rates for 64,000 businesses across Wales is being paid by the 40,000 firms which will be getting an increase in their business rates. Therefore, 40 per cent of businesses across Wales will still be paying more in business rates in 2010 than they did in the previous year.

It could have been so different.

The leadership of Plaid Cymru could have, if they had the courage of their convictions, honoured their manifesto commitment of ensuring that 50,000 businesses in Wales would be paying no business rates at all. However, they did not and the ‘Party of Wales’ continues to be silent about this enormous u-turn in policy, despite the fact that this idea was the brainchild of its former leader, Dafydd Wigley.

As he said back in 2007,

"My feeling is that a lower business rate can be a more effective tool than corporation tax for our small businesses....People may well ask how on earth can we pay for this. All I would do is to point to the increases taking place in the economic development budget in Wales since 1999. In fact expenditure has increased from £250m to over £800m per annum - and I really do ask what do we have to show for it? A significant reduction in the business rate might cost between £100m and £200m, depending on how it was applied, but it certainly can be afforded within that budget, and it would be better for that money to be re-circulating within the business sector, enabling it to take on more people, to set up new projects, and to have a new confidence and incentive for its work, than being gobbled up in the bottomless pit of bureaucracy, where so much of it ends up at present."

Plaid's failure to do what Dafydd Wigley proposed is highlighted best by comparing the situation in Wales to that of Scotland, where Plaid’s sister party has abolished business rates for all properties with a rateable value of £8,000 or less - a scheme that has benefited 120,000 Scottish businesses.

Whilst the Conservatives in Wales are attacked for proposing a reduction in business rates, have we heard anyone from Plaid criticise the SNP for a similar policy?

Of course not. Instead of doing something positive, Plaid is happy to fall back on bland claims that “The Welsh government, of which Plaid Cymru is a part, has won praise from economic commentators, the CBI, the trade unions and representatives of small businesses for its response to the recession".

Frankly, WAG’s policies could be praised by every Nobel Prize winning economist for all the good that they have done to the Welsh economy, as recent economic data has shown.

For example, statistics released by the government last week showed that Wales remains the poorest UK region with an annual growth rate that is lower than at any time since the 1980s. More shamefully, Conwy and Denbighshire have now joined the list of the five poorest areas in the UK.

Unemployment in Wales continues to be blight the lives of workers and their families struggling to survive recession.

In the last year alone, 600 Welsh jobs a week have been lost with almost half of all UK jobs losses in the last quarter coming from Wales. With two thirds of the funding for WAG programmes such as Pro-Act benefiting large businesses, those in power seem to have forgotten their own mantra that small firms are the backbone of the Welsh economy.

Certainly, if we are to compete successfully with other parts of the UK, we can start by making sure that small business in Wales gets the same type of business rate support as regions such as Scotland. After all, if it is good enough for the Scots – whose economy has grown at a far higher rate than Wales - then it should be good enough for us.

TAKING THE BEST OF WALES TO THE WORLD

Last week, I wrote about how Wales had experienced a decline in the number of new businesses since the Entrepreneurship Action Plan and the Welsh Development Agency were abolished four years ago.

Whilst entrepreneurship is critical in developing a coherent economic strategy, it is not the only solution for the problems facing the Welsh economy.

In an increasingly globalised economy, Wales cannot be isolated from what is going on in the rest of the world and it is critical that the right level of commitment and resources are in place to support international business activities.

However, it would seem that, as with entrepreneurship policy, there has been a major cut in the level of support provided by the Welsh Assembly Government to attract business into Wales as well as increasing the country’s exports and promoting Welsh business abroad.

A recent review into the activities of International Business Wales (IBW) showed that since 2005, staffing has been reduced from about 200 to 137 - a cut of 32 per cent.

At a time when it was critical to develop new markets, thirteen staff were lost at IBW’s ‘frontline’ offices, the inward investment presentations team in Cardiff has been closed down and there has been a significant downsizing of the inward investment research and analysis team. There has also been a reduction in IBW’s annual budget of 31 per cent since 2005, equivalent to £7.3 million every year, with a reduction of nearly £2 million per annum in the vital area of marketing, lead generation and support.

Therefore, IBW has had to do the job it did five years ago with roughly a third less of the resources. Despite this, IBW has managed to bring the same number of jobs into Wales in 2009 as it did in 2005 i.e. 6.2 per cent of the UK figure for new jobs from inward investment projects.

On the positive side, IBW has done exactly what would be expected of it under such conditions, namely deliver the same results with a vastly reduced budget. However, one can only speculate how many more jobs could have been created if the budget had not been reduced by WAG during this period.

Of course, it is not only up to WAG to promote overseas investment both to and from Wales. Last week, I spent seven days in Hong Kong cementing the University of Wales’ growing relationship with some of the major academic institutions in Hong Kong.

These included the University of Hong Kong (ranked 24th in the world), Hong Kong University of Science and Technology (ranked 35th) and the Chinese University of Hong Kong (ranked 42nd).

Indeed, the Chinese University link was of particular relevance because of its expertise in optoelectronics, one of the key high technology clusters in the Welsh economy. Only this week, their former Vice Chancellor, Professor Charles Kao, was awarded with the Nobel Prize for Physics, joining three other Chinese University academics that have been honoured by the Nobel Academy.

At the same time as I was in Hong Kong, my colleague was in the USA reaffirming our relationship with MIT (one of the top universities in the world) and, more importantly, establishing links with other global higher education players for the benefit of Welsh business.

Indeed, every time I travel around the world to talk about the strengths of our ‘small clever nation’, the reaction is always positive and in a world where collaboration is quickly becoming the norm, even the top universities and companies have realised that they cannot work in isolation.

Given this, it is time for WAG to reaffirm its commitment to ensuring that Wales punches well above its weight on the world stage. If the government rhetoric about ‘Team Wales’ is to be turned into reality, we must look to commit significant resources to create collaborative agreements at the highest levels throughout the world to benefit the Welsh economy.

One way to do this would be to send out ‘super trade missions’ every three months which comprise of a delegation of the best of Welsh business, government and academia to sell Wales to the world.

From WAG, this should include either the First Minister or the Deputy First Minister and top Cardiff Bay mandarins including the Permanent Secretary. They should be accompanied by and the leaders of our most innovative businesses, and vice-chancellors or senior academics from the Welsh university sector. This would ensure that any such mission would have the highest impact in a short space of time.

And yes, this super delegation should fly business class to whichever destination they go to in the world as the last thing I would want to see is Wales pitching against larger and better resourced countries with a team that is jetlagged and distracted when it arrives.

The great parliamentarian Oliver Cromwell once said that instead of striking while the iron is hot, you should make the iron hot by striking it. With the global economy emerging out of recession, we simply cannot wait for opportunities to emerge for the Welsh economy as we will inevitably be overtaken by bigger and better resourced competitors.

Instead, we must go out to and create opportunities through collaboration with willing global partners and ensure that we not only bring the best companies here to Wales to invest but, more importantly, that we take the best of Wales to the rest of the world.

THE WELSH PETER MANDELSON?

Having read some the commentariat’s response to Carwyn Jones’ new cabinet, I am surprised how much of the focus has been on Edwina Hart’s position in the photoshoot rather than what this will do for Wales.

Certainly, one of the issues that seems to have passed many people by is the change in the Deputy Ministers’ portfolios.

Under the previous Cabinet, it was generally agreed that Leighton Andrews did more than expected with his position as Deputy Minister for Regeneration, driving forward key projects on the ground that had made a tangible difference to local economies and generally overshadowing Ieuan Wyn Jones.

Indeed, the Cardiff Bay rumour mill seems to suggest that whilst civil servants in DET were generally ambivalent towards the Plaid’s leader authority, they would all chorus together "how high" when asked to jump by Mr Andrews (which happened frequently).

Many do not like Mr Andrews' abrasive and confrontational style and whilst I have been subject to it once in a while, this does not detract from the fact that his political skills are probably are second to none in Wales.

The fact that he has managed to manoevre himself into the position of effectively being the 'kingmaker' in the Welsh Labour Party speaks volumes.

Under the One Wales agreement, the economic development portfolio was out of Mr Andrews’ reach given that this was firmly in the hands of the Deputy First Minister. However, it is clear that this is the one portfolio in which Mr Andrews believes he has the necessary experience and expertise to make a difference.

Whilst some may feel that education is a poor second, it must be remembered that the new First Minister’s primary economic policy announced during the leadership campaign was to:

“Use the larger companies in Wales as a basis for attracting more business and more investment, using sector-based clusters, such as the opto-electronics sector around St Asaph and co-operating with universities on research and development and with colleges on skills and training.”

That seems to give an unequivocal indication that economic policy in Wales, under this new administration will not be driven by the Department for Economy and Transport, but by the education portfolio under which universities and skills currently fall.

To support this development, Lesley Griffiths has been appointed to take Mr Andrews' role within the Cabinet. Interestingly, she will not be replacing him as Deputy Minister for Regeneration as this role has now been abolished.

Instead, she will be undertaking a new dual role straddling both education and economic development. Indeed, the job of Deputy minister for skills, innovation and science will be key in driving forward the knowledge-based agenda in Wales highlighted by the new First Minister.

The political question is whether Ms Griffiths will be answerable to the Minister for Economic Development or the Minister for Education?

I think we all know the answer to that and it is clear that through this arrangement, Mr Andrews will effectively be driving forward the key portfolio that will ensure (or not), if Wales merges strongly out of the recession.

Of course, having political power is not the same as having the right strategy which will actually make a difference - the fact that Wales still languishes at the bottom of the UK economic league table demonstrates that despite hundreds of millions of pounds of spending by WAG on trying to get universities and industry to work together during the last decade, very little tangible difference has been made to the economy.

Whether this appointment now means that Leighton Andrews has followed Peter Mandelson and become de facto First Secretary is clearly up to others with a far greater political awareness than myself to decide.

However, one thing is for sure - his appointment will ensure that the next eighteen months in Cardiff Bay will not be boring.

PROMOTING UK TRADE AND INVESTMENT

Following the CleanTech Mission to Boston and New York in September, UK Trade and Investment asked me to take part in a promotional video for their work in the USA.

Can't wait for the phonecall from IBW!

PARTY POOPER

As Rhodri Morgan walks off into the sunset of retirement, what will be his legacy to Wales?

Given that his area of expertise was economic development, it is ironic that following his last day in the job, the latest GVA figures for Wales were released by the Office for National Statistics.

As has happened every year since he was elected as First Minister, Wales was again at the bottom of the prosperity league table.

Not surprisingly, the statistics show that during the last ten years, the nation's prosperity relative to the rest of the UK has continued to decline, despite the so-called 'devolution dividend' and billions of pounds of additional European funding.

Since 1999, the GVA in Wales has grown by only 47.5 per cent as compared to 57.6 per cent for the UK as a whole. If the Welsh economy had kept pace with the UK average, then an additional £3.1 billion would have been generated during this period.

In terms of prosperity per head, Wales now stands at 74.3 per cent of the UK average, easily the worst performance of any UK region.

Indeed, the annual growth rate for the Welsh economy of 3.0 per cent is the worse recorded in the period 1989-2008 measured by the Statistics Office.

Personally, I have always liked Rhodri Morgan and wish him well in his retirement. However, the truth of the matter is that on a political level, it is clear that his tenure has done little to help the development of the Welsh economy. And since his decision to abolish the WDA, the Welsh economy has grown at a far slower rate than in the previous five years.

Therefore, after a decade of his leadership at the helm of the Welsh Assembly Government, Wales remains at a record low in terms of relative prosperity with the rest of the UK and with the highest unemployment rate since April 1996.

Is this really the legacy he wanted to leave Wales after a decade as First Minister? I very much doubt it.

PLUS CA CHANGE

Having just got back from Hong Kong this morning, I hadn't managed to make a cup of tea before an email came through about Mohammed Asghar's 'crossing of the floor' to the Welsh Conservatives.

Considering the over-reaction on the Welsh blogosphere to an event that happens with regularity in most other democratically elected institutions, I just wonder what the reaction would have been if it had been a Conservative AM defecting to Plaid Cymru?

Anyway, politics aside, it would seem that in the important business of the Welsh economy, nothing much changes.

For example, yet another Welsh Assembly Government contract - this tiem from DCELLs - has gone outside of Wales, this time to a Manchester-based advertising company to undertake a campaign to support the take-up of apprenticeships in Wales.

Given that we have excellent companies such as Freshwater, Golley Slater and a host of other marketing firms here in Wales, you have to wonder what is going on, especially as I doubt that any of the marketing executives within this company will be based permanently in Wales.

I know that Carwyn Jones is on record as stating the importance of the public sector purchasing power in supporting Welsh business.

Perhaps one of his first jobs in power will be to ask his civil servants to ensure that this finally happens in reality.

NUMBER OF NEW BUSINESSES PLUMMETS IN WALES

Last week, a new set of statistics were published on business demography i.e. the births, deaths and stock of firms in the UK.

This has replaced the VAT data that was previously used to examine new firm formation. The result is that the new dataset is more accurate as it includes those businesses currently not registered for VAT.

Having examined this new dataset last week, I was shocked by the data on new business births for Wales. It showed that during the period 2004-2008, the average decline in the number of new business births across the UK as a whole was 3.5 per cent.

In contrast, the decline in Wales was 19.4 per cent - the worst performance of any region of the UK, with the next worst result found in the South West of England with a decline of 12.8 per cent. The data also showed some regions had increased the number of new businesses. For example, the number of new firm starts in Scotland had actually increased over this five year period by 13.7 per cent.

The catastrophic decline in the rate of new business formation in Wales since 2004 could have serious consequences for the economy. In terms of employment, this decline has meant that 6,270 fewer businesses have been created in Wales since 2004, impacting directly upon the number of new jobs within the private sector economy.

If we assume that each of these ‘lost’ businesses only generates, on average £50,000 of sales every year then, taking survival rates into account, the lost turnover to the Welsh economy is around £600 million.

However, it is not only the wealth and employment-creating potential of new firms which has been affected by this decline. Last month, the UK innovation agency NESTA released a new report on innovation indicators which indicated that a dynamic enterprise culture is essential for innovation i.e. a high birth rate of new businesses will drive competitive markets.

Therefore, the catastrophic decline in the number of new business starts will have a serious knock on effect on the innovative capacity of the Welsh economy, regardless of the increased spending on research and development within the university sector.

Another worrying aspect is that the biggest decline in new business births in Wales has occurred within the poorest parts of the nation, namely West Wales and the Valleys. The statistics show that this area has experienced a decline of 22 per cent in the number of new firm being formed during the period 2004-2008, causing potential problems within these communities.

As a UK Treasury study reported, successful entrepreneurship has the potential to help deprived areas through lowering unemployment not only through residents creating their own employment, but also indirectly through multiplier effects in the community and via other social contributions. The decline in the number of new businesses across this region could impact upon the ability of these poorer communities to recover.

Given that we are in the throes of the worst recession since the Second World War, these statistics could not come at a worst time. They are a clear warning that Wales could lag behind the other parts of the UK when any recovery takes place unless policymakers re-examine the effectiveness of enterprise policy in Wales.

If we are to create a strong and vibrant economy, then we need to see an increase, not a decrease, in the number of entrepreneurs in Wales. The fact that the biggest fall in the number of new businesses has been within the Convergence Fund areas of Wales, despite the tens of millions of pounds of European funding spent on encouraging more start-ups during the last few years, shows that the Welsh Assembly Government (WAG) has failed to achieve its aims of stimulating new businesses within this region.

Surely, it cannot be a coincidence that the decline in the business start-up rate began after the abolition of the Entrepreneurship Action Plan (EAP) for Wales and the merger of the WDA into WAG’s Department of Economy and Transport. Whilst creating a more entrepreneurial Wales was at the heart of the WDA’s mission, predominantly through the successful implementation of the EAP and its promotion of an enterprise culture, it has been relegated to the fringes of economic policy by the new regime within WAG.

This is despite the proud fact that Wales was light years ahead of any other part of Europe in terms of developing an effective regional enterprise strategy, a competitive advantage that we then threw away because of the whims of politicians and policymakers who failed to understand the long term strategy needed to create an environment in which entrepreneurs are encouraged and supported to flourish and create wealth and employment.

One can only hope that with a new First Minister who will need to stamp his authority on plans for a rapid economic recovery, entrepreneurship will again form a key part of Welsh economic policy and that the creation of new firms is encouraged as part of the drive to bring Wales out of recession.

POSTCARD FROM HONG KONG - DAY FOUR

Yesterday was too busy for blogging but the visit has continued to be successful with meetings at the University of Hong Kong and the Chinese University of Hong Kong.

There was great enthusiasm for collaboration between Wales and the faculties of science and engineering at the University of Hong Kong, which is ranked 24th in the World.

Certainly, there is an openness here for the sharing of international expertise and this could help us develop the Global Academy project beyond just the Prince of Wales Innovation Scholarships.

The meetings at the Chinese University (pictured above) were also successful, especially given the fact that the institution has four nobel prize winners, including Charles Kao, the father of the fibre cable. Given the importance of optoelectronics to the Welsh economy, I am hoping that academic-industrial links can be built with this great university.

As it is now 7pm in Hong Kong, I am off for a beer with one of my best friends, Dr Charles Li.

As he is currently head of RBS in China, I am sure we will have much to talk about!

POSTCARD FROM HONG KONG - DAY TWO

Had a very long day at the Hong Kong University of Science and Technology today, which started at 8.30am and finished twelve and a half hours later!

The meetings with senior members of the university management, as well as heads of faculty, were terrific, with a great enthusiasm for collaboration and co-operation in the future.

The day ended quite differently than I expected with an invitation to give a lecture on entrepreneurship to the executive MBA class.

Fortunately, I had a presentation on the Fast Growth 50 to present to the class and in the inevitable Welsh way, went half an hour over my allotted time.

UKHST's programme is ranked as No 1 in the world by the Financial Times and it was a real pleasure to discuss the challenges facing growth companies with a group of students who will be the leaders of industry in this region in a few years time. Even if they didn't learn anything from the lecture, they at least now know about Wales!

Tomorrow, I visit the University of Hong Kong - a different but equally excellent institution - where I hope to discuss further links with members of the faculties of science and engineering.

POSTCARD FROM HONG KONG

Have arrived in Hong Kong for the second of my visits to one of the most dynamic regions of the World.

This week consists of firming up our burgeoning relationship with some of the major academic institutions in Hong Kong, all of whom are keen to establish a strong partnership with the Global Academy project.

These include the University of Hong Kong (ranked 24th in the World), Hong Kong University of Science and Technology (ranked 35th) and the Chinese University of Hong Kong (ranked 42nd).

In contrast, the best placed Welsh university on the world rankings is Cardiff (135th), with the others nowhere to be seen.

Perhaps that is something for the new First Minister in waiting in Wales to ponder, especially given his emphasis on the importance of developing higher education's economic contribution during his leadership campaign.