Over the next month, this blog will look very carefully at some of the new policies developed as part of the Economic Renewal Programme (ERP) launched by the Welsh Assembly Government (WAG) last week. Hopefully, it will help to start a debate on whether this is the right approach to turn around the Welsh economy and to drag us from the bottom of the UK’s prosperity league table.
I will start by examining the decision to abolish International Business Wales (IBW), the Assembly’s overseas investment arm that was responsible for attracting business into Wales as well as promoting Welsh business abroad.
Some will say that this decision to close down the last remnant of the old Welsh Development Agency was justified by the outcomes of last October’s review of IBW by Glenn Massey, the former inward investment specialist. However, if you bother reading the Massey report in detail, it actually has little evidence to suggest that the division was doing badly.
If we examine IBW’s record on new jobs being brought into Wales in 2009 as compared to 2005, then the numbers are approximately the same, and equates to 6.2 per cent of the UK figure, which is higher than the proportion Wales would be expected to bring in as a region. More importantly, it did this job with roughly a third less of the resources than it had five years ago
Does this look like failure?
Actually, IBW has done exactly what would be expected of it under such conditions, namely deliver the same results with a vastly reduced budget. Whilst it was suggested that “IBW has left Wales at the bottom of the 12 UK regions when it comes to safeguarding jobs”, the report stated that made the point that “IBW has no direct responsibility for reinvestment by foreign owned companies in Wales.
Indeed, if you read Massey’s comments very carefully, it shows that the primary reason for issues such as the lack of branding, a silo approach across the Department of Economy and Transport (DE&T) and the focus on RSA as a tool for inward investment, were not due to operational issues within IBW itself but were failures in strategy that are decided at the highest levels of government.
To put it simply, it would seem that a lack of strategic direction at the top, rather than IBW, was essentially the reason as to why there was little care and attention given to the reinvestment needs of over 500 foreign owned companies in Wales, a situation that may have cost tens of thousands of jobs in Wales during the recession.
In fact, the potent mix of myopia and entropy that exists at the highest levels of the civil service is perfectly exemplified by this decision to scrap IBW and its functions.
Let’s take for example, its role in inward investment. Whether you agree with grants to large foreign companies (and I don’t), the real question is whether there is a role for an agency such as IBW to act as marketers for the Welsh economy, and to sell everything that is good about this nation to potential investors?
Consider this one recent change in the business environment that seems to have passed WAG officials by.
The new Westminster Government is gearing up the UK to be the most attractive place for inward investors with a reduction in corporation tax to 24 per cent over the next four years, the lowest level in Europe with the exception of Ireland.
Not only that, they have done the Welsh economy a massive favour as compared to the English regions by essentially wiping out ‘the opposition’ through their decision to abolish the regional development agencies that have been battling it out with IBW to attract the best companies.
Imagine if you were a business given such a golden opportunity?
With your main competitors closed down and the field wide open, would you have followed their lead and shut down the part of your firm that is marketing your goods to the rest of the World? Of course not - you would have taken full advantage of the situation presented to your business.
Maybe WAG doesn’t think that Wales can sell itself at a global level. If that is the case, what about IBW’s other role, namely the provision of support the internationalisation activities of Welsh businesses?
Does anyone seriously think that Welsh firms do not help with accessing overseas markets when the total value of exports for Welsh business for the last 12 months fell by 16.8 per cent to £8.8 billion. In contrast, Scottish exports rose by 3.5 per cent to £14.8 billion. Given this dismal performance, it is not surprising to find that Wales, with only 1264 exporting firms in 2010, accounts for only 2.7 per cent of the total number of exporters in the UK.
Would you, if you were in charge of the Welsh economy, therefore close down the body responsible for helping Welsh firms to increase their export activity or would you empower them, through your new economic renewal programme, to double that figure over the next decade, and ensure that Wales, at the very least, punches at its weight in terms of international performance?
The more one reads the Economic Renewal programme (and believe me, I have read it several times), the more one begins to wonder how WAG will deal with the 131,000 people currently out of work in Wales, with an employment rate that is lower than any other part of the UK apart from Northern Ireland.
If we don’t encourage entrepreneurship, help small businesses to grow, assist firms to internationalise and attract the best global businesses, then how are we going create jobs and wealth across all parts of our nation?
The business community can only hope someone within WAG has the answer to that conundrum.
I will start by examining the decision to abolish International Business Wales (IBW), the Assembly’s overseas investment arm that was responsible for attracting business into Wales as well as promoting Welsh business abroad.
Some will say that this decision to close down the last remnant of the old Welsh Development Agency was justified by the outcomes of last October’s review of IBW by Glenn Massey, the former inward investment specialist. However, if you bother reading the Massey report in detail, it actually has little evidence to suggest that the division was doing badly.
If we examine IBW’s record on new jobs being brought into Wales in 2009 as compared to 2005, then the numbers are approximately the same, and equates to 6.2 per cent of the UK figure, which is higher than the proportion Wales would be expected to bring in as a region. More importantly, it did this job with roughly a third less of the resources than it had five years ago
Does this look like failure?
Actually, IBW has done exactly what would be expected of it under such conditions, namely deliver the same results with a vastly reduced budget. Whilst it was suggested that “IBW has left Wales at the bottom of the 12 UK regions when it comes to safeguarding jobs”, the report stated that made the point that “IBW has no direct responsibility for reinvestment by foreign owned companies in Wales.
Indeed, if you read Massey’s comments very carefully, it shows that the primary reason for issues such as the lack of branding, a silo approach across the Department of Economy and Transport (DE&T) and the focus on RSA as a tool for inward investment, were not due to operational issues within IBW itself but were failures in strategy that are decided at the highest levels of government.
To put it simply, it would seem that a lack of strategic direction at the top, rather than IBW, was essentially the reason as to why there was little care and attention given to the reinvestment needs of over 500 foreign owned companies in Wales, a situation that may have cost tens of thousands of jobs in Wales during the recession.
In fact, the potent mix of myopia and entropy that exists at the highest levels of the civil service is perfectly exemplified by this decision to scrap IBW and its functions.
Let’s take for example, its role in inward investment. Whether you agree with grants to large foreign companies (and I don’t), the real question is whether there is a role for an agency such as IBW to act as marketers for the Welsh economy, and to sell everything that is good about this nation to potential investors?
Consider this one recent change in the business environment that seems to have passed WAG officials by.
The new Westminster Government is gearing up the UK to be the most attractive place for inward investors with a reduction in corporation tax to 24 per cent over the next four years, the lowest level in Europe with the exception of Ireland.
Not only that, they have done the Welsh economy a massive favour as compared to the English regions by essentially wiping out ‘the opposition’ through their decision to abolish the regional development agencies that have been battling it out with IBW to attract the best companies.
Imagine if you were a business given such a golden opportunity?
With your main competitors closed down and the field wide open, would you have followed their lead and shut down the part of your firm that is marketing your goods to the rest of the World? Of course not - you would have taken full advantage of the situation presented to your business.
Maybe WAG doesn’t think that Wales can sell itself at a global level. If that is the case, what about IBW’s other role, namely the provision of support the internationalisation activities of Welsh businesses?
Does anyone seriously think that Welsh firms do not help with accessing overseas markets when the total value of exports for Welsh business for the last 12 months fell by 16.8 per cent to £8.8 billion. In contrast, Scottish exports rose by 3.5 per cent to £14.8 billion. Given this dismal performance, it is not surprising to find that Wales, with only 1264 exporting firms in 2010, accounts for only 2.7 per cent of the total number of exporters in the UK.
Would you, if you were in charge of the Welsh economy, therefore close down the body responsible for helping Welsh firms to increase their export activity or would you empower them, through your new economic renewal programme, to double that figure over the next decade, and ensure that Wales, at the very least, punches at its weight in terms of international performance?
The more one reads the Economic Renewal programme (and believe me, I have read it several times), the more one begins to wonder how WAG will deal with the 131,000 people currently out of work in Wales, with an employment rate that is lower than any other part of the UK apart from Northern Ireland.
If we don’t encourage entrepreneurship, help small businesses to grow, assist firms to internationalise and attract the best global businesses, then how are we going create jobs and wealth across all parts of our nation?
The business community can only hope someone within WAG has the answer to that conundrum.
Comments
I notice that UKTI has come out with its annual report but there is no regional breakdown
http://www.ukti.gov.uk/export/exporthome/localisation/114034.html
Surely, we need to know how many new jobs IBW has brought in?
If they have done badly, then it is time for the them to go and WAG will have made the right decision?
On the other hand, if they have generated new jobs during the recession, then is this yet another cock-up by WAG in terms of their ERP?
Time for an FOI to Ieuan, BBC Wales?
If that's indeed the case, why has the UK Government failed to appoint a Minister for Trade and Investment?
In the last government, a Minister of State, reporting jointly to the FCO and DBIS had responsibility for UKTI. Under the coalition government, no such post exists.
Why?
"The startling rise is revealed in official figures released to the Western Mail. They show that before devolution began in 1999 there were 2,358 full-time equivalent employees in the Welsh Office. By March this year the total had risen to 6,186."
At least the public sector is growing under the Red-Greens
You merely mention aspects that have no relationship to the real situation.
You have neither the intelligence nor the expertise to question the real issues.
You have spent your life exaggeration and self-promotion.
I would stick to my part-time jobs if I were you.
Well you obviously do otherwise why bother commenting on this blog on a Saturday night.
Don't give the day job in DE&T.
They have no idea of the process or the protocols involved in wooing sizable inward investment
Like it or not you have to spend money to win business.
As a rule of thumb around 10% of the contracts you go after.
Wales needs all sectors of business and loosing a provision that knows its way around foreign investment is so stupid to be almost laughable.
So we loose sme business support and our major business finders, that good thinking in a recession!
Look more closely at the water in the Bristol Channel; it's not red but muddy brown, and the tide is out. We have been let down by popularist, idealogical politicians who will sail into the sunset on gold plated pensions most of can only dream of.
Bern
Should we be surprised at this turn of events?
As someone working within DE&T, I can categorically tell you that Dylan's intervention has caused major panic amongst the senior team in the department.
Ieuan and his advisers thought they had the whole PR exercise sewn up.
They had the CBI onside, the FSB muzzled, and the Tories and the Lib Dems neutralised. IBW had been set up as the "fall guy" to take the headlines. There was general jubilation and then Dylan's article in the Western Mail came out.
This resulted in panic amongst senior advisers and doubts began that they had developed a strategy that was, in fact, fatally flawed.
There was worry that the one or two senior civil servants who had provided most of the strategy were, after all, actually wrong in abolishing small business support in one move.
The panic resulted in the unprecedented move of a letter being sent from the Deputy First Minister to the Western Mail, a letter which then resulted in the "Minister vs Professor" article on the front page of the business pages and Dylan's withering comments about "Government buying Ferraris for every small business when all they need is a Ford Focus".
So much for "No one cares what you think". I can assure you that the opposite is the case within DE&T.
WAG. likes some of the commentators on this article, simply forgot that Dylan isn't just a columnist in the Western Mail but is a professor of entrepreneurship who has spent the last two decades examining small business and entrepreneurship and has more publications in this area than any other Welsh academic.
If there is one person you do not want to take on in this field, then he is probably that person.
There is now a recognition amongst Ieuan's team that there have been some major mistakes made with the strategy.
The "no grants" approach is going to be seriously damaging. If WAG give a large company a grant, then they will be damned for taking support away from Welsh firms, and if they turn down a company with hundreds of jobs, then they will be doubly damned.
IBW has also recently outperformed most other UK regions this year and yet this fact is being kept under wraps by the Minister.
One of the cattier comments is that Dylan has friends in IBW. I can assure you that his defence of business support has created more friends amongst the hundreds of civil servants who have been working with Welsh businesses for the last five years.
Keep up the good work.
http://merchmerthyr.blogspot.com/2010/07/why-is-wag-so-nervous-about-debate-on.html
"Valleys Mam said...
Assembly insiders tell me that senior officials in DE&T just don't know how to cope with the fact that they have been rumbled regarding the abolition of small business support.
Do they really think that no one would notice, how stupid is that .I have been banging on about the lack of support for at least a year .alomg with Dylan and Brian Morgan who has been eqaully as crtical but through different roots. I also know that the heads of teh various enterprise agencies have been equally active."
WAG has been rumbled, they are rattled and like many others who work in the Assembly, I am glad.
David - if you really want a discussion on policy, then why don't you have the courage to give me a call rather than engaging in your usual poison from your iphone. I thought you were better than that.
Anon 10:45am. There is usually a regional breakdown as there is so much competition amongst the UK regions. The omission could be because the RDAs are being abolished although given the flak that IBW has received, I think we would all like to know how many jobs they have brought into Wales during the last year.
Anon 2:04 - I haven't got a clue why this is the case, especially given that UKTI has been doing a sterling job.
Anon 4:13 - the size of the public sector is of concern and we wait to see whether, if Ieuan is scrapping the majority of programmes what will happen to the civil servants doing these jobs as I have been told that there is a no redundancy rule (hence the large pool).
Valleys mam - spot on. It is sheer madness to cut immediately support for job creators.
Bern - agree. Devolution could have made a real difference to the Welsh economy - it gave us the chance to create something special. Instead, we have a nation that has frankly not moved on since 1999 in terms of economic development.
Anon 8:41 - I haven't a clue what is going in WAG but I was genuinely surprised at the letter sent from the Minister and then the article in the WM on Wednesday. I can only hope that they will reconsider their view on support to SMEs although they may have gone too far to change tack.
As for David, I thought he had grown up by now but clearly not. That is a great shame as I am sure he could come up with some coherent comments rather than this childish abuse that demeans him and his employer.
Apologies but you will now have to go through comment moderation.
No Dylan isn't me, I was commenting on posts that were left on my blog.
The fault lies not with the messengers but with the message.
The government should be worrying ,to propose a policy that is even more detrimental to recovery than we could possibly expect shows naivety beyond belief.
Any major change should come from solid research and consultation that goes wider than the Bay Bubble.
may be it would have been a good idea to have actually spoken to people who have the research and practical knowledge of business development - I include in that DJE ,Brian Morgan and quite a handful of others who never have a look in.
More than just the ERP is flawed, the opposition is either totally economically challenged or we need to ask if now having the Con-Dems has politically castrated them.
Dylan more power to your elbow , lets just hope that the bloggers and commenter's who care more about Wales than party politics are not driven to having to moderation by stupid trolls.
In the light of the crap you have had this morning, I will be more than delighted to report back on more going ons within WAG later this week.
So much for rational discussion.
On the IBW front a commentator from overseas left this on my blog 'I hear that the Scots have increased their FDI & Trade budget by 25% to take advantage of the demise of RDA's and IBW!'
yet another own goal for the Welsh Assembly Government.