The discussion about how to strengthen the economic base in Wales has sometimes become a debate between the merits of homegrown SMEs and the virtues of larger companies. The truth of course is that both smaller and larger companies have a vital role to play in regenerating Wales’ economic landscape.
Larger companies employ more workers, typically invest more in research and development and can make a larger impact in developing a skilled workforce. And so it is worrying that Wales has attracted less and less inward investment from larger companies in recent years.
The House of Commons Welsh Affairs Committee found that inward investment into Wales grew substantially in the 1980s and early 1990s but since the late 1990s has been in decline, resulting in the closure of existing sites, and the loss of substantial numbers of jobs.
What its report exposes is that the foreign investment boom of the Tory years depended on government grants and low pay, which left Wales vulnerable when eastern Europe and emerging economies – where workers were paid even less –opened up to foreign investors.
The future for the Welsh economy does not lie in a Dutch auction over pay and conditions but in fostering growth through innovation (for example in technology and engineering) , driven by long-term private sector investment, underpinned by an intelligent industrial policy.
What can the Welsh government and UK government do to help create these conditions?
Better skills and education – the employability skills deficit in Wales has already been recognised by the Welsh government, but in addition to driving up literacy and numeracy we can do more to increase the awareness of students to the world of work and enterprise – from students running a school café as a cooperative to a greater understanding of the role of industry, business and social enterprises through the curriculum; and in higher education, research funding should be used to encourage the launch of innovative products and services – creating a demand for high-skill, high-value jobs
Better infrastructure – transport connectivity is a key factor for economic growth and the development of the high speed rail link will intensify the competition for investment, as more of the UK becomes accessible more quickly. Unless Wales upgrades its rail infrastructure we will continue to lose out. The UK government should extend the electrification of the Great Western line not only to Cardiff, but to Swansea, improving access to more of south Wales and the renewal of the franchise in 2013 should be used to drive up service levels
Better marketing – the Ryder Cup probably introduced Wales to more of the world than any other single event, but isolated events are not enough – we need a more dynamic push for the Wales brand internationally. Also, UK Trade and Investment should have a positive remit to encourage foreign investment in poorer parts of the UK, including Wales. Since 2000, most foreign direct investment in the UK has been in London and the south-east of England, and the absence of any Welsh companies in the prime minister’s trade delegation to India last summer highlights a seriously imbalanced approach to growth.
Increasing inward investment is crucial to the long term success of Wales. You can call this a pro-business agenda, but it is also a pro-skills and pro-jobs agenda. There are no quick solutions, but low pay and government grants can never provide the robust economic foundation that Wales needs.
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Jeremy Miles is a candidate for the National Policy Forum in Wales
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