Developing the Welsh economy

By Mike Hedges

The Welsh economy has not performed well either before or after devolution. When the Assembly opened in 1999, online retail was in its infancy, it was eight years before the first iPhone, five years before YouTube came online, computer games generated a fraction of the income of today, and Sega Dreamcast, the world’s first internet-ready console, was a year away from being launched.

Jobs such as the influencer, delivery driver for on-line retailers, professional computer games player and Uber driver did not exist. Since then, employment has become less secure and reliable. In 1999, the Welsh Government continued the Welsh Development Agency policy of enticing mainly Asian and American investors with grants, offering high skills and relatively low wages compared to other advanced industrial nations, and access to European Union markets. Not all attempts to attract foreign direct investment were successful. Pre-devolution, we had LG agreeing to come to Newport to create a large factory but despite a grant of £200 million, around £30,000 per job, the expected employment did not materialise.

The reason any economy is not successful is the same: is not enough skilled and high-paid jobs, too reliant on low-paid seasonal jobs and on primary production, not enough adding value. Having listened to the Conservatives on the economy for 11 years, their strategy can best be summed up as agricultural produce, tourism and seeking inward investment to bring branch factories. There is no successful economy in the world based on that strategy.

If you need to give companies a substantial financial incentive to bring a branch factory here, they do not want to come. Successful places such as Palo Alto, Cambridgeshire and Mannheim do not have to bribe companies to come: they provide the educated workforce, the infrastructure and the opportunities for inward investment and start-ups. Again, what we need in Wales is fewer LG-type investments and more Admiral Insurance.

Plaid Cymru’s policy of independence would reduce the Welsh economy and Welsh Government spend by a third. The economies of recently independent countries such as South Sudan, North Macedonia and Bosnia are doing less well than the countries they split from.

Successful places need to be able to attract and then retain businesses, and this must be based on understanding their requirements. An analysis of successful and less successful places suggest the following four factors as the key to economic success. First, a culture of enterprise and innovation, where places adapt quickly to new opportunities and everyone can share in the possibility and reward of business success. This includes embracing the opportunities presented by the revolution in life science, information and communication technology, artificial intelligence, and one of the fastest-growing areas, which is computer games.

Access to investment, including venture capital, is essential for businesses to start up, grow and deliver jobs and opportunities for all. Far too often, Welsh companies either stall or are sold when they grow into medium sized enterprises.

People need to be equipped with the skills that employers need, as well as with motivation and opportunities to work. There needs to be a culture of lifelong learning, enabling people to fulfil their potential and maximise employment opportunities, enabling a flexible response to change opportunities and encouraging companies to come to and remain in our towns and cities.

An efficient and reliable transport system is also necessary, enabling efficient delivery of raw materials to industry and of goods to market. I include the internet and fast broadband as part of the transport system, because if you’re an online company, the internet is what you use for transportation – that is what you send your computer games and your music down. Providing access to jobs, making towns and cities better places to live in and helping tackle social exclusion are all key.

Economic and transport planning needs to be based on the Welsh regions. We need to build on the strengths of the universities and see them as economic drivers. Too many students, including many brought up in the area, move away after graduating and often never return. We need science parks attached to universities so that we can use them as innovation hubs, and to specialise in key economic sectors such as life sciences, artificial intelligence, and ICT.

We also need an entrepreneurship and innovation centre that can provide a founder and incubator platform for students, young entrepreneurs, and investors. I know this works in successful cities such as Mannheim. We need access to capital, not just at the start-up stage, but at the two important growth stages of small to medium-sized and then medium to large. Too many firms on the move from medium to large end up being bought by bigger companies from other places in either Britain or Europe, and the economic benefits then disappear. The universities and further education sector need to look at upskilling our population; education must not end at 16, 18 or 21.

Finally economic success is not a secret formula. If we compare Wales to Denmark, which is just under twice the size of Wales but has an economic policy that works in areas like food and agriculture, environmental science, pharmaceuticals and biomedicine, Denmark is producing world-leading discoveries. Denmark is known to many of us for making Lego which it continually updates.

Denmark was a pioneer in developing commercial wind power during the 1970s, and today a substantial share of the wind turbines around the world are produced by Danish manufacturers such as Vestas, the world’s largest wind-turbine manufacturer, along with many component suppliers. Denmark produces a high number of patents relative to its population. Most of the new products are in the fields of life sciences and pharmaceuticals, biomedicine, environmental science, and food. The Danish pharmaceutical company Novo Nordisk is one of the largest companies in Scandinavia in terms of market value and has held a leadership position in diabetes care for decades. It supplies half of the world’s insulin for diabetics.

Innovative pharmaceutical products are also produced by Lundbeck and LEO Pharma, two other Danish companies, as well as a wide range of newer and smaller biotech companies. Denmark’s traditional strength in machinery and engineering and its strong educational system has become the basis for a thriving robotics industry based in Odense.

Denmark’s traditional strength in agriculture has become the basis for a thriving food science sector. Most people have heard of Castello cheese, Arla, and Lurpak. They turn their primary agricultural production into secondary goods where they make the profit.

Obviously, Denmark cannot be ‘copied’ but it gives us a role model of what can be achieved.

Mike Hedges is the member of the Welsh Senedd for Swansea East.

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Image: Mike Hedges. Author: Steve Cushen, licensed under the Creative Commons Attribution-Share Alike 3.0 Unported license.

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