China has a growth rate three times higher than that of Europe, but wage levels there are typically close to a tenth of the UK’s.

The mere fact that China is such a successful player in the global economy means that small businesses in Wales are affected by the growth of the Chinese market. But there are mutual benefits for both Welsh and Chinese businesses. China has a strong manufacturing base but is in need of technical expertise and innovative technologies that can be provided by Welsh companies.

Moreover, there is a strong incentive for Chinese companies to co-operate with Wales as it can be used as a gateway to Europe, and in turn the biggest consumer market in world.

Chinese labour costs are very low. There is a fear from some small firms that our manufacturing base could be undermined. Indeed if a large manufacturer relocates to China this has implications for small manufacturers who are first or second tier suppliers to the large manufacturer.

In terms of labour costs a Welsh small manufacturer cannot compete and many are suffering as a result. But many indicate, however, that labour is not their highest overhead and when transport costs are included they believe that they can compete favourably with Chinese products.

And as China’s economy develops its workforce, it will grow in wealth and in turn is potentially an extremely large consumer market for goods.

There is also potential for business-to-business commercial activity. Opportunities exist for western experts to provide services and sell innovative technologies. Indeed there is a keen demand for environmental technologies to reduce pollution outputs.

The point is that you can either fear the situation, or try to take advantage of it. But how could you go about doing this?

As a first step for a small business exporting into China it is important to find local distributors for products as it is unlikely that a small business without a local presence would be in a position to service the Chinese market.

Sourcing goods from China can be particularly demanding and it is necessary to go to China in order to verify that the work is of the right standard and that the correct control systems are in place.

If this is not properly managed it is possible that the goods will be of poor quality with potentially damaging consequences to the business concerned. A small business may not have the resources to manage the supply chain and many small businesses complain about uncertain service and quality during the first stages of sourcing.

It is possible to mitigate this risk and one technique is for a small business to ‘piggy-back’ on a larger company and source products from Chinese companies that have already have well established European or North American customers who have already helped the Chinese company implement best practices.

Initially a business will need to make a visit to China and they may find it difficult to obtain a business visa. To secure a visa it is necessary to first have a formal invitation letter from China inviting them to attend a meeting or an event. If this requirement is not met a visa will not be issued by the Chinese Embassy.

Understanding local laws and customs is important. For instance there is a lack of protection of intellectual property (IP) in China and some businesses run the risk of having their products copied. It is therefore advisable to register trademarks, patents and copyright with an accredited agent.

With China’s adhesion, however, to the World Trade Organisation (WTO) it is hoped that the problem of protecting your IP will be reduced. One of the main conditions of accession to the WTO was that China sign international treaties on business law. Nonetheless, a small business will not have the resources to take enforcement action in China to stop infringements against its intellectual property.

Import / export regulations and customs tariffs on both the Chinese and UK side can cause problems for small businesses, especially if they are doing this for the first time. It is therefore, important for small businesses to find a good freight forwarder who can deal with customs, documentation, storage and insurance.

Letters of credit can be difficult to obtain and understand for a small business. They are nonetheless vital as they are a promise from the bank to pay. The seller gets the money and the purchaser is then able to specify the quality parameters, standards, specifications and delivery time.

The financial crisis in Europe has become so severe that it has put the future of the euro, and indeed the future of the EU itself, in doubt. If the financial system in Europe collapses, it is going to plunge the entire globe into chaos.

If the financial system in Europe breaks down, we are all doomed. An economic collapse in Europe would unleash a financial tsunami that would sweep across the globe. The nightmarish sovereign debt crisis in Europe could potentially bring about the end of the euro. The future of the monetary union in Europe is being questioned all over the continent. Without massive bailouts, there are at least five or six nations in Europe that will likely soon default.

So it might seem a bit odd to write an article looking on the ‘bright side’ (so to speak), but that’s what I thought I’d do. I wanted to pen something that worked on the assumption that we all got through to the other side in – relatively – one piece.

I’d actually like to rewind to March 2004 when the heads of state of the EU member states met for the European Council and set the strategic goal for the EU “to become the most competitive and dynamic knowledge-based economy in the world, capable of sustainable economic growth with more and better jobs and greater social cohesion”.

However, these admirable objectives fell woefully short of realisation, even before the economic turbulence of 2008. Much of this was down to a lack of action in reducing regulatory burdens.

The European Charter for Small Enterprises identified ten key areas of action to help small businesses prosper and was adopted by the European Council in Feria, Portugal in 2002 and followed on from the Lisbon Agenda. The overarching principle of these various accords was to recognise the important role that small businesses played in the European Economy.

Whilst this was a step in the right direction, in reality that was pretty much all it turned out to be. Enterprise policy continued to be made in a vacuum and these agendas were rarely adopted throughout the various Commission Departments and across all EU institutions.

So should the EU get the other side of its current nightmarish scenario, it needs to outline a ‘New Deal’ for its dealings with the private sector. Previously, for example, there has been much debate and criticism of the way the European Union has consulted with stakeholders, and in particular the fact that SMEs are not well represented and their views are all too often ignored.

In future, the EU needs to consider the needs of SMEs in four key areas: firstly by organising periodical SME round tables with the TUC also being present, and to organise market research of SMEs on issues that the Commission is consulting on prior to a formal invitation to the Social Partners to negotiate an agreement.

Secondly, it should improve the conduct of the social dialogue by making it more transparent and accountable. This would be achieved by direct market research of SMEs and a longer time being allocated for consultation and an increased number of organisations being consulted.

Thirdly, it needs to create a new SME forum at the EU level with advisory status which would be restricted to Employment and Social Affairs in order to give substance to Article 137(2) of the EU Treaty that states Directives “Shall avoid imposing administrative, financial and legal constraints in a way which would hold back the creation and development of SMEs”, a principle that is often ignored.

And finally, a new social dialogue committee should be established where, unless a piece of legislation passes through this forum, SMEs in the European Union would not be bound by that piece of legislation.

There has long been a wide recognition of the need to improve dialogue with SMEs. The European Commission has developed several policies most notably: the European Small Business Charter, The Green Paper and the follow up Action Plan on Entrepreneurship, and the Better Regulation Action Plan.

These policies have all devised ways of improving dialogue with SMEs including the appointment of an SME Envoy, and the introduction of Impact Assessments to inform policy options.

Yet in spite of these efforts SMEs were still being ignored in favour of social and environmental lobbies. Rather than pay lip service to these concerns, politicians and policy makers need to enter the private sector mindset at all stages of the policy process.

For example, pre-2007 the burden of red tape had greatly increased. While individual laws may not be over burdensome on their own, the cumulative effect can be overwhelming. This is particularly the case with laws relating to health and safety, employment and the environment. Compliance costs can be enormous and have a disproportionate impact on small businesses that are invariably placed at a competitive disadvantage to their larger competitors.

Moreover, there were huge inconsistencies within legislation that made it impossible for businesses to know what there rights and responsibilities were. Therefore, it is about time that there is a review of all existing EU legislation to remove the burdens and inconsistencies. In future, legislation should contain review and sunset clauses and Regulatory Impact Post-Implementation Assessment (RIPIA) should be completed to check that the legislation is doing what it set out to do.

Make it a date: "Welsh Government needs to develop an economic plan which will provide an overview of the economic landscape over the next 20 years"

THINGS I’d like to see in 2012: namely, for the Welsh Government to set a new direction for the Welsh economy in order to attain the status and characteristics of a Premier League developed country within the next 20 years.

Key facets of this vision are economic dynamism, a high quality of life, and a strong national identity.

And strategies for the long term, which would also produce some benefits for Wales in the short to medium term, need to be directed at maintaining and extending the nation’s international competitiveness.

When change is so rapid and dynamic as in the international economic environment, the very planning process is fraught with risks. Very few predicted the global financial crisis or the degree of impact this would have on the world economy now and in the future.

Wales cannot hope to predict such dramatic events at home or abroad. But through scenarios and contingency plans our new direction should take into account various contributory factors, and weigh up other more gradual shifts and trends in international politics, trade and economics.

With clear lessons from the recent past of the world economy and Wales’ experience, the writing on the wall for the next 10 years and beyond is that economic strategies for Wales need to evolve from the past single dimensional type to a multi-dimensional one in order to remain viable in an increasingly complex environment.

In this context, the Welsh Government needs to develop an economic plan which will: provide an overview of the economic landscape over the next 20 years; define a clear vision for the economy and analyse its implications; initiate a national planning process, which is consultative and evolutionary in character; and help build a shared vision among labour, business and government on national economic aspirations.

Despite the long horizon, Wales must take steps now to seriously and vigorously pursue the goal of becoming a first division developed country for two reasons. First, some of the strategies, like enhancing manpower, requires a long lead time of one generation or more. Second, it provides the best possible assurance against being overtaken by other emerging countries which, if it happened, could lead to economic stagnation or decline.

In order to grow at relatively high rates, it is necessary to reorganise the way human and physical resources are managed. And the basic issue which underlies Wales’ efforts to become a developed country economically is the issue of international competitiveness.

On what basis can Wales hope to compete with higher-performing export-led countries? The answer can only lie in improving and upgrading to a level comparable to what these countries have today in key areas. And so long as Wales remains an open economy, the assessment of what factors are important is essentially one that is judged by companies themselves.

Wales needs to understand where the developed countries are on key parameters, and to move towards where they are. However, it must be recognised that, given our size, there are some things that are beyond our capabilities. Basic research, for example, is one area where a country needs economies of scale and a large pool of interdisciplinary talent.

But, as in Switzerland’s case, there are several niche areas in which it has specialised and earned a top developed country’s standard of living. Wales needs to identify and cultivate the right kind of niches and within these niches, move as close to the level of top developed countries as it is possible to achieve.

The single most important factor towards achieving developed country status is enhancing Wales’ most important resource, its people. They should therefore be equipped with: a high standard of competence; a high level of basic education; a high degree of industry relevance in training programmes; effective programmes for mid-career training; and nurturing important human resource qualities, such as the work ethic and creativity.

Wales has spent the last 15 years investing heavily in physical infrastructure, but emphasis now needs to be placed on soft infrastructure which consists of technological infrastructure, comprising a pool of trained manpower in key technologies as well as a network of technical competence centres and research institutes which enable companies to be effective in design and innovation, along with a social climate and institutional structure which supports innovation and a national system which encourages a high degree of co-operation among labour, business and government.

"If we can make this experiment in local broadcasting really work, it has to be a model worth rolling out"

THE future of television is a debate which is raging in the creative industries, the corridors of Westminster, the Senedd, and beyond.

How will the medium change and adapt in the age of the internet, where the buzzwords are interactivity and multi-media?

It might be a global headache but it’s one which a tiny corner of south Wales is doing its own bit to try to solve.

On January 31, 3VTV will be born. This local television channel is based in Blaenau Gwent, and making films especially for the community of Blaenau Gwent. With a population of just 68,400 at the last count, this really is “micro” broadcasting – broadcasting on a truly local scale.

Run by the Micro-Broadcasting Centre at the University of Wales, Newport, 3VTV is part-funded by the Welsh Government to the tune of £450,00 over three years. We have three main aims:

• To help build on the tremendous community cohesion which exists within Valleys communities, and to give local people a platform to champion the area and their own stories.
• To encourage digital inclusion, by giving people another good reason to go online, and helping them to do so.
• To help boost the local economy, providing a showcase for local businesses.

3VTV – named for the Three Valleys which make up Blaenau Gwent – will be broadcast on demand on the internet, at 3vtv.co.uk.

We will show films about and of interest to the communities of Blaenau Gwent, made by professional film-makers employed by the project and by students from Newport University’s acclaimed Film School.

This, I believe, is the project’s USP – the quality of our output which will set us apart from many existing internet-based broadcasters. But also, crucially, 3VTV will include content created by people in Blaenau Gwent who have a story to tell or who want to turn their hand to a spot of film-making. We’ll also showcase local talents in digital story-telling, photography, blogging and so on.

3VTV will be a mixture of industry-standard and community-generated content. It’s a model I hope will work, and judging by the reception we’ve had when we’ve been out and about promoting the channel and asking for input, it is one which is already intriguing people.

Some local people have however expressed incredulity that such a project is in their own town, their own county borough – that their area is worth something so bespoke yet so high in quality. But as every local reporter in the land knows, these communities are crammed full of great stories – and what we at 3VTV are determined to do is shout about them.

But the local economy is also central to the project, representing a key part of Newport University’s mission. How is a television project going to help boost the local economy where countless schemes have gone before?

Well, quite simply, we are working with small to medium enterprises based in Blaenau Gwent, who have never before used video for marketing themselves. We are helping local firms by making promotional films for them for free, which will then be shown on 3VTV.

The idea is to give these businesses the chance to promote themselves to the people and market right on their doorsteps. Already, results look promising; we’ve been showing a short film we made about a coffee shop in Brynmawr when we’re out promoting the channel and the response has been an overwhelming: “Wow! I’ve never really thought about that place – but now I’m going to go there!”

Interestingly, finding a model for the future of television isn’t one of our explicitly stated aims; it’s not one that appears on our marketing literature or on our website. But it is, of course, one of our main drivers.

If we can make this experiment in local broadcasting work – and I mean really work, for the community we’re based in – that to me has to be a model worth rolling out. That’s when we’d like to see the same model adopted in county boroughs the length and breadth of Wales. And who knows? Maybe the eyes of the creative and political world will be trained upon this tiny corner of south Wales, and will be impressed with what they see.

- See 3VTV from January 31 2012 at 3vtv.co.uk and follow us on Twitter @3VTV

Start ups should be taught the economic advantages of exporting

WE NEED a change in the culture of the Welsh business community and government policy to open new opportunities in the global market.

A deeper business culture change would include a change in the outlook of Welsh Government policy, together with a change in the attitudes of implementation bodies.

What’s required is a change in outlook with regard to making Wales an export-driven nation and this will include revisiting Wales’s education system; entrepreneurial development policies; public sector grants; planning policy; as well as better targeting of European Structural Funds.

Developing the export component of businesses must be consistent with present attempts to revise and improve business support services, and must also be linked to the strategy of generating more business start-ups in Wales.

The Welsh Government needs to assist this cultural change in businesses by proactively demonstrating the benefits of overseas trade, while assisting them to develop an export capability and increase their interaction in overseas markets. It is a matter of encouraging involvement and assisting success.

But the Assembly Government must also recognise the importance and potential of small and medium size businesses in increasing Wales’ exporting activity and hope that this realisation will be translated in the services provided. While it will on occasions be natural to give attention to the most successful exporting businesses, we should be cautious not to lose sight of the contribution made by the sum total of all individual exporting businesses.

The focus of a strategy prioritising SMEs is extremely important and should include, for example: the strategic objective of creating 200 new exporters over next three years, which should concentrate nearly exclusively on the SME sector; increasing the value of Welsh trade overseas to be conducted by increasing SMEs exports; SMEs should make up the majority in any key sectors identified; and attempts at partnership with other business support services should relate to the services and programmes provided to SMEs.

It is important that we strive to improve Wales’ overseas trade performance as a whole, while also ensuring that businesses in every region within Wales are in step with the improvements. This will require performance/activity indicators on a regional level that will contribute to the national picture. External monitoring and evaluation of our success is necessary to ensure that we fulfil our goals.

We have to start seeing a substantial and visible improvement in the value of exports from Wales compared with other nations and regions of the UK. At present Wales’ export performance is not satisfactory and the only means that improvement can be demonstrated in a constantly changing global economic climate is to benchmark our performance with other regions and small nations.

One way the Welsh Government can realise this goal is to help individual business develop action plans to focus on ways to develop the capacity and capability of new-to-export and existing export companies.

This revolutionary approach would require the provision of relevant information, quality and specialist advice, hands-on practical assistance, while at the same time promoting and marketing Welsh products in the international marketplace.

These action plans should take the form of three distinct paths to success, which includes the provision of business information; help with promotion and marketing; and administrative and research support.

To increase the value of Welsh export, we should highlight the high quality and uniqueness of Welsh products and services. A strong ‘made in Wales’ brand image will help to deliver real gains.

There will be an advantage in promoting key sectors of Welsh industry in primary markets. Some of these key sectors have already been identified through the new Sector Panels as having a growth potential. Every effort should be made to encourage businesses in these sectors to trade overseas. However there are other sectors which will also be of great contributing value. These businesses and sectors should not be ignored as a result of a blinkered pre-occupation in favour of the identified sectors. All businesses, regardless of which industry they belong to, should have equal and free access to export services.

Primary markets will constantly change in a competitive and diverse global economy. It will therefore be necessary for the Welsh Government to be constantly aware of changing trends and be ready to revise their activities and classification of ‘key sectors’ in order to be continuously effective.

An integrated and efficient approach will require close co-ordination and cooperation with the visions, aims, objectives and practices of other public bodies, particularly to avoid acts of contradiction and duplication between themselves which has blighted our development in the past.

There is a call for Wales to establish itself as a truly competitive nation in a global economy. For this to become a reality the focus should be on exporting rather than importing.

We need to start promoting awareness of Wales internationally while marketing what our nation has to offer. A successful exporting strategy will depend to a great degree on fostering a more entrepreneurial culture in Wales that requires a change in attitudes, both within the public and private spheres.

It is important to stress that in the drive to encourage more cases of domestic business start-ups, the economic gains of developing an exporting capability should also be highlighted from the outset. The main role of the Welsh Government must be to address and alleviate the difficulties and problems businesses face in relation to export activity, by providing information and assistance; promoting Welsh products to foreign countries; and opening markets on an international level.

This strategy should create the right situation to sell our products and services to the world, and by doing so will positively contribute to the vision of increasing the prosperity of the people of Wales.

Companies that involve staff in the innovation process appear to do better

INNOVATION and creativity in the workplace are essential in today’s demanding global economy. Consumers demand higher product features, high quality products and services as well as better value for money. Therefore, businesses need to continuously innovate in terms of what they offer the market.

However, businesses often find it difficult to develop a cogent innovation strategy. There is no simple solution. However, adopting certain leadership and business practices can certainly increase the likelihood of developing a more innovative business.

The thesis that I have been working on over the last few years has explored the links between leadership styles and practices that are based on encouraging and developing employees, and innovation. The research aims to develop a much clearer picture of what business leaders and top management teams can do to develop their organizations and become more innovative. A large-scale research project conducted by McKinsey & the London School of Economics, in 2007, suggested that the top 25% of manufacturers in Europe regularly adopted and implement contemporary management practices and processes.

The adoption of contemporary management practices, a major part of process innovation as it’s often termed, is seldom given the same attention as product innovation. However, process innovation or the adoption of new procedures and processes can often lead to businesses becoming more efficient and more effective in delivering their product and services.

A report by the Advanced Institute of Management, in 2008, argued that businesses should be “ambidextrous” in terms of their innovation strategy, that is adopting both product and process innovation strategies and practices. The research that I have carried out in Wales has shown that some of the most successful small and medium enterprises (SMEs) have put in place processes and practices to constantly review the way they deliver their products and services (process innovation) and systems to review and develop their product offering (product innovation).

The first part of my research involved sending a questionnaire to small and medium-sized enterprises (SMEs) across South Wales to find out more about their innovation practices. The businesses who responded were no strangers to innovation, with more than half having developed new products or services in the last year, while almost 70% of respondents advised they had improved processes or working practices, and half stating that this contributed to at least 10% of their companies’ growth in the last year.

However, the majority of the businesses surveyed did not have a formal policy when it came to reviewing products or processes, with 60% preferring to adopt an ad hoc approach.

The study found that innovative businesses have leaders who create an environment within their business that encourages new ideas and gives people the opportunity to try new things.

The study also found the greater use of more vision based leadership styles, like transformational leadership, the higher the innovation score of the businesses was likely to be. The study found that business leaders’ that tend to develop and practice more vision based and distributed leadership practices are likely to benefit from higher levels of innovative activity within their organizations.

It found a link between contemporary leadership styles like transformational and distributed leadership, and innovation. Transformational leadership includes: inspirational motivation, intellectual stimulation, and individual consideration. The majority of businesses questioned were practicing some elements of transformational leadership. The survey revealed that 60% of respondents developed their company vision together with employees and 79% encouraged employees to make suggestions about improving products and processes. Just over half of the businesses questioned recognised the importance of individual development, regularly using coaching and mentoring and encouraging continuous professional development or other learning.

It was also interesting to find, from the data, that the size of the business had little effect on the level of innovation activity. Therefore, I would suggest that businesses of all sizes can become more innovative as the size of the business did not necessarily affect its ‘innovativeness’.

Some of the most successful businesses had developed and implemented innovation practices and processes and regularly encouraged staff to participate in innovation initiatives that reviewed the business processes and its product offering.

In many respects the research supported the assertions made in the Advanced Institute of Management report, as it suggested that firms that developed and adopted both formal and informal mechanisms and processes to regularly consider both product innovation and process innovation tended to be more successful, than those that do not.

It's not all doom and gloom - although there is a lot of gloom still out there

BUSINESS confidence in Wales has slipped back into negative territory for the first time since the first quarter of 2011, the latest ICAEW-Grant Thornton UK Business Confidence Monitor has found.

In the fourth quarter of 2011, the Business Confidence Index fell from 16.5 to -9.2 according to the findings of the survey of 66 senior business professionals in Wales. And even though there has been some recovery in capital investment in Wales over the past year, business leaders believe that may be short-lived.

Why is it that business confidence in Wales grew in the last two quarters but has now fallen back into negative territory? Well, the impact of the Euro crisis, rising unemployment and public sector cuts are clearly having an impact, and there are clearly concerns about the economic future and the possibility of a double dip recession.

Consumer confidence is low and with energy, food and fuel prices biting hard, business confidence is being affected as we head into 2012, which now looks as if it could be another difficult year for many businesses in Wales.

Geraint Davies, a partner at Grant Thornton in Cardiff argues: “Despite the slump in overall confidence in Wales, private sector employment is holding up and competition is easing as the worst-hit businesses have closed. The big challenge, however, will be getting the private sector to start absorbing the coming losses in public sector jobs.”

Here are some of the latest Wales BCM findings:

Capital investment continues to grow

Firms in Wales increased turnover by 3.9% on average over the 12 months to Q4 2011. Turnover expansion has remained broadly stable since Q3 2010, suggesting business conditions have also remained relatively stable. Year-on-year growth in gross profits and sales volumes both stand at 3.1% in Q4 2011, also largely unchanged from levels seen since Q3 2010.

Likewise, expectations for growth over the next 12 months are stable, with an anticipated rise over the year from Q4 2011 for turnover of 3.9%, gross profits of 3.1% and sales volumes of 4.0%.

Capital investment has shown a recovery in Wales. Firms report increasing capital expenditure by 2.4% on average over the 12 months to Q4 2011. While the same as last quarter, this is the highest growth rate since Q1 2009. It also comes after a strong upward trend in 2011 following contractions in investment for much of 2010. This recovery may be short-lived, however, as firms expect to increase capital expenditure by just 0.2% over the coming year.

Private sector employment growth holding up

Employment creation remains in positive territory in Wales, as firms report increasing headcount by 1.5% on average over the 12 months to Q4 2011. This continues a positive trend in number of employees since 2010 when, on average, a reduction in headcount was reported.

The First Minister has announced a £75m scheme to create 4,000 short-term jobs each year for the next three years, aimed at getting unemployed young people into the workforce. The scheme will be available to those aged 16-24, a group badly hit by high unemployment, and they will be paid at least the national minimum wage for at least 25 hours a week.

Private sector employment growth may not be enough to counter public job cuts, however, as the unemployment rate in Wales reached 9.3% over July-September 2011 – up 1.3 point on a year before and compared with 8.3% for the national average. The Wales Audit Office suggests that 21,000 public sector jobs will be lost over four years.

Customer demand less of an issue

Fewer businesses in Wales appear to have issues with the level of customer demand than is the case in many other parts of the UK. Less than four in ten Welsh firms (37%) report customer demand to be a greater challenge than 12 months ago. This is down from almost half of businesses (48%) in Q1 this year and compares to up to 47% across the English regions in Q4.

At the same time, competition in the marketplace is also becoming less of an issue for firms in Wales. Fewer than one in three businesses (32%) report competition to be a greater challenge than 12 months ago. This continues a downward trend from nearly half of firms (45%) at the start of the year, with the current proportion the lowest since Q2 2009.

This suggests that either demand is returning and it is becoming easier for Welsh firms to find their market, or the level of demand is consistent but competition is weaker as some competitors have closed.

Either way, it leaves business leaders with some interesting questions to ponder over the Christmas break.

- For further information, please visit the ICAEW website

Croeso i Gymru?

THE better-than-expected third quarter Gross Domestic Product (GDP) figures released last month may have provided some small crumbs of comfort for the UK economy, but in Wales we remain in the dark over the economic picture on our side of Offa’s Dyke.

GDP is calculated on a quarterly basis at UK level.  It’s a measure which has many critics.  It is a blunt measure and it does not take into account the domestic economy (“free” work in the home or for the family), the underground economy, environmental degradation, insecurity or internal inequalities.  Furthermore, since GDP is a measure of production it does not tell us who gets the profits.

That said, GDP is undeniably a highly influential economic barometer.  It decides whether an economy is in recession or not.

There are plenty of people calling for alternative economic measures which can show a population’s wellbeing, sustainable development and progress towards equality and I would support them.  They may be unsubtle, but for the time being, GDP figures are important.

Welsh GDP figures are published, but not on a quarterly basis and very out-of-date.  The latest GDP figures for Wales, which are calculated by the statistical office of the European Union, are done on an annual basis and are three years’ old by the time they are released.  Therefore, in February of this year GDP figures for Wales were released relating to 2008.  This is not acceptable to Plaid Cymru, which is why we have called for the figures to be made available at the same time as the UK figures, as they are in Scotland. While the Welsh Government stubbornly adheres to its preference for the Gross Value Added (GVA) indicator (which does not take into account taxes on products or any subsidies going in), it is nigh on impossible to show whether or not Welsh independence is “unaffordable” as many claim.

But more importantly in the short term is the fact that we cannot tell whether Wales is in a recession or whether we were ever been lifted out of recession since the implosion of the money markets in 2008.  Given that our GVA and GDP figures are produced annually, it is impossible to officially state that Wales has ever been in recession, given that two or more consecutive quarters of negative growth are needed to come to such a conclusion.

An experienced business leader recently told me in a private conversation that he was convinced that Wales is in recession right now.  He may indeed be right, but with our current reliance on annual GVA figures, no-one knows.  There are strong suspicions that the UK is not officially in recession because the economy of London and the south east of England is out-performing every other part of the UK and that these historically affluent areas are masking the economic woes of the rest.

For the propped up, tax-payer-bailed-out banking sector which is concentrated in the London area, it has been business as usual since the 2008 financial meltdown with high wages and bonuses, but not when it comes to lending to small to medium sized businesses.  The near-freeze on borrowing to small businesses has had a huge impact on Wales where their significance, particularly in the manufacturing sector, is comparatively large.  If the suspicions are correct that London and South East has just about dragged the UK as a whole out of recession, it does not bode well for everywhere else including Wales.  Without up-to-date GDP figures, economic policies cannot be tailored to those areas which now could be helped by a stimulus package.

Higher than average unemployment rates and numbers of welfare claimants, coupled with low numbers of job vacancies, point to the need for an urgent attention.  Welsh GDP figures produced on a quarterly basis would give clarity as to the true economic picture here as well as providing an imperative for greater proactivity.  Plaid Cymru’s calls for powers over tax and other economic levers would garner wider support if it could be demonstrated just how badly Wales fares by being so closely aligned with and dependent on UK fiscal policy.  Why should Wales be treated as an economic region akin to the North East of England or the West Midlands when it comes to economic performance, and not as a country in its own right with its own primary law-making legislature? Our national status deserves to be reflected in our economic indicators.

The omission of GDP figures for Wales also leaves a gaping hole in the Welsh Government’s knowledge of its own business community.  Small businesses below the turnover limit of £73,000 do not have to register for VAT.  These small businesses slip under the radar of the Welsh Government who are not informed of their existence (even though HMRC is aware it is not required to not share that information with the Welsh Government).  This means that the Welsh Government knows nothing about an estimated one third of all businesses in Wales which fall below the VAT registration threshold.

Wales is its own country, with its own unique economic challenges.  Not only do we need the tools to deal with the challenging economic circumstances we face, but we also need the data which will give us an up-to-date picture as to exactly where we are.  Without this knowledge we will be constantly playing catch-up and that, surely, is not in the interests of anyone concerned with Wales and its future.

"We must grasp this opportunity to enhance sustainable economic performance through the medium of engine-room cities"

THE city region concept in South Wales East has been a Wales Spatial Plan placebo: something and nothing with a benign affect. Some would say glib-regionalism by another name.

Recently, the concept appears to have come of age with the imprimatur no-less of the Welsh Government (the Minister for Business), and the appointment of Dr Elizabeth Haywood, Director of the South East Wales Economic Forum (SEWEF) to lead a task-and-finish group. So why should we get excited about such an idea?

The Welsh economy is in a parlous state: bottom of the UK Competitiveness Index and as such Wales appears to be going backwards, not forwards. How then are we to alter what Professor Robert Huggins called a “destiny away from a future that increasingly appears to be one of irreversible decline”?

It seems that Wales needs to consider a concise menu of ingredients consistent with the powers within its gift. The sector panels and the respective task-and-finish groups are examples of a positive means of engaging with wealth creators. Another ingredient is for Wales to consider a proper city regions approach: leveraging the performance of dynamic cities. Certainly, Cardiff is an essential contender but other contenders might include Swansea and Wrexham or Chester in North Wales.

Concentrating on the Capital region, and the 2005 Enter the Dragon strategy for South Wales East, a review of the vision in 2010 stated candidly that “there are few signs that the region has moved towards the goal set in 2005 of becoming one of the most prosperous regions in Europe”. In other words, a true city region approach has not been adopted.

The concept of city regions has been around for several decades in greater Europe, the Americas and increasingly the Far East. Indeed, the recent IWA conference on city regions provided excellent, best practiced case studies for Vancouver, Stuttgart and Manchester. In England, it was the Competitive European Cities (2004) and the State of the Cities (2005) reports that highlighted the importance of cities to the UK economy. A startling finding was that core English cities were performing at least a third of GDP behind their European counterparts. UK government action followed.

With the exception of the Parkinson report in 2006 (Cardiff: A Competitive European City?), devolved Wales has been behind the curve on this debate. At least, that is, until recently with the reawakening of the idea and crucially potential political buy-in, mindful that it did not appear in respective political parties manifestos earlier this year.

Yes, a true city-region approach could address interconnected, strategic issues such as housing, employment and transport, with transport being the key to providing a truly connected region within and without South Wales East, as per Mark Barry’s Metro paper. Other key matters might include strategic regeneration, green infrastructure, creative innovation and how to address social exclusion. However, the principal argument is for enhanced, but sustainable economic performance. Research shows that governance arrangements spanning functional economic market areas can perform better than areas where arrangements are constrained by administrative boundaries.

In other words, a lack of co-ordination between cities and city regions is hindering growth. This is manifested by the fact that we do not have a unified regeneration programme. Currently, such programmes cross the portfolios of eight different Ministers and involve at least ten different initiatives. If we consider the excellent, recent Roger Tym & Partners report (Strategic Planning for the Cardiff City Region) as a proxy for the state of governance in South Wales East, then look no further than paragraph 3.25 where we discover that there is a “limited cross boundary evidence base” and that there are “difficulties of achieving consensus on anything other than general matters”.

Local matters are taking precedence at the behest of strategic matters in favour of the well being of the whole region. What this boils down to is the fact that for a relatively small region, with 10 local authorities, we have 10 visions from 10 sovereign bodies and, to quote Kipling, never the twain shall meet. You may say, what about SEWEF? It can egg-on, and encourage voluntary co-operation, but it has no power to implement and no budget.

All of this is inimical to sustainable economic performance whereby Cardiff’s engine-room (employment grew by 27% in Cardiff between 1998 and 2008, compared with Wales-wide growth of 14%, and 10% growth across the UK as a whole) is not being leveraged as a true asset for the benefit of the region and Wales.

Apart from functional economic market areas, there is also strong academic interest in agglomeration economies which can enhance productivity and innovation across city-region areas. Latest research undertaken by physicists Bettencourt and West and mentioned in the September issue of Scientific American (2011) suggests that a doubling in size of a city can lead to a productivity dividend of 20%. Equally, research by Falk acting for Regional Cities East in England suggests that a lack of housing can be detrimental to economic performance – a particularly relevant point in light of the lack of a strategic approach to housing allocation in South Wales East to benefit the polycentric region, and Cardiff’s LDP conundrum.

So where do we go from here? The recently announced news of a task-and-finish group to look at this key issue is very welcome. For my part (and my views are apolitical), a true city-region approach will require strong leadership (at all levels), a robust evidence base (provided by an external, independent group as per the MIER report for Manchester) and, where appropriate, robust regional governance (bodies) to drive the agenda (whether in Cardiff, Swansea or Wrexham /Chester).

With severely constrained budgets, a city-region approach provides an opportunity to do more with less – a case of getting ahead together – as well as achieving an economic dividend. However, if we do not grasp this opportunity to enhance sustainable economic performance through the medium of engine-room cities then we will be left behind, destined to homogenous mediocrity.

Leaders need 20:20 vision to see the way forward

AS RUSSELL Lawson wrote in his recent Boardroom blog:

“Yes, it is hard to be an owner-manager: running the business, finding the markets, coping with regulations, finding the staff, looking for finance, dealing with problems. The sector now requires greater management expertise than ever before. Directors and managers need a high level of skills, both professional and vocational, if firms are to flourish.”

In other words, it’s tough out there.  We live in very challenging times with ever increasing competition and there is a need to develop the skills that will equip future business leaders with the ability to survive economic austerity and grow their markets. The ability of SMEs to compete and grow is linked to their capacity to get certain things right – like marketing, branding and selling – but it is also related to their ability to provide business leadership.

People running a business in the current economic climate need all the support they can get. Yet current research highlights the fact that most leadership and management development provision fails to meet the real needs and expectations of SME managers. Too much of the management training on offer is based on practices that have been developed within larger firms. Attempts to down-scale these training strategies to small businesses have not worked because they have not been focused specifically upon the human resource needs of smaller firms.

Government policy has not helped either because it too is biased towards large companies and multinationals. As a result, small business owner-managers are generally skeptical of government supported management training programmes.  This has left a significant credibility gap in the delivery of practical management support to small firms who doubt the relevance of the training on offer.

Discussions with local businesses indicate that there needs to be more relevance, not only to the owner-manager, but also in the industry in which they work – support for developing a new business strategy has to be delivered within an industry context. It was felt that only then would any training be deemed ‘relevant’.

The type of training required was a range of strategic management skills, which owner-managers felt was much more important than day-to-day skills, so that they could better plan their business growth. In particular, the learning needs to be relevant to the daily activities of businesses but at the same time give a strategic overview of how they could be more successful. Firms also want the training to provide opportunities to ask other small business managers for their view on a particular issue.

Finally, the training needs to be provided in ways that can be relatively easily accommodated alongside the normal activities of the business.

As part of the team delivering the 20Twenty Leadership Programme I would certainly agree with these sentiments. The approach adopted on the 20Twenty is to focus on developing a combination of skills that lead to business growth.

Hence, the starting point of the 20Twenty journey is an in-depth analysis of where the participant’s company is now – via an informal due diligence of its management processes and a personality profile of the owner/manager. The programme then assesses where they would like their company to be in three to five years’ time and encourages them to provide a detailed map of how to get there – a three year strategic growth plan. We do this by enabling them to tap into a supportive network of other SME managers, mentors and coaches.

During the programme they experience one-to-one mentoring sessions with prominent business leaders and are trained by an executive coach. Participants automatically become a member of the Chartered Management Institute (CMI) and a registered student at UWIC (the new Cardiff Metropolitan University).

In total, the programme has attracted over 150 delegates since it began in 2009 and it is now in its third cohort.  This began in September 2011 and it has had an impressive take-up with 60 SME managers actively involved in the workshop programme. There are a variety of small firms on 20Twenty – from ‘one-man-bands’ up to much larger companies like Admiral and General Dynamics.

In the second half of the programme, a series of Master classes are provided on innovation and new thinking on a variety of business themes – including, Lean processes, creating a brand, maximising sales and making the business ‘investor ready’. All workshops are delivered by experts in a practical environment where problems are set to small groups who report back to the larger group.

However, the overarching aim of 20Twenty Leadership is to get participants to develop a three-year growth strategy for their business. Hence all the workshops and assignments are based around the needs of the business in driving sustainable growth.

The 20Twenty programme continues to gain momentum and we are now recruiting for the fourth cohort. Prior to that there will be ‘Taster Sessions’ in February/March which will explain what the course entails. Anyone can come along to meet the team and see the 20Twenty Programme for themselves.