What needs to happen to get the economy in Wales moving after the Covid-19 pandemic lockdown and will it just be a case of business as usual?
Here we pool the thoughts of business editor Sion Barry, chair of the IWA, Bethan Darwin, Ian Courtney of Wesley Clover, former CBI Wales chairman Michael Plaut, founder of Freshwater 海角视频 Steve Howell and managing director of Heavenly Roger Pride.
Sion Barry business editor
The debate is no longer on whether the Welsh and 海角视频 economies will enter recession, but if a full blown depression will take hold.
However, despite the devastating impact on human life and the economy unleashed by the Covid-19 pandemic, in Wales there remains, and I see it everyday beyond the noise and the PR spin, genuinely great firms, and the more with employee-ownership stakes the better.
But they could be even more impactful on the Welsh economy, creating well-paid jobs and helping to drive a much needed improvement in productivity.
To help firms get to the next level, and providing a conveyor belt of start-ups, we need not only patient long-term capital, but a network of smart expertise and support built into a new venture fund of scale.
Yes, private equity and venture capital funds abound globally and can be tapped into by firms in Wales, but the more embedded funds in Wales, the better.
So why not a government (Welsh and potentially 海角视频 too) backed fund — which could also be backed by private investors — with the financial firepower never seen before in Wales?
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It might need to dance around state aid rules, but this crisis has proven that we need a new way of supporting our economy.
It would have to be a radical departure from those funds that once invested are happy to sit back, take monitoring fees and appear engaged through nominated non-executives, whilst just waiting to push the time to exit button.
This should be an all encompassing fund, run by real experts — fund management could come from those currently in the VC sector — and one that helps create the environment for investment.
It could for example help create new joint ventures by fostering collaboration between existing firms; having proactively identified where companies could benefit from pooling their expertise, contacts, customers, products and services, from tourism and manufacturing to cleantech and fintech.
This would require a fund to be underpinned by smart ‘deal flow’ intelligence and having a real handle on what is actually out there in the Welsh economy; from that teenager developing a smart energy saving app in his or her bedroom, or that large corporate where a great idea from an engineer could flourish if spun-out into a new start-up with patient capital and support to help it develop.
The fund should be able to support businesses at different stages, including say grant support through the proof of concept and minimum viable product phases, through to funding for commercialisation and growth right up to scale-up.
It should also have a global reach in identifying collaboration potential and seeking to bring investment into Wales too.
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Academics are often not the best at assessing the commercial potential of their inventions or research. They might well have something very clever, but the key question is ‘will anyone buy it’? The fund should facilitate businesses coming into academia at an early stage to help to maximise commercialisation potential.
And in terms of venture capitalists on the ground, and this is already happening in the west coast of America, why not employ students themselves, and even pupils at schools — who really know what is going on — to help identify great ideas that could be supported and funded?
The fund could have sub-funds for specific sectors, as well as a regional dimension at a city region level.
It might look to the US where the most successful investment funds are frequently run by engineers.
The two pioneers of venture capital that spring to mind are Sequioa Capital and Kleiner Perkins. What these enterprises have in common is they were established by engineers — people with knowledge of complex industries and a vast array of industry contacts to act as mentors and customers
British private equity and venture funds are also dominated by engineers, but all too often of a different kind; bankers and accountants who are primarily ‘balance sheet’ engineers.
Reshoring
The process of reshoring should be accelerated with businesses, though many are already shifting, no longer seeing shareholder return as their primary purpose.
While yes raw materials might require importing, the more we can produce ‘locally,’ will not only help create new jobs and wealth, but reduce carbon emissions too. Although there will be a limit to what can be produced at home. For example, growing oranges might take up more energy and produce more emissions than being flown in say from Spain, whose current climate is naturally suited for the purpose.
However, what struck me when clothing brand Burberry announced it was stepping up to the plate to produce protective gowns for the NHS, was that its former factory at Treorchy should have been part of the narrative; but alas an operation, like countless others across Wales and 海角视频, that have long since suffered the price of offshoring, driven by an unfettered profit maximising mindset.
New Deal
On capital projects we need an explosion from rail and road to 5G, but also in human capital (and AI) in terms of workforce skills.
This of course would be predicated on a new funding arrangement with the 海角视频 Government and the borrowing capacity for the Welsh Government far beyond its current tepid £1bn over five years. A capacity of at least £5bn needs to be put in place.
A 21st century greener equivalent of President Roosevelt’s New Deal in the 1930s, could then be looked at to fund significant projects. Any public funding for capital projects, outside of road and rail, would also need to leverage private finance with the fund used to perhaps de-risk projects through costly development and planning stages.
But what type of projects? If you are going to build a tidal lagoon, then why not jump from what is effectively a proof of concept off the coast of Swansea, to a much larger energy generating scheme? That would need approval of the 海角视频 Government to raise the size of energy projects that the Welsh Government could approve.
We also need an explosion in new homes, but not just modular homes, but traditional bricks and mortar; building on tentative collaborations already in place, like between family-run and owned housebuilder Llanmoor Homes in Pontyclun and housing association Pobl.
With this pressing need for quality affordable housing, Wales should be at the forefront of building energy-efficient homes at scale with regional factories supported by a supply chain as indigenous as they can possibly be.
I do honestly see potential everywhere, but it needs all the dots (and many are already out there, but in isolation), to be joined up in a way that has never been done before and where everyone is invested, whether in the public, private or third sectors.
Chair of the Institute of Welsh Affairs (IWA) and leading employment lawyer Bethan Darwin
With everything we are learning during the coronavirus pandemic, can we do things differently in the future?
This is a question that must be debated and not just by politicians. It’s too important a debate to leave to them. Many of us in Wales have had time to think over the past six weeks about how, once this is over, we want things to change.
What we see on the news each day means that better funding for our health service is top of many people’s priorities.
Not far behind for many is better funding for social care. The Resolution Foundation reports that the social care workforce is large, low paid and insecure. 56% of social carers in Wales earn less than the Living Wage (£9.30 per hour) and zero hour contracts are prevalent. 83% are female and this contributes to the gender pay gap. There is also disproportionate BAME representation.
The episode of Rhod Gilbert’s Work Experience on carers, filmed before the pandemic struck but aired during lockdown, illustrated the valuable and difficult work carers undertake. Work that should be better paid and more secure.
The need to value many jobs traditionally seen as low skilled and therefore lower paid has been illustrated by the pandemic. It’s the supermarket workers, delivery drivers, refuse collectors and postal workers that have kept us all going, not commercial lawyers like me sat at our computers, safely at home.
Shopping locally and more sustainably is also high on the agenda. With supermarket delivery slots difficult to get, it’s our corner shops and independent butchers, bakers, fishmongers and greengrocers that have pivoted speedily into home deliveries to keep us fed.
The world of work has changed and will not go back to how it was before. One client I work with operates a large customer service call centre. Having switched all its advisors to working from home, it has already decided they will not be returning to the office because working from home has been successful and involves less travel time, fewer carbon emissions and means less office space will be required.
Other companies that have previously refused requests to work from home, “because that’s not how we do things” have now done things in precisely that way and found it works well. And we’ve all got the hang of Zoom, Skype and Teams now.
Alongside my day job, I am chair of the Institute of Welsh Affairs, an independent think tank, which specialises in public policy and debate around the economy, education, environment and health sectors in Wales.
The IWA wants to hear from those who have been thinking about the challenges we face in Wales because of Covid-19 and where the opportunities for real change are.
We are running a series of online panel discussions called Rethinking Wales. The first one took place on 16 April 2020 and can be viewed on YouTube. More sessions are planned.
Ian Courtney director of external affairs for investment firm Wesley Clover (writing in a personal capacity).
It goes without saying we are in unprecedented times. As I live in self-imposed solitary confinement I have been asked to reflect on the question what will the economy look like when the crisis ends?
Before doing so I want to reflect on the recent past. In the last twelve years we have faced three significant events that have shaped the economy and will continue to do so for the foreseeable future; the 2008 banking crash prompted a recession on a similar scale to the 1930s; the decision to leave the EU will inevitably have profound implications for economic activity, the details of which will remain unknown until trade negotiations are concluded and now Covid-19.
Many commentators legitimately predicted the banking crash would change the way we did things. And it did, but not necessarily in the way some people expected. Growth has been sclerotic, personal debt has increased and many of our fellow citizens have experienced stagnant wage growth. Many of these are the very same people who in times of crisis perform roles that society is most reliant on.
But these events are a mere sideshow compared to the situation we are in now.
The last official data indicated the annual deficit (the difference between spending and receipts) stood at just shy of £43bn whilst national debt (the accumulation of annual deficits) was just over 85% of 海角视频 output. On top of this some forecasters have suggested a 35% reduction in economic activity in the second quarter of this year, which will have an inevitable impact on tax income.
The unavoidable fact is that borrowing to fund the necessary emergency measures to protect the economy will have to be repaid. In these circumstances the questions are when and not if taxes are increased, who will bear the burden and finally will consumer spending return to previous levels.
I am in no position to speculate accurately but here are a few musings; firstly controversy is emerging about the authorities’ ability to meet the demand for personal protection equipment (PPE). One explanation is the nation does not possess an indigenous manufacturing industry.
There is also evidence that one of the reasons for the clearing banks’ slow start in implementing the 海角视频 Government’s emergency loan scheme is that large parts of the processing of paperwork have been off-shored to India amongst other places. Therefore it is not impossible to speculate we will experience efforts to re-shore some globally extended supply chains. This could provide a boost to the Welsh economy’s manufacturing sector.
Secondly will the kind of collective effort we have seen and the increased level of state intervention have a lasting impact on social attitudes which infuse their way into economic life. Commentators have drawn parallels with the experience during and immediately after the Second World War.
Finally productivity is the key to the long term challenge to economic performance. The admirable work of the team at Cardiff Metropolitan University has shone a light on the woeful Welsh record on this front. Welsh Government has a limited range of levers to address this issue.
But one key area it does control is education and to a lesser extent skills training. Too many employers consistently report difficulties in hiring staff with the correct credentials, whether this is basic attainment or professional and technical expertise. We cannot afford to be timid about this. In particular the prestige of teaching and education needs to be raised. In my opinion a decade long educational revolution is urgently required.
Steve Howell founder and director of communications agency Freshwater 海角视频
A crisis always prompts soul searching, all the more so when its scale is measured by a daily death toll.
The bank crash was an existential crisis to the financial system that ultimately did cost lives as austerity reduced life expectancy.
People said things would never be the same. But, apart from banks being forced to be more cautious in their lending, little has changed.
With the coronavirus crisis there’s again talk of a big rethink of how we live and work – from suggestions that home working will become the norm to a recognition that the NHS and public services can’t be stripped to the bone.
The Financial Times has even called a for a reversal of the prevailing policy direction of the last forty years”. In other words, ‘free markets’ will no longer be seen as capable of solving everything.
Britain has certainly found itself wanting after taking the application of this neo-liberal doctrine further than any other country since the Thatcher era.
A combination of the free movement of capital and the unwillingness of successive governments to intervene in the economy has meant that manufacturing is now only 11% of our economy.
Countries have always specialised, but Britain has taken this to a point where there are only two or three industries in which we are serious global players.
As many panic buyers found out in March, we don’t make freezers any more. As Matt Hancock has discovered, we don’t have much of a diagnostics industry.
Some argue that we need more labour ‘flexibility’ to be competitive. But how much further can it go when trade union action has been squeezed to levels not seen since the 19th century and millions of workers are on zero hours contracts or in insecure ‘self-employment’?
The idea of more people working from home is alluring to employers eager to casualise the workforce and cut costs. Just think, some commentators say, of the savings that could be made on office overheads?
But workers still need space, warmth and equipment, wherever they work. Expecting them to be efficient in a cramped and cold bedsit is both unfair and ultimately not going to make Britain’s economy great.
We are seeing two very different approaches emerging to what needs to change in after the Covid crisis.
One will look only for opportunities for private gain. The other will see how it has cast a bright light on our inter-dependence and realise that the well-being of one is fragile without the well-being of all.
Mike Plaut former CBI Wales chairman and entrepreneur (writing in a personal capacity)
If the Welsh economy is to recover from the recession that Covid-19 is causing, Wales will need to take bold and imaginative steps to encourage economic growth and recovery. Whilst there may be voices in some parts of the Welsh Government that are reluctant to put private sector, economic growth at the forefront, there are others who understand that it is this private sector that generates the tax revenue to fund our public services and also the employment so many of us rely on. Without a thriving private sector Wales risks becoming a poor backwater of the 海角视频.
As we begin to see the devastation of the economic fall-out from Covid19, Welsh businesses will need not only funding; but also perhaps more importantly strategic oversight and assistance as we seek to re-build Welsh industry.
There will be little point at simply throwing money at businesses without a strategic framework.
I believe it is time for Wales to take a lead and set up a Welsh Economic Restructuring and Regeneration Agency. This new agency to be at arms’ length from the Welsh Government so it will be able to take the necessary and difficult long term decisions that will be needed without short term political pressures clouding judgment. We already have a proven structure for this type of organisation in Wales in the way in which the Development Bank of Wales is set up, operates independently, but is accountable to Welsh Government.
This new agency will be tasked with restructuring and regenerating the Welsh economy on a strategic basis.
This will involve:
- Encouraging mergers and acquisitions to give businesses competitive advantages and scale.
- Ensuring we build clusters of independent businesses that can benefit from each other’s expertise and connections (we have a very successful blueprint for this type of co-operation in the compound semiconductor cluster in South Wales.
- Advising on public procurement opportunities.
- Identifying and encouraging our successful SMEs to grow.
- Providing advice and expertise to ensure that businesses make the right strategic and operating decisions.
- Developing links with the Welsh business diaspora, and Welsh Government offices overseas, to encourage development and investment.
It would be an agency which used its expertise and connections to build a Wales for the future.
The advantages of devolution is that it gives us the flexibility to do what is best for Wales.
It is time to be courageous and look to a new agency to try and help our economy recover from this pandemic, and build a prosperous Wales for future generations.
Roger Pride managing director of brand agency Heavenly looks specifically at the outlook for the tourism, which is a major employer in Wales
It has often been said that the tourism sector is resilient. The industry has always shown the ability to bounce back following crises of different sorts.
In Wales, we have had our fair share – the Sea Empress oil spill in Pembrokeshire in 1996, and foot and mouth in 2001. Then, in the short term, tourism was hit hard but soon revived.
But the impact of coronavirus feels different. Currently there is no tourism. Wales is closed. The world is closed. Everywhere is suffering. Cities and the countryside have been hit equally hard. All sectors are hurting: accommodation, meetings and conferences, airlines, attractions, cruising, and airports.
Ironically, only a few months ago, the biggest issue in tourism was the debate about overtourism - the negative impacts of mass travel on tourism honeypots like Barcelona, Amsterdam, Venice and Dubrovnik. Today even these hotspots are cold.
The organisations responsible for marketing destinations are also suffering. They depend on income from tourism businesses in the form of memberships, commissions and in some parts of the world, taxes.
Yet these revenues have dried up. In the 海角视频, many staff at destination marketing organisations have been furloughed or laid off. And there is no certainty that they can look to local and national government to help them out. As we navigate away from this crisis, there will be many demands on the public sector purse.
Even in the best of times governments in the 海角视频 have failed to see the value of tourism and fund it accordingly.
Coronavirus, however, does not signal the end of tourism. Most of us still have an innate desire to wander and explore the world. But, perhaps 2020 will be looked back on as the year that travel changed forever. When we get to the other side, I believe that it will be a changed industry.
Nobody really knows how the world will look, and how people will behave. Some people will still feel unsafe and not holiday at all.
Some will feel more secure in destinations on their doorstep. Others will return to their favourite place and gain comfort from being in familiar surroundings. Whilst those with cabin fever will long for new horizons and wide-open spaces.
Despite this uncertainty, I’m prepared to make a few predictions.
Space will be even more valued
Extra space has always attracted a premium. People are used to paying more for extra legroom on aircraft and more spacious hotel rooms. Moving forward, personal space will be seen as an essential requirement for many travellers.
Secluded and private beaches, remote resorts, and isolated cottages will be in more demand. As a way of reassuring potential travellers, EasyJet have already said they will keep the middle seat in rows of three vacant.
Travel will cost more
Because people will value space more, it is inevitable that international travel will be more expensive. Additional health security measures will also add to the cost. Some places will put limits on the number of visitors and perhaps look for ways that visitors can help meet the cost of a providing a safer environment. At least for some time, international travel will be reserved for the wealthy.
Domestic tourism will recover first
In the shorter-term, destinations will focus on attracting visitors on their own doorstep. We can expect restrictions on international travel, until an effective vaccine or treatment is found. Australia has been relatively successful in minimising the impact of coronavirus, it is currently only getting about 20 new cases a day.
Yet the Federal Tourism Minister, Simon Birmingham has warned Australians will not to be allowed to travel at least until the end of 2020. Those that do can expect 14 days in quarantine when they return. It is also likely that travel insurers will exclude Covid 19 related illnesses from their policies, creating yet another barrier to international travel.
Countries more successful in combating coronavirus will emerge more quickly
Already, those places which have responded more effectively to controlling the disease are slowly opening up to their own citizens. The kind of testing and tracking measures they have put in place may help them to accept tourists more quickly.
Take the example of Dubai. Emirates Airlines in conjunction with Dubai Health Authority (DHA) are introducing rapid coronavirus testing on arrival and departure from Dubai. I see more places introducing testing, in combination with tracking visitors and perhaps some form of medical passport. This will give visitors, as well as the host population, more confidence.
The meetings and conference industry will have to wait for a vaccine
This sector will be the hardest hit for some time. The speed with which we have all got used to conducting meetings on-line has been remarkable. My company is currently helping to create a brand for a challenger bank in Singapore, and we are having daily video conference meetings linking Cardiff, London, New York, Kuala Lumpur and Singapore.
Today it is business as unusual, tomorrow it will be the new normal and will dramatically reduce business travel. In January, the share price of tech company Zoom was $62.74, today it is $162.39.
Larger meetings, exhibitions and conferences will continue to be affected by social distancing measures. The timing could not have been worse for Wales’ new International Convention Centre in Newport.
There are those who argue that coronavirus has been good for the planet. It has given us a glimpse of a cleaner world. It has helped nature breath. And it has forced us to revaluate what is important to us. We are entering a new era, not AD or BC but PC (post Covid).
Future historians, will see this as the era that everything changed. Not just for travel, but for the world.