Director of CBI Wales Russell Greenslade says stable policy and targeted investment to improve the business environment are essential to keep Welsh firms competitive
The race is almost over to find out which party – or parties – will lead Wales in the years ahead. It’s a pivotal moment for our country and for the party that wins, it will mark a moment for real celebration. But victory doesn’t just bring celebration, it also comes with huge responsibility to take Wales, it’s people and economy, forward.
Key among those responsibilities is making Wales one of Europe’s top performing sustainable small economies by 2035. That’s the test set by the Welsh Government, and it’s one business stands ready to help it pass. Part of that story is harnessing Wales’ outstanding geographical advantage to drive forward investment in renewables, and other clean energy projects.
The CBI’s ‘Made in Wales’ manifesto set out a clear path to prosperity for the next Welsh Government to follow, with the goal of creating a more innovative and competitive economy. It urged political leaders to tackle the skills gap by supporting more young people into work, education or employment. Coherent collaboration between Cardiff Bay and Westminster, working in partnership with business, is also needed to drive long-term sustainable growth.
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In a fast-changing global economy, capital investments have a critical role to play. With budgets being squeezed in the public sector and parts of the private sector, tough decisions have to be made about where a company or organisation allocates its surplus to maximise return. Surveys have shown that often, firms reduce their spending on capital-projects during periods of low growth/rising costs, despite their role boosting productivity.
This is where the banks come in. Growth capital finance is offered to enable a firm to invest to expand, to find that new market as well as keep without sacrificing local spend.
Access to growth capital – to invest in that new AI system or that energy efficiency machine in the factory remains a barrier for many Welsh companies, especially SMEs looking to scale up. While finance initiatives exist on the high street, the Development Bank of Wales can play a major role in supporting firms with the AI challenges and opportunities in the years ahead.
Significantly increasing the amount of capital the development bank can lend to firms would support even more firms realise their scale up possibilities. For example, expanding the bank’s funds beyond their £2bn capitalisation would enable more Welsh SMEs to obtain the patient growth capital they need to create, export and expand.
The new government should look to partner with institutional investors such as pension funds and insurance companies to create a Wales-based investment platform that channels large-scale private investment into local projects and firms, strengthening our funding ecosystem for innovation and expansion and allowing firms to scale up at home rather than relocating.
Another concern is the lack of funding for key infrastructure projects in Wales, with £247 per person spent on infrastructure in Scotland in the past five years, compared to only £120 per person in Wales.
Government and business jointly investing in modern, reliable infrastructure will connect Welsh businesses to markets and talent, as well as significantly boosting productivity. To achieve that goal, we need to make real changes to the planning system to speed up improvements to the A55 in North Wales and deliver the M4 relief road in the south. Every £1 invested by government in building the relief road will deliver £2 (from improvements to transport economic efficiency, safety and lower carbon emissions) back that can be re-invested in the Welsh economy. We know it’s a great investment.
We must also press ahead with rail electrification in North and South Wales, and digital infrastructure so that all areas, especially rural communities, can access full-fibre broadband and 5G coverage.
In this economic climate, stable policy and targeted investment to improve the business environment are essential to keep Welsh firms competitive and deliver the devolution dividend.
We also need a Welsh industrial strategy to tie everything together and give us a roadmap for boosting Wales’s competitiveness. The strategy should offer practical solutions to expanding sources of patient capital, accelerate shovel-ready infrastructure projects, and ensure regulation and business policies incentivise productivity improvements.
Many of these steps require coordination between different agencies and government. Local authorities and the regional corporate joint committees, such as the Cardiff Capital Region, delivering on the ground and shaping strategy, the Welsh Government focusing on devolved economic levers and removing major blockers, and the UK Government providing funding options and policy support for UK-wide issues. By doing so, Wales can orchestrate an approach that will attract more investment, both domestic and foreign, and help good firms scale up here rather than elsewhere.
Whoever is elected must make collaboration with corporate joint committees and individual councils a key priority. That’s how we take a meaningful step forward with vital regional projects and ensure no corner of Wales is left behind by the AI revolution.
- Russell Greenslade is director of CBI Wales.
