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What Wales Could Be CRESC Report for FSB Wales WHAT WALES COULD BE Lucy Brill, Luke Cowie, Peter Folkman, Julie Froud, Sukhdev Johal, Adam Leaver, Michael Moran, Karel Williams WHAT WALES COULD BE Foreword For some time many of the Federation of Small Businesses’ members in Wales have had concerns about the Welsh economy, and have questioned whether economic policymaking in Wales really meets the needs of their businesses and the communities they serve. With this in mind, FSB Wales decided to commission a substantial piece of work – one which would look at what is going on within the Welsh economy, and suggest alternative approaches to yield a better future for small businesses and communities within Wales. We felt that an outside perspective would be essential to that task. With that in mind, the team at CRESC was a natural choice for us, as we felt their previous work on the foundational economy and industry supply chains would bring valuable insights to the work. The result of the project is this independent report What Wales Could Be. It is a report that challenges much of the received wisdom that exists around the Welsh economy. However, in its recognition of the role of grounded firms it reflects many of the experiences of the FSB’s 10,000 members from across Wales. Not all of the recommendations in this report will find their way into FSB Wales policy, but it has shaped key recommendations in the FSB Wales manifesto for the next Welsh Government. The conclusions reached by CRESC may be challenging to some in Wales, but I think that the emphasis on grounded firms and its call for government to ‘up the ask’ from big business strikes a chord with many of our members here in Wales. I really hope that this significant piece of research will help to spark a fresh debate over the future of the economy in Wales; a debate that causes us to properly consider how we can build a better Welsh economy and think a little more imaginatively about What Wales Could Be. Janet Jones FSB Wales Policy Unit Chair CRESC | Centre for Research on Socio-Cultural Change 1 WHAT WALES COULD BE Table of Contents About This Report ....................................................................................................................................3 List of Acronyms ......................................................................................................................................4 Executive Summary ..................................................................................................................................6 Introduction ...........................................................................................................................................9 What Wales Could Be..........................................................................................................................9 Chapter 1.............................................................................................................................................. 12 From the Welsh Gap to the Conditions of Enterprise ......................................................................... 12 The (unclosable) Welsh gap ........................................................................................................... 13 1.2 Welsh specifics: history and trajectory..................................................................................... 20 1.3 Industrial strategy?.................................................................................................................. 22 1.4: Wales as habitat and firm diversity ......................................................................................... 26 Chapter 2.............................................................................................................................................. 31 From Churning Ownership to Building the Mittelstand ...................................................................... 31 2.1 Attracting mobile firms vs developing grounded firms ............................................................. 32 2.2 The missing Mittelstand and absent brands ............................................................................. 33 2.3 Churning ownership ................................................................................................................ 36 2.4 The new Development Bank for Wales .................................................................................... 39 2.5 Connecting SME finance with ownership ................................................................................. 41 Chapter 3.............................................................................................................................................. 45 From Postcode Localism to Connected Procurement ........................................................................ 45 3.1 Stopping leakage and the limits of localism ............................................................................. 46 3.2 Political enthusiasm: more of a good thing .............................................................................. 48 3.3 Policy confusions ..................................................................................................................... 50 3.4 Reframing the problem: connected procurement .................................................................... 55 Chapter 4.............................................................................................................................................. 58 From Key Sectors to Responsible Business ........................................................................................ 58 4.1 What the WG does: key sectors and action plans .................................................................... 59 4.2 Supermarket behaviour: capturing processor profits ............................................................... 63 4.3 What the WG should do: raising the social ask ........................................................................ 67 4.4 Residential adult care .............................................................................................................. 71 Conclusion ............................................................................................................................................ 77 From devolution to making a new Wales .......................................................................................... 77 CRESC | Centre for Research on Socio-Cultural Change 2 WHAT WALES COULD BE About This Report This is a public interest report based on independent research into the Welsh economy by the Centre for Research on Socio Cultural Change (CRESC) at the University of Manchester. Karel Williams headed an intensive eight month research project from January 2015 to September 2015 when the project’s full time researcher was Lucy Brill. The salary costs of the project were funded partly from an ESRC award and partly by FSB Wales. We are grateful to Iestyn Davies, head of external affairs for FSB Wales and Rachel Bowen, policy manager for FSB Wales. They had the imagination to see the need for an independent review of the Welsh economy; and the realism to accept that this final report would produce challenging policy recommendations. The CRESC researchers are solely responsible for the contents of the final report which benefits from FSB comments but does not reflect the corporate position of the FSB, or of individual officers within it. The CRESC centre continues to facilitate and support radical, interdisciplinary research in a way that is unique. This research team has, in different combinations, now worked together on a variety of related projects on the on-going financial crisis and on industrial policy choices, partly through collaboratively funded public interest research. Recent CRESC public interest reports include Bringing Home the Bacon a report on meat supply for the VION meat processing company and the Great Train Robbery on railways for the TUC. CRESC | Centre for Research on Socio-Cultural Change 3 WHAT WALES COULD BE List of Acronyms AM Assembly Member BIS Department for Business, Innovation & Skills CBI Confederation of British Industry CIH Chartered Institute for Housing CRESC Centre for Research on Socio Cultural Change CREW Centre for Regeneration Excellence in Wales DBW Development Bank for Wales ESRC Economic and Social Research Council EU European Union FDI Foreign Direct Investment FSB Federation of Small Businesses GCA Grocery Code Adjudicator GDP Gross Domestic Product GSCOP Groceries Supply Code of Practice GVA Gross Value Added ICT Information and Communications Technology IWA Institute of Welsh Affairs LM Local Multiplier M&S Marks & Spencer NAO National Audit Office NEF New Economics Foundation NFU National Farmers’ Union NHS National Health Service NUTS Nomenclature of Units for Territorial Statistics OECD Organisation for Economic Co-operation and Development OFT Office of Fair Trading ONS Office for National Statistics PE Private Equity PISA Programme for International Student Assessment PQQ Pre-qualification Questionnaire CRESC | Centre for Research on Socio-Cultural Change 4 WHAT WALES COULD BE RHM Rank Hovis MacDougall SME Small & Medium sized Enterprises SNP Scottish National Party SQuID Supplier Qualification Information Database TUC Trades Union Congress VW Value Wales WDA Welsh Development Agency WG Welsh Government CRESC | Centre for Research on Socio-Cultural Change 5 WHAT WALES COULD BE Executive Summary This report proposes
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