Consultation on the Review of Business Support & Development Services

Wales’ economic performance has been poor for many years. GDP per head in Wales, expressed as a percentage of the figure for the UK as a whole, has been in the low to mid 80s since the 1960s.

Contributors to the poor overall economic performance are considered to be:

• a weak indigenous business base reflecting the historic dependence on a small number of industrial sectors which have suffered major decline
  
  
• low activity rates
  
  
• low-added-value production
  
  
• too few companies exporting an underdeveloped service sector and few headquarters functions
  
  
• lack of high tech, knowledge-driven industries and low commitment to innovation and R&D
  
  
• low exploitation of the opportunities afforded by information communications technologies
  
  
• low wages
  
  
• no tradition of entrepreneurship/low business birth rates
  
  
• relatively high business failure rates
  
  
• relatively poor growth rates from small company to medium-sized company to plc
  
  
• undeveloped potential within the tourism industry

The National Assembly for Wales in its document "www.betterwales.com" sets benchmarks for the Welsh economy for 2010. Specific targets include:

• The total number of new businesses should have risen by 35,000 and the number of jobs should have grown by 135,000. The percentage of people of working age who are in employment must have increased, reducing the gap
  between Wales and the UK. The proportion of the population aged 50 to 59 (in the case of women) and 50 to 64 (in the case of men) who are economically inactive should have fallen from around 40% in 1999 to less than 30%.
  6
  
  
• Business R&D should have grown faster than in the UK as a whole over the decade. The level of innovation throughout the diversified Welsh economy must be amongst the best in the UK.
  
  
• We must be more international in outlook… the number of Welsh companies exporting and having links with businesses worldwide must have grown.
  
  
• Output per head must have risen from around 83% of the UK average in the mid-1990s to at least 90%, generating an additional £5 billion at 1997 prices.

Economic forecasts predict that the Welsh economy is likely to grow by some 2.5 per cent year on year between 2000 and 2005, which will not of itself close the economic gap between Wales and the UK and the EU average.

To close this gap within a reasonable timescale requires a step change in performance and growth across many areas of the Welsh economy. Only business and industry can generate the employment and wealth needed to close this gap.

In response to these problems the public sector has developed a range of business support activities aimed broadly at overcoming constraints to business growth and development, stimulating new business formation/improving survival rates and attracting new business activities.

The Economic Development Committee is asked to consider many proposals for business support services. The Committee has been concerned that often it is being asked to make important recommendations on the basis of inadequate information about the likely economic benefits of the proposals and without a coherent strategic context.

The Committee decided that for these reasons, and because of evidence in Wales of concerns about the effectiveness and efficiency of, and evidence of overlaps between current business support mechanisms, that its first major review should be to look at business support and development services.