Economy, Trade, and Rural Affairs Committee

I'd formally like to invite the witnesses to introduce themselves and the positions that you hold, and then we'll move into questions from the Members. If I could start with you, Howard, first, and then move to Nigel and then Riccardo. Howard.

Thank you. My name is Howard Rupprecht. I'm the managing director of CSconnected. We're a Cardiff-based organisation that has a rather singular goal of the growth of the compound semiconductor cluster within south Wales, and so we work with a lot of different stakeholders to help support inward investment and growth of our industry.

Thank you.

I'm Nigel Driffield. I'm a professor at Warwick Business School, and I also have one of those titles that only universities could have, which is I'm the deputy pro vice-chancellor, which sounds like I'm someone's assistant's assistant's assistant, which is probably about right. I study foreign investment for a living as an academic. I'm on various committees, groups et cetera to do with regional development in the west midlands, and I'm going to offer an apology before I start: I have long COVID, and it makes me yawn, so if you're asking me a question and I start yawning, I can but apologise.

Thank you very much. Riccardo.

I'm Riccardo Crescenzi. I'm a professor of economic geography at the London School of Economics, where I'm also deputy head of the Department of Geography and Environment. I have worked extensively on foreign direct investment in Europe and across the globe, trying to understand the role of FDI, location strategies, their impacts. I had several public policy roles linked with regional development, also at the European Union level. The last one has been advising the European Commissioner for Cohesion and Reforms on the future of cohesion policy, trying to link globalisation, global value chains, FDI and regional development. I also had the pleasure to offer evidence to the Welsh Affairs Committee of the House of Commons on very similar matters, so I hope I will be able to bring some helpful insights.

Also based on a report at the Department for International Trade, supported by the Economic and Social Research Council, produced back in 2016 by the LSE on FDI in Scotland and Wales, that I will be delighted to share—. For this report, we have also produced a statistical update for you, so now it's ready and I will be able to share some updated data, if it's helpful for Members for their deliberations. Thank you very much.

Thank you very much, gentlemen. If I could start by asking a scene-setting question about inward investment into Wales. As someone with quite a bit of grey hair at the sides of his head, not on the top of his head, I can remember the glory days, if you like, of the 1990s, where Wales used to attract a considerable amount of inward investment in big-ticket investment, in effect. Could you individually give us an idea of what you see inward investment looking like today and going forward? And importantly, how does the Welsh offer compete with, obviously, other parts of the UK that are seeking to attract that inward investment? I'll start with you, Howard.

I mean, I think, without having full hard data on how effective the Welsh Development Agency days that you talked about were versus how things are now, it feels a little bit more opaque. I mean, I think you were talking about an era where there was a lot of structural change happening in industry, and globalisation was happening in a number of industries. So, you had Japanese companies saying, 'Hey, we want to manufacture in Europe', or American companies wanting to get a foothold. And so there was this sort of rather ripe market of companies wanting to expand globally. And I think the WDA, as with the Irish, were very, very good at going out and courting those companies and bringing them into Wales.

I would say, at this point in time, that we're in a very different, much more global interconnected world. And it's not as obvious as, 'Hey, there's a big opportunity for a huge plant to come here.' I think it's more subtle about where certain expertise and certain technologies lie and how you grow on existing assets versus expecting something just new to suddenly drop into Wales, so to speak.

Thank you. Nigel.

So, I lived in Cardiff through the 1990s, so I kind of remember what you're talking about. So, one of the roles I have is that I'm the lead for something called the Productivity Institute, which is a large ESRC-funded initiative looking at various aspects of productivity, but I'm the lead for the inward investment element. So, we produce a quarterly bulletin of how things are going. Now, it's not always a regional breakdown, so we don't do the region every quarter. On the basis of that, I'd say Wales does okay—a kind of six out of 10. You're doing okay. I think that the—. This is where I apologise and I'm going to start sounding like an academic a little bit, but you do need to nuance the question a little bit these days in terms of understanding what investors are looking for and what the motivation is.

So, if we go back to the 1990s, a lot of the large-scale investment that came in essentially came in because Wales, within the European market, was a relatively low-cost place, and that was what you attracted. Now, if that's the aim, then the whole of the western world is not doing very well at that at the moment, because there are lower cost locations. What I would rather ask is: how is the inward investment that you are attracting doing in terms of transforming the Welsh economy or boosting the Welsh economy or creating the sorts of jobs for the people who are looking for jobs, whatever it is? And there I would then not simply benchmark against every other UK region or devolved nation. I would say, 'Okay, what is your value proposition? And how are you doing against people who've got—against locations that might be Germany or might be Taiwan or whatever? How are you doing against them?' And there I think you're doing better than okay. You're doing quite well, as far as I can see, not having had conversations with the people running the policy. You seem to be doing quite well at attracting the sorts of things that I would expect you to be good at attracting. Does that make sense?

Okay. That's helpful, thank you. Riccardo.

I have two considerations. I agree with what was said before. The globalisation landscape has changed dramatically, so it's difficult to make comparisons. We did two big breaks. The first, if we look at the data for Wales, in comparison with total FDI into the UK—. The first big turning point is the 2008-09 crisis. That's where the FDI landscape changes for everyone. So, if we look at trends in FDI projects and their value, we were on a significant upward trajectory following the crisis. There is a plateau, in general, in FDI into Europe as a continent, but in general, in terms of global FDI flows. There is another big break, however, that concerns the referendum on membership of the European Union. Following the results of the 2016 referendum, the UK in general observed a rebound in terms of inward FDI flow. So, there was a recovery. That slowed down recovery vis-à-vis Europe as a continent, because it of course created significant uncertainty in terms of access to one of the largest markets in the world. So, in general, the UK as a whole managed to recover, with another big stop with the COVID-19 crisis; Wales didn't. So, if we look at numbers, we have a big plateau—a big decline following the crisis, a plateau between 2009 and 2016, and then from 2016 onwards, the wider rest of the UK slowly goes back to an upward trajectory, although there is a change in the composition on the type of FDI that you attract, but Wales doesn't manage to follow a similar trajectory, to go back to previous levels.

So, I think that this is something that is to do, as Nigel was mentioning before, with the positioning of Wales as a relatively low-cost location with certain characteristics that were favourable to investment with access to the EU. When access to the single market ends, or is called into question with the referendum, then there is the problem of coming up with a different value proposition for Wales. And this is where I feel we see more struggles, we see more difficulties, because there is a lot of reinvention to do, with many things changing. Access to the single market is one element, but then so many other things have changed in the global landscape, including the new geopolitical framework that follows the COVID-19 crisis, and there is room there to reinvent the value proposition of Wales outside the energy sector, which is where, at the moment, most of the investment, the larger investments, are concentrated.

Thank you, Riccardo. Alun.

I'm interested in the analysis we've just heard, and I think that much of what you've said has been on a similar basis. The world has certainly changed. We remember the 1990s. I remember being a recipient of the largesse of the WDA at different times, and it certainly had a very powerful brand and a very powerful influence, and perhaps the influence was greater than some of the things it actually achieved. The world has changed and, 30 years later, we're all different people. But I'm interested in your critique of today's policy. The WDA was abolished by the then Welsh Government in order to provide more agility to work in attracting FDI but also creating more holistic support for investors. And I'm interested to understand how you think the Welsh Government is today leading that work. A critique, if you like, of the Welsh Government's current approach to policy.

So, maybe I'll kick off and give you our perspective on that. So, this is really coming from the perspective of the semiconductor industry, but what I would say is that what we see of the Welsh Government's efforts to bring things in is that they have focused on industries where there's a provable competitive advantage. So, they're not trying to sell everything. They're not trying to sell Wales as a whole, they're trying to sell key sectors where we actually can globally compete and we have certain advantages. And that is fundamentally a good thing to do. I think that if you try to cover everything, you're not going to be successful. If I were to be remotely critical, I would say that, at a process level, sometimes that falls down. I think that the front-line people we work with are very, very good on the sectoral focus, but sometimes when it goes beyond that to the departments within the Government, it can slow down and be rather bureaucratic. But on the whole, the strategy is not wrong to focus on these things.

What I would also say is that you need that sector understanding to create good messaging and a value proposition around that, and I think you mentioned value propositions as well. But let's take the semiconductor industry. While we don't have TSMC building a $20 billion fab in Wales, of our four biggest companies three of them are American companies, and they're all investing heavily, and particularly KLA. KLA has virtually doubled their site in Wales. Vishay has expanded extensively and is investing more in new technologies. So, what you've got to say is: why are American companies investing in Wales despite there being $50 billion of incentives from the US CHIPS Act for them to go and do things in the US? And actually, when you really drill down to it, it's the knowledge and it's the skills. I mean, we're broadly competitive with other European countries. Our warehouses and offices are no better than anybody else's offices, but we have a lot of knowledge here and a lot of expertise and a really good skills pipeline. So, if I were to turn that into a message to say, 'Come to Wales,' I'd say, 'You can build a factory anywhere, but you can't staff it and run it in the semiconductor industry, but if you come to Wales you can.' So, the skills thing becomes the unique selling point.

So, this is my perception as an outsider, okay: one of the advantages that Scotland, Wales and Northern Ireland have over—abstracting from London—all the other regions of England is that because of the way certain aspects of Government function, you have better opportunities to do things like align skills policy, business support, inward investment. Looking at it from the outside, it looks to me like Northern Ireland does that slightly better.

Why do you say that?

If you look at their offer to inward investors, their cluster policy, their skills policy, it all looks very closely aligned. Following on from what Howard says, Wales looks aligned on, if you like, identifying certain key sectors that you want to go for, and then the support for those sectors. It does not look like the kind of business support element of, perhaps, building the supply chain of people who might be suppliers to you. It doesn't look like that's quite as well aligned. But that's me looking as an outsider.

Okay.

Riccardo.

Yes. Again, an outsider's view. Let me use the example of the study that the LSE tried to run in 2018. We were tasked with a comparative analysis between Wales and Scotland in terms of FDI attraction. We did our best. So, there were statistical data, and then we wanted to interview the people in charge of investment promotion in order to be able to make a comparison. For Scotland, you definitely have a phone number. So, our researchers, with one click and a phone call, were able to get in touch with someone able to give them, 'We are in charge—we are responsible.' For Wales, we couldn't include a proper section where we could give a fully fledged picture of what the investment promotion strategy is. So, in short, my view, if I were to make an assessment as a total outsider, it was the lack of a phone number, in a very competitive FDI landscape that is becoming more and more competitive, because more and more regions and more and more places within Europe are stepping in and are becoming very proactive in terms of their FDI strategies. Poland is just one example, but the whole of central eastern Europe, in segments that are relevant to the Welsh value proposition, is becoming more and more proactive in attracting FDI. Their skill set is growing quite significantly, also with the support of dedicated regional development policies that, in the UK, are still in the making. So, the result is that competition is higher. You have more and more—. We surveyed all investment promotion agencies in Europe, so we have a pretty good picture of how dynamic this not only national, but also subnational landscape is, and Wales is missing this co-ordination unit, in a sense, also with an outward-facing visibility, able to engage with investors.

Where engaging with investors requires new and diversified strategies, it’s about existing investors facilitating, for example, the expansion of existing foreign activities. So, that’s not only about the traditional FDI attraction, because more and more investment promotion agencies around the globe are saying, 'Okay, attracting FDI is only one part of my strategy; another important part of my strategy is growing the investment that I currently have, or convincing firms that are part of a wider business group to bring more of their activities and their high value added activities into our local economy'. But this requires cost and contacts with investors. It requires multiple contacts, not just a one-off. It’s not like a sales pitch; it’s really about customer care, and extensive and, sometimes, sectorally focused customer care that requires a deep understanding of the business model and the technologies of foreign investors that are present in the local economy. So, a targeted approach is very good, and is definitely the way in which multiple economies at the moment are going in terms of FDI attraction.

Thank you, Riccardo. Alun.

It’s a fascinating response from the three of you. I’d just like to go a little bit further, if I could. Howard, I think you said something a little different to other witnesses. So, if I could, I think what you’re saying, Riccardo, goes beyond a telephone number. And I get the sense that the telephone number, if you like, is the front door, but there are a lot of other things that we need to be doing behind that door. And then, also, the coherence, Nigel, seems to me to speak of a lack of co-ordination, of leadership, of recognition that the Welsh Government has within its economic development department of the needs of those people, of the customer, if you like, who you’re speaking to. Is that what you mean, or is it something different?

If you wanted to question all the people who are doing this, on this, what I would do, if it were me, is, as a starting point, I would start with the report that Richard Harrington did, which is very English centric.

Yes, that's fine.

Don't get me wrong, it is very English centric. And I would take it and I would say—. And that is very critical of how England does things, and how you’ve got the department for skills who’d never talk to inward investment because they’re seen as separate things. And I would go and I would say to the people, 'How much of this applies to you? Is this the same problem in Wales as is identified here? Are there the same planning problems? Do you—?’ If you start off and you’re running a multibillion-pound business in Shanghai, you start off and the first person you talk to is probably the Prime Minister, and then the next person you might talk to is, let’s say, the mayor of the west midlands. But then, suddenly, somebody says, 'Now, you have to talk to Warwick District Council'. 'Well, why do I have to do that?' 'Well, they’re your planning authority'. Now imagine you’re—. You’d just go, 'Well, I’m—'

This is absolutely true. I think you're absolutely right, yes.

If that is still the case—. If that is equally the case—forgive me, I'm not an expert on Welsh planning systems—but if that is still the case here—

You don't want to be. [Laughter.]

But if that sort of thing is still the case here, then there's your immediate stopping point. Now, the other thing I was talking about—. One of the things that I've talked to Richard Harrington about quite a lot is, for example, you go to a potential inward investor and you say, 'If you come here, we will fund now—not wait for skills shortages to become apparent—we will fund 400 apprentices in that FE college'. And you could just do that. But, in England, you've got the department for skills going, 'We're not doing that until someone—.' So, I don't know whether, within Wales, you have the capacity to do that. Northern Ireland and, as Riccardo mentioned, Scotland seem to be doing that bit quite well because of the kind of devolution offer. That was what I was saying.

Yes. Howard.

I think you've touched on something really important, which is actually the customer journey. All too often, I see Welsh Government seeing it from their perspective of how to minimise risk in each of the steps. And what you said happens absolutely does happen—it cascades down and you end up with somebody who's not really responsive and thinking about what that customer journey is.

But going back to what Riccardo said about the telephone line, I think that's almost a little bit more symbolic, because I know Wales, on the Business Wales website, does have a place where every enquiry is supposed to go in. But, actually, we're really talking about how you engage potential customers, and whether you do that in a reactive way or whether you do that in a proactive way. Now, having a phone number is a reactive way, waiting for someone to pick up the phone and say, 'Hey, Wales, can you do a new semiconductor factory?' Now, what I would say is we're actually much more proactive in terms of working with the Department for Business and Trade, at both a Wales and a national level. We work with the Welsh Government teams as well and we also work with Cardiff capital region. So, we're going to industry events and we're involved in trade missions where our likely customers are going to be. So, our first interface with these customers is not somebody picking up the phone and calling a phone line.

And then, I think another thing Riccardo raised, which I think is really, really important, is the difference between new customers and existing customers. Once you've secured a customer, if you don't look after that customer, they are not going to grow. And I've already explained to you that, in three of the biggest companies in our cluster—American companies—they're growing because of that relationship and that continued involvement going on. You can't bring them in and abandon them. You've got to work with them, and they're probably your best opportunity for continued growth if you can provide what they want, whether it's skills or whether it's other kinds of things. So, yes, customer journey, but can we be proactive in how we engage people, rather than be reactive?

But also, I think, Riccardo, what you were saying was also bringing together all the different elements of business support to provide coherence. Is that a fair analysis of what you were saying?

Absolutely, absolutely. That's the coherence. So, there is an outward-facing element, like the phone number, but the phone number, if you do have an actual number, and no-one is really able to answer 10 questions by a bunch of researchers from the LSE, let alone engage in a sustained manner with an investor—. So, the idea is that you have a communication site, and then you have co-ordination, an internal co-ordination, and then intelligence—so, being proactive, understanding, 'Okay, what type of investors do we really need? Are these investors already present, for example, elsewhere in the UK, so that it's easier to bring them to Wales, vis-a-vis trying to attract an investor who's never invested, for example, in Europe or in the UK.' So, there is a lot that can be done, having a unit that is able to guide also this proactivity with data. Today, what we can do in terms of the use of large language models, artificial intelligence, in terms of predicting, for example, the likelihood of a particular type of investment, lending or not lending, or predicting the potential impact of investors, are just incredible and completely new. So, there is a matter of creating intelligence, a matter of proactivity, as was said before.

An important element of co-ordination of a multiplicity of strategies, because the ecosystem—. I think 'ecosystem' is the key word. In our work, we refer to 'investment promotion agencies' or 'investment promotion efforts' by regional governments. We often use the metaphor of 'plumber'. So, what we need is something that plumbs the system, that works as a plumber of the local ecosystem, that builds all the pipes, that builds all the environment that is needed for the investment to actually embed into the local economy and expand. That's why you need co-ordination, from planning to the type of skills. When we look at what some investment promotion agencies are doing at the moment in Europe, they are training the workers that are needed to hold prospective investors, not necessarily even within their country, but abroad. So, they are proactively managing immigration flows of people with particular skills that they know are going to be needed by domestic but also by foreign firms in particular segments of the skill portfolio that is needed in particular sectors that they are trying to invest in.

So, such a proactive activity requires an understanding of what is needed—what is it that domestic firms need, but also, so that you see the foreign and domestic component, what is it that current and prospective investors will need and how can we make it possible? Do we have the resources available locally? Do we need to train local people? Can we do this in a credible time frame or do we need a short-term strategy to deal with a particular skill shortage at the moment that might be filled by clever, smart immigration policies, for example, and then complement that with training programmes that create a domestic skill set that create the supply of these skills from the domestic labour market?

Sam—

Sorry, can I just—?

No, I can't. Time to move on. Sam.

Riccardo, thank you for that whole answer there, because that's touched on a lot of what I was going to go in on around tackling some of the barriers towards inward investment. But I want to now take it slightly differently given that comprehensive answer there. And to Nigel and Howard in the room, the one thing that I've always thought that we don't do as well in Wales is tap into the diaspora element of Welsh diaspora, looking at inward investment, always looking at alternative inward investment from other countries, rather than using some of the good links that exist through GlobalWelsh, New York Welsh, for example. And there are examples that I will put to the Cabinet Secretary, when they're in front of this committee, of e-mails just going unanswered from Welsh diaspora looking to invest in Wales, as just a first point of contact, and I know we've touched on some of that sort of bringing together some of the elements around contact.

In terms of Wales as a brand, an identity and leaning on the diaspora element of it, where do we sit, not just within the United Kingdom—where do we sit with other similar nations in terms of the strength of Wales plc? Nigel or Howard—whomever.

I can kick it off. I mean, I think Wales has a good reputation. It's not vilified in quite the same way as either America or the UK can be sometimes, so I think people are generally favourable towards Wales.

Again, talking around the semiconductor industry, we're one of four recognised clusters in Europe. So, we have occupied a very specific position around compound semiconductors and we have a global reputation. When research and development delegations or academic delegations came from Canada recently, where do they go? They go to Scotland, they go to Cambridge, they go to Southampton and they go to Wales, because they know where the good stuff is happening in this particular field. So, I think we have a very good global reputation both as a country and also for our industry we have.

Could I just quickly come back to the point you made there, that Wales has that good reputation? That's great to hear. Is that with those that already know, who are already dealing in Wales, or is Wales perceived by those who don't have any dealings in Wales or the United Kingdom as—? Do they see Wales as favourably?

Well, at the Wales investment summit—I've forgotten who it was that was talking, but they were saying that the whole Wrexham thing has done more to put Wales on the map than anything else has done in the last 40 years. So, I think that there's certainly something around that. There's greater visibility than there was. I do think people maybe do not understand the subtlety of how the UK is structured, and I would also say there is—. One of the good things when we're representing the industry here is that we can very quickly and easily get access to senior people in Government. And to your point about England and the rest of the country, it's much easier, coherently, to sell a Wales story than a sort of a random UK story. You can bring in the big guns quite early on and meet certain decision makers and that kind of thing. So, I'd say generally favourable and good.

Okay. That helps. Nigel.

I'm not going to speak to the diaspora point because I don't know—

Okay, fine.

I don't answer questions that I don't know the answer to. I think—

You'd be no good in politics. [Laughter.]

Maybe I chose the wrong profession. [Laughter.] I go back to what I said before on the advantage that the three devolved nations of the UK have in terms of being better able to co-ordinate things; I think all three could probably do a little bit better at it. One of the things that struck me when—it happened to be in my bit of the world—the UK investment summit was held, whenever it was, not very long ago, I went through, and I could have predicted what would've been highlighted in every place. Because in my region, London still thinks we're hitting metal with hammers and we look like the Peaky Blinders. I'm exaggerating slightly, you know. And here, they still think in terms of—. Everybody who is in the UK who is not in London all have a job of moving the dial on the understanding of Whitehall of what the rest of the UK is actually like. And I would say that that's on all of us. I mean, that's on west midlands just as much as it is on Wales. But I think Whitehall is still stuck in traditional industries. If you don't get out of that, the problem with that for inward investment promotion is you end up promoting what you've already got, rather than what you could be world-leading at in the future or what's emerging or what's coming out of Swansea University or Cardiff University—you know, what could be the next thing. You end up letting London just promote what they think you've always been doing. So, I think that's a bigger problem than the perspective, say, of Wales in America or whatever.

Okay. That's interesting. Riccardo, any comments to add around diaspora or the perception of Wales?

Yes, very quickly. I think it is important to also look at outward investment, in the sense that a lot of the conversation is also focused, I think rightly so, on inward investment, what it is that foreign investors are doing in terms of investing into Wales. However, an important source of connectivity, together with the diaspora linkages, of course, comes from what is it that Welsh companies are doing abroad, so in terms of their outward investment. Because this creates links in foreign economies where Welsh companies are active and build a reputation. So, this is also another element of connectivity that can be potentially leveraged, not only because also outward investment has a significant potential for productivity, to generate productivity impacts, employment and expansion of domestic activities, but it creates the ground, because the Welsh companies that invest abroad have requirements, for example, in terms of their suppliers, in terms of the type of skills and jobs that they demand from the local labour market, similar to foreign investors that come into the Welsh economy. So, they prepare the ground, they are very important players to be monitored and potentially leveraged in order to see what type of investment can complement what they do abroad. So, an investment promotion strategy, an internationalisation strategy, should not only focus on inward investment, but also on outward investment: what it is that Welsh companies do abroad. And this can be another important element to be leveraged, as part of a 360-degree internationalisation strategy that aims at boosting local and regional development.

Thank you, Riccardo. Thank you, Chair.

Hannah.

Diolch, Cadeirydd. I'm going to turn to clusters and locations. I think the first very general question to you is—and I think we've touched on it briefly in your opening answers—how important do you think clusters are as a mechanism for attracting inward investment? Do you think both Governments, UK Government and Welsh Government, should focus on any new clusters or perhaps just focus their efforts on those that already exist? I'll go to you, Howard, first, because you were ready to go then.

Yes, I was in line. [Laughter.] I think clusters are hugely important. I'll start with my own experience. I had spent the 20 years between 2000 and 2020 working, first, in California and then another 10 years in Finland. Moving back to the UK, in the industry that I work in, there is no way I would have moved here if there hadn't been a cluster. People do not move internationally to go to a one-horse town—it's as simple as that. The magnetism of a cluster to bring in skilled people, from all over the world, is really, really important. You're going to get natural success and failure with that, and people are going to be mobile and they're going to move around that cluster. So, it's got to be a good place to live and it has to have those things.

Now, the second question I'd come on to, though, is: what does a cluster constitute? There's an awful lot of people that claim to be a cluster when, actually, what is critical mass with a cluster? In our industry, it's intrinsically linked to the universities because we're very research intensive. The semiconductor industry globally spends about 17 per cent of revenue on R&D. That's second only to pharmaceuticals. So, any cluster in semiconductors is normally linked to world-class universities, which both Swansea and Cardiff absolutely are in this field. So, you need this industry, you need finance, both public and private, you need academia, and you need people. That's what a cluster is. If you've got a cluster, it will be an attraction point—for talent and investment.

Thank you. Nigel.

Chair, I'm happy to go next, but Riccardo is one of the world experts on this, if you'd like to turn to him first.

Okay. Feel free, Riccardo—jump in.

Thank you, Nigel. I'm not sure about that. [Laughter.] I think clusters are a good thing when they are a good thing, in the sense that they work when they work and when they work organically because of market forces. So, definitely, as was mentioned before, more and more of the competition for FDI happens across global clusters. It's not necessarily about entire countries, but it's about specific locations within those countries. So, the clusters—the concentration of firms, activities, universities, highly localised ecosystems—are the big players that compete in the global arena for the attraction of FDI. As was mentioned, you don't just go anywhere, or somewhere in a space; there are very specific hotspots.

However, I think it's a different policy question as to how and to what extent these clusters can be created artificially. So, where there is no cluster, by means of a policy decision, we designate a particular area, and we say, 'Okay, this will be the next cluster in this particular industry.' Here, the history of failure is just incredible. So, when trying to develop from the ground up new clusters, the attempts have been so numerous across the world, but their success is well below statistical significance. So, if you try randomly, you are more successful.

So, the idea here is that, yes, they are important. So, it makes sense to invest in and reinforce the connectivity, even if the current state of technology is not necessarily only local. So, creating the—. Investing in existing clusters also means building their external connectivity, their capacity to outreach, to go outside in terms of inward and outward investment, like I mentioned. So, having highly connected clusters—that's definitely important.

On the idea of, 'Shall we create new clusters?', it's something that can be very expensive and a type of high-risk initiative. In the current framework of highly constrained public budgets, it makes more sense, like was mentioned before, to create the conditions, to create the playing field in multiple places, to have a strong value proposition and then allow the clusters to develop to the size and to the extent that is needed and demanded by market forces and by firms' needs.

That's my way of looking at clusters. They are definitely important. They are definitely the key players today. However, going to the policy step and saying, 'We should build clusters, or create new clusters where there are none'—maybe some will be about the evolution of existing clusters. They might have an evolutionary trajectory that makes them something different—that could be—or some clusters will die and others will emerge. But the evidence suggests that trying to use public policies to interfere with this process is something that is very, very high risk. So, it makes more sense, in my view, to invest in creating the conditions, and then let the spatial configuration that is most suitable for the local needs and for the particular demands of the specific technologies at this particular moment in time decide what is the most suitable spatial configuration.

Thank you. Just picking up on the point you said there—that was really helpful—around the capacity to outreach and be highly connected, both in terms of inward and outward investment, I know you've argued previously about the need to spread the benefits of inward investment. In your view, how can the economic benefits of inward investment potentially be spread across different parts of Wales?

Well, there the issue is very much about the supply chains that are built around the investors. So, you can have a large foreign investment that remains completely isolated. As an extreme, you can have what we call a cathedral in the desert, or something completely isolated from the external environment, that just comes for the, for example, subsidies. The European Union has lots of examples where the use of, for example, cohesion funds has created incentives for firms to locate their activity in a particular place, but then all the inputs into these particular activities were coming from elsewhere, so the local multiplier is very limited.

So, the role of regional development policies and of a careful, well co-ordinated policy for foreign investment is, like I mentioned before, acting as a plumber, so building all the connections in and out of the particular investor, so making more and more local firms become suppliers—first-tier, second-tier suppliers of the local investors—creating connections with universities, using these as a stepping stone for the upgrading of domestic firms. So, to become a supplier of this particular foreign investor, you need to raise your standards. You need to invest in innovation. You need to be able to work to these particular requirements. And that's something that can be definitely supported successfully by public policies when firms, by becoming suppliers, by being part of procurement, for example, of foreign investors, upgrade, become more proficient, become more innovative, learn. So, this is the input-output, using the supply chain.

The labour market is another channel. Technological exchange, technological collaborations with universities among firms is another part of a possible strategy to spread the benefits, to maximise the local benefits from inward and outward investment. This is, in my view, a much better and lower-risk use of public resources. And this might lead to the development of new clusters, for example, where these suppliers tend to locate in the proximity of the foreign investor, where the foreign investor acts as an anchor for the development of the cluster. Or it might be that, for these suppliers, it makes more sense to be located somewhere else where there is access to other types of resources—better transport infrastructure, energy. There can be a variety of other location factors. This is not a source of consent. If spatial proximity is not needed, there will not be a cluster configuration. But this doesn't mean that there are no visible economic benefits to the region and the local people.

Thank you. And I will come back to you now.

No, that's fine. So, if I think through what's been said, just to pick up on the clusters point, first of all, if one uses the Department for Science, Innovation and Technology's clusters map and one types 'Wales' or wherever, one of the clusters that it will find just the other side of Newport, just before you get to the bridge almost, is apparently there is a logistics cluster. Now, there isn't. There isn't a cluster. There's a bunch of probably quite successful logistics firms moving stuff up and down the M4 and going up the A460. I've nothing against that, but that is not, in any meaningful sense, a cluster in the sense that you asked the question.

The way I would phrase it, just to finish up, is that one of the other challenges that we have when we come to defining clusters in the UK is that travel-to-work areas are too small. So, we end up with quite tightly defined bits of the world. Because can you—? If you think of Wales, on the geography of China, it should be trivial to live in Swansea and work in Newport. Now, that probably is, because you just get on a train and whatever, but I posit there are lots of other bits of Wales, just like there are lots of other parts of the UK, where, if you get a job and you need to use public transport, it can be 25 miles or an hour and a half. And that’s one of the limiting factors. If we want clusters to develop, we want thick labour markets; you want to draw on as many skilled people as you can. And if you are limited by public transport, you're limited by transport infrastructure, then the clusters are smaller and then they're weaker when it comes to attracting investment in.

To just pick up the last point you asked Riccardo, if I may, am I okay to keep going or do you want me to be quiet?

Briefly, please, Nigel.

The way I would put it is: what are you trying to do? If we are in a location where what we need is we need jobs for people who are underemployed, then that's one investment public policy proposition. I posit there’s probably nobody in Cardiff with a PhD in biotech who is unemployed, so, if you want more of those, then what’s the skills policy, what’s the education policy? So, in terms of maximising the benefits, it’s what are you trying to do, and then you can position the inward investment proposition within that. And I could talk about that for hours, but I shall stop.

Sadly, we don't have hours.

The clock tends to beat us on situations like that, Nigel.

Just one very, very quick question.

Very briefly if you could, because the clock is nearly beating us.

I'll just come back to Howard. Just from the perspective of your experience with the semiconductor cluster, what would you say has worked well and what would you say could work better?

Hmm. Ah—

You're meant to answer that really quickly, according to the Chair—

Yes, sorry, I was going to say that what works well is having a good, coherent story. And to touch on what Riccardo said about supply chains, they're actually part of that attraction as well, getting companies to come here—they know they've got the suppliers as well. So, having things that are of interest to the companies coming in is important, and being able to articulate that and communicate that, that works well. When it gets bureaucratic, it doesn’t work well.

Thank you, Howard. Jenny.

The south Wales industrial cluster was launched with a fanfare a few years ago—a lot of emphasis there on energy policy, both creating new sources of energy and also capturing existing energy generated. I just wondered: is that a successful or an unsuccessful? Because it has all gone very quiet.

The honest answer is that why it has gone quiet I don't know. I don't know whether it has gone quiet because it has gone quiet, or—. I'm not a physical geographer, but you look at the topography of Wales and it is an obvious thing to do. But as to why it has gone quiet, I can’t tell you. Generally, the reason things go quiet on energy investments is because some bright spark decides to change the pricing mechanism. That’s generally why things go quiet. Somebody suddenly thinks, 'Oh, that's far too much. Why are we paying them this much? Let's cut it', and then investment stops. That's generally why. But as to whether that has happened in this case, I wouldn't want to speculate.

Okay. But how important is it to have an industrial decarbonisation policy, which the economy Secretary spoke about yesterday? Alternatively, decarbonisation policy requires us to have alternative sources of energy that aren’t carbon intensive. So, isn't that a—? How significant an issue is that for attracting inward investment—reliable sources of affordable energy?

So, one of the biggest problems that any energy-intensive industry has in the UK is the price of energy.

And the link to gas prices.

Just the price of energy, for whatever reason. Now, I’m assuming you don’t want to get into why that might be and spend a couple of hours discussing UK energy.

It would be an interesting conversation.

It might be.

But it's a significant issue, isn't it, when somebody's deciding whether to go to this country or some other place.

Absolutely, it is, yes.

I would add on that, without trying to be cynical here, that the companies primarily care about the cost of energy, and investments in clean energy haven’t translated into lower costs of energy in this country as a whole. And so, are we competitive on energy in this country? No. Simple as that.

But how much is that down to the focus, or lack of focus, on this as a key part of our industrial policy?

I don't think it's a focus issue. I think it's a policy issue as to how that translates into pricing for companies. So, I think there's a systemic problem, as you say, which we could talk about for 10 hours.

Okay. All right. We've already, I think, discussed the dispersal of advice that is not helpful to people who want to decide whether to come here or not, so I won't pursue that further.

Professor Crescenzi, you've previously highlighted the end-to-end support provided to inward investors by the Singapore Economic Development Board. What do you think Wales can learn from Singapore, with the caveat, of course, that their human resource policies probably would clash hugely with our social partnership models?

Thank you. There are a variety of examples that Wales can learn from without looking at best practices, in the sense that we can just transfer one model and use it in Wales. The idea is that there is a changing landscape, there are different conditions. But there is a lot that can be learned from Ireland, for example, from what is being done in Scotland. There is a lot that can be learned from a number of other competitors in terms of other regions in Europe. So, there is a lot that can be learned, and we try to, in our study, bring in some comparative examples.

But I think the key issue of the successful cases is that the focus is on key, priority sectors that match well with the need of the local economy and internal co-ordination. And maybe another element, just to go back to what was said before about decarbonisation, is also having local economic development and employment objectives in mind. Decarbonisation objectives can be and are indeed pursued through investment in the energy sector. However, there are plenty of other investments—it's something that we have been studying extensively—that can be greener, so that can contribute to decarbonisation objectives outside the energy sector, creating much bigger employment opportunities. Because also, when we look at energy investment, energy investment is high capital, so they are very expensive, big investments, but their capacity to generate employment is very limited. It's limited to the construction stage, and then there is some job creation linked with the maintenance, especially when it comes to renewable energy.

So, the issue is that it's true that, in the medium run, this investment can have an impact by lowering energy costs, but, on the other side, on the other end, when we look at their capacity to generate an economic development multiplier in the sense that we have discussed before, this is relatively limited. So, I think one of the questions that other players are asking themselves is: how can we pursue decarbonisation objectives, which remain a priority, which remain important, while also pursuing economic development and employment objectives? And there are very interesting opportunities coming for green investment outside the energy sector, where decarbonisation, the reduction in emissions, or other environmental objectives, including, for example, the preservation of biodiversity, can be pursued and can be achieved in other sectors that can create more jobs and develop the wider supply chains that we have mentioned before. And there are interesting examples on how this is being done in other European regions and clusters.

Do you want to just tell us a bit more about how it's being done in other European regions? Denmark and Iceland seem to have done quite a lot of work in this space.

Briefly, please, on that point, Professor, because the clock is ticking over there.

Yes, absolutely. Let me just hint, and then I'm very happy to follow up and dig deeper in a bilateral or with whomever is interested. I'm really very sorry not to be with you in person today.

There are two different types of strategies. The first is when you do have potential in terms of renewable energy—so, how do you build an ecosystem and how do you build activities that can create jobs that are linked with the availability of renewable energies, for example? So, there is a complementarity. But, there are also strategies where regions have leverage, the availability of energy that comes from outside the region to develop activities that are green in terms of a reduction in emissions not linked with renewable energies as such, including in the construction industry, for example, or cement, or R&D activities on how to generate new technology or new processes that can reduce emissions. So, there are a lot of activities that can be in the green ecosystem that are not only reliant on the energy sector, for example.

Thank you, Professor. We'll follow up, if we may, with a letter.

I had one final question, which we haven't mentioned at all—

Very briefly, if you could, Jenny.

—which is the role of the Basque Country and the Mondragon model. There are a lot of similarities between the Basque Country and Wales in terms of an industrial profile that still exists that is absent in lots of English regions. So, what does the Mondragon model tell us about the way of generating the jobs that we need? I wondered if you could briefly—. Have any of you looked at this at all?

I'm not going to speculate on that.

Okay. Fine.

Thank you very much, everyone. Luke, the final set of questions, please. We're into injury time, so don't—

Yes. I had a whole host of questions on skills in particular. It's an area that I'm particularly interested in. But, given the time, I think I'll ask—

We can go until 10:40, so you've got 10 minutes.

Right. Okay. I thought we were finishing at 10:30, sorry. In that case, one of the things we are constantly discussing in proceedings within the Senedd at the moment is the skills shortages within the Welsh economy. One of the questions I had was around the perception outside of Wales of those skills shortages. Is that something that's blocking people from wanting to invest within Wales? Or is it something, actually, that we perhaps are over-inflating ourselves, and we could find a partnership with those people wanting to come into Wales who might want to invest in some of our skills organisations?

I'll answer from a semiconductor perspective. Skills are dependent on the sector, whether it's media, whether it's fintech, whether it's semiconductor. I couldn't comment on the skills needs in those other sectors, but I would say skills are incredibly important in our sector because it's a very knowledge-intensive industry. My concern on the skills side—at a high level, between the universities they're putting out very good, highly skilled PhD and masters level graduates that are satisfying the needs—is that the really acute shortage that is going to get worse is in vocational training and general engineering roles. The country has spent far too long not doing enough apprenticeships, and there are a lot of people who will be retiring and need to be replaced. When I talk about doubling down on skills, I really mean we need to get really serious about vocational training in large numbers if we're going to maintain the growth. People talk about skills as a secondary issue, but our ambition is to double jobs from 3,000 to 6,000 jobs in the next five years. No skills, no growth. It's as simple as that. So, you'd better produce skills and deploy them to the right areas, and if we don't, we're in trouble.

Yes, all right. It really is as simple as that.

Yes, as simple as that.

If you haven't got the people able to work in the industries, then you're dead in the water before you begin. I suppose, then, there are challenges for the Welsh Government in its own budget. We talk about, for example, the loss of European funding. What I've been really interested in is how we think outside the box, how we might be able to partnership with some businesses, how we might be able to use stuff like the city and regional deals, the CJCs within Wales, to leverage some additional funding, trying to get us closer to what those levels were before we lost that European funding. Ultimately, if we're going to get to the scale that you've just mentioned there, and the scale in other sectors as well, we need significantly more funding.

I would absolutely like to see those efforts on big initiatives to drive more skills. I would also say I think we should have more agency as a country than we've got. One of the challenges is that education is devolved and there's an issue with the apprentice levy and how that comes back to the companies that are paying it. So, all the companies here are paying the apprentice levy but it doesn't directly come back in the way that it should do. As a small country with good access to Government, we should be able to sort this out ourselves and, instead, we just have a problem there.

It's not just companies; local authorities are unsure where their contributions to the apprenticeship levy are going. So, in those conversations, then, is that an open door to the Welsh Government to be able to have a conversation around those types of reforms? Are they even happening?

It will be warmly received by all the companies in our cluster. Currently, with the investment zone pending and the local innovation partnership funds pending, there are many expressions of interest going in, and skills are key to many of those interventions. So, not just from my organisation, but from other organisations, I know people are heavily invested in skills.

Nigel, do you have anything to add on this?

I don't have a great deal to add other than if we bring the question back to inward investment, typically, a skills shortage will not in itself put off an inward investor if there is clear evidence that there is an intention to do something about it, particularly if we're talking level three and four-type skills. 'Okay, we need a whole bunch of technicians to do whatever it is.' 'Yes, okay, you're going to start building something. By the time it's built, we'll have a bunch of people who are already in the third year of their apprenticeship.' That's a relatively easy fix, in theory. It's often a problem in practice because of what I talked about before in terms of co-ordinating activities. So, that's what I'd say on the importance for inward investors.

If I could go to Zoom.

Riccardo.

Yes, I totally agree with what Howard and Nigel mentioned before. I just want to go back to the problem of funding. That is definitely an issue with changing budget priorities across the globe. However, here, the issue is thinking about public investment as a multiplier for private investment in education. So, it's about creating a platform for companies to be able to contribute to the development of the skills that they need. Like Nigel was mentioning before, a conversation with an investor can be, 'Okay, as part of your physical investment, we create a platform whereby we can co-invest in the development of a particular type of skills.' We have seen investors in other geographies co-funding or even creating academies, developing institutions sometimes and often in co-operation with local entrepreneurs to train in particular skill sets. So, that's the availability of the people with the necessary preconditions to be trained—so, having the basic, fundamental prerequisites to be trained to then go into particular, more specialised tasks.

But this does not necessarily mean something—. You need a flexible structure because it's very difficult to forecast what the need of domestic and foreign companies will be in four, five, six, 10 years. So, you don't want to be creating more transaction costs, creating more structures, but you want to have flexible, sometimes sector-specific platforms to provide particular skills, to counter a particular deficit of specific skills. But this doesn't necessarily need to be something where significant or majority public funding is needed. Sometimes it's really about providing the platform and to act as a multiplier for private investors, as well as for contributions by the people themselves to get trained and partially fund their education and their investment in skills if there is a clear proposition of these skills also being transferable—'So, what I'm learning is something that I can use here, but then that's a career boost for me to become more productive and then work wherever.' So, there can be dynamic new funding models that do not necessarily rely on heavy public funding, but where the role of the Government is mostly about creating the platform and acting as a multiplier for private investment.

Thank you.

Great. Thank you. I can see the Chair is leaning forward now. That normally means I need to hand back.

Thank you very much, Luke. Thank you very much, gentlemen, for your evidence and in particular for the papers you provided prior to the meeting as well. The record of the proceedings will be sent to you to have a look at. If you have any concerns over the accuracy of that record, please raise it with the clerking team, otherwise that will form the official record of our proceedings this morning. Thank you very much. We'll now move into private session while we change guests and move to the second panel of the morning. Thank you.

Okay, we're back in public session for the second evidence of this morning's inquiry into inward investment into Wales. Welcome to Russell Greenslade from the Confederation of British Industry Wales. I'll ask you to formally introduce yourself and the position that you hold, for the record, and then we'll go into questions. This session is scheduled to last an hour. We are due to be joined by an additional witness, but that individual has had a problem on the M4 this morning, and we're hoping that he's going to Zoom in at some point in this session.

Russell, could you formally introduce yourself, please?

Thank you, Chair. My name is Russell Greenslade. I'm the CBI Wales director.

Thank you, Russell. The inward investment profile of Wales over the last 30 years has had its ups and downs. Obviously, there have been various formats used, from the days of the Welsh Development Agency to the Welsh Government's operation taking over, obviously, the role of the WDA. The numbers have been impressive at times and disappointing at times. Can you set the scene for us from a CBI point of view, of how you feel the Welsh Government and the inward investment policy it pursues has served Wales in attracting those key inward investors to create quality jobs here in Wales?

Certainly. Thank you, Chair. So, first off, there's no doubt that the Welsh Government is committed to supporting the economy as well, and that is with intent. Also, from a business perspective, the challenge now is less about direction and more about pace and consistency. That needs to be delivered, certainly following the very good Wales investment summit, which I personally attended. And I left that Welsh investment summit feeling very proud to be Welsh and with an excitement about what we could do here in Wales as well. I think, from a business perspective, Wales remains competitive to invest in—that's for certain. Where it underperforms is on scale and pace, and repeat investment as well. So, hopefully, from the investment summit, we're going to get some fruition that goes on with that, with investors that would have visited that summit, for example. They are decisive factors in long-term investment from businesses as well.

So, what CBI members consistently tell us is that delivery certainty now matters as much as cost. The bottom line to a business, as we know, is key, but now that certainty and that pace are equally as important for business to make that right investment decision and to create jobs.

So, as I touched on, the investment summit was very welcome to the business community and our members who did attend that, as well. As I said, I was there, with my boss, Rain, who is the chief executive of the CBI as well, and we met with numerous different businesses there and investors looking to come in. The key test now, as members themselves would recognise, is the follow-through, and that clear ownership of who is doing what and when. And those elements will then turn to momentum in the outcomes.

So, from an economic standpoint, Chair—going back to that—the greatest opportunity lies now not in additional promotion, but retention and growth of existing investors we have here in Wales. We have some amazing businesses here in Wales already, and it's how we can support them to grow, as well as inward investment that's coming in. And there are numerous different things—projects and policies—which are under way with that. But if we could do more on that, I think we would see more scalability of the businesses that are organically grown here in Wales as well, and maybe have more than one public limited company that's grown here in Wales.

Thank you, Russell. Our other witness has joined us—Gus Williams. Thank you, Gus, for joining us. I appreciate you've had some issues this morning. I will ask you, for the record, if possible, to formally introduce yourself, and then we'll carry on with the line of questioning, and Members will invite you to comment on the questions, similar to Russell, who's in the committee room with us. Are you happy with that?

Yes.

So, could I ask you, formally, to introduce yourself and the position that you hold?

Yes, very much, and, apologies, my laptop did the wheel of death, so I've had to join on my phone. I'm Gus Williams. I'm CEO of Bevan Buckland. Bevan Buckland is the largest independent accounting firm in Wales. We are headquartered in Swansea. That's the day job, but I'm also CEO of South Wales Chamber of Commerce. That's a position I've held for the last 12 months or so. So, I spend most of my time talking to Welsh businesses. That's my background, really.

Okay. Thank you, Gus. Russell, in your initial comments, you listed three or four key aspects of what you believe inward investment policy should be about, and what it needs to deliver. It was interesting that you didn't mention skills. In our last session, skills was a particularly prominent issue that kept recurring, and I noticed the Institute of Director's manifesto this morning highlights that the biggest of issue of concern for their members is the problem around skills as they see it. Do you believe that there is an issue around skills in Wales that, obviously, a potential inward investment, when thinking of workforce, would find an issue in maybe the profile that they're looking for for the workforce that they need?

Yes, skills is up there when we talk to businesses—certainly from inward investment or current investor here, and also where the new pipeline is coming from as well, certainly with—. For instance, there was an announcement this morning about what's going on in Pembrokeshire and what's going to be going up in north Wales—there are 7,500 jobs possibly. So, we need to make sure we've got the pipeline coming through for that as well. But we work very closely with further education and higher education on the skills pipeline that we need to do. But skills is always up there with businesses because they need to plan accordingly, to upskill their workforce as well, as well as recruiting new. And the industrial strategy could have and will have an important part to play in that.

Thank you. Gus, would you take a similar view—that there is an issue around skills when potential investors are considering locating to Wales?

Yes. I think—. Investment decisions really, fundamentally, come down to a few things: it's cost and availability of labour and skills, it's cost and availability of technology, cost and availability of transport, cost and availability of energy, and then, to some lesser extent, it's obviously the cost and availability of land and property. But in my experience, most of the big things that really—. It comes down to labour and skills, energy and transport costs. They tend to be the three sort of significant cost factors when deciding where you're going to locate investment. And then some softer things come in, which is the level of skills that are available, perhaps the availability of capital, supply chains, the co-location of other industries that can support yours and things like that. So, the basic fundamentals everyone looks at are your transport, your skills, your people and energy.

Okay, thank you, Gus. Hannah.

Thanks, Chair. I'm going to turn to focus on the kind of sectors that are targeted for inward investment, as well as the cluster approach. My first question is very much, you know—. To what extent do you think the UK and Welsh Governments are focusing on and targeting the right sectors, and are there any emerging sectors you think we should be including? I mean, I've got a list of about seven here, which we'll all probably be very familiar with, but are there any reflections on, actually, how we should build on what's already being done, but anything else you think is missing at the moment? I'll just go to you, Russell, first, because I'm looking at you and you're in the room.

Certainly. So, you know, this sector—. Advanced manufacturing, life sciences, semiconductors, clean energy and digital—those that go back to the skills side of it, which the Chair mentioned—it's getting the right skills for those sectors to grow, whether it would be part of the industrial strategy or the Welsh industrial strategy as well. So, it was really—. We've just started a new operating group, as we do with the CBI—artificial intelligence and technology. And it's for the reason that our members are asking for more information on that, because it's a massive growth area. Also those areas such as your data centres—I know that there are talks about that as well. But also, the semiconductor is a growing industry as well. We've got the electric arc furnaces going on in Tata as well—we've got one in Cardiff as well. So, that's the transition we're going in. Obviously, we've got the clean energy, which is happening all around Wales, using our beautiful natural assets. That's now accelerating.

I think we're on point, in answer to your question, in terms of the skill sets that we're going to need and the target areas that we're going for. And it all fits with what we're talking about, about the industrial strategy, the trade strategy. And let's not forget defence. Defence is a growing sector with investment by UK Government, and it's something we can seriously capitalise on here in Wales as well, which I know is in the industrial strategy as well.

Thanks. Just before I go to Gus, just to come back on that—in the last session, witnesses talked about the importance of having supply chains there as well in terms of attracting that inward investment. I guess the flip side of that for you and for who you represent is how the inward investment benefits are felt by businesses and organisations already in Wales. Do you have any views on how that is working now or how that could be improved?

The supply chains are hugely important to the eight pillars in the industrial strategy, and it's something that the CBI have said from day one, and how important that is to our economic and business landscape here in Wales as well. So, that is very important, because we have large-scale small and medium-sized enterprises here in Wales and supply chains to that. We've got some amazing examples of technology businesses in Hirwaun that supply some of the biggest companies, as an example. Those can be scaled up.

Thanks. And Gus, over to you now.

So, on the first bit, I don't think anyone would argue with you in terms of the sectors that have been identified, the fact that they are, clearly, important global growth sectors. Green energy is absolutely massive and crucially important. So, I think there's no complaint or argument that those are given some specific focus and attention. But at the same time, I think we have to be careful about focusing exclusively on those, because the reality is, if you think of sectors like construction, once you get outside of Cardiff and Newport and the south-east of Wales, industries and sectors like construction, hospitality and other stuff are really the mainstay of the economy out there. So, having a particular focus on those sectors where there is considerable opportunity and growth in the future—. But I don't think that should be done to the detriment of the broader economy, i.e. focusing all people and all resources on just those sectors. Completely ignoring the bread-and-butter economy of Wales risks winning on one hand, but you're going to lose on the other.

Okay. I guess the flip side of that to you, then, is how those, like you say, bread-and-butter sectors, so construction, hospitality, are able to benefit, perhaps, even if they're not within one of those clusters in terms of geographical location. Are there things that can be done so they better benefit, perhaps, from the inward investment that is happening now?

I mean, it then comes down to regional centres of growth, really. So, Cardiff has been a great success story, really, over the last 10, 15, 20 years, in terms of regeneration and transforming itself, and it's attracted a lot of UK-wide companies to base themselves there in Cardiff. I think what we need are some of the other cities, places like Swansea, where I am, down in the south-west, perhaps, around Milford Haven and places like that—. What we really need is anchor business growth that just attracts people, attracts that economic activity, and then that spills over into all of the other sectors. Swansea is not going to be a Cardiff; it's going be very difficult to attract those big multinationals to headquarter here in Swansea. So, we need to think slightly differently about what sort of investments and what businesses we can attract to different regions that will then provide a catalyst for, basically, people and better paid jobs. With better paid jobs, they spend more money, and that will filter through—they buy homes, they do all these things.

The fundamental economy really drives off what's driving the economic activity. So, that's where inward investment can be key and can be a catalyst. But we've got to think about how is it a catalyst for supporting the general economic activity of an area, and growing it. And also I think we need to just be careful and make sure that it isn't actually sucking some of the life out of other businesses. So, an example will be—and I'm not saying that this happens or is done, but it certainly has in the past—if you've got a multinational company coming in, it's getting subsidies, it's attracting all the skills away from existing, perhaps, smaller businesses, so it can actually be unbeneficial to those other businesses, if there isn't some synergy in supply chains and some of the other things. You know, you're basically competing. You've got to be risk-aware of creating a subsidised foreign investment that actually overcompetes with the local businesses that are already there—takes some of their skills, takes some of their talent—and doesn't contribute back in terms of feeding into the supply chain and the broader economy.

Okay. Sam.

Thank you very much, Chair. I was just exploring there some of the opportunities that have been mentioned, because we're talking about, or I'm hoping to talk about, some of the opportunities around a one-stop shop for support. When we've done previous inquiries—. I was looking on the website of the Development Bank of Wales—they've said that they'd like to have more of a role, and Business Wales, and how the two come together. So, Russell, if you're speaking to a business or an investor looking to invest in Wales, how easy do you think it is to signpost that investor to have good, productive conversations to be able to turn a discussion into reality?

I think the commitment, the intent, is there currently. I think it needs more firepower in order to—

What does 'firepower' mean?

If you're looking at—. It's been mentioned, in principle, in conversations, and the Chair mentioned it: a development agency, for instance, whether it be regional or national. Then, if it is to happen, additionally to what's going on in the Government internally, or the Government gets more firepower in order that they can do more, then it needs to have the resources to do it as well. The resources would be that they can make a decision, and business experience actually leading that side of it as well, because the connections with business will help grow that side of it. It has been mentioned by members, the WDA, as well, as an example, in meetings. But operational independence and resources is what I mean by 'firepower', in direct answer to your question there, and a clear end-to-end mandate as well, ensuring attraction, retention and expansion. So, it's very difficult to see when they say they support that in principle, because we will need to see the business plan and the economic plan of doing it to start with.

Okay. Just before I come to you, Gus, just to come back, Russell, on a point: what's the feedback from CBI members on business support around this? In the conversations you're having with your membership, are they saying, 'Look, I've got potential investors here, pent up investment that's looking to be explored, I'm just not sure how to take the next steps', or is it that they're saying, 'Look, I know how to do the next steps, I just haven't actually got the investment waiting'? What's the reality at the moment?

The reality is, they'll come to us—. Because, obviously, they trade outside Wales as well, so when we talk to—. For instance, I can give examples of what's going on in Manchester, in the Netherlands, for instance, in Scotland and in Ireland. So, we do need—. What they're saying is, 'Who do we go to?', and we signpost to who they need to go to within the Welsh Government, because we work in partnership, with all Governments, on that as well. So, we signpost. We have a good relationship with Government, and we put them in the right place at the right time with them. That's what we tend to do. What they say, then—. Should they need to come to the CBI to do that? Well, they are members, so they would expect that, and that's what we do. But if you look at an organisation who may not be a CBI member, where do they go? I can't answer that question. We are used for that reason by our members, to get that economic policy insight to make the right decision about investors, and also where to go.

Okay, thank you. Gus, from your perspective, then, with the many hats that you're wearing as a witness here today: business support for inward investors—what's your feeling on that?

This for me is one of, and not just in terms of inward investment but also Welsh businesses themselves investing and growing—. The issue of the political landscape, I think as I would call it, in Wales is definitely one of the top things that gets discussed and gets raised to me. What I mean is that you've obviously got UK Government, you've got the Secretary of State, you've obviously got Welsh Government, you've got the local governments, you've got capital regions, you've got business investment districts, you've got various different areas doing different things. This is my job—I live and breathe this, and I don't know entirely who does what and who's responsible for what. We were out in Barcelona last week, talking to ACCIÓ, which is the Catalonian sort of investment fund. As soon as someone has an interest in doing something there, they appoint a project manager, and that project manager is there to guide them through the political landscape.

Touching on one of Russell's points, I think he said 'firepower'; I would define that slightly differently. I think one of the issues here in Wales is that we don't really use executive power. So, Scotland has slightly more devolved powers, it has more executive powers, and it tends to use them. People often talk about Manchester, where you've got a mayor, and that mayor—. It's the same in London; I go down to London a lot. The mayors there tend to use the executive power that they have to the greatest extent that they can, and sometimes try and push the boundaries of that executive power. I think, when it comes to the political landscape in Wales, there are huge benefits from the fact that we are very collaborative in Wales—we like to work together—but the flip side of that is that that executive power is weakened because it's spread out amongst local authorities and other groups, and then you've got quasi-independent public bodies that have certain responsibilities for things. I think that there is a decision to be made at Welsh Government about whether Welsh Government should bring some of that executive power back to the centre, to try and get things done and get decisions made.

We have examples of, not inward investment, but Welsh businesses down here in the south-west that are potentially looking at new locations, looking to grow or build a new site or something. You've potentially got negotiations with four or five different councils, all of whom have a slightly different structure when it comes to supporting the economy and business, so different job titles, different responsibilities. You've then got to potentially deal with BIDs and the regions, to see what funding is available there, talk to the Welsh Government, see if the Department for Business and Trade and other people are doing things. It is very difficult to navigate, and frankly it's probably very difficult to navigate even if you're inside those organisations. So, for me it's an issue.

Thank you, Gus. Some of what you've mentioned there chimes with the Welsh Government's own internal review and the Welsh Affairs Committee inquiry into inward investment, talking about the fragmented and complex business support provision. In the previous panel, I asked around inward investment of Welsh diaspora with organisations such as GlobalWelsh, New York Welsh and the opportunities for those already with links to Wales to have an opportunity to invest, and what does Wales plc look like as an attractive prospect. Russell, from your perspective in the CBI, do you have discussions with Welsh diaspora? Are Welsh diaspora an untapped potential for investment into Wales? Given that it's a very diverse climate where everybody's fighting for inward investment, is targeting our diaspora who've been successful an easier way of potentially getting some of that investment into Wales?

Yes. That's part of the firepower I mentioned. And I agree with Gus; using our devolved powers more I think is a major asset to us in Wales as well, just going back to that support. But 'yes' in answer to your question, because why not? From a business perspective, everybody can know each other, warm introductions et cetera. We've got some amazing businesses that are operating there, especially in London—Wales Week London, et cetera, which is happening shortly. It's been going for many years. So, 'yes' in answer to your question—why can't we do more? We engage as CBI, as a business ourselves, so it makes sense.

So, it's happening—it's just you'd like it to happen more. Does more meat need to be on the bone there?

Yes, I think it needs to be scaled up. I think one message that's coming through is about pace and consistency as well. We've talked about the investment summit. It was an amazing event and congratulations to the Government. It's now what's next—that's the starting pistol. So, what you're saying there could be the next—. It might well be the next stages, but even more delivered at pace, and clear engagement. It goes on, but you need even more so, and those connections to be followed up, which is what I referred to in the beginning when I talked about following up on those connections—what do they need and want to come to Wales to invest, to employ more people, et cetera.

Gus, I appreciate the context that you gave on the SMEs that you represent, and I'm from an SME family, so I get that you're not looking to pit certain industries against each other or the big boys against the little boys, but from your perspective, is diaspora or that element of Welsh connectivity globally an untapped potential for inward investment? You're on mute, sorry Gus.

[Inaudible.]—family moved to London for work and economics; there was bugger all in the Valleys at the time. I went off; I lived in Tokyo, Hong Kong, New York, various other places. I always knew that I wanted to move back while I could still contribute something, and I think that that is something—. I've spoken to a lot of people. It's sort of a value and something they share, and there is something about Wales. I think one of our superpowers is we are a tight-knit group. We will call each other, we will introduce each other to our friends. If I need to speak to someone and I don't know them, I probably only need to phone one or two other people before I find someone who's got their phone number. So I think there is an opportunity there.

I think it is a bit of a superpower that we've got a lot of talented people that have gone and done things around the world, and I think, perhaps, once you get them back here and they see what's happening and see some of the opportunity, a lot of people sentimentally want to come back. So, it's a question of how do we communicate to them and get them to come here. I think part of it as well is getting them beyond Cardiff. Swansea has changed a lot in the last five years since I've been around here, and perhaps people who've been away don't see some of that change other than in Cardiff. So, it's communicating and promoting that. I think DBT is looking potentially to do a 'brand Wales' promotion. I think a key part of that has got to be to sell Wales as a place to come and work and live and do business.

Thank you. Thank you, Chair.

Alun.

I'm grateful to you both for your evidence this morning. You've both said very similar things in some ways in terms of consistency of approach and analysis. My question to you is very simple: so what does this mean? What does this mean for the Welsh Government and the way it structures itself? You’ve both talked about a level of complexity. You've both talked about a level of, sometimes, confusion, if you like, amongst people about how you address some of these issues, how you approach Government. So what does the Welsh Government do to structure itself in a more user-friendly way?

Would you like me to go first? I think the barriers we are consistently hearing that would help with that are the planning delays and unpredictability for investors and businesses that are here in order to grow. I know there are recent announcements that came out about infrastructure planning reform, and there's also more planning reform, but it goes back to that pace side of it. We need to be quicker at doing that because that will enable more investment.

Okay, we need to be more agile. I get that. But how does the Welsh Government become more agile?

Well, it's important to get the right people in the right place to do the job, and ensure that the numbers in the Welsh Government who are employed in planning, for instance—

Are there too many local authorities?

Pardon?

Are there too many local authorities, and that creates a complexity in the planning system?

I haven't got the information to answer that at the moment, sorry, Chair.

Well, you said the planning system is a problem.

From the Welsh Government point of view.

From a Welsh Government point of view?

The Member was asking about the Welsh Government, and that's what we're told by our members, from that point of view.

Is it too early to assess the effectiveness of the Infrastructure (Wales) Act 2024, which does set a very clear timetable for decision making?

Sorry, could you repeat?

The infrastructure Act, which is designed to speed up and simplify large planning decisions. Is it too early to say whether it's going to make a difference?

It has landed very well with businesses. We're here to talk about investment, and infrastructure investment is key to decisions by businesses, but it is too early for me to give any evidence on that.

Okay, thanks.

It has landed well, though.

Did you complete your answer?

I did, yes.

Gus, what's your response to that question?

I'll very quickly echo that on the infrastructure Bill; a positive response so far, but we'll see how it goes.

On the broader issue, what are the key issues? If you read a lot of the reports published by both the Senedd and the Welsh Government, I think we've all got a really good grasp on a lot of the fundamental issues and problems here in Wales. Something seems to get lost in the process between that clear understanding of what the issues are and outcomes at the other end.

Everyone I've spoken to and worked with in the Welsh Government is absolutely fantastic and really good at their job. I think there is somewhat of a culture that prioritises process over outcomes, by which I mean prioritises consultation and making sure that everyone is involved. I've said this to some other people—the way we do things commercially, if we've got an initiative and something we need to do, is that we'll get ourselves to a point where we're comfortable that our solution is going to work for 80 per cent of what we need it to work, and we implement that and then we figure out the complicated 20 per cent bits that are difficult as we go along.

When I talk about there being a focus on process, I think too equal a weight is given to every stakeholder. And, again, it's swings and roundabouts. It's a really positive thing and it's a very Welsh thing that we engage people, that we take into account people's views, but I think sometimes we can be more focused on that process than what comes out of that process, and give everyone equal weighting in terms of their voice and impact, and stuff like that, which I think slows things down and gets suboptimal outcomes.

And then it's this other point that—and I don't think it's a Welsh Government thing, this is a Government thing globally—there's a tendency to think we need to get things absolutely perfect and right first time round, which means you've got to solve the really complex tail-end issues, and that is very difficult to do, but it means that there's a big delay in getting the solution that's going to work for 80 per cent of the people 80 per cent of the time.

You've both in different ways talked about a cultural issue within the Welsh Government in terms of resources, but also in terms of the approach that the Welsh Government takes. If we establish that, what leads to cultural change? The previous Welsh Government abolished the WDA to become a more agile organisation within Government. I guess, having heard what you've both said in answer to the earlier question, you think that ambition hasn't been close to being achieved.

We've achieved quite a lot in Wales since that has happened, if you look at it on paper, but now it's the next step. The world has evolved, the world has changed. Look at the world that we're living in globally at the moment. So, it's very difficult to say what happened then. But if you look at what's going on now, with the free ports, which are a great opportunity for natural assets and investments that are already here—

Not all of us agree with that, but carry on.

There's a lot that's gone over that term. It's what's next is what we're interested in.

Yes. 'What is next?' is my question.

Next is to go and get more businesses to invest—

How do you do that? I understand what you're saying, but I'm worried, Russell, that you're not actually addressing the heart of this. We know what the questions are. So, how does the Welsh Government do it? Is Welsh Government set up in such a way at the moment to actually deliver what you're suggesting needs to be done? Because we understand the analysis.

The other side is I'm not sure how many people are employed. I work with them very closely, and I'd like to reiterate what Gus said: they are very good officers at what they do. Maybe they need more support, but that's on the internal side of it. Instead of a regional development or national development agency, as I mentioned, is there more investment needed in the economic development team? That's a much more in-depth question, which we need more information on as well. But those are two options—or three options, really: a national development agency, which we have always said the CBI would need to have more analysis on before any decisions, and we say 'yes' in principle on that, due to the complexities it could add, because nobody wants more complexities—

You sound like a Minister now answering these questions. There are more caveats there than I've heard from the Government since Christmas.

And also to look at further investment in the economic team of the Welsh Government. But that isn't a CBI decision, that's a Welsh Government decision.

Yes, but the CBI should have a view on it. I recognise CBI won't take a decision on that.

Those are two views that we could put forward for it.

Okay, thank you. Gus.

I'm probably in a position where I can stick my neck out a little bit more. There are two big things that I bang the drum about. Whatever organisation, whether you're running a business, public sector, Government—obviously it's more complex at Government—the fundamental challenge is exactly the same. It is that you've got scarce resources, and those resources are financial, people, skills, time, assets, technology—all those things. You've got scarce resources. What everyone has to do who's leading an organisation is decide what you prioritise to best allocate those resources to maximise your outcome.

And the other thing I'll say is that the first thing you want to do is you should always make it easier and cheaper to do the next bit. I think that's the bit that sometimes the Welsh Government gets wrong, which is a really clear, focused prioritisation of how it's going to use its limited resources. And particularly when you come down to discretionary spending, for example, and things like that, we tend to scatter it around very thinly. I think there is an argument that you could say, over the last 20, 25 years, that spending has not really fundamentally moved the needle economically in Wales. So, that's one thing, the prioritisation of scarce resources to maximise the impact. This comes back to the executive-power point, because the reality is, if you want to do some of that, you're going to prioritise some regions over others. You're going to prioritise some things over others, and it's going to upset some people politically.

One of the things I would say, and I'm biased in this because I'm in Swansea, if it was down to me, I would focus on growing in Swansea, building 50,000 to 100,000 houses in Swansea, creating a conurbation and creating a city that is big enough to then attract investment, growth, there are enough people here, and those sorts of things. Because the reality is, if we don't have cities in Wales that people want to move to, they're all moving out of Wales. So, the idea that we should prioritise every region of Wales and then everyone just slowly drips across the bridge, there needs to be some focus and prioritisation.

The other bit I would say is, there's consultation with the private sector, but I'm a very keen advocate of getting away from consultation and engagement to genuine collaboration. The thing I would say to everyone is, I genuinely do not know a single business owner that I speak to in Wales—or CEO, or MD, or whoever they might be—who does not care about Wales, doesn't care about the community, doesn't care about making a difference. I don't think we use those people and that expertise enough in terms of real collaboration with the Welsh Government, bringing in people with the experience, with the knowledge.

I think that there has, sometimes in the past—. Okay, there are some bad businesses out there—they tend to be big global businesses. But the reality is, if you're running an SME in Wales, you look after your staff, you've got a good relationship with your staff, you care about your community, you're funding the local rugby club, you're supporting local charities. I think we don't use enough of these people and their expertise, who would quite happily give their time and experience freely and for nothing. We don't bring them into the process enough. I think there's still a bit of an 'us and them' between the public and private sector, and nothing is going to happen in Wales unless we collaborate between the private and public sector.

Okay, thank you.

Jenny.

So, how well does the Welsh Government provide ongoing support to existing inward investors, and how effective is it in enabling them to expand or safeguard their operations in Wales? Shall we start with Gus Williams?

I'm probably going to plead the fifth on this one. I'm not close enough to that process to really have a meaningful opinion.

Fine. Okay. No problems, I'll come back to you later. Russell.

Can you repeat the question?

Yes. It's about the ongoing support to existing inward investors, to persuade them to do more and stay, rather than going somewhere else—so, expand or indeed safeguard their operations.

From my knowledge, there are people in certain departments, the customer relationship side of it as well, following what happened in the event, but also outside the event as well. Feedback from businesses is it can be quite complex and fragmented as an approach as well. So, we need to tighten that up, if anything, to be very focused on the sectors that we've mentioned, which are growth sectors, which are very much part of the industrial strategy. It's very difficult for me to answer it in full, because I don't know what goes on behind the scenes.

Okay. Well, let's think about Tata and the other steel operations around the corner from here. How good have we been at enabling them to be sustainable?

It shows what can happen when everybody combines. Gus mentioned working in partnership. Tata are making their own investments in the private sector, with Government, and also with the steel makers across the road as well. From a business point of view, it was good to see that happening, to keep the jobs here in Wales as well, but also new jobs that will come from that as part of that growth.

Okay—

Just before you go on, Jenny; Russell, I think you wanted to come back on. Sorry, Gus, you wanted to come back on.

Gus.

I did. I do have one thought on that, which I think is closely related in terms of the follow-up of foreign direct investment and businesses that come here. We've got a really fantastic, strong education and university sector here. I've discussed with a couple of people and one of the things that I think should be absolutely key to the development of businesses beyond that initial investment set-up is embedding them and ingraining them within our university, research and development, education sectors. For a couple of reasons: (1) it makes those businesses—

Okay. We understand the rationale, how good are we at doing it?

We're not, is why I mention it. I think one of the biggest gaps of potential is closer co-operation between business and the education sector. I think there are a few companies and people who do it extremely well, just not enough of them. Really, the businesses, off their own back, do it. I don't see a clear collaboration structure between the universities, Welsh Government, local government and the business sector that really tries to drive and encourage that. I think there's some good opportunistic stuff, but we're not really—. You know, it's up to people to take their own initiative. We're not creating a structure that makes it easier to do that, is my view. I'm not 100 per cent close to it, but from where I sit, that's what it looks like.

Okay. Is that your experience too, Russell Greenslade? Because I'm surprised at this, because we know that universities are anxiously looking for new sources of research money in order to sustain their activities in difficult circumstances.

From my experience, the collaboration does exist. Look at Swansea University and their semiconductor industry as one example. That works well. Cardiff, all our universities who we work with as well, as a business organisation, we work with them very closely. So, I would say, yes, I've seen that in action. And one example is, as I've just given, is Swansea University and the semiconductors, and I'm sure there's plenty more out there as well, who we work with, further education and higher education.

Okay.

Absolutely, there are some fantastic examples out there. I think there is more we can do. And you're right, the universities are obviously a lot more focused on that now.

Okay, fine. Russell, can I just pick up on something you told the Welsh Affairs Committee, which was that SMEs find engaging with inward investment challenging? Could you just pinpoint why that is? Is it because those inward investors don't want to talk to them?

SME to Government, you mean, is it? Is that the way you're phrasing the question? Sorry.

Well, I wasn't at the Welsh Affairs Committee. What did you tell them about SMEs' ability to engage with inward investors?

Sorry. When I mentioned that, it was because it was top of mind, because we are not only just bigger businesses, we do have SMEs as members as well here in Wales, as you would expect. And one example would be they couldn't find the right person to speak to about getting a brownfield site to expand into 100,000 sq ft warehouse and employ another 50 people. They were finding it increasingly challenging to talk to the right person. That's what I meant by that.

So, the right person amongst these inward investors?

Yes, from that point of view.

Okay. Because, obviously, this is one of the things our earlier witnesses were talking about, the importance of, once you get your inward investor in, you need to lock them in to elements of the local economy. So, what's the solution to that?

I think that then could go down to—. Welsh Government can lead, and obviously Government can get in the anchor businesses, or if we go back to the clusters as well, which was on the questions, you know, clusters are welcomed by investors as well, but they can support the supply chain, which was mentioned earlier on as well, which can be SMEs. Look at the industrial strategy, that's a supply chain to an SME. So, that's what could be done. But it's ensuring that the right SME is talking to the right person. There are numerous SMEs who are in our membership that supply the bigger businesses, and that's through conversation and agreements that have happened.

Okay. So, what are the barriers to local businesses being able to benefit from inward investment supply chains? Why is it not possible for—? Whose responsibility is it to ensure that inward investors know that there are excellent local businesses down the road, that they could be—

I think that's part of the support package. It's been mentioned about a concierge service, if you want to call it that. And that concierge service, or one-stop shop, one door, et cetera, could have that suite of information of, 'If you're making a widget, you need to speak to this person', because it also supports the circular economy here in Wales as well. That supply chain from the SME through to that, let's call it an anchor tenant, so an anchor business, that the Government could help to pull in because you've got the powers to do it.

Okay, but you don't think that's happening at the moment.

To an extent, it is happening, but more can be done as we scale up what we're doing here in Wales and what happens here in Wales as well, as part of our exciting future.

Okay, thank you.

Just for clarity on that concierge service that you termed there, Russell, I understand the UK Government do it in their inward investment offer, but it's your understanding that that type of offer isn't available from Welsh Government, is that correct?

To the best of my knowledge. I might be incorrect on that, so I wouldn't like to give a 'yes' or 'no' answer on that at this point in time. However, it makes sense from a business—. It's all about taking away barriers to do business as well, and if that is seen as a barrier, then that's something that can be done about it. Barriers are there to be worked over as well, in partnership as well, I should say.

Thank you. Finally, Luke.

Diolch, Gadeirydd. Sticking with the barrier issue, we've touched on a number of different barriers in this session. Russell, you mentioned resources being one of them, and firepower, which I think we've covered quite extensively. We've also touched on skills and infrastructure. I just wanted to come back to, I guess, the skills element here, and mentioning that need for closer co-operation, that we're not doing enough on that element of it, and more needs to be done. What more do you think, then, that we need to do on that front?

Purely on skills?

On skills, yes.

The big problem is the responsiveness of the education system, and it a little bit comes back to this prioritisation, and the fact that we don't do the easy stuff because we're trying to solve the complicated stuff. Again, I sit down with universities, colleges and things like that. We all have conversations. We all know exactly what the issues are. It's just that it takes an inordinate amount of time, especially if things need legislative change and what have you, so we seem to always constantly be playing catch-up, i.e. we've missed the boat. So, construction is an obvious sector where there are massive skills gaps and shortages, and we're still struggling to solve that, while at the same time, we're now seeing skills shortages in other areas. So, we're playing catch-up.

I think where I see businesses and the local colleges particularly work together, they've done some really fantastic work. There's some really fantastic stuff happening in Wales around skills. We need to learn from that, replicate that and have a mechanism for promoting some of those things. The other thing that's missing for me is that businesses know how to train their employees, they know what they need to do, and I think, sometimes, we focus funding too much on off-site training, i.e. classroom training, whereas with every business I speak to, it's really, 'You just need to give me a good person and I'll train them.' So, the balance there isn't quite right, because, obviously, businesses are much more responsive to what they need, the skills they need here and there today, and they're much better at prioritising and changing what skills people need.

So, it comes back to this collaboration between businesses and colleges, and perhaps a little bit more focus and flexibility in terms of some of the qualifications for on-the-job training, which is—. I run an accounting firm, right, so all of our accountants have to study four years and do a whole load of exams, but 90 per cent of what they then actually do on a day-to-day basis is stuff that we taught them. It's just that they can't do it without a qualification. So, it's a constant bugbear for us. Again, it's flexibility and collaboration, and just we need to be more responsive, and, again, involve people on the ground who are seeing it day to day.

If I could just very quickly come in on Russell's last point, in terms of follow-up with businesses and supply chain, I would actually argue that that is our job at the chambers, CBI's job. We are very good at that. We've got the business networks. We can introduce people. We do do some of this. It is an increasing focus for us. So, I think we only need a little bit of support from Welsh Government, and it doesn't really need money. It's just that I would argue that once the investment is in, Government has done its job, it's up to us, the business community, to then do the next bit.

Coming back to that skills element then, do you think the Welsh Government understands that particular need? I'm thinking about conversations that I've had with some of our FE colleagues, where there's very much a feeling that they're in a position where, when they're looking to commission new courses, they look at what Government is saying, they're not entirely sure what they're saying, they put their finger up in the air then, essentially, to work out, 'Okay, is this a course we need to commission? Is this the sort of direction we need to go in?' So, is it a matter of Welsh Government actually understanding—what you said—the needs of businesses, understanding them and giving a clear path for our educational institutions to follow?

This is a very good example of what I talked about earlier, in terms of the focus is on the process, not the outcomes. I don't know who's in the room there; I'm probably about to seriously upset someone. So, I've sat in on a few of the Medr consultations and things, and it is overwhelmingly supply-driven, not demand-driven, in the sense that there is a huge amount of voice given to all of the public sector stakeholders in education, and the voice of businesses who, ultimately, are the ones—. We know what skills we need. For me, it felt like it was a tiny proportion of that consultation process. So, I think it is an exact example of this idea where we're focused on process, we're focused on stakeholder engagement, we're focused on making everyone as happy as they possibly can be. That takes time and it leads to sub-optimal outcomes, and sometimes too much weight is given to the wrong interest groups.

Okay. Thanks, Gus. Any additional comments on that, Russell?

On the skills side of it?

Yes.

On the skills side of it, I think one thing we haven't touched on has been apprenticeships as well. We've talked about HE, but FE, there's an awful lot of work that goes on in the business community with FE as well. But the apprenticeship side of it, the apprenticeship levy—the Welsh Government do some great work on apprenticeships, but more can be done. And we're in the process of seeing what we can do, working with Westminster, about the apprenticeship levy here in Wales—because a lot of our members are outside Wales as well—and how we can utilise that levy to get more people into jobs here in Wales as well. Now, those are bigger organisations, but they still employ people who pay their taxes in order that they can help fund the public sector, NHS et cetera. So, apprenticeships need to be looked at as well as part of it. But skills are big—from an inward investment point of view, they are very important for any investor and a business that is here, which is Gus's point.

Thinking about one of the other barriers we talked about then, infrastructure: how much of a barrier is it for businesses who are looking to invest in Wales?

It gets seen as a barrier. I can give one example, if that helps. The barrier that was mentioned recently was getting into Wales as well, how could that improve from an investment point of view. If you look at recent relocations of organisations close to an access way into Wales, it's because of that; that infrastructure needs to be improved. That will instantly encourage more investment as well and it shows a sign of intent, that Governments are investing and continuing to invest, which will then breed confidence in the private sector as well. If we're bringing in more businesses, that's going to create more road, rail et cetera. But I do think Transport for Wales are doing a very good job in expanding their services at the moment, so I'm not necessarily talking about rail.

Okay. Just looking at the time then, just one final question from me. We'll start with Russell and then I'll go to Gus. Obviously, we're coming up to the Senedd elections now: what would be your top three priorities for inward investment for the next Welsh Government?

Simplified delivery: one system, one offer. From an investment point of view as well, use—[Interruption.] Sorry, was that—? Sorry, I thought somebody said something. Use the devolved powers boldly to help remove the barriers, speed up decision making, and back business confidence as well, which I've touched on. Obviously, I'm bound to say this as a business: be pro-business, because we can help grow the economy, as Gus has mentioned. We can employ more people and fund towards whatever needs to be done here in Wales. So, those are asks, I think, which are in the scope of whatever Government is in place as well. But I think, if you're looking for a theme, it's: take away the barriers to doing business, and make business easier to do here in Wales, be that a business that is existing here or a business that is looking to come in.

Okay. Gus, same question to you: top three priorities for the next Welsh Government.

Sorry, I was muted. Can you hear me now?

Yes, we can hear you now.

Sorry, that was the dog then. Feeding into the discussion you just had around infrastructure, times are tight; there is limited money out there for discretionary spending and stuff. I think there is a fundamental decision that you as politicians need to make as to whether—. It's not an easy calculation. Do we spread that money around in little pots and give subsidies to specific businesses, encourage inward investment, or, actually, does that money get more focused on some of the infrastructure stuff that has more long-term potential to benefit all businesses? And it comes down to—it's one of those political decisions—there's perhaps a bit more short-term benefit to spreading some of that money around, but, fundamentally, is it better long term to try and focus that money on the big infrastructure stuff that benefits all businesses? So, it's that, it's discretionary spending, where's your best return on investment, what's going to move the economy.

Second thing: we've got this growing number of 17 to 24-year-olds who aren't in employment or education. If we don't fix that, we might as well go home, because everything else is a bit of a waste of time. We've got more and more young people not having meaningful, purposeful careers and lives and jobs and things like that. So, that absolutely has to be the No. 1 priority.

And then the third bit is probably the political landscape planning bit. If I come back on the planning, the problem with planning in Wales comes back down to this sort of complex political landscape here—many different local governments, what have you. What drives everyone absolutely mad is not that you've got rules and regulations; it's that you've got rules and regulations that can be interpreted differently by different people, and that is what drives us all insane, because one local authority might interpret something completely differently—one planner might interpret something completely differently from another. So, it's a bit of a myth that businesses don't like rules and regulations. We love them if they're clear and easy to follow; we hate them if they're ambiguous and open to interpretation. So, that would be my top three.

Good, diolch.

Okay. Thank you, gentlemen, for presenting your evidence to the committee this morning. A record will be sent to both of you for you to have a look at. If you have any objections or views that you want to express to the clerking team about that record, please do so. Otherwise, it'll form the official record for your evidence when we complete our report. Thank you all very much.

Thanks for having us. I appreciate it.

Papers to note? Content?

Okay, could I have a motion to move into private session? Okay, we'll move into private session.