We now move to the short debate, item 9, the short debate in the name of Hefin David, on the value of small and medium-sized enterprises to the Welsh economy. I now call on Hefin to speak on that topic that he has chosen. Hefin.

Thank you, Deputy Presiding Officer. Thank you for the opportunity to lead my first short debate.

It was said in the late 1970s that, if every small firm took on one more employee, the unemployment problem would be solved. Indeed, with 4.2 million small firms in the UK our minds would soon turn to the problem of a shortage of labour. It appeared that, in the 1980s, the Thatcher Government took this absurd proposition vaguely seriously and for a time we heard of the enterprise economy coming to our salvation as traditional industry was strategically abandoned. I believe that small and medium-sized firms in Wales have the potential to contribute to the growth and development of our economy nonetheless. However, I’m under no illusion that they will solve all our problems, and they alone will not insulate us from the global uncertainties that are currently being created by politicians offering solutions to difficult problems in 140-character tweets.

I want to use this debate today to pose a number of questions about the role and value of SMEs to the Welsh economy, and I want this debate to be the opening, from these benches, of a wider debate that will contribute to the future development of this Assembly’s economic strategy, and I want all parties and none to play a part. It’s for this reason that I’ve established and chair the cross-party group on small and medium-sized enterprises. With a secretariat provided by the Federation of Small Businesses, it will hold its first full meeting in the new year. I hope this group will hear from a range of academics who, by their own proclamation, have been excluded from the policy-making process here in Wales, and therefore I hope they take up the challenge. I also want businesses themselves to play a part, to tell their stories, and for those stories to be heard by policy makers.

Today I will set out as much as I can my own views about areas that we may focus on in future debates. I am perfectly happy to be told that I am wrong, or at the very least that my understanding needs further refinement. My only intention is to provide a foundation on which further ideas can be built. In this context, I would like to briefly focus on two areas. Firstly, what is the role of SMEs in our economy, and, secondly, where are these businesses, and are they in the right place? I believe that it’s a mistake to see our small firms simply as engines of employment. The SME sector, though large, is also heterogeneous and fragmented. The role of SMEs in job creation is anyway disputed by academics. Some like Birch have claimed that they play a huge role in job creation, and others more recently have argued that their lack of durability means that small-firm employment is too insecure to be considered a long-term option for many seeking work.

Notwithstanding that dispute, there’s a distinction between policy makers’ desire for small-firm job creation and the indifference of owner-managers to such aspirations. SME owner-managers are undoubtedly reluctant employers, and indeed I entitled my PhD thesis ‘The Reluctant Employer’. Indeed, why would any sensible owner-manager choose to employ—[Interruption.] Thank you to the member for Llanelli. Why would any sensible owner-manager choose to employ when there are cheaper, more accessible, trusted alternatives? A great many owner-managers have reliable sources of support available to them at least in the medium term. They may be in the form of strong ties to family and friends who will help in the running of the business, but over time the manager will form relationships with other business associates who provide mutually dependable support that goes well beyond a transactional relationship. Access to this social capital is vital for the early development and growth of the firm. So perhaps instead of seeking economic salvation from our small firms sector we should look instead at what small firms actually do—things that are fundamental to our daily lives. I would add that the public and private sector are inextricably linked, and we should be suspicious of any policy maker who suggests that it would be in any way easy for private firms to take up the slack from reductions in public activity.

With such studies as ‘Towards a New Settlement’ by Dave Adamson and Mark Lang, and ‘What Wales Could Be’ by Karel Williams, academics have examined how we should re-orientate our economy here in Wales. They talk of moving towards a locally based and sustainable structure, with SMEs benefitting from strong procurement policy in which the Welsh Government takes a proactive lead. Indeed, Professor Adamson and Dr Lang are currently undertaking a micro deep place study in Lansbury Park in my constituency and I look forward to examining the outcomes. The work of Professor Williams forms a key part of what is called the foundational economy—those businesses that provide us with our basic everyday needs. And I’m keen to explore these ideas, however, they will come to nothing if their value cannot be coherently and concisely explained to both those making policy and those benefitting from it.

We should all, therefore, support the efforts of Lee Waters, the Member for Llanelli, who has made it his mission to explore these issues with business owners and residents in Llanelli. You may have seen it on Twitter. He has recently held focus meetings to discuss the needs of businesses and business users in his constituency, and I know that there are other Members of this Parliament that are taking similar approaches in their own areas, and I look, also, to the Plaid benches. I have to say, though, when Lee first told me he wanted to develop an economic strategy for Llanelli, I thought he might have bitten off more than he could chew, but anyone who knows Lee will know his tenacity and his desire to make innovative ideas work for the people he represents. You don’t get elected to Llanelli any other way. I’ve given him, and for the same reason, Steffan Lewis, a minute of this debate today and if there’s time, I’d also like to offer Russell George some time to respond too—[Interruption]. Well, he asked me late.

While not creating anything as grand as an economic strategy, I and my team have conducted our own research in the Caerphilly constituency. We talked to a range of business owners and customers and time and again, the conversations turned to the high street. Our town centres have come under a lot of pressure in the last decade or so due to a number of factors: the rise of internet shopping, out-of-town retail parks, costs of commercial rent and non-domestic rates. We have to ask ourselves now, ‘What do we want our twenty-first century town centres to look like, and do SMEs have a meaningful role as a thriving, accessible and visible part of our communities?’

Much of the evidence I’ve gathered suggests that we need localised conversations. Different town centres should be allowed to have their own unique personalities and this can be seen in all our constituencies. Yesterday evening, I discussed with an AM from another party these issues. She suggested we need to make intelligent and innovative use of vacant space in town centres. She said we shouldn’t be afraid to make the central business district smaller and use vacant shops for housing and flats. The remaining space should be given over to businesses that are going to thrive in that environment, but the space should no longer be seen as premium value. Such an approach would work in her constituency, she argued, and if it proves to be unpopular, I’ll note that it was an AM from another party. It might not work everywhere, which is why localised approaches are required, but in this thinking, we can see, cross-party, the germination of a new way of thinking about small firms.

In my constituency, there exists an innovation centre for start-up businesses called Welsh ICE. I’ve mentioned them before in this Chamber and they were identified as an example of good practice in the Welsh Labour manifesto in May. Yet again, they were mentioned in the ‘Western Mail’ this morning:

‘Five start-ups are reaping the rewards of being put on ICE’

—being part of Welsh ICE. And £1 million funding coming to Welsh ICE.

Many of these firms that exist there are direct customer enterprises and I wonder, why are they located on a business park on the edge of town? Is there a way to incentivise their development closer to the action? Given the importance of social connections, of connections to social capital, is there a benefit in doing so? Perhaps this is something we should investigate. Government at all levels has the power to make these things happen. Indeed, we can use future reform of public service organisations and future collaboration in local government as an opportunity to look at how to better engage SMEs and deliver on our objectives.

Jeremy Miles has written this week about a social enterprise economy whereby the public sector buys goods and services from social businesses, helping maintain resilient supply chains and, yes, social capital. These approaches have the potential to change our economy here in Wales. Perhaps it can be a way in which we make the best of uncertainties about Brexit, although there are no UKIP Members left here to listen to that. This does not mean turning away from the global economy of which Wales has long been a part. It means reducing the emphasis of Government policy on foreign direct investment—something that has characterised our economic development since the days of the WDA and, subsequently, the economic renewal programme. GE, Norgine and Nuaire are big players in and around Caerphilly and I would feel quite hostile to anyone who questioned their value. However, we should be arguing for a broader based economy that focuses on sustainable growth and employment without too much emphasis on inward investment. We need an economy that focuses on particular sectors; SMEs that are rooted in our communities and that have an interest in sustainable growth, without too much of a preoccupation on firms that are fast-growth and high-tech.

Let’s look to the future. Our small firms are not our economic salvation and the sector should not be seen as an engine for employment. They have very specific needs. Instead, we should see our SMEs as part of a bigger puzzle. It’s time to take a step back and consider how we can maximise their potential.

It’s Small Business Saturday on 3 December, so I wanted to time this debate to lead up to this day, where we show support for the role of small businesses in our society and in our economy, and more generally. However, Small Business Saturday is just one day. We can use this debate and that day to kick-start a bigger conversation about the roles that SMEs play in engaging with the wider economy and how this can help us grow successful SMEs that have huge value to the Welsh context.

I thank Hefin David for his kind words and for holding this short debate and for giving me some very short time in that short debate. I do appreciate it.

One minute.

Indeed. Noted. There are chill winds blowing through our economy, Dirprwy Lywydd, and the situation could well get very challenging in coming years, depending on the terms of trade of Brexit. Hefin’s speech nicely summarises many of the discussions we’ve already been having as backbenchers recently in trying to stimulate new ideas and a consensus for a resilient economic policy that can protect our vulnerable communities.

As he mentioned, I held a public workshop in Llanelli on Saturday morning as part of wider discussions that I’m having to try and generate some local interest and ideas for what we can do. What was striking is that people find it very difficult to think beyond the town centre and beyond retail for how local economies can be regenerated, reflecting, I think, a generation of economic trends that have reshaped the industry of our areas, but focused instead on consumer economics as a way of driving forward our economy, and also on roads as a way of reaching shops and of commuting out.

I think we do need to recast that debate, and he’s absolutely right that this can and must be done on a cross-party basis. The ideas that he mentioned on the foundational economy, I think, are key and I look forward to further discussing those with all parties.

I’d like to congratulate the Member for Caerphilly for securing the debate and being elected the chair of the cross-party group. It seem to me that we’ve been talking a long time in Wales about creating a ‘Mittelstand’ without actually moving that and progressing that agenda forward. I think that’s going to be crucial when we look to new projects on the horizon, such as the Cardiff capital city region and the Swansea bay city region and the metro for the south-east because, if the vision for the metro is simply to make it easier to move people from outlying towns to the centre, then we will have missed a great opportunity to develop the SME sector in the country and lay firm foundations for the economy.

What about the parts of the country that are not covered by city regions? The geography of Wales demands that we have a national approach to regional policy, if you like, and of course, within that, to create growth poles within our region so that it’s not Cardiff that will dominate, surely, the entire focus of the capital region in the south-east; there are growth poles in fantastic towns like Caerphilly, like Pontypool, Merthyr Tydfil and elsewhere. So, if we want to move the country forward with a strong ‘Mittelstand’ and a strong SME sector, there has to be a nationwide focus to regional policy and local development as well.

I’m very grateful to the Member for allowing a minute of his time. I should say for the record that I did ask at the very last minute in the day and the Member accepted if time allowed.

Can I say that I agree with virtually everything that Hefin has said? I congratulate him on being elected the chair of the cross-party group on small businesses, of which I am a member also. All I would say is that I’m very keen that the Government continues to promote young people—having a positive life option for them to enter small business themselves. When I was in school, it was very much a case of, ‘What do you want to be: doctor, nurse, teacher…?’ And when I said, ‘I want my own small business, please’, that wasn’t really accepted by the careers officer; it wasn’t on their tick box. I’m pleased that times have changed now. But I would very much like to see the Government continuing to support programmes where business leaders go into schools and promote starting your own business as a positive life opportunity for them—outlining the risks, of course, but making sure that they are aware that it is a reasonable option for them to undertake. I look forward to working with Hefin on the cross-party group on small businesses.

Thank you very much. I call on the Cabinet Secretary for Economy and Infrastructure to reply to the debate—Ken.

Thank you, Deputy Presiding Officer. Can I thank Members for their contributions, especially the Member for Caerphilly for bringing this important debate forward today?

We know that microbusinesses and SMEs are the lifeblood of the economy here in Wales. They support more than 62 per cent of people in employment across the country, and they account for more than 90 per cent of enterprises across Wales. They provide a vital role in creating jobs, in increasing productivity and, of course, in driving growth across Wales, in rural and urban areas.

This debate, I think, is timely, given that this is Global Entrepreneurship Week, with thousands of events and activities taking place across the UK to celebrate entrepreneurship and to inspire our new and future entrepreneurs. And last year, of all of the events that took place across the UK, 18 per cent were here in Wales. That was a great success story, and I'm hopeful that, this year, as many events have been hosted on Welsh soil. As part of the celebrations, I attended the Institute of Directors’ south Wales business leaders’ breakfast just this morning to say a few words about the Welsh Government’s commitment to encouraging and supporting entrepreneurs. This morning, I also attended a round-table discussion with a group of young business leaders and entrepreneurs, arranged by the Federation of Small Businesses, to hear their views on the role of business and entrepreneurship. To me, the role of Welsh Government is in supporting businesses and entrepreneurs. It is very clear that we need to make Wales the very best environment it can be in which to start, to run, and to grow a business. That means that we need to be there to give the right support at the right times to business.

One of our key initiatives for supporting business is through our Business Wales service. The latest phase of the service was launched in January of this year, with the aim of creating 10,000 new businesses and more than 28,000 new jobs by the end of this decade. The latest figures show that, between January and September, Business Wales had helped to create over 2,100 jobs, it's safeguarded 350 jobs, supported over 2,200 people seeking advice, and provided information and direction to more than 5,000 customers. Business Wales also supports smaller employers to explore new markets, which could be international trade or public sector supply chains for the many infrastructure projects that are being put in place across Wales. Examples include rail electrification, the Newtown bypass, which I was pleased to cut the sod of with the Member, Russell George, just on Monday, and, of course, the £12 billion Wylfa Newydd project, which will be the largest energy infrastructure project in Wales over the next 10 years, and bigger than the 2012 London Olympic Games. We also continue to support indigenous business and have seen a record number of active enterprises headquartered in Wales. In fact, the latest figures show that Wales has the highest number of new businesses in over a decade.

Another key issue for Welsh Government is in supporting businesses to access finance. Work continues on the establishment of the development bank for Wales, which will improve the ability of SMEs to access finance, building on the experience and expertise of Finance Wales. Its objective will be to provide greater levels of funding to SMEs, whilst also improving the integration of the provision of advice and support to businesses by working more closely with Business Wales.

As a Government, we don't pretend to have all the answers, which is why I have also been engaging with business to seek views on the economic priorities that will inform the development of four cross-cutting strategies that will underpin ‘Taking Wales Forward’, our programme for government. I've done this because I want our Government to be a pro-business Government that makes it a priority to talk to businesses large and small about their views on developing the right approach to grow prosperity and deliver greater financial security for businesses and individuals across our country. More than ever, we need to ensure that the resources we have at our disposal are used to secure maximum impact and the best outcomes for Wales. And our focus remains on delivering programmes and ensuring stability and confidence for businesses large and small.

Thank you very much.