4. Will the First Minister make a statement on Welsh Government policy to grow medium-sized enterprises in Wales? (OAQ51153)

Yes. ‘Prosperity for All’ sets out a range of actions and priorities that will benefit small and medium-sized enterprises, and they include the development bank, enhanced Business Wales support and infrastructure investment.

Just last week, the Federation of Small Businesses published the report ‘Wales’ Missing Middle’, in which they stated that,

‘In the missing middle medium-sized firms, those employing between 50-250 people make up a slim 12 per cent of employment.’

They went on to say that, of those that do exist, they often face choices to sell to larger multinational entities rather than to pursue sustainable domestic growth. What plans does the Welsh Government have to address this issue and to what extent will it feature in the forthcoming economic plan?

The Member has addressed an issue there that is absolutely right. We have faced too many instances in the past where businesses that the Germans would describe as the Mittelstand businesses, the owners tended to sell rather than grow. It’s a problem we’ve had for years. We looked at one point at whether we could look to resurrect the Cardiff stock exchange to enable them to grow and then become listed. It wasn’t practical. That was something we looked at 10 or 11 years ago.

What can we do in the meantime to help them? We’ve got the Business Wales service, of course, which helps SMEs including medium-sized businesses, and the development bank of Wales will be a core component part of the Welsh Government’s economic policy and delivery to build on the expertise of Finance Wales. That will help SMEs to access finance. And the economic action plan will, undoubtedly, look to support businesses of all sizes. I think it’s fair to say that, 20 years ago, the emphasis was entirely on attracting overseas investment and nothing else. That’s what the Welsh Development Agency did. That’s no longer the case. We know how important that broad and strong pyramid of SMEs is, and Mittelstand businesses, if I can call them that, because they are the base of the Welsh economy, and we want to make sure that our offer helps to strengthen them as well.

Last week, I asked for a statement on whether the Welsh Government had plans to review the terms and conditions on which grants in Wales were made to businesses, following the job losses at Newsquest and the threat to jobs at Essentra in Newport. Both companies have received grant aid from the Welsh Government. Since then, it has emerged that of the £320 million spent on business support since 2010, less than a quarter was classed as a repayable grant or a commercial loan. And, less than 2 per cent has been repaid. Does the First Minister agree that there is an urgent need to review his Government’s policy with regard to grant aid to businesses to ensure that their objectives are achieved and the maximum benefit to the taxpayer is obtained in the whole of Wales?

One hundred and fifty thousand jobs have either been created or preserved as a result of the money that Welsh Government has made available. We’re not going to apologise for that. The reality is that the move towards repayable finance was originally made in 2010—seven years ago. Now, circumstances have changed since then. We’ve found that businesses were not able to access finance. They didn’t see repayable finance as attractive to them. So, yes, we have provided more grants, but we have seen the results and we’ve seen many, many thousands of people who are in jobs today because of the support that their Government has provided for their families, in order for them to have an income for the future.

One of the key conclusions of the FSB report is that Welsh Government economic policy has relied too heavily on attracting foreign direct investment. That’s not just true of this Government; it’s true of Welsh economic policy going back 50 years to when Cledwyn Hughes produced ‘Wales: The Way Ahead’ in 1967. It hasn’t worked. At best, it’s been a short-term sticking plaster; at worst, it’s sold the Welsh people the fallacious myth that the salvation to our economic woes would come from outside. Will we at last see a sea change in the new economic strategy, so that we can concentrate not on selling Wales as a location for the world to produce, but invest in our own capacity to produce our own innovations, our own skills and our own enterprise?

I don’t see the two as being in conflict. It is right to say that we have been very successful in attracting foreign direct investment and many, many thousands of people in Wales are employed by companies outside Wales. That is not something that we should apologise for—it’s a mark of our success. He is right to say that, certainly, the experience that I had at the start of the last decade was that economic policy was geared, because of the WDA, almost entirely towards attracting very large investments at the cost of not supporting SMEs. We can’t afford to do that anymore, because we want to make sure that SMEs are able to grow in the future. At that time, our universities didn’t work with SMEs; they didn’t see themselves as economic generators, they didn’t see themselves as having to produce start-up businesses based around their own research. That’s all changed. Our universities are very much on board now, and we have worked with organisations like the FSB. We’re interested in what the FSB have to say in terms of what we can do to support businesses in the future, but we have to understand that all countries—well, all open countries—rely on foreign direct investment. They create many thousands of jobs in Wales. It isn’t the be-all and end-all, we understand that. Getting a balance is absolutely crucial, and that’s exactly what the economic action plan will do.