4. What steps is the Welsh Government taking to enable firms to remain in Welsh ownership? OAQ52988

Business Wales is working collaboratively with stakeholders, including the Development Bank of Wales and Social Business Wales to support businesses with succession planning.

Thank you, Cabinet Secretary. We know that the economy of Wales is marked by having a small number of very large anchor firms and a very large number of micro firms, but a missing middle—too few medium-sized firms. And small firms that tend to grow often cash out and the ownership leaves Wales. We're now seeing in Llanelli the difference between a grounded local firm and a rootless global firm, and indeed, the difference that grounded local management can make. A decision by the German family firm Schaeffler to close its Llanelli factory is not a first. They tried to close it in the early 2000s, but then a strong local management, committed to the area, fought back and developed new products that saved the plant. This time, the local management were not rooted in the area, and we are now seeing the consequences, with 214 families this Christmas facing an uncertain future. So, would the Cabinet Secretary update us on how the Development Bank of Wales is planning to grow a base of medium-sized Welsh firms, and what steps can be taken to support the local workforce in Llanelli in the current circumstances?

Can I thank Lee Waters for his question? The company that the Member refers to was in contact with me today. I spoke to the plant manager and I'm keen to speak to the CEO in Germany. It's my belief that the Development Bank of Wales has a huge role to play in ensuring that as many of the, if you like, missing middle remain in Wales and in the hands of Welsh people—. I think there are many people who have said that we need to move to the German model of retaining particularly medium-sized enterprises in Welsh hands.

Whilst I'd urge Members not to make the mistake that de Tocqueville warned us of many, many years ago, which is that you shouldn't try to transplant a culture from one country to another, what we should do is look at the different behaviours and attitudes towards business ownership where, in the UK, I'm afraid there has been a cash-in-and-check-out attitude, once a business reaches a certain size, whereas in other European countries such as Germany, there is an attitude of long-term growth and long-term commitment within a family or within a co-operative. Whilst we can't transplant that attitude and that culture, what we can do is learn from the Germans and others how we can apply a greater degree of long-term planning and commitment to the businesses that people feel so passionately about when they're growing but which they then wish to depart from once they reach a certain size.

So, the Development Bank of Wales is going to be an important component in ensuring that as many businesses in Wales remain in Welsh hands as possible, and there is already—I'm pleased to say—a management succession fund, which amounts to £15 million. This is money that has been allocated to the bank by the Welsh Government, and the development bank are also currently seeking £10 million from Welsh pension funds to swell that particular investment pot.

But it has to be said that the development bank alone can't take responsibility for increasing the number of Welsh businesses that remain headquartered here; it's also for the Government itself, which is why one of the five calls to action within the new economic action plan concerns the headquartering of businesses in Wales. And it's also why Business Wales itself is promoting the fund and ensuring that as many businesses as possible and as many business leaders as possible are able to integrate business funding and support in order to identify and support succession deals—wherever and whenever they may apply.

If we make it harder for people in Wales to sell their businesses to people from outside Wales—or 'cash out', as I think it was referred to—isn't there a danger that that, in turn, would discourage people from building their businesses in Wales in the first place?

I'm not necessarily advocating that we make it harder for a business to be sold. My concern is the attitude towards business growth, which is very different here in the UK compared to economies such as Germany and Denmark, where there is an attitude amongst many business leaders and business owners that crosses generations, rather than simply crossing five-year plans. I think what's essential is that businesses are given the right financial support and the right management support in order to plan for succession. That's precisely what Business Wales and the development bank, between the two, are trying to do.