APPENDIX 18
Memorandum from Ceredigion County Council
The peripheral location of Ceredigion and the
other Counties in West Wales has particular disadvantages for
both inward investment and indigenous growth. The perceived remoteness
of the region is a disincentive for inward investment with:
— above average haulage and transport
costs making business less competitive;
— remoteness from major markets and
suppliers;
— the distance from business customers
reduces the time available for business links and marketing initiative;
— highly skilled workforce but low
pool of labour for attracting new inward investment companies.
The disadvantages presented by peripherality and
the perceived remoteness of the region is a constraint to both
inward investment and indigenous growth by SMEs.
The rural areas are highly under-represented
in relation to the level of inward investment in Wales. Rural
Wales, as defined by Objective 5b, has 25 per cent of the population
of Wales but in 1997-98 attracted only 2 per cent of the total
inward capital investment in Wales. This unfair distribution in
terms of inward investment is compounded the further west one
travels, and we need only to consider the Welsh Development Agency
statistics on Inward Investment in 1996-97 to appreciate the small
number of projects directed to the west. In that year, inward
investment generated £2.952 million of capital investment
and created 13,798 new jobs in Wales, of which Ceredigion, Carmarthenshire
and Pembrokeshire received only £519,000 capital investment
and 30 new jobs from inward investment. This uneven allocation
of inward investment throughout Wales has also prompted re-direction
of scarce resources to meet the training needs of the large inward
investment companies e.g., Lucky Gold Star, Newport. There is
a strong argument for increased resource allocation and priority
to be given for inward investment in West Wales.
Mr Peter Hain MP, in his statement to the House
of Commons, on 18th June, 1997 made the following comments in
relation to the matter of inward investment policy and the industrial
location strategy of the Welsh Development Agency.
"The WDA's industrial location policy is
based on the economic case for promoting inward investment in
Wales and it has been most successful. The new Labour Government
are determined to build on that success.
However, it has been easy to attract inward investment
to the south east and north east of Wales. I agree with . . .
. . . . . . we now need to address the balance between east and
west Wales.
I expect the DBRW to give priority to the West
of its area. At least 55 per cent of its programme expenditure
will be concentrated in that area by 1999/2000 and we expect that
at least 40 per cent of the jobs to be created this year will
be outside Powys.
We are pressing for a fairer distribution of
inward investment throughout Wales, particularly in West and North
West Wales but also in the South Wales Valleys".
There are no changes in policy or in the circumstances
of west Wales which would warrant a change in the corporate statement
of the WDA or DBRW to give priority for inward investment or resource
allocation to west Wales. However, more recent policy advice from
the Secretary of State and Welsh Office has suggested a more balanced
approach between inward investment and indigenous growth with
the later to receive an enhanced status under the new Agency.
The constraints to inward investment are not
dissimilar to the problems faced by indigenous SME. One very important
factor is the supply of suitable development land at costs which
are comparable with other regions of the UK. Unless rural west
Wales is able to supply quality strategic and local sites for
industrial development the region could be faced with the possibility
of outward investment by the more successful SMEs in their efforts
to expand. The more successful small and medium sized businesses
anxious to be more competitive may be attracted to strategic locations
in the south and east which are more convenient to markets and
to suppliers, thereby increasing their competitiveness on the
regional or national scale.
The successful indigenous business in rural
Wales tends to develop through an incremental approach to expansion
and will, as part of this process, develop its own highly skilled
workforce and strong product image. Once these successful businesses
approach the ceiling or threshold of their potential in the local
economy they may be faced with by-outs or take-overs by larger
national companies or may be persuaded for competitiveness reasons
to re-locate to a more convenient location for distribution and
market outlet purposes. Unless there are specific reasons to the
contrary e.g., family commitments, seldom is there a strong enough
reason for successful businesses to remain in West Wales.
The shortage of effectively available industrial
land i.e. land assembled and with infrastructure and service provisions
already on site, is a serious stumbling block for inward investment
and for indigenous growth and expansion.
The DBRW have had a number of enquiries for
sites and development in the Aberystwyth area which they have
been unable to satisfy, consequently, potential inward investment
companies and successful businesses in the Aberystwyth Travel
To Work Area have been forced to look outside the County for suitable
premises and/or land for development.
The shortage of strategic employment sites in
the Aberystwyth area is already a constraint to the future plans
and expansion of existing SMEs. The foresight of the old Cardiganshire
County Council in the late 1960s in its allocation of industrial
land at Glanyrafon catered for inward investment and indigenous
growth for a period of 30 years. A similar strategic vision would
secure long term growth and prosperity in the north of the County
and in Mid Wales. The lead in period for planing and land assembly
is likely to leave Aberystwyth without a strategic development
site for a number of years. The DBRW and the County Council are
working closely to identify a strategic site, and once endorsed
by the Local Planning Authority either through its deposit Local
Plan or through the submission of the planning application there
remains the problem of capital funding. Neither the DBRW nor the
County Council have the capital budget necessary to release strategic
development sites and they will have to rely upon European Funding,
Capital Challenge, Strategic Development Scheme and other Welsh
Office support. The policy of the Government in requiring the
DBRW and the WDA to raise income via the sales of land and premises
has resulted in the depletion in the stock of premises available
for letting. The private sector in those limited where it holds
quality sites is, in the absence of choice, able to hold on to
the land as investment opportunity. This problem is exacerbated
by the lack of a public sector investment programme in the supply
of industrial land and premises for new business development and
advance factories.
There is a shortage of land that can be developed
at costs which industry would be prepared to accept in other regions,
and in west Wales there is extra effort and costs involved in
land assembly for industrial development.
The strategic development sites, important though
they are in catering for inward investment and indigenous
growth, will never be able to answer the needs of all SMEs and
micro-businesses in the smaller towns, villages and countryside.
The slow step by step approach to investment and growth in rural
areas often can result in more successful business ventures becoming
hostages to their own success—unable to expand in their
present location nor wishing to relocate to an industrial estate
of business park at one of the larger towns. There are examples
of successful SMEs in Ceredigion which are faced with this dilemma,
they are ready for business expansion but are unable to effect
development or the costs of re-location.
The strategic development sites need to be complemented
by a pepper pot development approach to retain small businesses
thereby supporting sustainable development in their local communities.
The lack of employment alternatives in rural
areas leaves the individual with little choice other than becoming
self-employed. Rural South West Wales area has one of the highest
proportions of self-employed workforce in the UK e.g., the workforce
in Ceredigion is made up of 34 per cent self-employed due mainly
to the large number of farmers in the County. The growth from
sole trader to employer and to SME requires development of new
business skills and acumen often unrelated to the primary purpose
of the business. Training and development programmes are needed
to support these small businesses to bridge the gap and create
a dynamic and forward looking business culture.
Regional aid policy and funding is governed
by State Aid rules, DTI Travel to Work Areas and the assisted
areas maps for the region. The patchwork of assisted areas in
Wales is often unrelated to the needs of the rural economy. The
Regional Selective Aid (RSA) system relies heavily upon the use
of unemployment rates to define Development and Intermediate Areas.
The use of unemployment figures as criteria in defining assisted
areas is not necessarily the most appropriate means by which to
measure the economic advantages and disadvantages of rural areas.
A more sensitive mechanism, responsive to the needs of rural areas
which takes on board low wages, activity rates, seasonality of
employment in tourism and the reliance upon public services sector
would reflect more accurately the economic characteristics, and
needs of rural regions.
The Welsh food processing industry with its
many sectoral inter linkages (agriculture, hotels, catering, tourism
and retail) has seen a growth in the number of niche markets for
premium and organic produce, notably dairy products. Opportunities
for creating added value in food related diversification in the
agriculture sector are considerable. To support investment in
this industry we need a pro-active project based approach which
takes ideas forward through assessment, research and technology
support and in providing the marketing advice. The Food Centre
Wales located at Horeb, Llandysul is able to fulfil this role
for Rural Wales but the stumbling block for new or expanding businesses
is the high level of capital investment necessary to meet the
higher specifications than normal. It may be preferable in these
circumstances for new project ideas to receive testing support
and advice from a project based economic development initiative.
Local Authority Capital Grants to businesses
complement Welsh Office grant measures e.g., Ceredigion County
Council has a Small Food Producers Grant up to £70,000, at
which point the WOAD Food Producers Grant takes over.
The Organic Food Sector is another area which
has considerable potential for growth in Rural Wales. Several
of the existing large organic food processing and packaging businesses
in Ceredigion are unable to fulfil order books using only local
suppliers and fall back upon imported material from as far as
France and Spain.
The volume and the guarantee in supply of organic
products can easily be improved through the organic conversion
scheme grants if they are brought into competitive line with the
rates offered in other EU Member States. The current organic conversion
scheme in Wales and the UK is considerably lower than schemes
on mainland Europe.
One of the corner stones of the rural economy
involves the public service sector. In Ceredigion the County Council,
the two Universities, hospitals, the College of Further Education
and the Research Institutions employ a significant proportion
of the workforce. Any restructuring of these organisations would
result in a loss of relatively highly paid occupations which would
have a dramatic impact upon the local economy.
Business Development grants for both inward
investment and indigenous growth are based essentially upon capital
investment normally associated with the manufacturing industry
sector. The opportunity for offering business development support
in capital grant aid is relatively weak in the rural areas like
Ceredigion where the manufacturing sector accounts for only 7
per cent of employees.
There needs to be a certain degree of hard headed
realism in assessing opportunities and potential for inward investment
in West Wales and the Local Authority would welcome new business
ventures from outside but the scarce resources available means
that business support and advice provided by the County Council
will focus upon indigenous growth in those sectors with acknowledged
growth potential. The time and resources which would be needed
to attract inward investment into rural West Wales will be relatively
high in relation to effort and money spent in nurturing the local
entrepreneurial skills and ideas for indigenous growth but we
can ill afford to discriminate between inward investment and indigenous
growth—both serve a vital function in revitalising the local
economy.
One of the greatest strengths of the rural area
is the enterprising culture of the self-employed and the relatively
high skilled workforce. Programmes supporting indigenous development
and business growth should recognise these strengths where people
investment is just as important as capital investment schemes.
Highly educated, well trained and skilled people are needed to
support inward investment and indigenous growth. Innovative, outreach
and business orientated approach to training for both employees
and employers will help re-energise the rural economy.
The agriculture industry and farmers are facing
a serious crisis in industry and the effects of this crises will
be felt first in the associated businesses and in the rural community.
If agriculture is to remain a fundamental indigenous industrial
sector of the rural economy it will need to adapt quickly to create
alternative sources of income. The agricultural diversification
programme will have to be integrated with wider business activities
and will need to be supported by the Welsh Office Rural Development
Grant Scheme to add as a catalyst in new demonstration and test
projects in the rural areas.
Information Technology will play a vital part
in business development, education and in servicing Government
at both local, regional and Assembly level. The role of Aberystwyth
as a centre in hosting the meetings of Regional Committees of
the Assembly will help to foster the inclusiveness concept in
Government. The provision of a broadband link through the heart
of rural Wales will reinforce the strategic development role and
functions of Aberystwyth. This can only be achieved through significant
levels of public funding.
E M Bronwen Morgan
Director of Corporate and Legal Services
Ceredigion County Council
9 June 1998
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