Select Committee on Welsh Affairs First Report



13. Promoting trade and investment is the single largest activity of the Foreign and Commonwealth Office (FCO), accounting for 39 per cent of its frontline overseas staff activity.[28] Much of this work is now carried out under the auspices of British Trade International (BTI), a new body created in 2000 to bring together the various components of trade and investment promotion for the UK.[29] BTI consists of two branches: Trade Partners UK, which deals with trade development, trade promotion, outward investment and investment promotion, and Invest-UK (formerly the Invest in Britain Bureau), which promotes inward investment to the UK.[30] A representative of the National Assembly sits on the Board of BTI.[31]

14. In June 2000, the National Assembly established WalesTrade International, which brought together the overseas trade work which was previously carried out by the National Assembly and the Welsh Development Agency (WDA) and operates under the direct control of the Assembly. The WDA retained its overseas inward investment work, so the split between WalesTrade International and the WDA more or less reflects the split between Trade Partners UK and Invest-UK (I-UK).[32] WalesTrade International has two staff based overseas,[33] and the WDA has 25.[34] BTI has a network of 1,400 overseas staff, based in more than 200 posts and covering roughly 140 overseas markets.[35]

15. Although they are still relatively new organisations, the evidence suggests that Trade Partners UK and WalesTrade International are working well together. Officials from the NAW went so far as to describe their working relationship with Trade Partners UK as "excellent".[36] The Chief Executive of BTI told us that they has had a good deal of success with a number of products from Wales, including contracts in Brazil and South Africa for a Merthyr Tydfil firm which makes heavy lifting equipment, the export of camera equipment for use in large stadiums and the export of self-adhesive film used in the aircraft industry to the Middle East and Latin America.[37] One reason for the good relations between Trade Partners UK and WalesTrade International might be that Trade Partners UK was first established at about the same time that devolution was taking place, and efforts were made to involve the devolved administrations right from the start.[38] We are pleased that WalesTrade International and Trade Partners UK are working well together.

16. We have already reported during this Parliament on investment in industry in Wales.[39] We found that Wales had been markedly more successful than other parts of the UK over the last twenty years in attracting investment in manufacturing from overseas.[40] Although its share of inward investment into the UK had fallen since 1991 (from 19 per cent to 11 per cent), it was still far higher than its share of the population (five per cent).[41] Inward investment has been an effective way of creating large numbers of jobs to replace those lost in the coal and steel industries in the 1970s and 1980s, and the importance of this consideration is once again highlighted by the current problems with the steel industry in Wales.[42]

17. The granting of Objective 1 status to two-thirds of the country provides an opportunity further to enhance Wales's attractiveness as a strong business environment and an ideal location for foreign investors. We heard evidence from Hicks Randles , a firm of chartered accountants in Mold who are developing a website called Click-Cymru which is designed to reach out to the Welsh expatriate community to promote Wales and Welsh business abroad. They are hoping to receive Objective 1 funding for the project, which is being undertaken in partnership with CELTEC.[43] We also heard of other initiatives to promote Wales abroad which were seeking Objective 1 funding, some led by public-sector organisations and others led by small and medium-sized business such as Hicks Randles. For small businesses, there is a limit to the amount of time and money they can invest in a project before receiving funding and we are concerned that delays in the distribution of Objective 1 funds may lead to some projects led by small and medium-sized enterprises being lost entirely. Objective 1 funds in Wales are distributed by the Wales European Funding Office (WEFO), an executive agency of the National Assembly for Wales. We invite the Assembly to examine the resources available to WEFO for administering the Objective 1 budget.

18. Unfortunately, witnesses' confidence in Trade Partners UK was not entirely matched when it came to Invest-UK, British Trade International's inward investment wing. The Welsh Development Agency (WDA) works closely with Invest-UK and believes that it has a successful track record, but they are concerned that Wales has on occasion been poorly supported by Invest-UK. They allege that a number of high profile investment missions from Japan and Korea have not included Wales on their itinerary despite the fact that both countries have strong business links with Wales and despite lobbying from the WDA.[44] To some extent, this is reflected in Invest-UK's outcomes: of 757 inward investment decisions recorded by them in 1999-2000, only 45 went to Wales.[45] At just under six per cent of the total, this is considerably smaller than Wales's overall share of UK inward investment, suggesting that investors who approach the UK through Invest-UK are less likely to invest in Wales than those who approach it via some other route.

19. The First Minister told us that relations between the WDA and the Invest in Britain Bureau has been "pretty unhealthy" for a long time, but that since the creation of BTI relations with I-UK had begun to improve. The Assembly's Director of Economic Affairs thought the tensions stemmed from natural rivalry between organisations representing different areas.[46] The Chief Executive of BTI told us that I-UK worked very closely with the WDA—they were in "daily, if not hourly contact".[47] He thought that working relations were good and pointed to the example of the First Minister's visit to Japan in September 2000 and to a number of trade missions that year—for mobile telecoms, auto­components, flat panel display and other manufacturing—which had visited Wales.[48] Invest-UK's main argument about the level of support it provides to the WDA is that it is not for them to direct potential investors to any particular part of the UK. Investors make their own decisions, based on their business needs and what each region has to offer. I-UK's job is to maximise the total size of the "investment cake".[49]

20. British Trade International is still a young organisation but there is encouraging evidence that since its creation relations between the WDA and I-UK have been better than those with I-UK's predecessor, the Invest in Britain Bureau. We accept that Invest-UK's role is to maximise the total amount of investment in the UK and this emphasises the importance of promoting Wales abroad, alongside the UK as a whole. This is largely a matter for the National Assembly for Wales and its sponsored public bodies.

28  Ev. p. 85, paragraph 32. Back

29  Q. 59. Back

30  Ev. p. 87, paragraph 49. Back

31  Q. 59. The representative is the NAW's Director of Economic Affairs (Ev. p. 2, paragraph 16). Back

32  Q. 46. Back

33  They are based in the USA and Singapore, see Ev. p.3, paragraph 17. Back

34  Ev. p. 131. Back

35  Ev. pp. 87-88. Back

36  Q. 47. Back

37  Q. 79. Back

38  Q. 81. Back

39  Fourth Report from the Welsh Affairs Committee, Session 1997-98, HC 821, Investment in Industry in WalesBack

40  By "inward investment" we mean foreign direct investment, not investment in Wales from other parts of the UK. The Welsh Development Agency uses the term to describe investment from anywhere outside Wales. Back

41  Fourth Report from the Welsh Affairs Committee, Session 1997-98, HC 821, Investment in Industry in Wales, paragraph 5. Back

42  Minutes of Evidence taken before the Welsh Affairs Committee on 1 March 2001, HC 259, Session 2000-01, Job Losses in the Steel Industry in WalesBack

43  Q. 217. Back

44  Ev. p. 132. Back

45  Ev. p. 88, paragraph 56. Back

46  QQ. 43 & 44. Back

47  Q. 69. Back

48  Q. 70. Back

49  Q. 76. Back

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Prepared 27 March 2001