Examination of Witnesses (Questions 340
- 357)
WEDNESDAY 17 MARCH 2004
CBI
Q340 Dr Francis: I think you have
part answered my next question. Are contacts with the DTI and
Westminster more frequent and better than with the WDA and the
National Assembly or the reverse? You have begun to explain that
you are in the process of change really.
Mr Rosser: Our contacts with DTI
have been virtually nil for the last three or four years. Interestingly,
the chair of the CBI's Manufacturing Council UK-wide, Nick Brayshaw,
is currently being used by the DTI to undertake a UK-wide consultation
on the DTI manufacturing strategy. I sense from conversations
that the DTI's contacts in Wales are not strong and so for his
visit to Wales to undertake this consultation, which is happening
next week, I have arranged the programme for him. I think that
is an indication of how the relationship not just between the
CBI in Wales and the DTI but between the DTI and Wales plc could
probably do with some reinforcement.
Q341 Dr Francis: You indicated really
that the Secretary of State for Wales acts as a kind of conduit
for you rather than direct links into the DTI.
Mr Rosser: That is right. Our
links with the DTI are largely undertaken through our various
directorates in London, and Andy may be able to refer to that,
and we have raised Wales-specific issues through Welsh Office
ministers.
Mr Scott: To reinforce that point,
as David said, a very large percentage (95% or whatever the figure
would be) of the issues which would be of concern to manufacturers
in Wales, Northern Ireland, Scotland, Yorkshire and Humberside
are issues that would be of common concern. So clearly we have
a great deal of interface with the DTI, and we work very closely
with the current Secretary of State. We were fairly instrumental
from the CBI's point of view in getting this further review of
how the Government's manufacturing strategy is being implemented.
We have called for what business would expect to see following
the establishment of a strategy, which would be a detailed action
plan with milestones and reporting back on achievements against
those milestones. That is exactly what Nick Brayshaw, the Chairman
of our Manufacturing Council is now doing working with the DTI
to help try to put that manufacturing strategy into sharper focus.
We have a lot of interface and when we have those links with the
DTI we do endeavour to work back through to our respective regions
in England, Scotland, Wales and Northern Ireland to make sure
that what we are saying centrally will reflect the broad thrust
of what the manufacturing community would also be wanting us to
say as representatives of other parts of the UK.
Mr Rosser: The CBI has some pretty
rigorous structures in place to enable members wherever they are
in the UK to feed into our policy teams in London. The CBI in
Wales—
Q342 Dr Francis: It is interesting
that when you answered the first question you actually described
I suppose a kind of temporary Fortress Wales mentality, although
you had never thought of it in that way.
Mr Rosser: I certainly had never
thought of it in that way. I thought of it in the perspective
we have a new organisation in Wales with which we have no links;
we very much need those links and that has to be the focus of
our efforts.
Q343 Dr Francis: I understand that
need but you are now refocusing and your relationships with government
are multi-faceted?
Mr Rosser: I have made myself
unpopular in the Assembly frequently by telling them that the
major issues affecting our members in Wales are issues that are
determined in this place. We have always understood that.
Q344 Dr Francis: If I could follow
that up and ask a more precise question, how has the devolution
settlement for Wales affected the UK Government's approach to
economic development for Wales?
Mr Rosser: I am not sure how to
answer that. I am not sure I could describe to you what the UK's
Government approach to economic development in Wales is and whether
it has an approach. I sense—and it is no more than a sense—that
even in those policy fields on economic development which are
not devolved which the DTI retains responsibility for there is
either a reluctance or a nervousness to cross the border, and
whether it is "we do not have to worry about Wales any more"
or whether it is "we do not want to offend the Assembly by
being seen to be stepping on toes", I am unclear. It is no
more than a sense but I see no sign of the UK Government actively
involved in economic development in Wales.
Q345 Dr Francis: Do you think CBI
Wales needs to engage with the UK Government to explore that a
little more?
Mr Rosser: Again I am unsure.
We have, as we have said, very strong links between the CBI nationally
and the UK Government. Most of the issues are common across the
UK. I have already said that I am uneasy with the poor links that
we have with our representatives in the UK Parliament and that
is something we want to try and address.
Q346 Dr Francis: Can I give you an
example: economic inactivity. Set to one side economic performance
in terms of employment, it is much more interesting in terms of
inactivity. In 1997 there were over seven million people in UK
who were economically inactive and I think the figure is roughly
the same today, and those statistics are much sharper in Wales.
To give you another example, something that is close to my heart
at the moment concerns the number of carers, people who look after
people in their family who are disabled or elderly or whatever.
In my local authority we have the highest proportion of carers
of any county in the UK—22,000—and the highest proportion
of heavy end carers, those who look after people for over 50 hours
a week. That is not a major issue necessarily in certain parts
of England but it is a big issue in terms of getting people back
to work in old industrial parts of South Wales, particularly the
Valleys. That is an issue really that the Chancellor needs to
address and it is an issue really that CBI Wales needs to address.
The TUC highlighted it in their recent pamphlet Unemployment:
The Next Steps where it said that one of the biggest factors
in economic inactivity is the number of carers who cannot access
education, training and work.
Mr Rosser: I am not sure that
economic inactivity per se is going to be a major policy
objective for the CBI.
Mr Scott: To the extent it is
(which is partly what you are alluding to) constraints which are
preventing some of those people getting back into the workforce,
assuming they are in position so to do so, (and some of those
carers may not be in a position where they can easily go back
into the workforce) how easily and how effectively can they access
relevant training requirements if that is what they need. Therefore
from a business point of view, as a potential pool of skilled
workers, it obviously does have an interest. This is all part
of how do we ensure that we have the most effective training provision
which is both developing the skill sets of those who are in the
workforce and is also looking at those who are currently not and
what is constraining them. Sometimes it might be factors which
are not necessarily directly down to their own skill sets. It
might be something to do with the social issues which you are
describing which constrain them from being available to be in
the workforce. To the extent there are training issues, and indeed
there are because there are substantial numbers of the UK population
who do not have basic skills of numeracy and literacy for instance,
which is another reason why they are economically inactive, we
do need to address those sorts of issues and it is a key part
of the up-skilling generally that we need to do within the workforce.
Q347 Dr Francis: We have heard evidence
from other witnesses and Julie Morgan commented about the existence
of a workplace cre"che. Having a cre"che is beginning
to become part of mainstream employment policy. Similarly you
have organisations like the Shaw Trust which are working with
government and the Department of Work and Pensions to assist people
with disability back into work. These are now mainstream good
practice in employment and I would envisage, and I would like
to think that you would as well, that the next category of socially
excluded people from the workforce would be the seven million
carers that are in this country, 80% of whom are in the working
age group and 80% of that 80% want to go back to work and cannot.
Mr Rosser: I am not sure what
business can do to solve their caring problems to enable them
to come back to the workforce. I can clearly see—
Q348 Dr Francis: You would welcome
government initiatives to support that?
Mr Rosser: If we are not at full
employment we are perilously close to it, so, yes, government
action which can increase the available workforce is welcome.
Business has its role to play in that through the creation of
flexible shift patterns, et cetera, so it is a two-sided thing
but on the particular issue of carers though, I am struggling
to see how business can solve the care responsibilities.
Dr Francis: Sorry to have hijacked the
agenda.
Chairman: I would not have said that,
Dr Francis, I think they are interesting points you raise but
we do need to get on with it. Mr Caton?
Q349 Mr Caton: In your memorandum
you highlight the fact that the vast majority of large employers
in Wales are not headquartered in Wales. What do you think can
be done to attract headquarter functions to our country?
Mr Rosser: I think for headquarters
we mean indigenous businesses, so from that perspective it is
a question of growing our existing businesses. There are a whole
lot of issues there, including improving access to wider markets,
Wales is a very small market in itself which is not big enough
to sustain large businesses. Those large businesses do operate
globally, certainly UK-wide, so key issues about improving access
to markets will enable businesses to grow more rapidly than they
might otherwise have done. In terms of relocating head office
operations, I guess we are talking about divisions rather than
perhaps true head offices. That has been an aspiration of our
FDI policy, I think, for quite some time. There are a whole lot
of issues there Certainly international transport links are key,
the higher end skills base is key, and addressing the perception
issue afflicting Wales which says that Wales is there for a manufacturing
model is key. All of us have roles to play there.
Dr Guilford: I would have highlighted
exactly those three things. As I alluded to earlier on, we have
more difficulty attracting what you might call the head office
functions to our site in Cardiff than we do in attracting the
manufacturing functions in terms of internal competition within
Amersham. We have been quite successful over the years and we
run a large part of the IT in the UK now from our site in Cardiff.
We have quite a large commercial presence there and so on, so
we are making inroads, but I think the perception issue probably
remain the largest one, combined with the transport infrastructure.
It does not look at first sight like the sort of place where you
see a lot of head offices. I think Cardiff is beginning to change
and with it the perceptions might change as time goes on but there
has to be a belief that you will be able to recruit and retain,
as David referred to earlier, the high-end management personal,
the financial and legal people and so on. That will probably take
a little bit of time to be there. Certainly international transport
has to upgrade significantly. Things are moving in the right direction
but it will take some time and there are a number of centres in
the UK probably ahead of South Wales in that respect.
Q350 Mr Caton: Thank you very much.
A not closely related supplement; what role do you think design
and indeed other creative industries should play in adding value
to manufacturing? How could that be facilitated by government
at whatever level?
Mr Scott: First of all, it has
been a sector which has been perhaps, until relatively recently,
quite significantly overlooked in terms of its real value. It
is a relatively new sector and certainly creative industries generally
compared to some traditional sectors in manufacturing are relatively
new. It is a fairly disperate sector right through from design
at one stage to software manufacturing through to games manufacturing
through to the film industry to creative industries. So there
is a very wide range of industries and it is not an easy one to
define but it is a very substantial economic activity in its own
right. It is an area where the UK has real key strengths. It is
an area where the UK internationally is recognised as having key
strengths and it is certainly one where there was a Creative Industries
Task Force which the Government looked at two or three years ago
defining the scope of the industry and then looking at how that
industry could be promoted effectively in the UK and particularly
how that industry could be promoted internationally. A range of
factors were identified there, of which a key one was literally
giving credibility and profile to the sector overall. It is probably
not sufficiently well recognised the strengths that the UK has
for instance in the computer games industry. We have a lot of
the design capability but what we not do is exploit them sufficiently
here and develop them out of the UK. It is an industry in which
the UK has great strengths. It is also an industry which is largely
small and medium sized and an industry which is very dependent
upon electronic communications of one means or another which would
lend itself to not being physically located in any one particular
part of the country. It does not have to gravitate to one part
of the country because that is the natural location for it, so
Wales ought to be as open and as attractive for those sorts of
sectors as indeed other parts of the UK can be and are. So I think
it is a very important part of the economy and one which I think
is going to be increasingly important when we look at the decline
in other more traditional sectors.
Mr Rosser: It is what it can add
to manufacturing. We talked earlier about perhaps redefining value
added. I think innovation in design is a key component offering
added value to traditional manufacturing industries. There are
some very interesting services available from two or three of
our university institutions which can assist manufacturers with
product design, design for ease of manufacturing, for example,
and rapid design. I do not think those are widely enough known
about but those companies who have used them have found them very
useful indeed.
Q351 Albert Owen: To take you back
to an earlier observation Mr Scott made about the links between
universities and the productive economy, what incentives should
the United Kingdom government offer to business to work more closely
with the higher education sector?
Mr Scott: I am conscious Grahame
did not have a go at that one last time round so I will let him
have a go and come back.
Dr Guilford: I am not sure that
incentives is necessarily the right approach. Certainly in the
sector I am in (but a number of other sectors as well) it is natural
and inevitable that there will be contact with the academic sector.
That is contact in a global sense. You would collaborate in the
location where the particular experts in the area that you want
actually work. If the academic sector has the expertise, if it
is capable of collaborating effectively, that collaboration will
take place. So I would focus on that side rather than giving industry
incentives. The capability has to be there within the academic
sector. If it is there, it will draw in industry collaboration
almost undoubtedly.
Mr Scott: There is one area which
can act almost as a disincentive for collaboration and this is
what is called the research assessment exercise which is the process
by which universities or research departments in universities
get the ratings which are used for their research council funding.
In order to get those five-star ratings, a key criterion is peer
review published papers, which is the classic way in which the
academic community works. If there is a closer dialogue with industry
it can almost be counter-productive in terms of their assessment
for research rating. The CBI has been feeding into various of
the exercises looking at the research assessment review and arguing
very strongly that having that closer dialogue with business can
be a key part of ensuring that research is then taken into the
market-place. Far from it being detrimental in terms of them securing
a five-star rating it ought to be positive. We would say that
would be a key change. If we could get that focus on the industry
collaboration as a key part of their assessment process that would
be very positive. The second area is greater collaboration in
terms of deciding where the intellectual property resides when
the research is undertaken jointly between business and universities.
We think that should be very much an issue which is determined
in negotiation between individual universities and the partner
it is working with rather than it being a presumption one way
or the other. What we are also working up with the Association
of University Research and Industry Liaison Officers is a system
of model contracts as to how you can assess that. There will not
be one single contract, it will vary depending on the type of
research being undertaken, but we think there is scope for looking
at the best practice operating in certain areas and seeing whether
it could be deployed more effectively, rather than having a blanket
with either the IP going all one way to the universities or the
IP going all one way to business. It genuinely needs a dialogue
appropriate to the individual needs of the parties.
Q352 Chairman: I think this is probably
the last couple of questions. In a recent Western Mail
article a spokesperson from the CBI, who described themselves
as head of policy, suggested that our visit to the United States
was a "strange" choice. Given that the US is by far
the biggest investor in FDI in Wales I wondered if you could say
why the CBI spokesperson, if it is the view of the CBI, thought
meeting with those companies was a strange choice?
Mr Rosser: I think my colleague
had not realised the focus of your visit was to go and talk to
the parent companies of existing investors in Wales. We did not
communicate that terribly well. As to the choice of overseas locations
to go and explore, I am just struck by the dominance of China
in discussions that I have had with members across Wales recently.
I am struck by a number of perspectives on that. Firstly, how
the attitude to China has changed. Three years ago China was a
global threat. It was going to be the source of low-cost labour
and low-cost goods which were going to come and wipe out our home
market. About 18 months ago businesses thought, "Well, China
is now an opportunity. We can go and source low-cost production
there to protect our home market." I sense that in the last
six to 12 months China has increasingly become seen as a major
opportunity as a market to explore. Nine meetings out of ten I
will have with businesses across Wales will mention China at some
stage in our conversation. The other reason that is particularly
interesting is the sheer spread of businesses going out to China.
It is not, as you might expect, the clothing manufacturers, it
is not just those and it is not just electronics companies. I
was with a £5 million turnover business in Welshpool the
other day which is just setting up a joint venture in China. I
was with a small shipping company in Cardiff which let contracts
with China. I was with a further education college in North Wales
recently whose principal was just about to get on a plane to go
to China to look for students. The way in which a whole range
of businesses in all parts of Wales is exploring that market I
thought was quite remarkable. The other reason I think an exploration
of what is happening in China would be valuable to the Committee
is the sheer pace at which businesses can get things done, and
contrasting that with some of the experiences members have in
the UK, not just Wales. We have members in the chemical sector
who will make two trips to that market ten months apart and in
the interim period a fully functioning chemicals plant is set
up. Ten months is the time it would take to have initial discussions
with the planning office in the UK. That was some of the thinking
behind that comment.
Q353 Chairman: A further comment
about going to China, we had advice from advisers obviously as
to where to go and I think maybe a more historical view of China
was prevalent that it was more of a threat than a market, and
you cannot examine a threat.
Mr Rosser: It is changing so rapidly
it is unbelievable.
Q354 Chairman: I can see there is
an argument there as to what we could usefully do as Committee
and it might be a bit more difficult to see what we would go and
look at. I think we have learned today the kind of things happening
there from yourselves and also from the other witnesses and, yes,
they have got cheap labour which is a problem and they have got
a huge and growing economy, which is a problem maybe for us but
it also could be seen to be an advantage. I understood that comment
but your previous one—
Mr Rosser:—I think our communication
could have been better. The other thing about China is we must
not dismiss it as cheap labour. It is skilled labour and it produces
quality products and that is what is so impressive and challenging
at the same time.
Q355 Dr Francis: The pace of change
as well. We took this decision about this time last year to go
to the States and even this time last year I suspect that we would
not have had this dialogue about China.
Mr Rosser: I suspect you are right.
Dr Francis: The Minister for State for
Higher Education, when discussing the Higher Education Bill, one
of the questions asked was why amongst many reasons have you changed
your mind and he quoted the statistic of the number of graduates
in China which has quadrupled in a short period of time and makes
your point about talking about a knowledge economy; they are building
a knowledge economy now, are they not?
Q356 Chairman: We can all be bounced
by journalists in our respective professions.
Mr Rosser: I am sure we have all
done it.
Q357 Chairman: It can happen and
it can lead to some misunderstandings. I have to say that it has
been a very, very useful session, a very long session, and we
appreciate your patience and help. We have listened and I can
assure you that a lot of the messages you have given us will go
on into our report.
Mr Rosser: Thank you very much
for the opportunity.
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