Written evidence from Dr David Grant,
Vice-Chancellor of Cardiff University
MANUFACTURING AND TRADE IN WALES
Dr David Grant became Vice-Chancellor of Cardiff
University in 2001, having spent more than three decades in high
technology international businesses. From 1994 to 1998, whilst
employed as Technology Director of GEC plc, Dr Grant chaired the
Manufacturing, Production and Business Processes Panel of
the UK's first Foresight Programme. The Panel studied many factors
influencing the long-term prospects for manufacturing in the UK.
INTRODUCTION
I welcome the opportunity to provide evidence
to the Committee and will do so primarily by addressing opportunities
to create higher value-adding businesses in Wales. I will comment
on the challenges and opportunities for business development,
and opportunities resulting from improved partnerships between
businesses and universities.
The Committee should note that I have been a
Vice-Chancellor in Wales for less than three years, and have developed
my opinions of businesses in Wales as a result of discussions
with colleagues in Cardiff and other universities; discussions
with WAG, WDA and other bodies; discussions with business leaders—many
of whom lead SMEs; and discussion with Russell Group Vice-Chancellors
on the roles of RDAs in promoting University-Business developments
elsewhere in the UK.
BACKGROUND
A decade ago, at the time of the UK Government's
first Foresight Programme, an analysis by the Manufacturing Panel
indicated that many manufacturing operations across the UK had
received low investment; many products were undifferentiated and
business processes were lagging innovative approaches overseas.
UK manufacturing employment was falling rapidly. Manufacturing
employment in Wales, and the importance of manufacturing to the
economy of Wales, was far higher than in other regions of the
UK. The Foresight Panel concluded that many UK manufacturing sectors
were vulnerable to competition from lower cost economies overseas.
Some manufacturing sectors and UK regions were
taking steps to halt the decline, and the Foresight Panel chose
to hold discussions in Scotland and with Scottish Enterprise.
There was clear evidence at that time of an increasing emphasis
on higher value-adding products, clustering of universities and
businesses, focus on markets such as electronics, and an integrated
regional strategy. However, when compared with knowledge-based
economies developing overseas, Scotland's good performance was
in some cases overtaken.
(An excellent paper from Cardiff University's
Professor Cooke, "Wales and Scotland: the High Roads and
Low Roads to the Knowledge Economy", explores, brings up
to date and expands upon matters the Foresight Panel briefly reviewed
a decade ago.)
One important outcome of the first UK Foresight
Programme was the huge benefit that industrialists and academics
gained from jointly addressing longer-range complex economic,
social and technological futures. Our backgrounds led to different
but often innovative perspectives on an uncertain future. We realised,
of course, that together we were capable of influencing that future.
The Programme underpinned government policies and actions that
encouraged far greater levels of university-industry partnership
as a vital step to achieving success in the emerging knowledge
economy. The most recent examples of UK Government investigations
of this important area are the Lambert Review of Business-University
Collaboration, published on 4 December 2003 and the DTI's Innovation
Report—"Competing in the Global Economy: the Innovation
Challenge", published on 17 December 2003.
THE CHANGING
BUSINESS LANDSCAPE
Businesses change with time in order to maintain
a competitive edge and satisfy the evolving expectations of customers
and other stakeholders. It is evident that the pace of change
has accelerated in the last decade, but so too has the complexity
and uncertainty of markets and competition.
Global markets and global competition, often
supported by global e-business networks, are changing the business
landscape. The increasingly networked world of business has many
advantages. Supply chains, often globally integrated, can respond
efficiently to market opportunities and competitive pressures.
There is a downside, as illustrated in a recent
example. When patterns of demand change, or a market/business
segment "overheats" as it did in telecommunications,
the supply networks can be rapidly and radically changed. SMEs
who depended on a specific network were vulnerable. In a remarkably
short period of time, multinational companies collapsed and supply
chains were torn apart: SMEs had rapidly to diversify or die.
When market demand increases, as it must to satisfy growing global
ICT needs, new supply networks will emerge. Businesses that have
continued to invest in technology, or have access to technology
in universities, will dominate.
This is not a new business or market experience.
Markets and businesses undergo continuous change. Today, however,
the pace and magnitude of change is far greater than ever before.
Global market demand for many services and products
is rising. Businesses, large and small, can benefit; but businesses
must be proactive, or respond more rapidly than ever to market
and competitive forces. Product and process innovation is crucial
to success.
The recent Lambert Review of Business-University
Collaboration confirms the increasing importance of universities.
The review points out that many large companies are less reliant
on corporate laboratories and far more likely to work with universities.
Furthermore, enterprises of all sizes working with universities
are twice as successful, measured by a range of success criteria,
than enterprises that do not work with universities.
A PERSPECTIVE ON
WALES
My observations as a newcomer to Wales suggest
that the Welsh Assembly Government has a good understanding of
the need to develop a knowledge-based economy. Education, economic
and other policies emphasise this need. However, Wales has a legacy
of economic, demographic and social challenges that influence
the pace of development.
A substantial decline in manufacturing has taken
place in recent years. This is often in businesses with lower
value-added products; where competition is based on price rather
than technology. A brief review of employment statistics suggests
that Wales now has 16.4% of its workforce in manufacturing compared
with 13.5% for the UK. The gap has closed. Will it close further?
The pattern of the workforce in Wales has changed such that overall
employment levels have not suffered too much. Unfortunately this
shift does not appear to have increased levels of employment in
the knowledge economy.
GDP per head (or Gross Value Added) in Wales
is 78.9% of the UK average. Earnings per head are 87% of UK the
average. 14% of the workforce is self-employed compared with 12.4%
on average in the UK. 10.9% of the workforce is in high technology
businesses compared with a UK average of 11.6%. Qualified scientists
and engineers comprise 6% of all employees in Wales compared with
a UK national average of 9%. Furthermore, 26% of the workforce
in Wales holds higher qualifications and this compares with 32%
in Scotland and a UK average of 28%. Wales has a large number
of SMEs; few large businesses; very few corporate headquarters;
and a very low rate of business investment in research and development.
In 2001, Business Enterprise Research &
Development, BERD, in Wales was only £136 million or 1.1%
of the UK total. In comparison, Scotland performed 4%. In the
same year, the total research expenditure of universities in Wales,
funded from UK Research Councils, industry, and other sources,
was £83 million. This is the most important driver of a knowledge
economy in Wales, but I believe the resource level is far too
low. The expenditure of £83 million between 13 Welsh institutions
was equivalent to the research expenditure in King's College,
London.
A breakdown of the £83 million spent in
Welsh universities shows that they received £22 million or
3.6% of the UK Research Council research expenditure. Scotland
with 8.6% of the population received 12% of the funds. Why then
do universities in Wales not receive a higher level, perhaps 5%,
of Research Council funds?
Professor Richard Davies, Vice-Chancellor of
Swansea University, has recently analysed the total number of
academic staff performing high quality research in Wales. Professor
Davies looked particularly at staff in 5 and 5* departments (research
assessed to be of national and international excellence, and therefore
most likely to attract collaborators and/or have a significant
economic impact). The analysis was standardised to show staff
per million population in Wales, England and Scotland. Professor
Davies demonstrated that across all disciplines, England has 40%
more staff and Scotland has 80% more staff. In the science, engineering
and technology disciplines, England has 120% more staff and Scotland
has 250% more staff.
Further analysis reveals that in total, universities
in Wales have only 395 academics in 5 and 5* science, healthcare,
engineering and technology disciplines. They are making a huge
contribution to the knowledge economy in Wales, but I believe
we need far more academics of this standing if Wales is to achieve
its ambitions.
In summary, it is clear that Wales has too few
businesses investing in the future. There are no large private
or public research establishments in Wales. Consequently universities
in Wales are the dominant source of research, however, as shown
above, Welsh universities perform quantitatively below UK or other
comparator levels. Thus the priority for university-business collaboration
in Wales is not only to improve networks and technology transfer,
but it is also to create greater levels of science and technology
to transfer.
All universities, whether teaching-led or research-led,
play an important economic and social role through the services
and support they offer businesses and other organisations. As
an example, I have been greatly encouraged by the achievements
of CUIN, Cardiff University Innovation Network. Monthly meetings
regularly attract over 100 people; many from SMEs in Wales. The
Network encourages business-to-business collaboration as well
as business-to-university links. Over 2,500 individuals, representing
hundreds of businesses, are registered on the network. Annual
awards for innovation have given me an opportunity to see just
what remarkable progress can be achieved by businesses in Wales.
There are many exciting initiatives and developments
in Wales. Centres of Expertise for Technology and Industrial Collaboration,
CETICs, and larger "Technium Centres" follow good practices
I have seen in other countries. Broadband Wales will support networks
of excellence and will be a window on the wider world. Finance
Wales and other initiatives will underpin entrepreneurship. Advisory
and other services are readily available—although sometimes
the schemes seem confusing to the user community. The WAG, often
through the WDA and ELWa/HEFCW, continually engage with clients
and partners to seek further ways of encouraging growth. There
is, however, a limited budget and this must be used effectively.
SELECTIVITY
Business success needs vision, leadership, partnerships,
excellent resources and effective resource allocation. Good businesses
target their resources at the products, services and markets most
likely to yield a sustainable return on investment. In contrast,
businesses sometimes feel that governments and their agencies
spread resources too widely.
Professor Dylan Jones-Evans of Bangor/NEWI,
writing in 2003 about the Wales Fast Growth 50 Programme comments
that, ". . . in Wales, there has been a reluctance on the
part of the Welsh Assembly Government to go down the road of specifically
backing growth firms that have the ability to create wealth and
employment within their local economies." He notes that with
some exceptions, ". . . the overall impression is that the
support being offered is largely fragmented with very little coherence
or focus on the requirements of these businesses." Professor
Jones-Evans contrasts Wales with the more successful developments
in Singapore.
There is a risk that funding for university-based
research may also be spread too thinly in Wales. Of course we
can say with pride that some universities in Wales have excellent
and internationally recognised research groups. Indeed, Cardiff
University was in 2001 ranked number 7 in the UK for the quality
of its research. Even Cardiff, however, fails to achieve the size
or critical mass needed to sustain success in a rapidly growing
international research community. Quality matters, but so does
size. UK Research Councils and others funding science will continue
to invest in the best research groups irrespective of location;
but in science, engineering and technology in particular, it is
important to have facilities and infrastructure capable of supporting
world-class research teams.
I firmly believe that further investment in
Wales' research-active universities will greatly improve partnerships
that enhance the performance of indigenous businesses.
Higher levels of research intensity will lead
to more spin-outs, technology licence opportunities, and the development
of an entrepreneurial culture. Furthermore, a strong research
base will be a magnet for higher technology and higher value-adding
businesses that can be encouraged to move to Wales. FDI should
be targeted at these higher value-adding businesses with an ability
to establish long-term partnerships with universities and the
community.
Dr David Grant
April 2004
REFERENCES
Economic Statistics Monthly—January
2004. Statistical Directorate, National Assembly for Wales.
Welsh Economic Review—various editions.
WERU, Cardiff University.
Higher Education, Further Education and Training
Statistics in Wales: 2001-02.
National Council for Education and Training
for Wales and the Higher Education Funding Council for Wales—Published
2003.
Forward Look 2003, Government Funded
Science and Technology, Office of Science and Technology, DTI.
"A Winning Wales"—the
National Economic Development Strategy of the Welsh Assembly Government,
28 January 2002.
"Wales for Innovation"—The
Welsh Assembly Government's Action Plan for Innovation, November
2002.
Welsh Development Agency, Draft Corporate Plan
2004-05 to 2007-08 "Creating Success Together",
August 2003.
Lambert Review of Business-University Collaboration,
HM Treasury, Published 4 December 2003.
Innovation Report—"Competing in
the Global Economy: the Innovation Challenge" DTI Published
17 December 2003.
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