Inward Investment in Wales

Written Evidence submitted by General Dynamic UK

EXECUTIVE SUMMARY

· Investment in Wales by GDUK.

· UK Government sets the overall framework for employment in

the UK. Competition between international Governments to attract overseas investors is intense.

· Welsh Assembly Government (WAG) has a major interest in persuading investors to select Wales over other parts of the UK, and the backing it is able to offer can be critical.

· Lack of available funding constrains WAG’s ability

to assist (and therefore attract) new investors. Recent budget cuts inevitably raise questions about future prospects.

· Too soon to judge likely effectiveness of the recently

introduced Economic Renewal Programme.

· However, GD UK’s very positive experiences of dealing with

WAG over coming to, and investing in, Wales offer genuine grounds for optimism.

GD UK’s INVESTMENT IN WALES

1. Based in the UK for almost half a century, General Dynamics UK employs around 1600 people.

2. We have a long and strong history of working closely with the UK MoD, notably as a key supplier of avionics to the UK's fixed wing and helicopter fleets (dating back to the 1960s), the leading systems integrator for the Army’s fleet of vehicles, the manufacturer of the next generation of the Army’s Armoured Fighting Vehicles and a leading provider of security and resilience technology and capabilities which enable battle-winning military command and control through information dominance.

3. The three main components of our business are Command, Control, Communications, Computers and Intelligence (C4I), Advanced Projects and Technologies (AP & T) and Mission and Security Systems (M & SS).

4. GD UK first moved to South Wales in 2001. Since then, our operation has evolved and grown rapidly. We now employ some 800 people at two sites in the Valleys, Oakdale and Newbridge. Both our C4I and AP & T Business Units are based in and led from Wales, as is our R&T capability, focussing on our unique EDGE facility, which specialises in transforming innovative ideas into products with practical, problem-solving applications.

5. We recognise that the focus of the Committee’s Inquiry is on overseas-based companies investing in Wales and that, while our parent company General Dynamics is a US company, GD UK’s Profit and Loss responsibilities are entirely in the UK, with the company having operated here since the early 1960s.

6. We nevertheless believe that we have useful (albeit selective, hence the relative brevity of this submission) insight to contribute to the Committee’s deliberations by dint of our experiences when investing in Wales over the last decade and our dealings with the WAG over that period, in particular given the recent changes to how it allocates funding to support industrial development.

HMG’s ROLE

7. It is, of course, for HMG to establish the overall framework for employment in the UK. Levels of taxation, ground rent, remuneration of staff, industrial capabilities, skill sets, logistics and access to markets - all of which are susceptible to influence by Whitehall - are important factors considered by industry when selecting a new location to establish a business.

ATTRACTING COMPANIES TO WALES

8. Wales has the additional advantage of being able to use the extra political and financial support available from the WAG to entice companies looking to establish themselves in the UK. Many of the capital and recurrent costs identified above are lower in Wales than in other parts of the UK, though to some degree this is offset by some infrastructure shortcomings.

ADJUSTING TO THE COMPREHENSIVE SPENDING REVIEW

9. We are naturally aware that this picture has been complicated by the consequences of the recent Comprehensive Spending Review for the funding which Cardiff receives from London; the most obvious impact has been the introduction of the Economic Renewal Programme (ERP), which will undoubtedly result in profound changes in the mechanisms through which the WAG disburses funding for industrial support.

ERP AND SECTOR GROUPS

10. Our understanding is that critical to the working of the new system will be the establishment of six Sector Groups, with the identification of a finite number of "anchor companies" within each. The WAG’s relationships with such anchor companies will be managed through so-called "Key Account Management" principles (with which we are thoroughly familiar, since this is a well-established approach within GD UK); and the need for the Assembly Government to recycle funding wherever possible is leading in turn to an increased focus on making grants repayable (effectively interest-free loans).

11. It is self-evidently too early to judge the effectiveness of new ERP framework. However, there are known and well-proven advantages to Key Account Management, which will produce benefits for both the WAG and anchor companies. More significantly still, we are strongly encouraged by the high level of engagement we have enjoyed at all levels of the WAG, from Ministers down. This comes at an important juncture for GD UK; after 10 highly successful years in Wales, the company is at its next major investment point.

GD UK’s EXPERIENCES

12. Our expectation is that the next phase of our co-operation with the WAG will focus on the availability of skilled staff, and in particular shortfalls in the number of suitably skilled/qualified/capable engineers emerging from academia. The Deputy First Minister has made clear that he wishes to establish world leading R&D, R&T and manufacturing capabilities in Wales. We look forward to working with him to help bring this about.

13. It would be wrong not to conclude this submission by stating unequivocally that it would have been impossible for us to achieve all that we have since moving to South Wales without the extensive, consistent and staunch support which we have received from the WAG.

November 2010