To be published as HC 854-viii

House of COMMONS



Welsh Affairs Committee

Inward Investment in Wales

Tuesday 8 November 2011

Nick Baird, Martin Phelan and Kirstyn Boyle

Evidence heard in Public Questions 446 - 488



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Oral Evidence

Taken before the Welsh Affairs Committee

on Tuesday 8 November 2011

Members present:

David T C Davies (Chair)

Stuart Andrew

Guto Bebb

Geraint Davies

Jonathan Edwards

Jessica Morden

Mr Robin Walker

Mr Mark Williams


Examination of Witnesses

Witnesses: Nick Baird, Chief Executive, Martin Phelan, Director, Investment Projects and FDI Transition, and Kirstyn Boyle, Head of Strategy and Business Partnerships, UK Trade and Investment, gave evidence.

Chair: Good morning. We are not being televised today so you can make any slips that you want and it will never be held against you. I am going to let other members kick off and I might interject, but this is not some sort of Rupert Murdoch-style grilling. We are just trying to inform ourselves more than anything else; so feel free to tell us anything you think is relevant. The only thing is that we have about an hour so I may have to speed up the questions. I usually do at some point in the proceedings, but we will see what happens.

Q446 Jessica Morden: Thank you very much for coming. Can I start off by asking you to explain UKTI’s role within Government?

Nick Baird: UKTI is effectively the Government’s investment promotion and export promotion department. It has two parents: BIS and the Foreign Office. In terms of inward investment, we have agreed targets which are essentially to bring 750 new inward investment projects to the UK each year. We do that both through the teams we have in our embassies and missions overseas, and our new private sector partners, PA Consulting, in this country. On the export promotion side, we also have agreed targets in terms of the volume of services and the number of interventions we provide through our services in support of British companies. I can describe those services more fully, if you would like. Those are delivered by teams in the regions, who operate through a private sector contract and, again, our trade teams in the missions overseas.

Q447 Jessica Morden: In terms of being overseen by the Foreign Office and BIS, how does that work in practice and what are the advantages and disadvantages?

Nick Baird: It is a very good system. With BIS, you are integrating trade and investment fully into the growth strategy, which is led by BIS. I work extremely closely with my colleagues there. I sit on the BIS board on all the more domestic aspects of the growth strategy. My own background is Foreign Office, and I worked before this job on the Government’s campaign to commercialise it. We work very closely with the broader Foreign Office agenda on prosperity, which includes issues such as market access, building up big relationships with all the emerging powers, and our work on the European Union to extend the single market and so on. It is a very good system. I sit on the boards of both organisations. I work very closely with the Foreign Secretary, the Business Secretary and my own Minister, Stephen Green, who sits in both organisations as well.

Q448 Jessica Morden: Can you explain practically how you go about attracting inward investment and your experiences when you talk to CEOs of how they feel, particularly about Wales? What are the protocols?

Nick Baird: Our system has some new aspects to it, which I should bring out. Essentially, it begins with the setting of targets, which I have described, and then it moves to a lead generation phase, where our teams overseas will be proactively scanning the horizon in our key inward investment potential companies, looking for companies that are already global or going global which have skills and sector competencies to match our own economy, and then making contact with those companies, pushing for investment into our country. That is for new companies. We also work very closely with our existing inward investors to encourage them to expand further. Underpinning all that, we engage in generic and sector-specific events which showcase the excellence of the British economy, both generally and sector-specific. That is the lead generation aspect.

When we get some interest under the new system, the project goes into what we call a pipeline, managed for us by PA Consulting. That pipeline then triggers a process whereby different parts of the country can bid to host the particular investment. Then, a process starts of working with the client on where the best place for them to locate would be. Then, PA Consulting, working with our own staff, will take an inward investor through the whole process towards landing a project, whether it is to do with taxation issues, grant, planning, skills and so on. Then there is a process of aftercare as well.

In terms of the second part of your question on Wales, we are extremely proactive right across the world through all our embassies, working very closely with the Welsh Government in showcasing the particular advantages of Wales around the skills that arise from the very strong clusters, the aerospace cluster in particular, but advanced manufacturing also. There are also life sciences, sustainable energy, media, legal professional services-all those strengths-plus the proximity of Wales to big centres, in particular London. I was very impressed to hear that, apparently, one can get from Cardiff to London in one hour 36 minutes now on the train. There is, also, the relative low cost and quality of life. We are very heavily engaged right across the world in showcasing those advantages.

The figures for last year on inward investment were not great. All of us acknowledge that, but, quite interestingly, the figures for exports are very good. In Wales, in the last financial year, exports went up by 30%. The year to date increase in exports retains that. That is higher than any other part of the UK except London. It arises very largely from the FDI into Wales, which is very heavily engineering, aerospace and other advanced manufacturing- based. There are certainly some good statistics out there as well as the tricky ones on inward investment.

Q449 Chair: How much are PA Consulting paid each year?

Nick Baird: Martin, do you know the exact figure?

Martin Phelan: Yes, I do. Depending on how they perform, because it is very much a results-based contract, were they to achieve all the target outcomes, of which there are several layers, the total management fee for delivery would come to just shy of £1 million. That is out of a contract of just over £13 million.

Q450 Chair: What made you choose a private company to interface with the private sector?

Nick Baird: Our own view is that, bringing in the expertise and the private sector links of a company, and a process of strong incentivisation as well, will increase the quality of our performance. We have also done this through our trade teams-our export support teams-across the country. We have tracked very considerable improvements in performance by doing that through a private sector approach.

Chair: If you have a written breakdown of the figures that you could send us, that would be helpful.

Q451 Mr Walker: Wales’s proportion of FDI has fallen over the years. We have been hearing in this inquiry some of the reasons for that. In your opinion, is there anything that has happened over the last decade or so which has made Wales a less competitive place for foreign direct investment?

Nick Baird: It is a challenging picture; that is undoubtedly true. I know you have looked very closely at the figures in the ’80s and ’90s. They were really impressive figures for inward investment-in fact well out of proportion with the size of Wales as a proportion of the economy as a whole. Over the last decade, it has been in the high single figures most of the time, although it has dropped to lower single figures in the last year or so, which is for much of that time more in proportion with the size of Wales’s economy as part of the overall economy of the UK.

There are a number of factors. I would not claim to be a huge expert on this, but what strikes me in terms of general, global trends which may well have affected Wales is, first, the type of investment that increasingly we have seen into this country. The balance of investment has moved away from engineering and manufacturing over that period toward services, although there is a lot of very good manufacturing investment coming in. It is an issue of scale and balance. That is one element of it. The second element-and this is again very noticeable globally-is the increasing concentration of investment around big urban centres. You see that in the UK as a whole, and the concentration of investment around London is very strong.

There is no doubt a range of other factors, too. The other thing that is, to me, very impressive is the way that Wales is adjusting to that. Although it is terrific that it is fantastically strong in aerospace, advanced manufacturing and so on, there are new sectors emerging. There is media around Cardiff, and financial and professional services such as Legal & General, Admiral and so on. If we push forward that diversity, that would be very beneficial to Wales.

Q452 Mr Walker: Other regions are affected by the same global trends. Are there any particular reasons for them standing out in terms of their performance?

Nick Baird: The big pluses tend to be recognisable clusters. You have seen recognisable clusters, for example, in Manchester, which have taken it forward. Martin was there yesterday and may want to say a few words about that. High-tech clusters help particularly as well. We see the huge success, for example, of clusters around Cambridge university and the success that we are able to make in Tech City in the east end of London, again, because it is high-tech. We have also seen a lot of success around the old, automotive industries in Birmingham and Liverpool. That is because of traditional skill bases which have adapted, adjusted and upskilled to the new requirements. The big Tata investments in Liverpool and Birmingham have been fantastically valuable. I do not know if you want to say anything about it, Martin.

Martin Phelan: Just a little. We have seen some real growth in the big cities. London, particularly, has grown. It is not necessarily so much about a climb in one area as growth outstripping some areas, London being the most noticeable in terms of how it has managed to grip the issue of foreign investment. That is part of the trend of FDI globally. Manchester, where I was yesterday, as Nick said, has very successfully managed to market its brand as a city of certain things-creativity, for example, but, at the same time, industrial capability. The way they have projected themselves is quite interesting. They have built one of the more effective city structures for inward investment around MIDAS, which gathers the partnerships together and operates as one single, coherent unit.

Q453 Jonathan Edwards: When we were in Germany, Germany Trade & Invest seemed to have a mission statement to rebalance their economy geographically, partly as a result of the reunification process. They have been extremely successful. Is it in your mission statement-because, presumably, the UK has greater wealth polarisation at a regional level-to target investment into its poorest areas, or is it more a free-for-all approach?

Nick Baird: The Prime Minister and the Business Secretary made it very clear that they are looking for rebalancing in a number of ways. They are looking, of course, for rebalancing from an economy which is fuelled by debt and based on domestic consumption; they are looking for a rebalancing from services to manufacturing; and they are looking for a rebalancing from London to other regions. In terms of the way that we as an organisation operate, we will not particularly prioritise any regions, but we will take in all the investment that we can possibly get from countries and companies around the world, and we will work very closely with the different parts of the United Kingdom to showcase their particular advantages and attract investment in those directions.

Q454 Chair: Do you find that employers are complaining about educational standards in Wales or in other parts of the UK? A comment that has been made to me in the course of this inquiry is that people in an area of high unemployment are applying without even basic social skills, a basic level of mathematics or spoken English. Is that an issue that has been raised with you before?

Nick Baird: Yes. I have had raised with me issues around the importance attached to engineering in this country through our education system and the need to encourage greater enthusiasm. There is a lot of support from inward investors around the Apprenticeships Programme, for example. It is more an inward investor here and an inward investor there rather than a consistent picture from inward investors talking to me about lack of the basic skills required to operate in a business environment.

Q455 Chair: Is that UK-wide or specific to Wales?

Nick Baird: I have been doing this for only two months so it is not a very long period. I have certainly not heard anything specific to Wales in that sense. I have talked to a lot of inward investors active in Wales, particularly GE, which I talked to at some length. It very much enjoys and benefits from its experience in Wales.

Chair: I will probably have to speed it up a little bit now, if I may.

Q456 Mr Williams: I have a question on some of the figures in your submission. You stated that between 2003 and 2010 an average of 173 jobs was created for every project in Wales compared with a UK average of 105. What is the explanation for that?

Nick Baird: I think it is true that job-intensive projects, in particular, have gone to Wales for the simple reason that costs and labour costs are cheaper there. The kinds of projects that have traditionally gone into Wales have been more job-intensive than elsewhere in the UK, particularly London. It remains true that that is the case, because, although Wales got only 2.6% of the projects last year UK-wide, the figure for jobs was 5.8%.

Q457 Mr Williams: You mentioned earlier and in your submission the four areas where you feel Wales still has a strong, competitive advantage. I am glad you mentioned skills. That is obviously critical. You also mention proximity to UK hubs in Europe, competitive property prices and the quality of life. As you promote Wales, which of those four is the most important?

Nick Baird: It is probably quite difficult to identify one as more important than the other. The package is very important. To me, it is a very persuasive picture on skills. When you look at the aerospace clusters and the really good experience that Airbus, GE and BA have, the advanced manufacturing beyond that with terrific experiences through Ford, Sony, etc., and the way that we are moving to new sectors, which is really impressive and needs to be pushed forward, all that is absolutely critical. It is that, allied with the fact that it is a cheaper place to do business and a beautiful, beautiful country. These are, all together, what give it the edge. It is the collectivity of those points.

Q458 Mr Williams: How much of an edge does Wales have over eastern Europe when one looks at some of the benefits of investing there, not least lower labour costs? In short, are those benefits strong enough in themselves to promote Wales positively?

Nick Baird: That also links in to the UK-wide picture for attracting inward investment. A number of things on a UK-wide basis that the Government have taken forward are relevant to the balance between the attractiveness of the UK, including Wales and eastern Europe: corporation tax rates, the work that is going on with regard to regulation, the skills that exist already and the way that they are being supported. Across the UK, it remains, as we know, the No. 1 destination for FDI in Europe. Although it is a challenging time for FDI, the reductions we are getting are pretty small. If you look at the reductions elsewhere in Europe, including eastern Europe, they are more significant than we are getting.

The other very important areas for the next period in which Wales shares are the big infrastructure developments going forward and some of the Welsh aspects of those, such as the big offshore wind farms and all the infrastructure around those, and nuclear generation at Wylfa. These are really big projects, not just in themselves but in terms of the supply chains and the associated infrastructure with them. I am going on to a really big infrastructure investment conference with the Chinese straight after this, and we will absolutely be stressing the opportunities for them as well in the Welsh aspects of this big infrastructure development programme.

Q459 Mr Williams: In terms of infrastructure, I do not represent a part of Wales in the south or the north, but I could relate to at least three of the four positive ways in which you could sell Wales in my constituency. One in which we could not compete is through the absence of an adequate broadband infrastructure. The starting point for a lot of the companies you are talking to is that there is a robust, fast broadband cable, is it not?

Nick Baird: Yes. It is absolutely critical. I do not know whether this happens in Wales-forgive me-but with the enterprise zones in England fast broadband is a priority. The Government are moving forward as fast as they can with the 4G auction as well.

Q460 Mr Williams: In an area like mine, there is excellent research work being undertaken in one of my universities in Aberystwyth. If our capacity to build meaningful hubs is impeded by that, I would imagine that would be a great negative.

Nick Baird: It is true of my conversations with inward investors that fast broadband is very important.

Q461 Guto Bebb: Can I follow up on the issue of proximity to hubs? You mentioned in your initial statement that Cardiff, after electrification, will be within one hour and 40 minutes of London. How important is proximity to London for people making decisions to invest in Wales?

Nick Baird: It is extremely important. It is really important for the Welsh Government to build on strong contacts with London HQs over the next period. We have clear evidence that a good way into expanding inward investment in other parts of the UK is to have very good relationships with the London HQs as they try to develop and expand their engagement in the UK. They are going to look for other parts of the UK in which to put some of their expanded capacity. In those circumstances, it is absolutely critical to be able to get to them fast. That is one aspect of this.

For all companies, it is very rare that you will get an inward investing company which does not need, by definition, to be travelling globally a great deal of the time. They need to get to Heathrow very quickly, or other airports which have extensive, international connectivity.

Q462 Guto Bebb: You also mentioned in your evidence that you co-operate with the Welsh Assembly in trying to attract inward investors into Wales. Can you expand on your relationship with the Welsh Assembly and the partnership work you are undertaking?

Nick Baird: Yes, indeed. We work extremely closely with our Welsh colleagues. We are now working quite closely with the new arrangements in the Department for Enterprise. I will go and see my colleague for my first proper meeting with him on 24 November. Martin and his team work extremely closely with their colleagues. There is a new major projects team under an official called Jason Thomas, which has been set up in the last two to three weeks, and we want to work extremely closely with them.

It is important to stress that the process I have described is quite new. The key focuses of our joint working over the next period need to be making sure that the Welsh Government and its officials understand the new process and can fully access it. It is basically the idea that, when a company bites and a project goes into our pipeline, the Welsh Government are straight in there and have all the information to present their offer for that particular project if it is relevant.

Secondly, I want to work very closely on showcasing with the Welsh Government. We have a very good narrative, but we need a renewed, compelling narrative that every key inward investment country overseas has our ambassador at their trade teams so that they can get across the four or five key points.

The other thing I want to do with my opposite number in Wales is make sure that everything my organisation and I know about best practice in inward investment is being carried out effectively in Wales. I am thinking of practical things like having really good business champions to speak on behalf of Wales. Are we getting Tom Enders and GE out enough everywhere, championing Wales as a business delegation? Do the universities of Wales work closely with their alumni overseas in getting them to champion Wales in their particular countries? Are we sufficiently active in working with the embassies in London to get consulates in and so on and so forth?

To underpin all this, we have put in place two particular things: first, one of our own inward investment relationship managers, Gareth John, who has experience with the Welsh Development Agency from the past, to manage our relationship with Wales to make sure all these things are being pushed forward. We have also signed a memorandum of understanding with the Welsh Government to underpin all this.

Q463 Guto Bebb: I welcome everything you have just said, but you used the word "new" several times. Is that an indication that the relationship has not been what it should over the past few years?

Nick Baird: I have only been around for the last two months. The relationship has been perfectly good. Martin, perhaps, will have a longer perspective on it. I am a new chief executive. We have a new approach, and I want to put energy and drive into this and really understand myself what the issues are in Wales. I am uncomfortable with the figures we had in terms of the number of projects for last year. We must not have that again. I am determined to work closely with my opposite number to make sure that does not happen.

Q464 Chair: Who is your opposite number?

Nick Baird: James Price is the relevant director general of the Business, Enterprise, Technology and Science Department.

Chair: We probably are going to have to start speeding this along a bit.

Q465 Guto Bebb: Significant changes are being undertaken in terms of the relationship with the Welsh Government. How can you ensure that there is no duplication of effort in this age of austerity to make sure that all resources are being used in a constructive manner? Are you confident that can be done?

Nick Baird: Yes. The answer to that is by really close working. We need to be absolutely aware at all points of what the Welsh Government are doing, their particular priorities, where their resources can be best focused, what we can do and make this complementary. We need to do that in terms of the Welsh Government’s offices overseas. Where the Welsh Government have offices, we will be in support; where they do not, we will be acting very intensively for Wales. Here, in this country, it is through a real understanding of what the Welsh Government are doing to make sure that our action is supportive and complementary. The way you do that is by being aware of what they are focusing on and how our skills can be applied.

Although we are not here to talk about export and trade issues today, I have looked at the figures and they are not good enough in terms of Welsh company use of our export support services. I want to make sure that Welsh companies are coming on trade missions a lot, using the reports that our embassies provide and properly accessing our funding to support companies in exhibitions overseas. Wales is performing well on exports but we can also help them do better.

Q466 Guto Bebb: I have a very short final question and a yes or no answer will do. In the eyes of potential investors, is the fact that Wales has a devolved Administration a positive or a negative?

Nick Baird: I think the answer to that is that, particularly with new investors, it is always a question. They do not start with a perception that it is therefore bound to be more difficult but with a perception that they need to understand how the two organisations and Governments work together, and I think that is really important.

Q467 Geraint Davies: I am very encouraged by everything you have said, but, during our visits to Brussels and Berlin, the impression was given in the UKTI offices that there is typically little or no contact with the Welsh Government and not very much involvement. While I support what you have been saying in terms of ambassadors, alumni and the marketing strategy, this has not happened to date. Would you like to comment on that?

Nick Baird: My main comment would be that it will not happen on my watch. I will be really determined to prioritise Wales and give it proper priority in the overall picture. It is critical for all of us, right across the United Kingdom, that we push on the inward investment side. I am absolutely determined. The way one does this most effectively is by having a really clear, simple message that everybody across our organisation understands on the benefits of Wales. You have a longer history of this, Martin. What is your sense of the overseas awareness of the Welsh offer?

Martin Phelan: To be absolutely honest, it is probably variable, but that is probably true of the rest of the UK as well. Over the years, the relationship has been okay. I think it has been as good as the relationships with any other parts. The sorts of things that Nick has talked about we have not done in the past. There is a lot more opportunity now to help through the extra resources we have with the new arrangements and the physical closeness of the relationship which we can now achieve through Gareth and one or two others operating in an employed way in England, which we have not had before.

Q468 Geraint Davies: Wales’s GVA is something like 74% of the UK average. At a time of austerity and public sector cuts, the dependence of Wales on public services is particularly important now we are getting new investment in trade. At a time when the RDAs have been abolished, I would have thought there would be a greater opportunity for Wales to draw down these potential opportunities. That does not seem to be happening. Kirstyn, you are involved in partnerships and strategy. Is there a new opportunity to talk to the Welsh Government about their priorities in their offices? What they said in their offices in Brussels was that their three priorities were grants, policy development in Europe and profile. They did not mention inward investment or trade at all. UKTI said they were happy to do something. In fact the officials said very little. What do you think about that? I thought I would bring you in because you have not said anything.

Kirstyn Boyle: We are co-located with the Welsh investment people in New York and in the UAE, and we get 80% more FDI from the States than we would ever get from Brussels. In that sense, they are right. They are prioritising key markets. Wales used to have an office in Germany and, with the reorganisation, that person was moved out. That is what you alluded to earlier: that it is all being re-formed now and picked up. There is always a danger with putting investment officers in Brussels that you can get sucked into the politics of the euro rather than talking to businesses. Businesses are clearly in Germany, France, America, China and India. They are probably the key markets that the UK, as a whole, should look at, and Wales possibly as well.

Q469 Geraint Davies: Mr Baird, you are a fresh pair of hands and eyes, driving this forward. There have been a number of changes in the Welsh Government since the reorganisation of their economic development. We have a new Minister, Edwina Hart. Have you made contact? Is there an opportunity there for a new, happy marriage, moving forward?

Nick Baird: I am determined to work with her as closely as possible. I very much hope I will be able to see the Minister on 24 November. That would be my ambition. I have been in contact with my official opposite number. I speak a lot also to the Welsh Secretary. I have talked to the Welsh Secretary twice about these issues since I started.

Q470 Geraint Davies: The levers now are devolved so it is important, is it not, to work hand in hand?

Nick Baird: Absolutely.

Q471 Geraint Davies: Mr Phelan made a point about Manchester and city brand development. Representing Swansea, I am particularly interested in Swansea. Are there opportunities for Swansea and Cardiff? Are you working on that sort of thing or is that off the radar?

Nick Baird: Yes, we absolutely are. There are real opportunities around that. That is part of the compelling narrative that we need to develop. One of the things I have not talked about as much as I should have done is the really strong research base backing that we have in the manufacturing, engineering and aerospace industries in Swansea university and its associated cluster of high-tech companies. I am really interested in visiting there.

Q472 Geraint Davies: We celebrate the centenary of Dylan Thomas in Wales, particularly in Swansea, in 2014. We are interested in building tourism opportunities and brand values in Swansea with the Dylan Thomas brand, which is international. Is that something with which you would be interested in helping us?

Nick Baird: Absolutely. We have this new Great campaign, which has been very much led by Number 10, which is this big, new campaign of showcasing British excellence in industry, which is of interest to us, but also Britain as a tourist destination. I sit on the Great board and I will absolutely ensure that we have enough Welsh involvement and Welsh branding as part of that. Taking advantage of these big anniversaries and events like the Dylan Thomas centenary is really important. The other thing I want to do is bring many more big, UK-wide events to Wales. For example, if we have a big China investment event like the one we are doing today, why not do it in Cardiff? We are, for example, planning the next Britain/China JETCO meeting in Cardiff. That will be Vince Cable and his opposite number in December.

Q473 Geraint Davies: That is very encouraging. Would you be prepared, for instance, to come down personally to Swansea to meet the vice-chancellor, some representatives from Amazon and other main investors to talk about showcasing and encouraging inward investment?

Nick Baird: I would be delighted to do that.

Geraint Davies: Excellent. I will be on the phone.

Q474 Stuart Andrew: We heard from Sir Roger Jones, the former Chair of the Welsh Development Agency. He said that the abolition of the WDA would sentence Wales to nearly 10 years in the wilderness in terms of industrial development. Do you agree with that statement? Do you think that the brand of Wales suffered with the abolition of the WDA?

Nick Baird: I really do not know the answer to that question, I have to say. From where I am sitting, I will work with whatever organisation is there, and I will work as strongly as I possibly can with them. I am very encouraged. It is a really good move that my opposite number, James, has set up this new major projects unit. We are very keen to be heavily engaged in that. I really do think it makes sense to put a lot of resource into this over the next period. We all know the issues around constrained domestic demand at the moment. We all know that exports and inward investment are what we have to do to get ourselves back to sustainable growth as a country, as a whole. It is really worth investing in this area.

Q475 Stuart Andrew: What do you think the skill mix should be of the people involved in such an organisation? Should it be just civil servants or do we need to broaden the scope of expertise?

Nick Baird: We should definitely broaden it, in my judgment. The vital skill sets are strong marketing capability, real knowledge of the sectors in which the country is strong and real capacity to build relationships with key investors going forward. That is another area that we are trying to take forward in UKTI, which is much better client account management of our relationships with inward investors. At the top level, the Government have introduced new ministerial level client account relationships with some of the biggest inward investors, including some who are very active in Wales, and exporters. We are going to expand that. There will be ministerial level accounts, but then we will have accounts for companies managed at a lower level, right the way through our organisation. I am very keen to talk to my opposite numbers in Wales about really good client account management of inward investors as part of this.

Q476 Stuart Andrew: Can I go back to the overseas offices again? The Massey report mentioned that they wondered why more staff were being recruited in India, for example, where the returns have not been that successful, whereas those in America have been. Do you think UKTI is better equipped than the Welsh Government to promote Wales abroad? Are the Welsh Government right in spending money on resources like that?

Nick Baird: I certainly think it makes sense to do so. The existence of an office in a particular country, even if the embassy as a whole can do a perfectly good job in presenting Wales, has power symbolically, in terms of saying, "We really want your investment in Wales." There are difficult judgments about where you put these offices. The United States is so obviously the biggest investor that it is important to pay attention to that market. I am very struck by the speed with which Chinese and Indian investors are growing. There is huge capacity there. UK-wide, India is now our third biggest investor. As you know, Tata is the biggest manufacturing employer in the UK bar none now.

There is that balance between the present, in terms of size of investment, but also the opportunities for the future, which may not be a particularly distant future either.

Q477 Stuart Andrew: Finally, on the operations in the United States, the Massey report says that the decision to centralise all the operation in New York goes contrary to best practice. What is your view of that?

Nick Baird: It would be very difficult for the Wales Office, I suspect, to spread its resource much into other cities, but we have that network. Because we are co-located in New York, that will strengthen the ability of the Welsh Government Office to access the broader network. I was in the United States a few weeks ago talking to all our teams and they are fantastically active. It is a best of class performance out there, not just waiting for companies to come with their offers but going out, engaging with companies and seeking to attract them to the UK.

Q478 Jonathan Edwards: Where is Gareth John based?

Nick Baird: He is effectively peripatetic. A lot of our investment promotional advisers work from home. I think he lives in Wales; so effectively he is Welsh-based.

Q479 Jonathan Edwards: In an earlier answer, you said you wanted to improve Welsh presence on trade missions. For example, with regard to the recent trade mission to India, how many Welsh businesses went on that trip?

Nick Baird: I would have to write to you on that. The figures I have been given are that 40 Welsh companies came on our trade missions overall last year, which is not enough. I cannot tell you what proportion that is, although I am sure we could give you that, but it is not enough. As part of this big, new approach that the Prime Minister will be launching on Thursday to get 100,000 new SMEs exporting between now and 2015, we intend to use intermediary organisations to work in partnership on that: chambers, trade associations, banks, lawyers, accountants and so on, those with big SME networks. On the back of that, we are going to hold big SME conferences across the UK, including, if the Welsh Government agree, in Wales, and then have SME mega-missions into some of the big growth markets, including India. We will make absolutely sure we take a good number of Welsh SMEs with us to present the real opportunities there and be honest about the challenges.

In the context of India, Tata are very interesting because they have a particular ability to help companies, partly those in their supply chain but others as well, to engage with Wales. They have already offered to take a number of SMEs into training centres in India to help them engage better with the Indian market.

Q480 Jonathan Edwards: We were talking earlier about the UK Government’s strategic aim of geographically rebalancing the economy. How are you going to play a part in that if you do not have any targets? Is there a danger, if we have this free-for-all, that the nations, the regions and the state are competing against each other?

Nick Baird: It is a very good point and something I ought to discuss with my colleagues in BIS. If we have that broader approach clearly set out by the Prime Minister and the Business Secretary, my organisation should in some way match on to that. I cannot give you an answer now but you are absolutely right. I ought to be talking to BIS about how we make that a reality. We will engage really closely with the Welsh Government to make sure that we have the best possible case for putting to companies overseas, but we need to think more about what we as an organisation can do to help the Government’s overall objective to rebalance in the way that we have said. We will come back to you on that.

Q481 Chair: What would be the impact of differential tax regimes across the UK? Is that likely to confuse or encourage potential inward investors?

Nick Baird: That is a very good question. It is probably not easy to provide a single answer. I suspect bigger inward investors will employ expert financial advisers, who will give them judgments as to what that, therefore, means in terms of where they should place all or part of their productions. For smaller ones, it is probably confusing, I would imagine.

Martin Phelan: I agree. The answer to your question is probably both. Generally, we see a call from investors to try to simplify as much as possible rather than complicate the tax environment and to try to avoid continuous change, which then affects predictability issues, which are a big factor for investment decisions.

Nick Baird: I emphasise Martin’s point about certainty. I have had that message very strongly from inward investors. If they are going to make a medium-term commitment, they like to know that there is going to be certainty about taxation, regulatory planning and other issues. They do not like uncertainty.

Q482 Chair: I can understand that. You have been there for two months, Mr Baird, so this might be more relevant for Mr Phelan, but have any inward investors ever mentioned the issue of the Welsh language to you in either a positive or negative sense?

Nick Baird: Certainly not to me over my two months.

Martin Phelan: Not to me in my years. That may or may not be an issue, but it certainly has not come to my attention.

Q483 Chair: Do you have any quick view on the potential for enterprise zones to stimulate growth in a given area?

Nick Baird: It is a really good way of getting a focus and prioritisation around particular areas.

Q484 Chair: We will want to see a few in Wales then.

Nick Baird: Of course, this is very much for the Welsh Government to take forward. My understanding is that they are taking forward enterprise zones. In the ones I have seen and visited in England, there is huge enthusiasm in the relevant areas to use them as a basis for growth.

Q485 Geraint Davies: Coming back to this issue of competing regions, when we were in Brussels, I received a copy of the West Midlands presentation, "Why should you invest in the West Midlands?" From your point of view, all the different regions and nations of Britain will be interested in inward investment. I do not quite understand how we can get you to promote Wales as a place to invest when you have Yorkshire or whoever it is knocking on your door. How do you discriminate and differentiate?

Nick Baird: It will depend largely on the specific benefits of a specific part of the country. There will be sector specialisations. If we are engaging with a particular company from a particular sector, in the aerospace sector it is absolutely obvious that we would be pushing Wales. If it is a sector in which Wales is not particularly strong but Newcastle or the north-east is strong, for example, we would push them. But we do not want to just be doing it ourselves. When we get a project into the pipeline, Wales, the different English regions and others are competing for that project if it is an area they want. A big American company project goes into the pipeline. The details of that are available to everybody. If Wales thinks it is right for Wales, they need to be actively selling, and using us to sell, the reasons for investing in Wales. No doubt English regions may bid as well. I think you know this process quite well, Martin, so maybe you want to add something.

Martin Phelan: Historically, with the devolved Administrations, although not with the RDAs in the past, we have shared our pipeline through a system called DocStore, which has enabled the Welsh Government, or the Invest in Wales Bureau beforehand, to respond to us within the context of that pipeline.

Q486 Geraint Davies: Have they responded?

Martin Phelan: They have. They have not always responded to all of them, but they will look at them and make a decision about their competitiveness within a particular project and respond to those that they see as ones in which they could compete. We work with them and others to build the overall UK proposition, which may be one of a number of options in which Wales could be a part. We are improving the system as part of the benefit of the PA relationship which will make it easier to use, to work within and search. It has some quite neat searches around sectors and other functions which will make it a little easier.

Q487 Geraint Davies: Can I finally ask a couple of very quick fire questions? First, £1 million to PA Consulting does not seem much money in terms of the value of the work they are doing. Could you comment on that? That is my instinct, anyway. Secondly, do you feel the Severn Bridge toll impeded inward investment in South Wales as a tax on trade? Finally, I was going to ask about how we use foreign students as ambassadors for tourism and inward investment. I am sorry about all those but we are running out of time.

Nick Baird: It is probably best for us to set out for you in writing exactly how that contract works and is financed, and the incentivised elements of it. The Severn Bridge I have not heard about particularly. Students are really important in all sorts of senses. It is important that universities work closely with other economic authorities to be quite systematic about using their alumni networks to showcase the benefits of Wales in this case. I have seen it done quite effectively by universities. It has been done well in Manchester, for example. It is really effective.

Q488 Chair: My last challenge is for you to give us three bullet points as to how we could improve inward investment into Wales.

Nick Baird: First, get a really simple, compelling narrative about the specific and distinctive benefits of Wales. Secondly, I would encourage engagement with the big London HQs. That is vital. Thirdly, I would encourage engagement with embassies in London and try to get more consulates in Cardiff, particularly with the big, emerging economies. I do not know where it has got to, but I am engaged, because of my particular background, with my Turkish opposite number about the possibility of a Turkish consulate in Wales. There is quite a lot of enthusiasm. I don’t know where that has got to.

Chair: Excellent. Thank you very much indeed.

Prepared 14th November 2011