Moving your business to Wales

Financial incentives aplenty are attracting a range of growing companies to Wales. We look at whether entrepreneurs are benefiting from the efforts of the Welsh Assembly Government.

Wales has received well over £1 billion in funds from the European Union (EU) for sustainable economic development since 2001. That level of backing hints at some serious socio-economic issues, notably in West Wales and the Valleys, that need to be addressed.

The theory behind some of the funding is that, by encouraging new investment and entrepreneurship, there will be more wealth to go round for the three million people who live in Wales. While the wider circumstances may be harsh (only Cornwall and the Scottish Highlands receive similar EU backing), there is an opportunity for businesses looking to reduce overheads and receive funding for growth.

Mark Orchart is the MD of Indigo Telecom Group, which is headquartered in South East Wales and generates sales of £12 million. He says the company has benefited enormously from the training support facilitated by the Welsh Assembly Government and its inward investment arm, International Business Wales.

‘I absolutely take my hat off to them,’ he comments. ‘I have skilled workers in Wales and to keep them up to speed with the new technologies, the overhead of training can be quite a burden. The Welsh Assembly recognise what’s important for us and we are in the third year of a support programme for training.’

The amounts are meaningful, running into the ‘tens of thousands of pounds’, says Orchart. ‘It makes a difference between going on a training course or not. We have our own account manager [from the Welsh Assembly] and we meet three or four times a year. He comes in and looks at the requirements of the business. He did try to get us grants when we moved offices. It didn’t transpire, but at least he tried.’

Make or break

Stuart Staples, a director at Conduit, which runs call centres in Cardiff and Swansea and employs 1,300 people, enthuses about the grants, which helped the business in the early days. ‘As a growing business, the backing made a real difference,’ he says, noting that staff turnover is impressively low. ‘There is a great attitude from employees.’

Both Orchart and Staples praise communication and transport links. Says Orchart: ‘I’m right on the M4 and M5 and can be in Reading in an hour and a quarter, and I can be up North on the M50 in no time.’

Ian Williams, an enterprise director for North Wales at International Business Wales and a member of the Welsh Assembly Government, observes that it’s easier to access the South East of England than people imagine. ‘Travelling time is easy and the rail links are close,’ he says.

According to Williams, since Wales opted – by a slim margin  – for devolution, it has created a system where it’s easier for regular owner-managers and CEOs to meet with real decision makers in the corridors of power. ‘While the very large companies have the luxury to wait – to some extent – on decisions because they have reserves of cash, mid-caps need immediate decisions. We give them access to our prime minister and economic development minister. There is no way on earth you are going to get that kind of service in Whitehall.’

Fostering growth

In total, there is a centralised pot of £104 million from the Welsh Assembly Government that is available for businesses through a variety of programmes. For property developers, Williams says that International Business Wales will take on the head lease risk of a new build, providing five years of guaranteed income ‘because we know we are going to fill the property. There are property options [for developers] all over the South and the North Wales corridor. It is more difficult in mid-Wales, admittedly, but we do have some property options there as well.’

Williams notes the creation of nine “Techniums” for early-stage science and technology ventures. These are buildings set beside universities where, under one roof, a company will get office space, business support and be introduced to other companies and academics. In terms of financial backing, Finance Wales – created by the Welsh Assembly but a private entity –  has spent over £100 million on young, ambitious companies since it was set up eight years ago. During 2007 to 2008, it invested £20.8 million on 185 investments and has around £130 million of managed funds. It is currently in negotiations with the European Investment Bank for additional firepower of £150 million. If successful, this cash will come in during the first quarter of the year and, significantly, Finance Wales will increase the amounts it can invest – at its discretion – from £1 million to £3 million.

It may not be Silicon Valley, but the cash is helping businesses to expand. That said, survival will be the main priority for many companies and with unemployment in Wales rising by nearly seven per cent in the latest quarter to 98,000, the Welsh Assembly has created the ProAct initiative. ‘If a company is in difficulty, we will put in £2,000 per person for training. Rather than get rid of people, they can be sent to the local college.’

Williams is ebullient about the range of programmes designed to attract mid-sized concerns and the larger corporate entities, such as Amazon. He observes that renewable energy should become a major industry given the country’s geography, pointing out that the sectors which are important for the economy are bio-technology, back office services, the automotive industry – ‘we still believe this is vital to the Welsh economy, although we tend to work in tier two, so we are suppliers to the main suppliers’ – and information technology. ‘We seem to be building up a reputation in bespoke programming,’ he adds.

North and South

Evidently companies of all sizes are doing well and many are grateful for the incentives and benefits provided by the Welsh Assembly and its subsidiary organisations. There are, however, two sides to every story. In terms of business, there does appear to be something of a North-South divide within the country.

Gerald Kitchen is the chief executive of payment-processing specialist Secure Trading. Having founded the company in Bangor, North Wales in 1997, Kitchen says he’s ‘never seriously considered relocating because of the cost’. He acknowledges that International Business Wales has been supportive, but ultimately he feels ‘a bit disappointed’ as ‘there are very few incentives to stay’.

He explains: ‘Retention [of companies] is a problem. There is an aggressive strategy to bring businesses in, but you need investment too to keep them… There is no meaningful retention strategy.’

International Business Wales’ Williams argues that a huge effort is being made to ensure companies stay. ‘We will always want to recruit high calibre – especially knowledge economy –  companies into the North Wales pool, but most of the focus for economic development in North Wales is on retaining companies currently located in Wales. Employers say that it is cash flow operating aid that they really need right now. We are actively rolling out the national Small Business Finance Scheme that enables the government to guarantee the lion’s share of bank loans, and the ProAct programme.’

The concerns don’t end with cash flow. In price comparison website Moneysupermarket, Wales has a true online success story. Co-founded by the Simon Nixon in 1999 (now chief exec) and located in North East Wales, the company employs over 500 staff. Spokesperson Tim Newhouse notes that a new wing was opened to the Moneysupermarket HQ and a point was made to use local suppliers, producers and architects.

‘We’re giving something back to the community,’ says Newhouse, dryly. It’s a barbed comment as he goes on to say that not enough is being done to support established concerns. ‘We just feel the Welsh Assembly should value us.’

Connected thinking

Although there has been the occasional grant, Newhouse states that Moneysupermarket hasn’t ‘seen many of the benefits at all from being in North East Wales’. He goes as far to suggest that, ‘in the South, it’s easier to have face-to-face meetings with the Welsh Assembly in Cardiff. It’s easier to build personal relationships’.

There are two main concerns. The first relates to transport. Newhouse argues that while there is one good rail link to London, it would be helpful if the Welsh Assembly could address the Wrexham to London line. Others raise issues about the lack of flights from Cardiff Airport to North Wales (none at the weekends). A more pressing problem, says Newhouse, relates to IT infrastructure in North Wales.

Williams insists this is also being tackled. The Welsh Assembly has invested in FibreSpeed, a broadband network. ‘This should allow businesses to get large-scale capacity [broadband] at a third of what they are currently paying,’ says Williams. ‘The FibreSpeed line stretches through almost all the main areas of population across the North Wales corridor.’

For Jonathan Smith, a director at Moneysupermarket, the network doesn’t deliver. ‘FibreSpeed will be an excellent service for home broadband users, but regretfully it misses the mark by some distance for a business such as ours. A total bandwidth of ten Gbps [Gigabits per second] is not sufficient for us alone – never mind sharing this with 14 business parks.’

The FibreSpeed programme to improve broadband capacity was launched two months ago and Williams maintains that it has been ‘immensely successful’. Be that as it may, such polarised views mean that at least one company in North Wales still needs to be convinced of FibreSpeed’s merits. Rather flatly, Moneysupermarket’s Newhouse notes that the company’s IT infrastructure would be better served in Manchester and that it has been approached by councils in England to move elsewhere. ‘We’ve rejected the offers thus far,’ he comments.

Wales is in a period of transition and the mixed messages and experiences of small and mid-sized companies reflect that. But municipal assistance, in the form of advice, grants, benefits and other financial incentives, is there for companies and in quantities that won’t be found elsewhere in the UK.  

A second tranche of EU backing is set to continue to 2014. ‘I don’t wear that as a badge of pride,’ says Williams. ‘I want us to get into a position so that we don’t qualify for another round of funding. What it does mean for mid-cap companies and entrepreneurs is that, all things being equal, they really should be looking at Wales.’

Without question, there’s plenty to think about.

See also: Seven of the best start-ups in Wales

Marc Barber

Marc Barber

Marc was editor of GrowthBusiness from 2006 to 2010. He specialised in writing about entrepreneurs, private equity and venture capital, mid-market M&A, small caps and high-growth businesses.