I have recently published a paper with Dr Martin Rhisiart, of the University of South Wales, in the journal “Technological Forecasting and Social Change”.
It examines the impact of “Wales 2010”, a project developed by the Institute of Welsh Affairs in 1993 to set out the future policies to make our nation prosperous, and how its proposals for developing entrepreneurship had impacted upon the Welsh economy.
One of the clear recommendations from the Wales 2010 was the development of an entrepreneurship culture through key institutional actors such as the Welsh Office and the Welsh Development Agency.
And it was the Welsh Office that initially responded to the challenge and vision of Wales 2010 in its economic strategy document, ‘Pathways to Prosperity’ in 1998 where a commitment to establishing an entrepreneurship action plan was included as the basis for establishing a bespoke programme for enterprise.
As this blog has discussed several times, the impact of the Entrepreneurship Action Plan (EAP) for Wales established in 1999 was profound. Through actions such as embedding an entrepreneurial education in Welsh schools, colleges and universities, creating funds for SMEs and start-ups and encouraging entrepreneurship within the public sector, it began to transform the Welsh economy into a ‘Land of Enterprise’.
Its main target was increasing the number of new businesses and according to data from the UK Office for National Statistics, the number of start-ups created during the period 2002–2005 increased by 21 per cent as compared to 13 per cent for the UK. More relevantly, there was an increase of 24 per cent in the poorer region of West Wales and the Valleys where the above programmes were specifically targeted.
And then there was a moment of policy madness within the Welsh Government when, in 2004, the organisation responsible for implementing most of the EAP, namely the Welsh Development Agency, was abolished. The EAP closed down soon after and entrepreneurship became largely absent within the innovation and economic policy sphere in Wales. As a result, what support there was available was fragmented rather than drawn together under one strategy.
For example, in the most recent economic strategy published by the Labour-Plaid Cymru Welsh Government - the 2010 Economic Renewal Programme - entrepreneurship was only briefly mentioned once in 53 pages, illustrating that it was not particularly high on the Minister’s agenda.
In fact, the assertion that “entrepreneurship is vital for developing a strong economy and therefore crucial for our future prosperity” was not backed up with actions or programmes within the strategy and was more of a vague statement.
The result of not having a strategic focus on entrepreneurship within the Welsh Government can be clearly seen in the start-up statistics between 2005 and 2011. Whilst there was an overall fall of 6 per cent in the number of new businesses in the UK, the decline in Wales was more pronounced (−30 per cent) with a higher deterioration in the West Wales and the Valleys (−33 per cent).
Given that in the preceding period Wales had actually overtaken the UK in terms of business births through the development of a co-ordinated and coherent plan, the subsequent removal of any strategic policy in entrepreneurship clearly impacted directly on the number of new businesses in Wales.
However, since the appointment of a new Minister for the Economy within the Welsh Government in 2011, there has been a gradual reintroduction of key initiatives that suggests that entrepreneurship may be moving back up the policy agenda.
In fact, it is interesting to note that the approach of Welsh Government's policymakers has moved away from a formal strategy for entrepreneurship towards a looser approach in which there are now distinct programmes that address the different elements of entrepreneurship policy including access to finance, high potential start-ups, business support and entrepreneurship amongst young people.
More importantly, there is again a clear strategic intent to develop entrepreneurship that has learnt from the previous policy vacuum since 2005 and has now developed a series of specific interventions that are again reflecting the aims of Wales 2010 namely to create a suite of action areas and needs to support entrepreneurship.
A new entrepreneurship panel has also recently been set up to provide the Welsh Government with strategic guidance and expertise on the development and delivery of the entrepreneurship agenda in Wales. As a result, new firm formation has been increasing again in Wales for the period 2011–13, growing by 38 per cent as compared to 33 per cent for the UK. Interestingly, as there is no longer a specific European Union funded programme focusing on encouraging entrepreneurship predominantly within West Wales and the Valleys, this region has experienced slower growth (34 per cent) in business births than the rest of Wales.
The changing fortunes of entrepreneurship in Wales is best illustrated by the figure below which shows the business birth rate (i.e. new companies as a proportion of all enterprises) over the period 2002-2013.
Therefore, what this paper shows is that through having a dedicated and innovative entrepreneurship strategy, there can be real positive impacts on the economy, especially if it specifically addresses the historical and institutional weaknesses in this area and, more importantly, has a long-term view on entrepreneurship policy.
Certainly, if Wales is to continue its recent economic revival then the original principles of the original Wales 2010 plan published twenty two years ago, namely to ensure that everyone can develop their talents to the full in establishing a thriving ‘enterprise culture’ in Wales, must be at the forefront of government policy for years to come.