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It was good to finally see the Federation of Small Businesses (FSB) in Wales finally baring its teeth over WAG’s plans to change the economy in this morning’s Western Mail and suggesting, as this blog has for the last few weeks, that small firms are suffering as a result of this policy.

The response from WAG was predictably one of denial, and reflecting its current strategy that if its spokespersons keep stating that the Economic Renewal Programme (ERP) will be helping small firms in Wales often enough, the rest of us may start to believe it.

However, it is interesting what the WAG spokesperson has noted in the article, namely that “The FSB were consulted extensively during the formation of this policy”.

In other words, the FSB agrees with the ERP and shouldn’t now be complaining about its implementation.

Of course, the FSB, like all other organisations across Wales, was consulted over what should be in the Economic Renewal programme. However, as far as I am aware, no further consultation took place regarding the actual contents of the ERP published back in July, which was a closely guarded secret until the launch ‘party’ at Panasonic.

If that isn’t the case, then it would seem that WAG is now essentially stating that the FSB – the main business representative body in Wales – actually supports

• limiting soft loans to a “picking winners” sectoral approach
• getting rid of business support for thousands of small firms
• spending hundreds of millions of pounds of taxpayers’ money on ultra fast broadband that the vast majority of its members neither wants nor needs

Of course, there is one way to clear this up.

To date, small businesses up and down the land have had no opportunity to respond properly to the new published strategy from WAG. Given this, perhaps the best thing to do is for the FSB to put the ERP to the test and fully consult their 10,000 Welsh members on whether the strategy will benefit small firms in Wales.

Then we can find out whether the FSB membership does agree with WAG over the future direction of the Welsh economy or whether they believe that the small firm sector in Wales has been sold up the river by a government that simply does not understand the entrepreneurs of this nation.

What has become clear, in the absence of any real consultation by politicians and policymakers about the implications of the new Economic Renewal Programme, is that many small businesses simply do not have a clue about the fact that WAG is abolishing all grants for businesses. The only exceptions to this decision are those firms within the six key sectors of ICT, energy and environment, advanced materials and manufacturing, financial and professional services, creative industries and life sciences which will be moved into a new repayable grant system. WAG certainly seems to be in an inordinate rush to disadvantage small business in Wales. According to a senior businessman I spoke to last week, all grants from the Welsh Assembly Government have been stopped immediately although the new repayable grant system for six key sectors will not be operational until the end of the year. As a result, it seems that no government support will be available to the small firm community in Wales for the next six months. This will mean that at a time when banks remain reluctant to lend and we are trying to emerge out of the deepest recession for 90 years, there will be no financial support from WAG for the majority of small businesses. This is a position that can only be classed as economic madness when the existing grants could easily have been phased out over the remainder of this financial year while the new system was being put into place. In principle, I have no objections to a system of repayable grants if it is managed properly and made available to all Welsh businesses – we certainly should not limit financial support to a small number of sectors, especially given the previous track record of politicians in “picking winners.” Indeed, as Wales emerges out of recession with 130,000 people currently unemployed and a further half a million classed as economically inactive, we must support every viable business opportunity to create employment, and that means investing in all parts of our business community. However, is there anything wrong with the current grant system that should lead to its abolition? To date, no real rationale has been given beyond the fact that WAG should carefully consider “its interventions at the level of individual companies.”  Apart from disparaging comments about a “grant dependency culture” in Wales, has any evidence been provided to show that the current grant system does not produce results for the Welsh economy? Given the impact that the withdrawal of financial support will have on the ability of the small firm community to grow, has there been any detailed conclusion of the impact of business grant schemes in Wales? Perhaps there has been no detailed analysis because evaluations of similar support programmes show that grants do actually make a real difference at the level of the individual firm and have considerable knock- on effects for local economies. For example, a recent study commissioned from academics by the UK Government suggested that business grant programmes are delivering benefits to the English economy through net additional employment as well as higher value-added benefits such as regeneration, skill enhancement and the development of supplier networks. There also seems to be a misinterpretation by many politicians of the level of grant awarded to small firms across Wales. In almost all instances, the entrepreneur will have to come up with the majority of the funding for any project to be developed, with the grant being used to plug any finance gap for that business. Such a “co-investment” model seems to pass with little criticism when applied to a public sector project, such as the £15 million of public funding recently awarded to Bangor University to create a new arts centre. Yet, there seems to be a real difficulty among the current set of governing politicians and policymakers within WAG to invest public money in supporting the real wealth creators within the economy, the small firm sector.  The stock answer by many opposed to grants to small businesses is that “the businesses would have done it anyway” although the evidence from the UK Government study referred to earlier suggests otherwise. In one example, the grant added to the total investment and therefore boosted the future stream of revenues, while in another, the grant enabled the owner to increase his growth objectives for the business. In another case, the additionality from the grant scheme enabled companies to modernise their facilities far earlier than planned or purchase new capital equipment vital to the services that they could provide, especially for firms operating in more traditional sectors of manufacturing. Of course, there is nothing wrong with the principle of repayable grants but they will only work if the rest of the UK also adopts such a scheme.  If not, then small businesses in other regions will be given an unfair competitive advantage relative to Welsh small firms. In addition, any large business will think twice before choosing Wales over another UK region that not only has grants available to investors, but is as good, if not better, when it comes to other advantages such as infrastructure or skills. As the poorest region in the UK, surely we should be maximising our support for Welsh businesses, not reducing it?

With the advent of the “Big Society” in the UK, the Economist makes timely reminder of the obstacles that faces those “social entrepreneurs’ who try and bring innovation to their communities and try solve some of society’s most intractable problems.

Of course, this is nothing new.

As I wrote over two years ago, there should be a greater partnership between government and social entrepreneurs to find creative and sustainable solutions to society’s problems, especially within some of the poorest regions of Europe such as West Wales and the Valleys.

Indeed, the same problems seem to exist wherever you are in the World.

As the Economist points out, the biggest obstacle in both America and Britain is likely to be the inertia of the bureaucratic, rule-bound public sector. It also notes that success may depend on the emergence of a subgroup of social entrepreneur that (are called) “civic entrepreneurs”, who can navigate the treacherous waters of bureaucracy.

Given the difficulties within social enterprise programme such as Communities First, the question is not whether we have such civic entrepreneurs in Wales, but whether any are ready to put their heads about the parapet and make a difference within their local communities?

More relevantly, will WAG become less anally retentive about their micro-managerial approach to any type of community that receives public money?

One of the great management thinkers of our time is Tom Peters, who broke into the consciousness of the business world through his writings with Robert Waterman in the groundbreaking book “In Search of Excellence”.

His subsequent writings have been very much on the same theme of trying to see the different side of management practices and his 2003 book “Re-imagine” still has the power to make one think differently about the business world. If you want a peek inside the book, you can access Chapter 2 here.

One of Tom’s real strengths is to be able to make the complex sound simple and his blog is a joy in deconstructing the most complex issues.

I particularly enjoyed this week’s entry and I thought that it had real echoes for not only individuals but for organisations and even government (including our own here in Wales!).

As Tom says:

“I started blogging in June of 2004, and the best part of it, frankly, is the wonderful comments that come from India at 1 a.m. or come from anywhere. And one morning when I logged on, I had gotten a lovely comment from a guy by the name of Dave Wheeler. And it went like this: “What are the four most important words in an organization?”And the four words were: What. Do. You. Think.And I thought about it and I thought, “My God. This is just bloody amazing.” What does What Do You Think mean? What Do You Think, when you say it to me, means: You are a person of value who has an opinion that I want to hear. And so, I’ve started taking it to its ultimate extreme and saying, “Okay, I want you to keep a little scorecard. Keep it in your pocket, wherever else. How many times” —and I do, everybody’s watching this— “how many times in the course of a day do you say—not five words, not three words, not 10 words—What Do You Think?”You know, we hear this about empowerment and that about empowerment and this program and that program and this training course and that training course. I would argue, in the world of engaging people, nothing is better than the four words: What Do You Think? Try it. Count it. Measure yourself. See what happens.”

So, what do you think?

Finally, some good news for the Welsh economy.

According to a report from the BBC, more than 100 jobs could be created after the expansion of Unit Engineers and Constructors Ltd with significant positive knock-on effect on suppliers and sub-contractors in Wales.

More importantly, the company expects its overseas trading activity to significantly increase to make it one of the  leading exporters in Wales.

For those of you who follow this site, Unit was the fastest growing firm in Wales in 2009. 

Led by the irrepressible Bill Ledwood (pictured), the company has grown by 978 per cent in the period 2006-2008, and currently employs 167 people.

Read the interview with Bill following last year’s Fast Growth 50 awards here.

Its latest development sees it expanding its base through the purchase of the Midlands-based firm Birwelco Ltd and Unit forecasts an annual turnover of more than £50 million for its acquisition by 2013.

Congratulations to Bill and his team and given the fantastic response to this year’s competition, we will hopefully see more good news from fast growing Welsh businesses over the next few months.