No term used to epitomise the British economy more than “trading nation” and so, given the desperate need to increase trade to drag the country out of its current economic doldrums, it was good to see our most senior politicians at Westminster and Cardiff Bay recently zigzagging their way across the Asian continent.

As is usual in these high-level trade missions, much of the press focus is on the links with multinational companies that have invested strongly in this country. Yet, perhaps more important to the future of the Welsh economy is the potential of indigenous businesses and their ability to sell goods and services internationally.

So how is Welsh business performing in this regard?

According to the most up to date statistics from the Welsh Government, Wales accounts for just over five per cent of the international trade of all UK regions, which is higher than its share of businesses across the economy. Indeed, exports worth £13.4 billion were generated in 2011, an increase of 14 per cent on the previous year and a figure higher than the UK average growth of 12 per cent (although lower than the 18 per cent recorded in Scotland).

Whilst this is a highly creditable performance for a small economy, it is no cause for celebration. Wales remains largely dependent on just four industries that account for over 80 per cent of the value of exports, namely energy (30 per cent), engineering (29 per cent), metals (13 per cent) and chemicals (8 per cent). Fortunately, analysts suggest that these sectors will continue to grow over the next few years and announcements such as Tata’s £800m investment into the Welsh economy will ensure that overall exports should continue to grow over the next few years.

However, if Wales is to develop its economy, other industries must also show growth over the next few years and it is disappointing that the key sectors highlighted by the Welsh Government for special support continue to have little impact on exporting performance.

For example, sectors that have experienced an overall decline in exporting activity during the last year include automotive, biotechnology and pharmaceuticals, and the largest drop in performance was experienced by the telecommunications industry with a 30 per cent decrease over the year. It is also worth noting that the destination of our exports has changed considerably during the last twelve years.

Back in 1999, Welsh exported 73 per cent of its goods to the European Union but by 2011, this had fallen to 42 per cent, considerably less than the UK as a whole where 53 per cent of exports cross the Channel. In contrast, 29 per cent of all our exported goods go to North America, far higher than for the UK as a whole and, more importantly, our trade across the Atlantic has grown by 16 per cent during the last year. In terms of emerging markets, whilst Wales’ trade with Latin America has grown by 45 per cent, we have only experienced a growth of 8 per cent in the key markets of Asia and Oceania (as compared to 21 per cent for the rest of the UK).

Therefore, the current exporting scoreboard for the Welsh economy is a mixed bag of results. Whilst overall exporting growth is buoyant, it remains focused in a narrow range of industries dominated by large companies such as Tata, Airbus and Dow Corning.

This suggests that there is still much to do in terms of getting small and medium sized enterprises (SMEs) in Wales to internationalise their activities. The data also fails to provide good news for those policymakers who have focused their efforts on supporting those key sectors that should have the ability to grow in international markets. Given this, it may be pertinent for each of the sector panels appointed by the Welsh Government to examine how the companies within their remit can adopt a more international approach to their business and develop their massive overseas potential.

It is therefore clear that there needs to be a more strategic approach to targeting key markets. This not only applies to regions such as North America which are proportionately more important to Wales than the rest of the UK, but also in emerging countries in Asia where we are underperforming. In this respect, the Welsh Government should examine how it can work more strategically with the UK Government to better target these markets.

If we are to develop a more export oriented economy, then it not only the quantity of exporters that must increase but also the quality. For non-exporting firms, there are various interventions that can get them to start thinking seriously about internationalising their activities. These not only include seminars and workshops, export information provision and sponsorship to trade fairs but also opportunities for greater networking, especially with foreign customers. This is a role that large multinational companies based in Wales could undertake given their operations in other countries. Academic institutions could also draw on their extensive networks to link Welsh firms with alumni overseas.

For those Welsh companies already internationalised, they may need less government support with regard to developing overseas business relationships although policymakers, through supporting sector-based co-operative arrangements, can get key Welsh businesses working in the same industry to mutually support each other in export markets. Again, this is something that the Welsh Government, through its new sector panels, could facilitate and thus increase the reputation of Wales’s products and services overseas.

Therefore, if government, industry and academic institutions can work together to develop a new approach to support the internationalisation of business, there could yet be a Welsh renaissance in trading overseas.

Western Mail Column 10th March 2012

I am sure it will have been a massive disappointment that Cardiff was not chosen as the site for the UK Government’s £3 billion Green Investment Bank.

Given the worries by Westminster politicians over the independence vote in Scotland, the choice of Edinburgh as the site of the bank’s new headquarters was not much of a surprise, especially as the Scottish capital is already a major financial centre.

However, the real prize for South Wales from the UK Government is still out there, namely securing funding from the Department for Transport funding for the electrification of railways.Already, business cases have been prepared by the Welsh Government and submitted to the Department for Transport.

One focuses on the extension of the electrification of the Great Western main Line to Swansea, whilst the other on the entire valley line network, including lines to Ebbw Vale, Maesteg and the Vale of Glamorgan as well as the core valley lines north of Cardiff.

Both projects are equally important. The first in ensuring that the second city in Wales has a fast transport link to one of the World’s major cities, thus opening West Wales to potential investment, and the second in regenerating the South Wales Valleys and enabling efficient commuting to Cardiff.

Indeed, given the billions of pounds spent on trying to regenerate the poorest parts of Wales in the last decade, it is likely to be a transport project that brings workers to jobs, rather than the other way round, which is likely to have the biggest impact on the future prosperity of some of our poorest communities.

In fact, one can only applaud the current Welsh Government for finally supporting the development of a city region of 1.4 million people around Cardiff. But if it is to succeed as a modern European city, then it has to have a modern transport infrastructure to support any future development.

Given the changes that have occurred in Cardiff since devolution, it is incredible to think that there has been no major project in the capital city of Wales since 1995, when the last section of the section of road from Culverhouse Cross to Cardiff Bay was opened.

In addition, the development of a strong financial services sector in the city based on a new enterprise zone, which is the aim of both Cardiff Council and the Welsh Government, could see tens of thousands of extra jobs created in this sector alone by 2020. Yet, without a coherent strategic approach to transport, the revitalisation of Cardiff and much of South Wales is likely to be undermined.

And it is no longer acceptable that our capital city remains at the European average in terms of connectivity by road and rail when it is trying to position itself as a competitive international centre. 

In fact, Mark Barry, in his excellent paper for the Cardiff Business Partnership- A Metro for Wales’ Capital City Region, hit the nail squarely on the head by stating that whilst a good transport infrastructure does not guarantee economic success, it is also true that economic success can only occur where there is a good transport infrastructure.

So, ensuring the success of the electrification of the Valley Line Network and the main line to Swansea is critical, as any negative decision will mean that it will probably be decades until a similar case can be made successfully, ensuring that Wales will continue to bump along the bottom of the UK’s prosperity league table.

I have been reliably informed that the business case prepared for both projects by Welsh Government officials has been thorough and professional and should stand up against other projects from other parts of the UK that are also looking for funding.

However, things are never that simple, especially when there is strong lobbying for rail schemes in and around Manchester and the Midland Mainline Electrification. And whilst some may think that Wales ‘deserves’ the funding, others will be making the same case for their regions.

Given this, it is vital that we adopt a strong “Team Wales” approach to this, which not only involves politicians from all parties in the National Assembly, but also businesses in the region and local authorities.But most importantly, the Welsh Government needs to put aside any political differences it may have and work closely with the Wales Office to ensure there is a strong voice for both transport projects within the corridors of Whitehall.

The stakes are far too high for petty political point scoring and if this opportunity is missed because of an inability to work together for the benefit of our economy, then it will be Wales that will be the poorer for it.