Why Wales needs to focus on attracting SMEs rather than multinationals

Murco refinery, Milford Haven

Image credit: www.bbc.co.uk

Recently, I was interviewed by BBC Wales about my views on the recent announcement that Murco was reducing its workforce by about 80% and was now looking to sell its large Haven-side site in Pembrokeshire.

Following an interesting and diverse interview, only about 10 seconds was used in which I make the point that Welsh Government should focus its efforts on attracting growth SMEs to Wales, rather than wooing large multinationals whose departure devastates the local economy.

I wanted to elaborate a little further on my thinking and would welcome anyone’s views to challenge or develop my thinking. I believe the following factors influence this discussion:

South West Wales is a long way away from the main UK and international economy and although we live and work in a beautiful area, our peripherality disadvantages big businesses. Our transport links are not great, we have a small population, a narrow skills base and the regional supply chain is set up to support an SME based economy.

Most large, non SMEs make things and sell them. The large petrochemical plants and LNG are only in Pembrokeshire because Milford Haven is a deep and large sea haven; if it were not for this world class natural asset, these organisations would not be in Pembrokeshire.

Multinationals take time to grow and adapt to their global trading environment. The ‘oil’ world has, and is changing and it is not viable to upgrade the facilities at Murco. The Murco refinery is but one part of Murco’s global operations, so now as its economic performance is not what is required, a global trading decision has been made to shut it down. If Murco were a Welsh head quarter based business, it probably would have competed more aggressively within its sector marketplace to maintain competitive advantage. Moreover, such multinationals head offices’ are not based in Wales, so their profits are realised elsewhere, often beyond the UK. (Note: When I was in America many years ago, someone heard my accent and when I said I was from Wales they replied “what part of London is that”!)

SMEs are the engine of the Welsh economy. They are by their title, small, specialist and flexible. Furthermore, if they are not heavily involved in a large supply chain it is my view that they are more resilient and responsive to market changes. Why, because they are often owner managed and their leaders or directors have their ‘skin (equity) in the game’. They cannot afford to fail!

SMEs tend to be loyal to home territories and although they may become large corporates, key elements of their operation and company registration remain where they were set up, or where they were nurtured and experienced high growth. Therefore, in addition to daily/weekly operational spend (wages, supplier payments etc.) their annual profits are more likely to be spent/invested here.

In ‘manufacturing’ sectors, I do not see how we can attract anything but niche, specialists to our rural economy and most that are succeeding nationally/internationally are likely to be large SMEs (i.e. up to 250 employees). But, we also should be targeting and attracting knowledge based businesses who trade online and do not need large, expensive infrastructure. They have specialist facilities and needs and it would be right to help subsidise these establishment/growth costs if they are going to relocate to Wales, thrive and stay.

Changes in corporate culture, belated arrival of fast broadband, etc. and an integrated, online global marketplace means that quality businesses can now trade in Pembrokeshire and command South East England market rates (and earn proportional profits). The problem is, I do not think that the powers that be are that effective at identifying and wooing these businesses to come and establish and grow in an area where we have a very high quality of life, good schools, a range of diverse, well priced housing, a world class natural environment, and only a fraction of the societal problems encountered in large urban conurbations.

The leaders and directors of these SMEs are individuals, parents, fathers and mothers first, and Directors or Managers second. Many more people are now more conscious of how they choose to live their lives – work is not the destination but the means to get there. I see very little activity that presents a positive view to these, often young, very bright and capable decision makers to ‘up sticks’ to South West Wales, where they probably can reduce their costs, (overheads, rents, salaries) and improve the quality of life for them and their staff which will increase their ability to compete. Once based here, they will then grow, not by appointing large tranches of personnel at one go, but incrementally with several personnel here and there; locally we can support such steady growth.

Visit Wales,  as the tourism department of the Welsh Government,  I think, are doing a good job raising Wales’ profile as a great place to visit, it should also be actively promoting Wales as a great place to live and work!


 

Jeremy Bowen Rees

Managing Director

Landsker Business Solutions

www.landsker.co.uk

01994 240631


Image credit:  www.bbc.co.uk

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Jeremy Bowen Rees

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