Business News Wales Meets:
We’ve been through some turbulent times in the last few months with many businesses suffering the impacts. How have the Cardiff Capital Region’s decision making and operations been affected?
We’ve had 4 meetings of the Regional Cabinet, 4 meetings of the Investment Panel, 2 of our Economic Growth Partnership, 2 of our Regional Transport Authority, 1 of our Programme Board, 1 of our Compound Semiconductor Foundry Board.
The only reason we have those meetings is because we have important decisions on investment proposals that need to be taken forward. The rate and pace at which we’ve made those decisions, in in order to keep up to speed with the real challenges on the ground, has been quite extraordinary.
We understand the City Deal is a long game, but in the short term are the commitments to shared funding provided by government bodies and local authorities likely to be impacted?
Of course health and wellbeing will always be the number one priority, but I think time and attention is starting to turn to the long-term economic impact. We’re trying to make sure businesses can maximise what is there for them, but quickly we’re going to be into building greater resilience.
When the economy starts to return to “normal” there are going to be some big questions to answer. Do we want the same economy as we had before? What about some of these behavioural changes that have been thrust upon us, shouldn’t we be doing more to keep some of those after lockdown?
What would your response be to those who might challenge the case to continue to fund the City Deal investment activity?
We have an opportunity to fundamentally reinvent our future; to think about the big issues that impact our region, like inequality. What better time to come together and work cohesively to inform that new future?
I won’t accept throwaway remarks in this climate, it’s not the time for them; it’s time to come together and fundamentally think about the future that we want to create.
There’s been a lot of activity recently with a significant uplift in the pace of projects coming through the investment pipeline. Can you talk to us about some of these and the impact they might have on the ground, starting with CS Connected.
CS Connected is really significant because it is an enabling technology. Next generation compound semiconductors are the technology you find in medtech devices, future energy systems, low emission vehicles, electric vehicle systems, 5G, communications.
Back in 2017 CCR invested in the compound semiconductor mega foundry in Newport. On the back of that, last September I took a report through to Regional Cabinet for a request we were making to the UK Government for £44m, £26m from UKRI, and the rest from partners. You will have seen in the press within the last week we are one of 7 regions in the whole of the UK that have been successful with that bid, which is massively significant for us. It is a huge boost to the region.
What we have now with this £44m is 4 areas of unique competency we can build out in the region. One is a collaborative R&D programme which will maximise supply chains not just in Newport and Cardiff, but many areas in the region like Caerphilly, RCT, and Bridgend. Next is working with our Regional Skills Partnership, led by Leigh Hughes, thinking about how we build skills, not just the high-end graduates and PhDs, [but] apprenticeships.
Third is CS Connected, the trade body around compound semiconductors. Lastly, in the foundry we own in Newport, there will be a demonstration space and visitor centre.
We’ve also seen seed funding for the fintech sector agreed, what will investing in this sector do for us in the longer term?
When we looked at our evidence base a couple of years ago, we saw potential for real comparative advantage in insurtech. We’re seeing so much disruption in businesses now, using different platforms to appeal to a wider customer base. Think about what the future will bring if we maintain an element of social distancing, how we conduct business; e-commerce will be a massive part of that.
The innovations are coming really fast, they happen much more quickly than in any other sector I know. This isn’t just about the big business dimension and scaling up traditional models of economic development. Think about the foundational economy, how models of retail will have to change; the role of the knowledge economy and technology in that is going to be absolutely critical.
We’ve seen funding for specific companies, especially in the medtech sector. Can you elaborate on those and the rationale behind those investments, and why they are good for the region?
We have a lot of medtech proposals at the moment. One we approved a few weeks ago is about creating a new diagnostic device which is going to be fundamental in the fight against Covid-19; it’s got huge commercial opportunity. We turned it around really quickly because at this time it is critical when we see the right opportunities we can act fast to take advantage of them.
One of the things Cabinet approved recently is a Challenge Fund. The fundamental starting point is we’re not setting off with a known here, the same old solution or process we want to undertake; we’re setting off with a problem that needs to be solved, and there is no obvious solution or end point that currently exists.
We’re hoping to make money available to people who think they can solve the problems of the public sector. We want to pick these around the foundational economy – food, retail, hospitality, tourism, public transport – because they’re the sectors that are being hammered at the moment and will continue to be hammered for some time if you look at the ONS projections.
Instead of knowing what we want to achieve, the brilliance of this process is we don’t know what we can achieve. That’s a new way of working that could be very exciting, and could be scaled up significantly beyond the initial £10m which Cabinet have given their approval to.
You mentioned the Challenge Fund, can you elaborate on what sort of challenges we might expect to see over the next few months.
There are several areas I’ve outlined: public transport, food security, retail and town centres, rapid decarbonisation; the things we really feel we have to have different solutions to right now in CCR.
We then get public bodies behind some of those key challenges, and then we go out to the market and say: this is the problem we want to solve, no obvious solution exists or we want to do it differently, who can work with us? We’d then help that business to potentially commercialise that solution so it could be scaled up beyond that initial end customer.
The effect is that we disrupt public procurement so it’s more of a problem-led approach. It creates new markets from engaging new local businesses. It gives the end customer, the public service client, a much more innovative way of solving the problem. It’s based on what is the problem we’re trying to solve, who can work with us and come on a journey to solve that, rather than going through traditional beauty parades to get the same old products that don’t really do the job.
You recently announced the CCR’s 10 priorities for addressing the impact of Covid-19. There’s a lot of focus in that document on new funding interventions, but it also talks about the desire to support start-ups and entrepreneurs. Can you explain these priorities a bit more and how we can better support starts?
We recognise start-ups are responsible for the majority of new job creation. One of the things Cabinet approved was a Strategic Premises Fund, another was a cluster fund for SMEs so that we can support our key clusters. We also spoke about different funding mechanisms that we are going to need to be able to deploy.
At the moment we take an evergreen fund approach. We have a strong desire to create returns on investment that continue to be reinvested to build real resilience in the CCR. We recognise, with “patient capital” being a very real need for some of our medium-sized businesses, we’re going to have to think about equity products potentially: convertible equity, loan guarantees, securitisation, and collateral backing.
We never wanted a fund which was about spending down the capital; this is about living off the interest and making sure we have the ability to recycle and reinvest funds to take a much longer-term approach.
Fast forward 12 months, what would you hope you and your team have achieved, and what impact would you like to have created?
We’re only a few years in, but we have 24 live projects in train now. Not all will succeed; some will naturally fall out as we work through our due diligence processes.
The Housing Fund is up and running, I’m hopeful we’ll see early signs in the market around sites that are currently non-viable. The Strategic Premises Fund will be up and running in a year’s time, as will our Cluster Fund with our build-out around compound semiconductors.
With our Graduate Scheme, even in this climate we’re finding fantastic opportunities and organisations that want to work with us in medtech in particular. They’re taking on testing staff and we have graduates ready with those skills to fit into those positions. Our Challenge Fund will be up and running and we’ll be working with multiple businesses on solving those big industrial and societal problems.
In terms of medtech businesses, their products will be hitting the market, localising those supply chains, because our reliance on overseas supply chains when we have the ingredients and conditions in CCR can be quite frustrating.