Welsh business must be supported to boost innovation in order to drive productivity and economic growth.
Frank Holmes, founder partner of Gambit Corporate Finance and Chair of the Investment Board of the Cardiff Capital Region, said that Wales’ economy had ‘stagnated’ and that the private sector needed to be at the forefront of a significant step-change in the factors which would facilitate economic growth.
“Our investment in innovation as a nation is extremely low, but so is the UK as a whole. Without innovation, we won’t improve productivity, and without that, we won’t achieve economic growth,” he said. “Innovation is fundamental, and we need to establish a Public Private ecosystem to support it.”
He highlighted statistics about Wales’ economy, noting that productivity levels are the lowest in the UK, while voluntary economic inactivity is the highest. HMRC’s most recent tax intake data shows just £2.4 billion was collected in Wales, from 1.7 million people, an average of £1,700 per person, said Frank, with 125,000 people paying more than half of it.
“You can’t build a nation on £2.4 billion,” Frank said, adding that the private sector must be supported to play a critical role in driving innovation and creating new markets, both domestically and internationally.
“It's absolutely fundamental the private sector is allowed to do what it does best, and that is to commercialise innovation, deliver it and allow companies to scale in existing or new markets. It's the only way that we will create sustainable, quality jobs.”
However, he said Government must ensure the conditions are right:
“The public sector must enable the private sector by providing infrastructure, good services, and by removing barriers such as restrictive planning and regulation. This requires working across Public and Private boundaries to share risk, reward and responsibility.”
The Cardiff Capital Region Investment Board has adopted a distinct approach to funding innovation, aiming to move the region away from a reliance on grants and doing things differently which requires a ‘risk wise’ approach in pursuit of a resilient investment strategy.
Of the £495 million allocated to the region for its City Deal economic programme, much has been channelled into debt and equity instruments and subsidiary funds to support innovation, housing, and infrastructure projects, including digital connectivity.
“The funds that have gone into innovation have been put into debt and equity instruments directly and through subsidiary funds, for sites and premises, innovation investment capital, and a housing viability fund, so we can build homes in the areas and communities where locals want to live, and putting in place the transport system and digitally connected so they can get to work, wherever that might be.
“Our evergreen funding is a new concept, but what it has done is establish governance and frameworks which are making the region investable, seeking to attract external capital from pension funds, sovereign and infrastructure finance.”
The Investment Board has identified several sectors with significant potential for growth, including semiconductors and creative industries. Frank noted these as examples of the region’s strengths, which can be built upon through targeted investment and innovation.
Frank also stressed the importance of fostering a culture of curiosity and creativity from a young age.
He said:
“Innovation must be embedded into schools, so it becomes part of the curriculum. It enables curiosity, creativity, and ambition, which are essential for the next generation to raise the bar and grow our region.”
Looking ahead, Frank emphasised the need for Wales to take charge of its own future.
“The only way we’re going to get Wales up and running is not by over dependence on the Welsh or UK Governments, but by leveraging private markets for the financial investment we need to build this nation.
“As we're all very aware, our growth has been stagnating and it's not going anywhere fast. Innovation, Productivity, Inclusivity and sustainable growth are completely intertwined. Unless we start with the innovation, we can't get the productivity levels that we require, and if we fail, we won't get the growth we need for prosperity and economic well being.”
