Discusses how grounded firms and the reconnection of regional supply chains can stimulate growth in Wales

1. Grounded firms
and Welsh Government policy
Karel Williams
Manchester Business School
manchestercapitalism.co.uk

2. What’s in a (company) name
• FTSE 100 co. names efface connection with place, product or
founding family: Aggreko, Aviva, Capita, Diageo, Evraz, Experian, G4S,
Serco, Vedanta, Xstrata (cos. formerly CU, Distillers etc)
• Other FTSEs have done a BP and dropped the British: BAE systems,
BG Group and BT Group (British Land still uses British)
• A world away from South Wales in 60s and 70s with firms and
factories that suggested connections: Llanelly Steel (1907), SCOW/
Trostre works, Morris Motors Felinfoel/BMC
• A world which survives elsewhere eg in Sweden, Sandvik and
Husqvarna ex home towns < 25,000 population

3. Grounded firms vs ungrounded firms
• Some capitalist firms (and many public organisations) are grounded
tied to place by roots and branches
 supply side: regional supply chain, support services, relevant
technical education and human skills;
demand side: branch distribution or network configuration ex need
to serve population/ tap demand;
Underpinning: stable ownership and local management cadre
• But financialization undermines stable ownership + magnifies
instability + unsustainability….. producing more mobile, ungrounded
firms in the private sector; results (a) churning of employment and (b)
the missing Mittelstand

4. Result (1) churning of employment
• Moveable employment: footloose, globalised and financialised giant
firms have global options and can pull out as Sony did at Bridgend
where it once employed 4,000
• Precarious employment: large companies in sectors like food
processing respond to retail order switching with plant closures as
Two Sisters did with Avana bakeries
• Pass the parcel employment: in SMEs, the family sells out and the
firm is passed between corporates like Rachel’s Dairy which has
successively had American and French owners

5. Result (2) the missing Mittelstand
• Wales’ structural economic peculiarity? the missing Mittelstand
with only 2,000 enterprises employing 50 -250
• Dumb bell distribution of firm size: (a) 1/3rd of Welsh employ in
micro firms employing less than 2 and with low turnover = largely
labour only artisans vs (b) 40% of Welsh employ. in enterprises
employing 250 or more i.e. large factories, call centres etc
• Missing middle indicates (a) non Welsh supply chains for global
PLCs eg Ford, Tata and the rest with branch + legacy plants in the
corridors leading out of Wales (b) financialization = exit strategies for
local SME owners, leaving adjunct branches eg tinopolis will follow
Gocompare, Halo and Rachel’s Dairy

7. WG’s policy response: Attract the mobile
• Seek inward investment by mobile firms + make Wales more attractive
with training and infrastructure = long dead WDA still sets the template
for WG policy + their Q “ how can we do more for you”?
• By 2014 FDI is at new record highs……. with the same old dodgy counting
of benefits to produce misleading totals:
totals include M and A spend and property investment; no calculation of
net benefits after deducting costs like project subsidies and sweeteners
including tolerance of tax avoidance
 social claims are of jobs created not wages paid; but FDI like Amazon
warehouse in Jersey Marine locks in low pay which increases the social bill
for child care, housing benefit and pensions
“captured” FDI investment too often produces branch plants which do
little beyond assembly; 2012 manufacturing supply chain on how “ Welsh
based, FDI based companies lack the means and authority to innovate”

8. Pouring water into a leaking bucket?
• WG policy = pouring more water into a leaking Welsh bucket
 big firms coming in to Wales only replace the Murcos and Two Sisters
pulling out
medium firm stock increased by start ups and reduced to branches by
M and A eg FTSE 250 Admiral is clearly a consolidation target, esure is
30% owned by 68 year old Peter Wood
• Wales does have a handful of technically competent private sector
firms operating in competitive sectors eg Ifor Williams trailers; but
generally without ownership that protects them from merger and
acquisition

9. Change the frame: our stock of grounded
firms
• We do have a huge stock of grounded public organisations and
private in the foundational economy: tied to localities because
demand for basic goods and services is distributed according to
population.
• 30% of Welsh employment is in public sector organisations and para
state firms like nurseries and residential homes delivering mainly tax
funded health, education and welfare.
• Another 10% is in private sector provision of basic services in the
form of pipe and cable utilities, transport, food processing and
grocery distribution.

10. Change the question: raise the ask
• Raise the WG ask for all public sector orgns + larger firms:“ what have
you done for us” ; specifically on employment and procurement put
back in return for tapping local demand
• A question not only about construction spend but also about
services; not only for local authorities but also for universities and
hospitals as for supermarkets and utilities in the private sector
• Doing more strategically, what we are already doing half heartedly in
LG procurement + what we intend by making Welsh NHS an anchor
co.
• Wouldn’t Wales be a better place if dom care employers paid a living
wage + if supermarkets committed to Welsh suppliers on fair
contracts ?