David Lermon, Wales director of ICAEW

Confidence among business professionals in Wales has improved only marginally in the last three months, failing to keep pace with the rest of the UK, according to the latest ICAEW UK Business Confidence Monitor (BCM).

A total of 70 senior business professionals in Wales were interviewed and the UK Business Confidence Monitor (BCM) from Institute of Chartered Accountants in England and Wales recorded a Confidence Index score of 17.7, a rise of just 0.8 points from the third quarter of 2009. Wales is now nearly seven points below the UK average although year on year Wales’ Confidence Index score has increased more than the UK average.

The UK economy is undoubtedly in better shape: Michael Izza – Chief Executive of the ICAEW

Over the months of June, July and August more than a quarter of all UK job losses (24,000) occurred in Wales. However, firms in Wales are more optimistic about employment prospects over the coming year. They expect average number of employees to increase by 0.9% over the coming 12 months, in line with the UK average.

David Lermon, ICAEW director for Wales, said: “Results show clearly that while business confidence is improving, the speed of that improvement in Wales is slower than across many other parts of the UK.

“Job losses in Wales are running faster than other parts of the UK although the survey suggests that firms are optimistic that they will be taking on more employees during the next year.

“Although jobs are being lost there has been some good news with the opening of the £675m St David’s 2 shopping development in Cardiff, which has created considerable employment, and in North Wales Airbus is investing hundreds of millions of pounds in its business at Broughton.

“But public sector spending accounts for a higher proportion of overall economic output in Wales than the rest of the UK, so Wales is likely to be hit harder from the UK Government spending squeeze, imposed by Whitehall.”

Steep contractions in several key indicators of business health are expected to be followed by strong improvements over the next year. Having seen gross profits decline by 4.2% over the last 12 months – the steepest decline for any part of the UK – firms in Wales now expect surpluses to grow by 5.2% over the coming 12 months.

Sales volumes, which contracted by 4.7% over the last year – also the largest contraction in the UK – are now forecast to grow by 4.9%, the fastest regional growth rate forecast this quarter. If delivered, some of this expected increase will be the result of a strong rebound in trading following a particularly harsh decline. The positive outlook for sales is also reflected in the fact that the region’s Confidence Index score has increased by 70 points since Q4 2008, which is more than the UK average.

Welsh firms expect turnover to rise by 5.4% on average over the coming year, the strongest rate of growth forecast by any part of the UK this quarter.

Business professionals in Wales also expect capital investments by their own firms to pick up over the coming year. A 2.5% increase is forecast, reversing the 1.4% contraction seen year to date.

Reflecting the fact that output is currently operating close to 6.0% below capacity, firms in Wales expect price pressures to remain relatively weak. After seeing 0.7% growth over the last 12 months, Welsh businesses expect selling prices to rise by 0.9% over the coming year. For the first time, expected price growth is above expected growth in input prices for the coming year, which is at a record low rate of 0.4%.

Wales is likely to be disproportionately affected by an expected period of fiscal consolidation, as public spending accounts for roughly 67% of Welsh output, second only in the UK to Northern Ireland. The NHS – which employs around 90,000 staff in Wales, making it the largest single employer in the region – has already warned of cuts in jobs and services because of funding pressures.

Further, firms in Wales remain considerably more likely than in the rest of the UK to complain about the level of government support for business. Roughly one in seven firms (14%) report level of government support for their business to be a greater challenge to performance than a year ago, a larger proportion than any other part of the UK and compared to a UK average of 6%.

Michael Izza, Chief Executive of the ICAEW, said: “The UK economy is undoubtedly in better shape than this time last year and the improvement in confidence shows the relief businesses feel to have kept their heads above water. Although we are still on track for a return to economic growth, the recovery is very fragile and will take time. Tightening of fiscal policy, the return to the 17.5% VAT rate, continued difficulties accessing finance and a budget Christmas by consumers are all potential threats to this recovery.

“Businesses are backing the recovery but banks are not. Access to capital continues to be a problem despite government reassurances and a willingness to invest by companies. We cannot emphasise enough the fragility of the recovery. This month’s Queen’s Speech and the upcoming Pre-Budget Report are effectively the starting guns for next year’s General Election. Policy makers need to be careful that the measures they announce support the recovery rather than unintentionally threaten it.”

Welsh Conservative Leader - Nick Bourne (right)

There are regional variations in Assembly Government help for businesses during the recession say the Assembly Conservative group.

Figures released to Opposition leader Nick Bourne following a Freedom of Information request reveals that not one penny has been paid out under the ProAct scheme to help businesses in the Conwy local authority area. But in Neath Port Talbot firms have received £2.3mn under the employee training and wage subsidy initiative.

Nick Bourne said the figures undermined Assembly Government rhetoric about supporting businesses and communities across Wales.

He added that they also highlighted the failure of Plaid Cymru, which holds the Assembly seat of Aberconwy and the economic portfolio in the Assembly Government, to lobby on behalf of local businesses.

According to official figures the unemployment rate in the Conwy Parliamentary constituency has risen from 5.3% to 8.1% between September 2008 and 2009.

An update paper for the eighth economic summit last month also reveals that of the applications for ProAct money by sector, 18 grants were awarded to hairdressers, nine times more than to the aerospace sector.

Commenting on the figures, Opposition leader Nick Bourne AM said: “The wide regional variations in ProAct funding are a matter of concern.

“We are, of course, pleased to see so many businesses in south west Wales benefiting from the scheme. But these figures expose the failure of Plaid Cymru to lobby on behalf of local businesses in Conwy who have yet to receive a penny under ProAct.

“While we have welcomed schemes like ProAct it is clear from the fact that unemployment is now at a 16-year high that they are not working to anywhere near the level we were promised.

“Wide variations in ProAct funding, coupled with the impact of business rates revaluation, means small firms in some parts of Wales will continue to be hit hard by Labour’s recession.

“We were promised Assembly Government help for businesses in every part of Wales. The evidence suggests this is far from the truth.”

Randerson: "this is the beginning of an interesting debate"

Commenting after the Deputy First Minister, Ieuan Wyn Jones, invited her during Plenary today to send him proposals for a Welsh Stock Exchange, Welsh Lib Dem Shadow Economy Minister, Jenny Randerson AM said:

“I’m delighted that Ieuan Wyn Jones has said he will look at the proposals.

“In the coming weeks, I’ll be working with many of the experts who have contacted me to offer their support in order to send a more detailed plan to the Deputy First Minister.

“I do hope that this is the beginning of an interesting debate which could lead to a welcome facility for Welsh businesses.”

But the survey showed that the negative impact among Welsh business was the lowest among the regions and countries of the UK – eight per cent below average. At 70 per cent it was two per cent up on the position in 2008.

It paints a detailed picture of how UK businesses of all sizes, in all regions and all sectors – as well as their counterparts across the globe – have felt the impact of the world recession.

Wales have reported less of a negative impact than in other parts of the UK

David Lermon, Wales director of ICAEW, said: “There’s no doubt that Welsh businesses, alongside other UK businesses, have had a tough time over the past year. While businesses in Wales have reported less of a negative impact than in other parts of the UK, the situation is still very tough. It is clear that many businesses here feel that they will continue to be impacted by the economic problems for the next one to two years.”

Like others, businesses in Wales affected most commonly expected the impact of the downturn to affect their organisation for another one to two years (48%), with 34% expecting an earlier end.

A total of 64% of businesses in Wales expect the credit crunch/downturn to impact negatively on their business in 2009, in line with other UK businesses. They were also much in line with the UK average in terms of the perceived impact of changes in consumer demand (49%), in global commodity prices (34%) and in exchange rates on their 2009 business (35%).

Despite the obvious impact of the economic downturn, most UK businesses still have plans to grow turnover in the next two years, although growth expectations have generally been scaled back. Businesses in Wales are in line with the UK average, with 65% planning annual turnover growth over the next two years, and those planning growth targeting growth of 11.5% p.a. on average.

Significantly more businesses in Wales than average identified increased profitability as their one key business objective (54% vs 42% UK average). Significantly more than average considered increasing

cash balances among their wider objectives (84% vs 71%), although it was no more likely to be seen as their key objective.

Only 50% of Welsh businesses are said to be globally engaged. They are also significantly below average in terms of the proportion with operations or activities outside their home country.

And 60% of businesses surveyed in Wales say that the UK’s regulatory and taxation environment is not business-friendly. As for other UK regions, a small majority of businesses in Wales cite business tax changes (59%), employment tax (57%) and employment legislation (52%) as perceived hindrances to their operation and development. However, these are joined by health and safety regulations, mentioned significantly more frequently than UK average as a hindrance (58% vs 45%).

Cowbridge Road - average increase of £1500

Thousands of small businesses face paying hundreds of pounds more in business rates next year. Now Cardiff has learned that firms on High Streets across Wales will be hit with higher bills because of a revaluation which comes into effect next April.

The Government’s Valuation Office Agency (VOA) carries out a revaluation of all rateable values in England and Wales every five years.

The next revaluation is due to come into effect on April 1st, 2010. All properties will have their rateable value assessed on the valuation date of April 1st, 2008.

Research undertaken by the Welsh Conservative Party’s economic commission demonstrates that thousands of businesses, including those in some of the country’s most deprived communities, will be hit by the rates hike. Examples include:

In Cowbridge Road East, Cardiff, only one firm out of 390 along Canton’s main shopping street is not facing a bigger business rates bill, with all the others having an average increase of 25 per cent, or around £1,500 per business.

On Mostyn Street, Llandudno’s main shopping area, businesses will be paying an additional £550,000 which equates to an increase of 15 per cent on their business rates.

In Merthyr Tydfil’s High Street, 84 per cent of all businesses will face an average business rates increase of 16 per cent – an average of £1,500 per business

In Aberystwyth, public houses face an average increase of 29 per cent, equivalent to £2,450 per business.

Tenby’s hotels are facing an average increase of 27 per cent in their business rates for 2010, equivalent to an average of £2,800 per business.

Professor Dylan Jones-Evans, who chairs the commission, said raising business rates in the middle of a recession could be disastrous for many small firms across Wales.

He added: “I am astounded that during a time when every penny counts for the survival of small businesses, the Welsh Assembly Government has done nothing to stop the major increase in business tax bills next year.

“Worst of all, it seems that even small businesses within our most deprived communities will be faced with a massive increase in their rates bills

“The Assembly Government is responsible for this form of taxation, yet has failed to realise that it is exactly the worst sort of tax during a recession.

“Unlike other forms of taxation on firms business rates remain the same regardless of the performance of the business as it is based on the property occupied by the business and not on turnover or profitability.

“To many businesses it is a fixed cost that must be paid regardless of success.

“It is one that becomes disproportionately higher for many small firms as their income reduces.

“While an increase of a couple of thousand pounds in business rates may not seem much to those in Government, it could mean the difference between survival and failure, especially for many small shops up and down our High Streets.”

Shadow Minister for the Economy David Melding AM said: “This is the biggest tax hike small businesses will have seen for five years – and bills will land on their doormats next April just weeks before the general election.

“During the last Assembly election campaign Plaid Cymru promised that if elected tens of thousands of businesses would be exempt from business rates.

“Two years after entering government and nothing has been done to keep this pledge.

“This tax hike will go to the heart of every community and every High Street in Wales.

“In March Welsh Conservatives said we would scrap or cut the level of business rates for up to 90,000 firms across Wales.

“Measures such as this are vital to help the Welsh economy emerge from recession and to ensure small businesses get the help they need.

“The Assembly Government has failed to show the ambition shown in Scotland on business rate relief or along the lines we proposed for Wales earlier this year.

“Instead, they appear content to roll over and allow this massive tax hike to go ahead without any support for the firms that will be affected by it.”

Businesses across Wales will receive bills based on the new valuation by April next year. The Valuation Office Agency says the revaluation is not designed to raise extra revenue from business rates – it is used to ensure that business rates liabilities are redistributed in line with changes in the property market

Premises subject to business rates are given a rateable value by the VOA. Local authorities use the VOA’s assessment of a property’s rateable value to calculate business rates bills. The rateable value is based on the likely annual open market rent for the premises at a particular date. Rateable values are reviewed every five years – this is called a revaluation. They were last updated in Great Britain on 1 April 2005, based on market rents at 1 April 2003. Properties that have been changed since the last revaluation (eg extended) can be reassessed.

The VOA has updated the new rateable values which are effective in England and Wales from 1 April 2010, based on market rents at 1 April 2008. Details of every 2010 valuation can be found on the VOA website: http://www.2010.voa.gov.uk/rli/en/advanced

University - open for business

Welsh businesses looking to improve their economic competitiveness and develop new products with the help and support of University experts are being urged to sign-up for a free business awareness event.

The University’s Innovation Network is holding a free evening event on Wednesday 30th September, 2009 designed to showcase new opportunities available to businesses, in all parts of Wales, to collaborate with and access University research knowledge and facilities.

With financial support from the Welsh Assembly Government’s flagship six-year, £70m Academic Expertise for Business (A4B) programme, the University has developed a series of Knowledge Transfer Projects – including Knowledge Transfer Centres (KTCs) in a variety of specialist subjects including engineering, manufacturing, business, healthcare and the built environment.

KTCs are designed to identify and transfer knowledge and skills between academic institutions, business and the wider community.

Professor Ken Woodhouse, Pro Vice-Chancellor for Engagement said: “A central theme of Cardiff University’s research activities is ensuring it benefits Welsh business and improves the Welsh economy.

“By creating these Knowledge Transfer Centres, with the Assembly, we hope to improve and accelerate the transfer of knowledge and expertise from our world-class research into added value development and new products for Welsh business.

“The aim is simple – as our academics undertake world-leading research, they develop expertise and use facilities which can massively benefit innovative businesses in Wales. It is therefore imperative that Welsh businesses have the chance to tap into this resource and exploit those ideas for the benefit of their business.”

Attendees will hear from a number of key speakers from across the University, who will each outline collaboration opportunities and the possibilities for free business access.

Key speakers at the event include: Denis McCann, School of Engineering, who will discuss Environment, Performance Engineering and Green Communications opportunities; Professor Stefan Dimov from the University’s Manufacturing Engineering Centre on Micro and Nano Manufacturing; Professor Mo Naim, Cardiff Business School, will cover e-Enabled MultiModal Transport; Professor Keith Harding, School of Medicine, will talk about the work of the Welsh Wound Network; and Professor Phil Jones, from the Welsh School of Architecture, will discuss opportunities around research into low carbon building design.

Professor Woodhouse added: “In the current economic climate, this event is designed to reach out and support Welsh enterprise and offer businesses access to Cardiff University’s technical expertise and specialist facilities.

“I would encourage as many Welsh businesses as possible to sign-up for the event.”

The event takes place at the Trevithick Building, on Wednesday 30th September. Registration starts at 6pm and there is a free buffet supper and networking opportunity after the presentations.

Interested businesses can register for the event by contacting Cardiff University’s Innovation Network by email: innovation@cardiff.ac.uk, telephone: 0800 801750 or on-line: www.innovation-network.org.uk

Cllr Mark Stephens

An innovative approach to improving services while reducing costs is being taken forward by Cardiff Council.

A number of long term partnerships are being established to bring in expertise from the private sector to work alongside the Council at the same time as strengthening relationships with other public services.

The first of these, a partnership with international IT specialists Tata Consultancy Services (TCS) is now being finalised. TCS will bring their experience of improving information systems in over 42 countries to Cardiff and will work with the Council to create a new ‘Innovation Centre’ to develop new ways of working and build on the success of C2C ‘Connect to Cardiff’.

This partnership, which will not involve any Council staff being transferred to the private sector, will also help to make savings in spending on technology such as hardware and software as well as enable the Council raise money through the development of technology-enabled products

This innovative partnership approach is now being turned to other areas of the Council. A series of forums is being arranged to hear ideas from potential partners on how they could support service development in areas such as schools, social services, transport and leisure, as well as the continuing economic regeneration of the city.

The successful partners will work closely alongside the Council’s existing services to identify efficiency savings and to help create new platforms to support joined-up working across the Council and with other organisations and partners. This new approach will improve the quality of services delivered to citizens and provide better access through a variety of new and existing channels.

Councillor Mark Stephens, Executive Member for Finance and Service Delivery, said: “We have been very clear in Cardiff about the challenging economic situation affecting all local authorities, which is why I am pleased that we are making good progress in finding solutions to the problems we face.

“By bringing in the best of the private sector we will be able to improve services and save money as well as ensure that we are protecting existing jobs.

“The establishment of these partnerships is part of the wider change programme which is driven by the aim of providing customers, citizens and communities with more choice and better services.

“The Council has a long and successful track record of working in partnership with the private sector to deliver significant regeneration in the city centre and at the International Sports Village. We are now using this experience to look at how we can make the Council more accessible and address disadvantage by having the flexibility to shift resources to the other services we deliver.”

The selection of partners will be through the OJEU Competitive Dialogue process and will be supported by the use of e-tendering and online bid evaluation in partnership with Value Wales.

Rodney Berman - Leader of Cardiff Council

A fund to help businesses in Cardiff safeguard and create new jobs was officially launched by the Leader of Cardiff Council, Councillor Rodney Berman and Deputy Leader for Cardiff Council and Executive Member for Economic Development, Councillor Neil McEvoy  on Tuesday at County Hall.

The fund has been developed to support new and existing businesses and offers support through a range of financial assistance schemes including loans, grants and potential equity investments.

A number of companies who have already benefited from the fund, including VCOR – a software development company, who were given help to develop a new vehicle rental software system and T-Box Solutions Ltd, who were given a loan to enable them to fit-out and install new equipment at their units in Willowbrook Business Technology Park in St.Mellons were at the launch.

Also present were partner organisations who have helped support the Capital Cardiff Fund including UK Steel Enterprise Ltd, Finance Wales, Fusion and Xenos.

Cllr McEvoy, said: “We all know that 2009 has been a difficult year in terms of the global recession but I am pleased that in Cardiff we have managed to buck the trend in terms of business development and employment opportunities.

“The St David’s development in the heart of the city has seen the creation of 1000s of jobs and the Capital Cardiff Fund has helped to secure the future of businesses already established in the city and I am delighted two of the companies it has already helped will be attending the launch to talk about their experience of the fund.”

“In the current financial climate small businesses need all the help they can get, the work of the Council’s Business and Investment Team is going along way to ensure companies in Cardiff have the support they need.”

To find out more about the Capital Cardiff Fund please contact the Business and Investment Team on 029 2087 3158.