Welsh Affairs Committee
Oral evidence: Promoting Wales for inward investment, HC 444
Wednesday 19 March 2025
Ordered by the House of Commons to be published on 19 March 2025.
Members present: Ruth Jones (Chair); Ann Davies; Gill German; Claire Hughes; Andrew Ranger; Steve Witherden.
Questions 1 - 7
Witnesses
I: James Gardiner, Senior Economist, EY; Ken Poole MBE, Head of Economic Development, Cardiff Council, and Invest in Cardiff; Professor Riccardo Crescenzi, Professor of Economic Geography, Deputy Head of Department of Geography and Environment (Research), London School of Economics and Political Science; and Nan Williams, Chair, GlobalWelsh, and CEO, Four Communications.
Written evidence from witnesses:
- Professor Riccardo Crescenzi
Witnesses: James Gardiner, Professor Riccardo Crescenzi, Nan Williams and Ken Poole.
Chair: Welcome to this Welsh Affairs Select Committee oral evidence session. My name is Ruth Jones and I am the Chair of the Committee. I thank all the witnesses for being here today in person or virtually. It is great to see you. I am delighted that you are the first people to be introduced to our inquiry into promoting Wales for inward investment. We want Wales to be one of the greatest places in the world to live, work and build a business, so we are looking forward to learning from you and others as we go through how Wales can make the most of its potential and attract more business investment.
Does any Member need to formally declare any interests they may have in this inquiry? No. In that case, we can proceed. Today’s session is an opportunity to learn about the big picture for inward investment and how Wales can compete on the world stage, so thank you very much to the four of you who are with us today.
There is a complication this afternoon: we are expecting votes at 2.50 pm and there will be five votes. Our session will therefore come to a close at 2.50 pm. I am really sorry about that. We will look to follow up in writing any questions that we have not managed to get to by that time. My apologies for this; as you can see, Parliament is at work. It is a dynamic, living, breathing thing. Thank you for your time anyway.
Will all four of you please introduce yourselves very briefly?
Professor Crescenzi: I am very pleased to be here with you today. I am Riccardo Crescenzi, a professor of economic geography at the London School of Economics, where I also act as deputy head of department for research in geography and environment. I have researched foreign direct investment, global value chains, and the internationalisation of domestic firms in various capacities, looking at Europe and the world and at the UK in particular.
Nan Williams: Hi, I am Nan Williams. I am the current chair of GlobalWelsh and in my day job I am an entrepreneur with one office in Wales.
James Gardiner: Hi, all. I am James Gardiner, a senior economist at Ernst & Young, with a particular focus on macroeconomics and investment. I usually co-author every year our leading flagship investment publication known as UKAS, which you may already be aware of. It is good to be with you.
Ken Poole: Good afternoon, Chair. I am Ken Poole, head of economic development at Cardiff Council and also head of the Invest in Cardiff brand. I have worked for over 40 years in the public sector and the private sector on advising companies on inward investment strategies. I am delighted to join you today.
Q1 Chair: Thank you very much for attending. It is good to see you. Let me start with Mr Gardiner. The Welsh Affairs Select Committee last looked at inward investment over a decade ago, and obviously the world has changed a lot since then, so we are going to look at the specific opportunities and the threats to and obstacles for us. Why do you think inward investment is so important to Wales?
James Gardiner: That is a good question. I think our publication often assumes that it is just good from the get-go, but we see in our macroeconomic analysis, and particularly in areas that benefit from large amounts of inward investment, a very strong correlation with growth and high-value-added skills, and particularly with attracting the kind of skillsets and the kinds of industry that a particular part of the economy would wish to attract. There are numerous reasons why we want FDI to come in, and we know it disproportionately makes up a large share of productivity here in the UK. I guess the trick, particularly with devolved regions and other parts of the UK, is in ensuring an equitable capture of that investment and creating a strategy that targets the right kind of investment for that particular area.
Chair: Thank you. Normally, I would expand the question, but because of time constraints I will go straight to Ann Davies.
Q2 Ann Davies: Nan, from your experience what are the barriers that disincentivise investment into Wales?
Nan Williams: I am speaking particularly from a diaspora perspective, and I would say that the barriers are not as significant as you think from a diaspora perspective. We have as many Welsh people outside of Wales, largely business people, a lot of whom are entrepreneurs and potential investors in Wales—as many as live in Wales live outside Wales. According to our most recent research, the barriers are knowledge, which should be able to be overcome, and signposting where they might go to find their path and their routes to people who might be able to assist them.
There are other things that are much longer term. Infrastructure is always an issue that comes up—most specifically transportation—and then there are personal worries for people coming back and wanting to bring their families back to Wales with them, but that is more than a Wales-specific issue. There are a lot of things that we could do more about, and some longer-term things, but that is very much from a diaspora perspective.
Q3 Ann Davies: Would the three of you agree? Professor, do you agree with that? What about other barriers?
Professor Crescenzi: It is important to think about the connections. That also links with the previous question about how and to what extent FDI and investment are embedded in the local economy. What is it that investors are looking for? How and to what extent can Wales offer the necessary ecosystem that foreign investors can connect to in terms of input, output, knowledge and skills—all the requirements they might need in the surrounding environment? This is important for two reasons. First, to attract FDI, and for investors to choose a particular location, they need to find a strong value proposition from the place, and some of these propositions are sector-specific or function-specific.
Also, if we want investment to be resilient, to be attached to the place and not to be volatile—for example, only using short-term investment that might be made available by Government incentives—we want investment to be embedded and to find strong connections. We do not want investments to be cathedrals in the desert, disconnected from the local environment. This is important for the resilience of the investment. It is also important for impact and to generate a local multiplier from the investment itself.
Ann Davies: Can I put the same question to Mr Poole?
Ken Poole: The barriers we have seen in attracting investment to Cardiff over the last 10 years focus on skills. Do we have the right kind of skills and the right infrastructure to support business? A lot of work is therefore done on demonstrating that we have the right product and the right capabilities to attract investment. We have also had issues over the last few years with infrastructure, available sites and available land. Surprisingly, across Wales the availability of serviced land, particularly in the south-east Wales region, is not as plentiful as you would anticipate.
We also still see barriers in terms of the perception of Cardiff, the region and Wales, which we still need to address quite strongly in branding and marketing literature. Those are some of the principal macro barriers to attracting investment into Wales, but we still have a lot of capability and a lot of strengths here. Our challenge now is to put those strengths in front of investors and show how we can deliver for them in meeting their investment criteria.
Ann Davies: Thank you. I would like to ask how we would overcome the barriers, but in fairness to Claire we had better move on so that we all get a question in. Perhaps we can follow that up with a written question.
Q4 Claire Hughes: I am a PPS in the Department for Business and Trade, but I am participating in this inquiry as a member of the Welsh Affairs Committee and a constituency MP for Bangor Aberconwy in north Wales.
Professor Crescenzi, what do you think Wales should focus on to make sure that it remains a competitive destination for investment, given that we are in quite a tumultuous global economic climate? What do you think the priorities should be?
Professor Crescenzi: If we look at the profile of inward investment into Wales over the past 20 years, we see that before the referendum on the UK’s membership of the European Union a significant share of total investment came from the EU14 or the EU15—the old member states of the European Union. That has changed, and we see a pretty unique change in the origin of FDI when looking at the data that we have available. This means that the value proposition of Wales has changed as a result of the changing relationship with the European Union. This is something we observe across the board, but it seems to be particularly important in Wales. So the first issue is what it means to invest in Wales with a different or changing relationship with the single market.
An additional issue is linked to the sectoral composition of FDI. We see a strong presence of energy investment, which is of course a good thing, but we also know it is linked to high capital-intensive investment, which tends to come with big equipment but is very limited in terms of job creation, and sometimes limited also in terms of multipliers—what happens in the local economy once you have this type of investment, beyond the construction phase. By looking at the composition of the origin of the investment in the sectors and how this has evolved over time, we see part of the challenge in terms of rebuilding the value proposition: what Wales can offer investors.
I think there are important margins that can be exploited by looking at the current strengths. It is very important to look at the current profile and understand where investors are going in terms of sectors, but also in terms of functions. What is it that they do? What is the investment about? Is it about production or R&D, or a combination of the two? Is it about the end market? It is important to try to understand what type of advantage investors are trying to seek and where they are clustering in terms of input-output linkages. That is what we call value-chain mapping—trying to understand where Wales can situate itself in a changing global landscape, because of course through the relationship with the EU we now have a completely different international picture, potentially—it is very difficult to see what the future will look like.
What we see at the moment, and what investors are seeing, is a lot of uncertainty. There are lots of announcements and then things go in a different direction, so it is very difficult. It is a very unstable environment. The issue is about how to help investors to make their decisions in such an unstable environment, and send a clear message about what the value proposition can be, while also presenting a value proposition that makes investments click for Wales, really being able to connect with the local environment in a synergistic manner.
Chair: I make a plea for very brief answers. I am sorry that we are very time-limited today.
Q5 Steve Witherden: Mr Gardiner, the future world of work is going to be very different. How can Wales ensure that its promotion strategies are future-proofed against major shifts in the Welsh economy—for example, as a result of advances in AI?
James Gardiner: From the work and analysis we have conducted at EY we think that some of the more successful long-term strategies focus on those areas of investment that are within the control of Wales. We will often hear investors discuss risks that are perhaps not within that control—for instance, things like the cost of energy are frequently complained about.
The strategies that I think perform very well regionally for, say, Scotland, Wales, Northern Ireland and the north of England focus on the origin of investments in a very strategic way. Countries like India are now incredibly important investors into the UK. There is still a bit of a perception among local IDAs and local investment bodies that the same origins of investment have continued uninterrupted, but we see the United States’ market share coming down, the rise of Indian investment and a similar level of German investment. There should be a strong focus on bilateral investment that is aligned with those kinds of interests that Wales sees on a like-for-like basis.
Then there is a focus on the needs—what sectors are telling us are the things that are preventing them from investing. We have seen very tangible examples. We have held investor roundtables on things like life sciences investments throughout the UK. People in life sciences would often discuss lab space and the ability to create the space in which they need to work, because they are making big capital-intensive, long-term investments. Their requirements are fundamentally different from those of the tech sector, for instance, which, as far as our survey goes and as far as our roundtables have informed us, cares much more about the cultural aspects of the workforce. They care a lot more about a skills pipeline.
To my mind, the way to create resilience for investment in Wales is to have a laser-like focus on which countries and on which specific sectoral barriers, and then also focus on the right activity of investment to create a business-friendly environment for investors. Without a doubt the United States’ investment profile is disproportionately coming into the UK, and quite often investors perhaps do not necessarily get local regulations and local barriers or understand the local government system. Creating an environment that is hospitable in that sense is equally important, because we have seen investors shift away from certain locations in the devolved regions and the north of England for that very reason. That is my recommendation.
Q6 Gill German: I would like to move on to how we promote the different regions in Wales. My constituency is in north Wales; what does north Wales have to offer, particularly in respect of its proximity to the north-west and to international airports? How do we make sure that we drill down to the exact things that Wales offers, beyond the region that inward investors might be most familiar with?
James Gardiner: In a sense it is quite reassuring to hear you describe it like that, because very often with regional inward investment bodies we hear the idea of them competing against each other within the UK, but I work with a lot of international investors and can tell you that that is not the way they think about it. They are often thinking about getting a foothold into the UK. They are not hugely thinking on an intra-UK competitive basis. Proximity to a large international airport is absolutely very appealing to investors. We have seen that from some of the financial services businesses that have invested in the north-west of England, for instance.
Q7 Gill German: Do you feel that is well enough understood out there? Is there more we could be doing?
James Gardiner: No—there is absolutely more.
Gill German: I see you shaking your head, Nan.
Nan Williams: I think understanding is one of the key elements.
Chair: I am going to have to bring this session to a close. I am really sorry, but the Division bell has gone. I am so sorry. This obviously was not planned. We thank you so much for your time this afternoon, but I have to bring this session to a close now.