Since Britain’s vote to leave the EU there has been a “significant increase” in Welsh companies seeking export support, the country’s Director of International Trade and Investment told diplomats on a recent visit to Wales.
“This is concrete evidence that Welsh businesses are starting to realise that they need to think about new markets and new opportunities globally,” Andrew Gwatkin told a gathering of the Association of Economic Representatives in London (AERL).
“We’ve had three record years in terms of Foreign Direct Investment,” added Gwatkin, but he warned that FDI over the last financial year had shown signs of tailing off, which may be a result of the uncertainty caused by Britain’s vote to leave the EU.
“One fifth of investors cited Wales’s proximity to European markets as a key reason for investing. That is a big question mark following the referendum,”he said.
Acting Head of Inward Investment Richard Shaddick told economic attachés there were key advantages to investing in Wales, other than the proximity to EU markets.
One important development is new capital borrowing powers that will be devolved to the Welsh government in 2018, which would unlock financing for public-private partnerships in major infrastructure projects. These would create jobs and “improve the connectivity” of Welsh cities to other major metropolitan areas in the UK, explained Shaddick.
He added that Wales was attractive as a low-cost place to do business, being 37 per cent cheaper than London, and also had a highly-skilled labour force. New investors could expect easy access to decision makers and funding support to develop innovative products.
Apart from traditional sectors such as advanced manufacturing or financial services, Wales leads the field in research-led highly specialised areas, such as tidal energy. During a visit to the Royal Mint AERL members learned about advances in digital currency and the use of nascent blockchain technology.
Costs and benefits of Brexit
Asked what the benefits and costs were for the Welsh economy post-Brexit, Gwatkin said a weaker pound had made some Welsh exports more competitive but that had to be balanced against the higher cost of imported inputs.
The opportunity to strike free trade deals outside the Single Market could also boost the Welsh economy, “but these deals will take time and expertise,” he warned.
With two thirds of Welsh exports destined for Continental Europe, the biggest threat to the Welsh economy would be Britain exiting the Single Market without a deal in place and being forced to fall back on WTO rules, he said.
Asked how much say the Welsh government would have in trade talks, Gwatkin said the Welsh First Minister Carwyn Jones was clear that any deals would have to take into account the “special nature” of the Welsh economy.
“There is no structure in place yet but there is a stated intent from the first Minister that he will be able to feed in to the highest level his concerns about the needs of the Welsh economy.”
Wales is currently a net beneficiary of EU structural funding to the tune of £650m annually which will be lost once Britain exits the EU. However, Gwatkin said it was the “clear intention” of Welsh First Minister that this funding would be replaced.
Another danger was the perception that Wales, where a majority voted to leave the EU, had “turned its back on the world,” said Gwatkin. “We need to get the message out that Wales welcomes the best talent from around the world and is open for business.”