Economy Minister Jeremy Miles on business support, entrepreneurship and the development bank

A new approach to business support aimed at reducing duplication and complexity, as well as a new economic council tasked with challenging the Welsh Government on its approach to the economy, have been identified as priorities by new Economy Secretary Jeremy Miles.

The former education minister, who narrowly lost to Vaughan Gething in the First Minister leadership contest, confirmed he is also prioritising more targeted support to encourage higher levels of entrepreneurship among young people and graduates, as well as university spinouts – with an increase in equity support part of the solution.

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While not yet setting any firm targets as part of a wider approach to improving skills, productivity and driving exports, while making Wales what he describes as being “the best place to start a new business”, he has also confirmed turnaround reviews in five key areas, including net zero, skills, AI and maximising growth opportunities in renewables.

Mr Miles, whose portfolio also includes energy and responsibility for the Welsh language, said the focus will be “practical and actionable”, rather than on creating new strategies.

Mr Miles, who is two months into his new cabinet role, said: “We will start in the next few weeks with two projects on how we accelerate growth opportunities in renewables – and how we deliver change on the ground in the take-up of future skills.

“The next round of three projects will be about SME productivity, effective regional working and on artificial intelligence. The economy was front and centre and the top priority of my campaign.

“My view is that we will achieve all the other things we want to as a government around health, equality, education and tackling poverty, only if we have a truly sustainable and growing economy which is offering decent jobs to people right across Wales.

“Being offered the opportunity of doing this role and having energy as part of an expanded economy portfolio has been fantastic.”

He said a new national economic council, for which members will be selected through a public appointments process, would replace the existing ministerial advisory board.

Mr Miles said: “My basic message is I want to have people on that council who will challenge us and bring different perspectives to ones we may have, as I think it is important to have that open discussion with people who may see things differently to us. So I am keen to receive constructive challenges from people who will think outside the box and encourage us to do the same.”

The make-up of the council is likely to consist of entrepreneurs and others working in the private sector, as well as those from the education sector and trade unions.

On Welsh Government business support, he outlined during the leadership campaign a possible option of bringing it under a new body at arm’s length from the Welsh Government – while stressing it would not mean the recreation of the Welsh Development Agency, which was abolished under the then Labour administration of Rhodri Morgan in 2004 and brought into the Welsh Government.

He said whatever the delivery model of Welsh Government business support – which includes programmes under its Business Wales banner – it needs to be more aligned with the support provided at a regional and local authority level in Wales, as well as with the activities of the UK Government in Wales.

Mr Miles said: “I think there is a recognition everywhere that the business support landscape is quite busy and sometimes can be confusing to businesses, so what I want us to do is to try and simplify and integrate the work that is happening.

“We have Business Wales for business support, but have also got the Development Bank of Wales [wholly-owned by the Welsh Government], the property and trade export teams within Welsh Government, as well as other bodies and organisations including local government and the UK Government.

“I want to simplify and integrate all of that more effectively. I don’t have any preconceived outcomes in mind at this point, but we will be doing that work and I think it is really important that the focus of our business support is on the stuff that makes the biggest impact for businesses, and I want to make sure that we are hearing the voices of business in how we do some of that as well.”

Asked what difference it would make to the economy if the Welsh Government ceased funding business support, Mr Miles said: “Some businesses might give the view that you are implying [that it wouldn’t make any difference], but that is not the most common view.

“There will be businesses that do need the support that we and others provide, and the job that I have is to make sure it is as easily accessible and as useful as it can possibly be, and there is a balance that has to be struck between the broad-based support that we provide and the more specific interventions.

“The theme that I have been talking about before and since I became minister is the importance of doing everything that we can to increase productivity in the Welsh economy, so having a suite of interventions that are really driving productivity will be critical to that.”

Mr Miles welcomed the recent evolution of the Cardiff Capital Region – that covers the 10 local authorities of south-east Wales – under a legal footing as the first of four planned corporate joint committees covering the whole of Wales.

He added: “I think there is absolutely a task for us as a government and the regions to work more closely together.

“In a world where access to public funding is much more constrained than any of us would like it to be, we have to make sure that everything else is aligned and pushing in the same direction.

“That is certainly true within the Welsh Government, but it is also true between the Welsh Government and local authorities. I would also like it to be true between us and the UK Government as well.”

While he said the relationship with the UK Government has been challenging, it was important to signpost to Welsh firms what Westminster-based support is available, such as credit export finance and export assistance.

Mr Miles said: “At the end of the day, there is more funding in the Welsh economy for economic development than simply what the Welsh Government makes available, so it is absolutely critical that it is made as strategically and without duplication as possible. That requires joint working.

“There are examples of good joint working with the UK Government, but frankly there are also examples of the UK Government seeking to circumvent the Welsh Government, like the Shared Prosperity Fund, which has been incredibly counter-productive. The Welsh economy needs the support of all governments that work in Wales and from my point of view that is the approach I would like to see.”

The UK Government now has a team of export assist advisors in Cardiff supporting Welsh businesses to win new overseas orders.

Mr Miles said: “There is an ongoing dialogue with the trade advisers that are in Cardiff and I think that could be productive.”

Development Bank of Wales

Mr Miles has said he would not have accepted the £200,000 in donations that Mr Gething's leadership campaign took from Dauson Environmental Group, whose founder David Neal received a suspended prison sentence in 2013 for illegally dumping waste at a conservation site.

Nearly a year prior to the donations, a subsidiary company within the Duason group, Neil Soils, received a £400,000 loan from the Development Bank of Wales for the acquisition of a solar farm.

At the time of the loan, which is on track to be repaid in full and with interest over its five-year term, Mr Gething was economy minister with responsibility for the development bank.

Chief executive of the development bank Giles Thorley said that during his eight years in the role he had never been contacted or pressurised by any Welsh Government minister in relation to the hundreds of loans and investments it makes each year.

Giving evidence to the Welsh Affairs Committee at Westminster earlier this month, Mr Miles confirmed that he had asked the development bank to reflect on whether any recent experience had caused it to look again at its diligence processes.

Asked to give further clarity on his thinking, Mr Miles said: “In light of what has been in the press recently, my question to the development bank, as I said to the committee, was would they reflect on their due diligence processes. Ultimately, that is a matter for them as they are arm’s length from the government, but it does seem appropriate for me to ask them to reflect.”

He said he was not seeking reflection on any individual transaction, but on the bank’s overall approach.

Asked whether the development bank should in future consider making it a condition of any lending that firms make no political donations during investment terms, he said: “It is a matter for the development bank to have in place processes and procedures which are appropriate for what their functions are.

“As a minister, my role is to look over the course of a remit to the bank as to whether it is meeting its objectives. It is not about individual transactions but overall performance.”

During his leadership campaign, Mr Miles received a donation of around £2,000 from entrepreneur James Hadley, who in 2009 received a community sentence after a teenage girl suffered burns on a sunbed at one his salons in south Wales. The donation was subsequently declined.

Mr Miles was asked how long after receiving the donation was a decision made not to accept it and the rationale for doing so.

He said: “The rules provide for a mechanism to decide, having received the money, whether to accept it into the campaign and in that period I decided not to accept it. There are lots of reasons why people decide to take donations or not, and I decided in that particular context not to.”

In its last audited financial year to the end of March, 2023, the development bank posted pre-tax losses of £24.1m.

The biggest factor was a fall in the value of equity investments, which included a £10.4m (at the time) reduction in the valuation of stakes held in AIM-list businesses, and (while not a cash movement) a £9.3m notional interest charge on Welsh Government loans. It has also written off £27m from the now closed £50m Wales Life Sciences Investment Fund.

The fund had been managed on behalf of the Welsh Government by Arix Bioscience, before coming under the development bank.

Mr Miles said: “On the overall picture, I think they have been really successful in leveraging private sector funding, which is great.

“I think there is more to do in the equity space, but I don’t think that is entirely in the hands of the bank as it is about the willingness of businesses to do equity.”

On graduate entrepreneurship, he added: “My own view about supporting early-stage graduate start-ups is the more we can see of that, right across Wales, the better.

“I would also like to take forward how we can back universities to support their graduates to commercialise some of that R&D and IP. We are a small country and should be able to take advantage by putting in place the right ecosystem.

“We are seeking to increase the impact of R&D in Wales and translate that into beneficial economic effects. So there is more that should be and can be done than is happening at the moment. The development bank has a part to play in that, but certainly not the only.”

With a modest discretionary spend in his budget, Mr Miles was asked whether additional funding could be found to increase start-up levels, or whether it would have to be deployed from existing resources.

He said: “What I want to do, from a HE and FE perspective, is to see what more we can do to support young entrepreneurship and graduate start-ups generally.

“I don’t have any preconceived outcomes in mind, but I think it is timely to do that, because I do think universities should be creating more sustainable and scalable graduate firms than currently.”

The university sector in Wales, and for the UK as whole, is facing significant financial challenges. UK-wide, around 50 have confirmed redundancy rounds, including voluntary schemes at Swansea and the University of South Wales.

The sector is seeing a significant fall in overseas students in the face of tougher visa rules from the UK Government.

Universities have become increasingly reliant on higher-paying foreign students to subside loss-making domestic students, with calls for the current student fee cap of £9,250 per academic year being increased and allowed to rise in line with inflation.

Mr Miles said: “It is a concern and is happening right across the UK because of the pressure that the higher education funding model is under. What I want to see in Wales is the QR [quality-related research] funding that we make available having the biggest possible impact it can and having that direct line of sight between research funding on the one hand and economic impact on the other. I think we need to emphasise that there is more than we can do to make sure that we commercialise that R&D which benefits the economy.”

Port Talbot Steelworks

Indian-owned steelmaker Tata is still on track to end heavy steelmaking at Port Talbot, with the closure of its two blast furnaces, by September.

The company said the current primary steelmaking model is financially unsustainable, claiming it is incurring losses of £1m a day.

As part of a £1.2bn funding commitment, with £500m from the UK Government, it plans to invest in a new arc furnace at Port Talbot, making steel from scrap steel.

The ending of primary steelmaking will see nearly 3,000 jobs losses across Tata’s UK operations, where it has downstream operations at locations including Trostre, Shotton and Llanwern, with the nearly 2,000 at Port Talbot.

Unions are calling for a longer transaction period and keeping Blast Furnace 4 operational until 2032 at an additional cost of around £622m.

Mr Miles said: “Tata has been clear in its approach [blast furnace closures] and most recently to the First Minister in the meeting in Mumbai.

“I think one of the many reasons why the news from Tata is so hard to swallow is the point at which the announcement has been made is that we are weeks or months at most from the prospect of a new government with a fundamentally different approach to investing in the economy and the infrastructure that we need for the renewables of the future, which will change the level of demand for steel in the Welsh economy and the UK economy more broadly.

“With that on the horizon, it is absolutely the worst point in time for this decision to be taken.

“There are different alternatives for the future. They do require capital investment, but we have an incoming Labour government that is prepared to make that investment. So they shouldn’t make any irreversible decisions until there is an incoming Labour government in place.”

He was asked if a new Labour government in Westminster would commit to subsidising losses at Port Talbot in any extended period for blast furnace steel production. The Labour Party had made a £3bn commitment to support the UK steel sector, but it is unclear what amount could go to Port Talbot.

Mr Miles said: “This is a step-change in terms of the level of commitment and investment from what the current government has put in place and comes with an industrial strategy which is the critical aspect.

“The Welsh Government supports a just transaction to the new method of steelmaking and that involves keeping a blast furnace open longer and making the transition more smoothly and sustainably. That is what we want to see happening and with a different government there is a stronger prospect of that happening.”

Asked if primary steel could be maintained longer-term at Port Talbot, whether through the use of hydrogen or supported through carbon capture and storage technology, he said: “We believe there should be primary steelmaking capacity in the UK, not least given the opportunities that we have in south Wales in the future around floating offshore wind and other demands for steel.”