The Welsh economy and the role of procurement David Rosser, Director, CBI Wales & South West CIPS South Wales 14 September 2011
Agenda ● CBI Background ● The Economy ● Economic renewal programme ● Procurement issues
CBI Mission and Membership CBI Mission “ to help create and sustain the conditions in which businesses in the UK can compete and prosper for the benefit of all” CBI Membership ● Most large companies active in the UK ● Many SMEs ● Most trade associations ● President - Sir Roger Carr, Chairman, Centrica plc
Welsh membership ● Nine of top ten Welsh companies ● Inward investors ● Outward looking SMEs ● 7 HEIs ● 4 FEIs ● 75% WG anchor companies ● Chairman, Scott Waddington, CEO SA Brain & Co ● Vice Chairman, Graham Edwards, CEO Wales & West Utilities
Temporary factors weigh on Q2 GDP ... UK quarterly GDP growth Quarterly sector growth % q/q Production Construction Services % q/q 1.2 2.0 CBI forecast 0.9 1.0 0.6 0.0 0.3 -1.0 0.0 -0.3 -2.0 -0.6 -3.0 -4.0 Q4 10 Q1 11 Q2 11 • UK GDP growth slowed to 0.2% q/q in Q2. International GDP growth % q/q • But temporary factors (April’s extra bank holiday USA Euro Area and supply chain disruptions) were largely to 1.2 blame. 1.0 • The ONS states that underlying conditions were 0.8 stronger , with growth close to the long term 0.6 average of 0.7% 0.4 • However, activity has slowed in the US and Euro 0.2 Area, raising concerns about the global outlook. 0.0 Q1/2010 Q2/2010 Q3/2010 Q4/2010 Q1/2011 Q2/2011
CBI surveys point to weaker sentiment... CBI surveys: business sentiment Business volumes % balance % balance +60 40 +40 20 +20 0 0 -20 -20 -40 Expectations Retailing Manufacturing -40 -60 Manufacturing : Volume of Output -60 -80 Services Services: Business Volumes -100 -80 2001 2003 2005 2007 2009 2011 2005 2006 2007 2008 2009 2010 2011 • CBI surveys point to a weakening in business Manufacturing investment % balance sentiment across the economy. intentions 20 • Growth in manufacturing output has slowed, with a 0 further easing expected. -20 • The DTS points to a sharp fall in retail sales in -40 August. Service sector business volumes have also Buildings declined, with a further fall expected. -60 Plant & machinery • Weakening sentiment has led manufacturers to -80 2001 2003 2005 2007 2009 2011 reappraise their investment plans.
Labour market weakens, inflation to rise further... % 3mma/y Wage growth (excluding bonuses) Vacancies Thousands 750 6 700 5 650 4 600 3 550 2 500 1 450 400 0 200 200 200 200 201 200 200 200 200 201 3 5 7 9 1 3 5 7 9 1 • Labour market conditions have deteriorated: • ILO unemployment rose by 38,000 in Q2 • Job vacancies at lowest level since Nov 2009 • Involuntary part time working at record rate. • Wage growth remains weak, at around 2% y/y. • Inflation to rise to around 5% in the autumn, but to fall back towards target through 2012.
UK overview 2011-12 UK GDP % y/y 2010 2011 2012 CBI Forecast 4 GDP 1.4 1.3 2.2 Household Consumption 0.7 -1.0 0.6 2 Manufacturing output 3.5 2.7 2.4 0 Consumer Prices 3.3 4.5 2.8 -2 Unemployment (%) 7.9 7.8 7.7 -4 2011-12: Recovery continues, but outlook -6 2002 2004 2006 2008 2010 2012 grows more challenging Contributions to GDP growth • 2011 GDP forecast cut to 1.3%, from 1.7%. % points 2010 2011 2012 2.0 1.5 • Conditions have grown more difficult, but the 1.0 recovery is still expected to make further 0.5 headway. nil nil 0.0 -0.5 • 2012 GDP forecast is unchanged at 2.2%. But -1.0 an improvement in global conditions and -1.5 Households Government Investment Inventories Net Trade business sentiment is crucial. Data source: Haver Analytics
Welsh economy ● Three or four economies ● Individual companies trading as well as those elsewhere ● Exports ● Innovation, R&D ● Activity rates ● Sectoral make-up ● Work value
WAG Economic Renewal Programme CBI input Storyline: ● Recognise the need for radical change ● Make growing the private sector the overarching goal ● Choose the most effective deliverer of public services ● Radically improve the business environment ● Then, and only then, worry about business support “Wales’ economic renewal is too big a job to be left to DET, every department and minister in WAG must account for how they have helped to grow the private sector”
Economic Renewal Programme The outcome Great business environment ● Infrastructure ● Planning ● Education and skills ● Innovation ● Procurement ● Deregulation and legislation Grants? ● Mobile FDI, green economy, innovation ● Sectoral focus
Procurement issues ● Public procurement - the Welsh pound ● Growing the Welsh company base? ● Social clauses - right or wrong? ● Outsourcing? ● PPP, PFI ● Procurement to drive innovation and create markets ● Equipping Welsh companies to win public sector contracts elsewhere
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