The Welsh economy and the role of procurement David Rosser, - - PowerPoint PPT Presentation

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 GDP growth slowed to 0.2% q/q in Q2.
• But temporary factors (April’s extra bank holiday

and supply chain disruptions) were largely to blame.

• The ONS states that underlying conditions were

stronger , with growth close to the long term average of 0.7%

• However, activity has slowed in the US and Euro

Area, raising concerns about the global outlook.

• 0.6
• 0.3

0.0 0.3 0.6 0.9 1.2 % q/q

UK quarterly GDP growth

CBI forecast

• 4.0
• 3.0
• 2.0
• 1.0

0.0 1.0 2.0 Q4 10 Q1 11 Q2 11 % q/q

Quarterly sector growth

Production Construction Services 0.0 0.2 0.4 0.6 0.8 1.0 1.2 Q1/2010 Q2/2010 Q3/2010 Q4/2010 Q1/2011 Q2/2011 % q/q

International GDP growth

USA Euro Area

CBI surveys point to weaker sentiment...

• CBI surveys point to a weakening in business

sentiment across the economy.

• Growth in manufacturing output has slowed, with a

further easing expected.

• The DTS points to a sharp fall in retail sales in
• August. Service sector business volumes have also

declined, with a further fall expected.

• Weakening sentiment has led manufacturers to

reappraise their investment plans.

Expectations

• 100
• 80
• 60
• 40
• 20

20 40 2005 2006 2007 2008 2009 2010 2011 % balance

CBI surveys: business sentiment

Retailing Manufacturing Services

• 80
• 60
• 40
• 20

+20 +40 +60 2001 2003 2005 2007 2009 2011 % balance

Business volumes

Manufacturing : Volume of Output Services: Business Volumes

• 80
• 60
• 40
• 20

20 2001 2003 2005 2007 2009 2011 % balance

Manufacturing investment intentions

Buildings Plant & machinery

Labour market weakens, inflation to rise further...

• 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.

1 2 3 4 5 6 200 3 200 5 200 7 200 9 201 1 % 3mma/y Wage growth (excluding bonuses) 400 450 500 550 600 650 700 750 200 3 200 5 200 7 200 9 201 1 Thousands

Vacancies

UK overview 2011-12

2011-12: Recovery continues, but outlook grows more challenging

• 2011 GDP forecast cut to 1.3%, from 1.7%.
• Conditions have grown more difficult, but the

recovery is still expected to make further headway.

• 2012 GDP forecast is unchanged at 2.2%. But

an improvement in global conditions and business sentiment is crucial.

CBI Forecast

2010 2011 2012 GDP 1.4 1.3 2.2 Household Consumption 0.7

• 1.0

0.6 Manufacturing output 3.5 2.7 2.4 Consumer Prices 3.3 4.5 2.8 Unemployment (%) 7.9 7.8 7.7

• 1.5
• 1.0
• 0.5

0.0 0.5 1.0 1.5 2.0 Households Government Investment Inventories Net Trade % points

Contributions to GDP growth

2010 2011 2012

nil

nil

• 6
• 4
• 2

2 4 2002 2004 2006 2008 2010 2012 % y/y

UK GDP

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