Vol 3 Issue 2 2012
Death of the High Street? The Growing Threat to Welsh Town Centres Lean Production for Lean Times How TATA Saved £300m at its South Wales sites View from the Top Welsh Politicians on where we go from here…
Swansea Business School
Swansea Business School
Pu IN to ll-o SI u D Ec the t G E W on u om els ide h y
Putting the ‘ale’ back in Wales The Future of the Welsh Brewing Industry
SOUTH WALES BUSINESS REVIEW │
winter/spring 2012 Volume 3 Issue 2
THE WELSH ECONOMY, FLYING HIGH OR IN FREE-FALL?
Design & Print: SMU Print Unit
Contributors: Richard Dunstan
Opinion: TIME TO PUT THE ‘ALE’ BACK IN WALES
10 Minute Guide:
Business Perspective: ‘WEATHERING THE STORM’ AT TATA STEEL
THE WELSH ECONOMY IN FIGURES
As we move into a new and exciting year for the UK- an Olympic and Royal Jubilee year – we reflect in this issue of the SWBR on the state of our own semi-devolved economy here in Wales. As a small country with a high degree of control over our destiny, we ask whether we’re in a stronger position than our neighbours in coping with the ongoing financial crises, and whether politically and economically we’re doing the right things as a nation to address these issues.
Editorial Board: Kathryn Flynn, Samantha Morgan, Pam Murray
A VIEW FROM THE TOP
Flying High or in Free-Fall?
PRODUCTION TEAM Editor: Lucy Griffiths
THE STATE OF OUR NATION
The Welsh Economy...
Point of View: THE DEATH OF THE HIGH STREET
News and Reviews
CONTACT US Web: Email: Twitter: Post:
www.smu.ac.uk/swbr email@example.com @SWBusReview Lucy Griffiths South Wales Business Review Swansea Business School Mount Pleasant Swansea SA1 6ED
Alternative formats If you require this document in an alternative format (e.g. Welsh, large print or text file for use with a text reader), please email firstname.lastname@example.org
Richard Dunstan is a Senior Lecturer in accounting in the Faculty of Business and Management at Swansea Metropolitan University. He is a Chartered Accountant and his teaching specialisms include corporate reporting, auditing and corporate governance, accounting software and business law.
Will Fleming Will Fleming is a Chartered Marketer and Senior Lecturer in Marketing at Swansea Business School. Prior to working in Higher Education he held senior marketing positions in a number of Welshbased businesses in the Brewing and Sports sectors.
Dr Charles Smith-Brocca Senior Lecturer in Economics and Education, Dr Smith-Brocca has been involved in Welsh politics and economics as an advisor for many years, and is regularly called upon by the Welsh media for comment on economic issues.
Lucy Griffiths Editor
Dr Charles Smith-Brocca, Economist, Swansea Met lecturer, and regular media commentator on economic and political issues provides a personal reflection on more than a decade of devolution in our feature article on page 4 where he calls for the Welsh Government to invest in transport and communications. One of Wales’s most significant employers, and a company which has experienced rapid growth in recent years, Tata, show how they’ve responded to the increasing economic pressures on their organisation with their aptly titled ‘Weathering the Storm’ programme of cost-cutting and efficiency savings at their South Wales sites on page 14. The huge shift in consumer buying patterns in recent years and its impact on our town centres is considered by Richard Dunstan on page 12 in his piece on ‘The Death of the High Street’ which, as well as considering the negative impacts recent changes have had on retail stores, offers up some hope for the future of our shopping areas; and another great Welsh tradition, brewing, is given the Scottish treatment by Will Fleming on page 8. From a political perspective, we asked three former Swansea Met staff members now making their way through the minefields of Welsh politics for their thoughts on the current economic challenges facing Wales. Nick Bourne, Mike Day and David Rees AM provide an insight into the political drivers of economic change and give their views on how the Welsh Government is tackling the not inconsiderable issues they face now, and in looking ahead to the future (p6). Along with all this we have our usual round up of news and reviews and our regular 10 minute guide – this time an ‘at-a-glance’ guide to some key Welsh Economic statistics (p10). I very much hope you enjoy this issue and that you’ll join the debate with us via Twitter (@SWBusReview) or on our web site: www.smu.ac.uk/swbr - and don’t forget you can subscribe to the SWBR via our online form or by emailing your details to: email@example.com.
Lucy ISSN 2049-5544 Disclaimer: The articles in this publication represent the views of the authors, not those of Swansea Metropolitan University. The University does not accept responsibility for the contents of articles by individual authors. Please contact the editor if you have further queries. Registered Charity Number / Rhif Elusen Gofrestredig 1139800 © Swansea Metropolitan University 2012, all rights reserved.
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Opinion: The State of Our Nation
never saw the light of day. The policies actually circulating among actors at the regional level focus almost exclusively on the ‘supply side’. This was, for example, certainly true of most projects financed by Wales’s Objective One programme. Insofar as they focussed at all, they focussed on ‘employability’ rather than ‘employment’.
Personal Reflections on a Decade (or so) of Devolved Economic Development Policy
Meanwhile, any small, incremental, long-term economic gains achieved by supply side changes were always in constant danger of being swamped by short term demand-side shocks, such as factory closures, interest rate changes, and the position of the pound against the euro. And since the credit crunch and recession dating from 2007-8, the demand side of the economy is almost totally at the mercy of market forces and political actions that cannot be effectively managed from Westminster and Whitehall, let alone Cardiff Bay and Cathays Park.
Dr Charles Smith-Brocca Senior Lecturer in Economics and Education
the need for an international perspective. There was also some recognition that the days of massive inward investment projects were over.
Following the paper-thin majority for devolution in the referendum, from The Learning Country onwards, the flow of reports purporting to provide various strands of economic development strategy became a torrent. Although in many cases they merely provided nonprioritised ‘wish-lists’ rather than anything approaching a coherent strategy, the major themes that emerged were similar to those that are familiar to regional policy makers throughout the EU: a stress on the need for local entrepreneurship; a reliance on small business as a possible motor of economic development; a wish to identify and promote knowledge-based industrial ‘clusters’; the desire for re-skilling; and
“Since the credit crunch and recession… the demand side of the economy is almost totally at the mercy of market forces and political actions that cannot be effectively managed from Westminster and Whitehall, let alone Cardiff Bay and Cathays Park.”
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Immediately following devolution Wales faced three particularly pressing economic challenges: the continued decline of manufacturing, exacerbated by what was then a ‘strong’ pound; the foot-and-mouth crisis of 2001, and its downward multiplier effect on the rural economy; and the need to develop a strategy for the use of Objective One structural funds.
I suggest that our experience since then has shown that devolution can deliver very well on the ‘soft’ areas of economic and social policy, that is to say in domains such as human resources and skills, although the plight
of the ‘NEET’ (not in employment, education or training) is far too persistent; while ‘hard’ economic progress in terms of earnings, output, and living standards, have so far appeared to be beyond the capacity of the devolved institutions.
Early in the new millennium some academic economists in Wales such as Stephen Hill, Kevin Morgan, John Lovering and our own John Ball, were arguing that supply side changes alone were insufficient for Wales to achieve even modest ambitions: what was needed was a consistent stimulus to the demand side. Hill, for example, demonstrated in 2000 that Welsh GDP had to grow by at least 1 per cent more than the UK to achieve a target of 90% of UK GDP per head by 2010, and rather more than this to achieve parity by 2025. It goes without saying that none of this has happened, nor will it happen, and in fact Wales has slipped down the regional economic league tables with the Welsh political class hard pressed to provide any hard evidence that their work has boosted economic growth in Wales at all.
If the Welsh economy has had a mixed history since devolution, economists like myself are partly to blame; I was a member an Objective One Strategic Management Board and also of a ‘quango’ (sorry, I should have written ‘Assembly Sponsored Public Body’) that advised on skills, employment and ‘welfare to work’. To be honest, I found these organisations rather inward looking, steeped in the cultures of civil service and local government, and ultimately unproductive. A more flexible and potentially more dynamic source of ideas was an adhoc committee on which I served all too briefly. It was called together by the then Assembly Chair of Economic Development, Swansea’s Val Feld, AM. Sadly, and tragically, Val was lost to us after far too short a time, and some of the radical ideas which we chatted about, such as the view that as much as possible of the Objective One funding should be invested in transport and communications infrastructure,
During the devolution campaign of 1997 devolution enthusiasts, including myself, made many references to ‘role model’ regions across the EU. We argued that the governance of economic development by strong, devolved institutions would correlate with better economic performance, as appeared to be the case in autonomous, globalised places with vigorous and confident regional cultures and identities such as Catalunya, Baden-Württemberg, Rhône-Alpes and Lombardia.
What is to be done? Development economists have a useful slogan: ‘trade not aid’. Smaller countries than Wales have prospered through ‘export-led growth’. Wales must develop export multipliers through overseas trade (with ‘overseas’ loosely defined to include the rest of the UK). A major task of the Welsh Government is to create and support networks that are not only
Wales-wide but UK wide, Europe wide, and even world wide, enabling outward-looking individuals and companies to trade internationally. One area in which the Welsh Government could usefully enhance its capacity, therefore, is in the realms of paradiplomacy: not only through trade missions, but also through direct contact with other regional governments, overseas companies and even national governments. It might well raise constitutional eyebrows, but at the very least Wales needs a Minister for Europe, or perhaps a Foreign Trade Minister, or maybe even a Foreign Secretary.
“If Wales wants to adopt one strategy that singles it out as a business centre, why not adopt this vision: universal, free wi-fi internet access across the whole nation.”
The theme I end with is the same one I have followed since the early days of devolution. A major problem in Wales is its position at the periphery of Europe, together with its internal lack of mobility. In order to get its workers to work and its products to market Wales needs a transport revolution. ‘The Day We Went to Bangor’ was a fun song, but the reality is that a car journey from Swansea there and back takes two days for any driver who is not Steve McQueen. It is ridiculous that the most efficient location for an all-Wales conference is not Llandrindod Wells but London (the first train of the morning into Llandrindod station costs a small fortune to use and arrives too late for
most conferences). Two centuries ago de Tocqueville said that any nation that cannot organise its transport would not be a nation for long. Today he would have said ‘transport and communications’, and it is clearly wrong that the rural and coastal areas of Wales, the ones where businesses most need broadband, are the very areas that are least likely to have access. If Wales wants to adopt one strategy that singles it out as a business centre, why not adopt this vision: universal, free wi-fi internet access across the whole nation, from Llangennith to Llangefni, from Rhossili to Wrexham. We need an electrified railway, not stopping at Cardiff, but going to Swansea and beyond. We need proper links, both on the ground and in the air, to Cardiff International Airport. We need direct road and rail links from north to south as well as east to west. In short, Wales needs to operate as one economy, not as a patchwork of subeconomies, having better links with English cities than with their own capital. Creating the infrastructure would provide a much needed medium-term boost to the demand side of the Welsh economy, and equip Wales’s supply side for a future of full engagement with Europe, armed not with a begging bowl, but with an array of Welsh-produced goods and services available for sale. As a symbol of Welsh enterprise, or the possible lack of it, at the time of writing the Swansea-Cork ferry service appears to be under threat. One hopes that Welsh politicians will rally to this cause, and I believe we should go several steps further. A strong economic, social, cultural and political institution linking the Atlantic Celtic nations of Wales, Scotland, Ireland, Brittany and Galicia, with the whole organisation closely integrated into the EU, would form a better option for Wales than being tied to the apron strings of Little England, should their famous Eurosceptics get their own way.
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Political Perspective: Three former Swansea Met staff, now in politics, reflect on the political priorities for the Welsh economy.
Nick Bourne Welsh Conservatives
We live in interesting times. The United Kingdom faces massive challenges in tackling its budget deficit and in going for growth while the crisis in the euro zone threatens the stability of our largest market. This is eye watering enough but add on to that Wales' continuing relative decline in GVA against the UK as a whole and it is clear that a massive effort is needed to turn around Wales' fortunes. Yet the difficulties we are in present opportunities as well as threats. Let me offer up a few thoughts. The prospect of qualifying once again for structural funds in the EU though it is distinctly something that is consummately not to be desired provides opportunities. Wales should look to the success of other nations and regions that have made great and profitable use of these resources and principally Finland and Ireland. The relatively small investment of sending business men and women to discover how these countries benefited makes great sense.
“Wales has a toe in the water in China…but needs to do more elsewhere especially in India to build up strategic business partnerships” Wales is well served in Europe and, while as I say lessons should be learned, there are other major markets where we need to do far more. The great growth in world markets in the coming years is not going to be in Europe or the USA. It will be in Brazil, Russia, India and China (the so called BRIC countries) as well as elsewhere. Wales has a toe in the water in China (Chongqing) but
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needs to do more elsewhere especially in India to build up strategic business partnerships. We have the benefit of a common language as English is the lingua franca of business in India and there is also much shared heritage. I feel sure that there are members of the Indian community in Wales who would be able and willing to help massively in such a project.
“a major effort needs to be made to place Wales at the forefront of the market for the green revolution” Meanwhile within Wales skills for the workforce are vital and the Welsh government, HE providers and business need to be in regular dialogue as to what the needs are and how they should be addressed. Lastly a major effort needs to be made to place Wales at the forefront of the market for the green revolution. Once again the role of HE and business together is pivotal. In particular Wales is very well placed to lead the world in marine technology. Just some thoughts on key areas within my allotted space. It is good to see my alma mater in such good shape and offering a forum for debate and ideas.
Mike Day Welsh Liberal Democrats
Businesses have been facing difficult financial times and tell me that there has been a lack of clear policy and direction while the Welsh Government has been re-organising its business support and funding activities. Clearly Wales cannot have total control over its own economic destiny, and our prospects are intricately linked with the fortunes of the UK, Europe and global economic matters.
“There is no longer any silver bullet, using our cheaper costs and better quality of life to attract the big job creators.” Wales has experience of reliance on inward investment, some of which, like the LG venture, has been painful. There is no longer any silver bullet, using our cheaper costs and better quality of life to attract the big job creators. And the ability of the Welsh Government to stimulate economic growth is restricted by the lack of wealthcreating natural resources, (such as that which Norway can claim) and no economic and financial infrastructure under Welsh Government control. There is currently only very limited discretionary spending in the Welsh budget which can be used to leverage investment. It seems very odd that while local authorities have borrowing powers, the Welsh Assembly does not. Borrowing for capital investment in schools, roads and other infrastructure projects would have a double impact – stimulating the construction industry, as well as providing the means to deliver economic growth in future.
Investment in school building, if linked with a policy such as ‘Beyond Bricks and Mortar’ adopted in Swansea could have a multiplier effect through the supply chain. Investment in school buildings is much needed and would also lead to improved education for our young people. Most businesses play to their strengths and national and regional economies should be no different. Despite poor PISA performances, Wales understandably has a proud tradition of developing skills and competences of its young people, which have often been exported to other parts of the world. We must continue to develop them, and look at ways of retaining the skills needed for a future upturn in the economy. Schemes at all levels of education are needed to prepare our young people and encourage them to stay. The Prince of Wales Innovation Scholarships provide an example of the kind of scheme needed, but much is being achieved in developing enterprise skills in children and young people in Swansea from primary school years through to further and higher education, with examples of excellent practice in Gower College Swansea, and our universities. This is as a result of many organisations in the private and public sector working together through the Building Enterprise Education in Swansea (BEES) group which I have the privilege of chairing. Much can and should be done in the short term.
David Rees AM Welsh Labour
The OECD has recently predicted that the UK will return to recession in 2012 and the latest ONS figures show the economy only grew by 0.5% in the third quarter of 2011. At the same time we see youth unemployment spiralling to more than 1 million and unemployment at its highest for 17 years. Following on from this, figures coming from the analysis of the chancellor’s autumn statement by the Institute for Fiscal Studies show that real household disposable income will fall in real terms between 2009 and 2012 by 4.7% - easily the largest fall over a threeyear period since records began in 1955.
£216 million over 3 years as a result of the autumn statement. However, we are doing this against a backdrop of a massive 50% cut to the capital budget in real terms over five years. We have been doing all we can to stimulate the economy, protect jobs and services. Unfortunately, it is ultimately the UK Government that holds the macro and fiscal leavers that can make the most difference and they are admitting to lower than predicted growth and a difficult year ahead.
This situation simply confirms our growing fears for the economic outlook. The ruthless severity of the Westminster cuts has more to do with ideology than necessity and is choking off what fragile growth we have seen so far. Added to this we see the current crisis within the Eurozone and the impact that is having on Welsh businesses together with huge uncertainty in the markets. The Welsh Government is doing all it can to protect the people of Wales and is using the levers it has to stimulate economic growth. The Welsh Government has recently announced a number of measures to support the Welsh economy, including: a £55 million package to support business; a £38.9 million economic stimulus package; £90 million of centrally retained capital funding to be spent on infrastructure projects together with a further *NB Plaid Cymru were also offered the opportunity to contribute to this story. Image: ©iStockphoto.com/susandaniels
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Time to put the ‘ale’ back in Wales? Will Fleming
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7 Pubs closing every week in Wales 30% pints sold in UK pubs today are beer or real ale,
in 1960 it was 99%.
The other 70% of pints? Lager…
328 commercial breweries have existed in Wales
can be deduced by the rent of King Ine of Wessex in AD 690 which was set as;
“10 vats of honey, 2 full grown cows, 10 geese, 20 hens, 10 cheeses, a full amber of butter, 5 salmon, 20 pounds of fodder, 100 eels, 30 ambers of clear ale 12 ambers of welsh ale.” However, it is not until the industrial revolution that large scale production of beer comes to Wales. In particular the discovery of quality coal and the subsequent mining of this precious commodity in places like Merthyr Tydfil and the Rhondda Valley suddenly made Wales an attractive place to work and live. As the demand for labour rose it mainly attracted agricultural workers who wanted a better life for themselves
over the last 325 years
44,000 jobs lost in the brewing sector between 2003 and 2008
16 million fewer pints are sold daily in UK pubs than in 1979 Data source: British Beer and Pub Association (2011)
Welsh brewers had been producing ales in serious volumes for hundreds of years despite attacks upon it like the Sunday opening ban and the temperance movement. In fact in the last 235 years there have been 328 breweries in existence at one time or another. In the 1950s there were a number of major operating breweries including the Wrexham Lager company, Buckleys and Felinfoel breweries in Llanelli, Evan, Evans Bevan in Neath and the Swansea Vale, the Rhymney Brewery of Merthyr Tydfil, the Clubs and Institutes Union owned Crown Brewery in Pontyclun and S.A. Brains and Hancocks in Cardiff. However, as the larger English brewers embarked on aggressive expansion strategies, the 1960s saw almost all of the Welsh companies being taken over and then ultimately over time eventually closed in efficiency and cost cutting exercises by the parent company. In recent years a number of major trends have impacted upon the beer market. Arguably the single most important issue has been the rise of lager. The real ale market has been in steady decline over the last 50 years; in 1960, 99% of sales of beer were real ales. Since then the owners of the lager brands have created well
targeted marketing campaigns that young people could relate to and demand for continental beers has grown significantly so that the split is now 70: 30 in favour of lagers and, had it not been for the good work of the Campaign for Real Ale (CAMRA), it is likely that this situation would now be much worse.
The Welsh have been linked to ale brewing and its allied trades for centuries. Evidence exists of small scale home brewing but it is most likely that the origins for this activity began in the monasteries, with monks being master craftsmen. In Wales they produced two main types of ale, a standard beer, cwrwf, and the Welsh ale, bragawd, which was the premium product of its day as
Brewing by the numbers…
“Welsh brewers had been producing ales in serious volumes for hundreds of years despite attacks upon them like the Sunday opening ban and the temperance movement.”
Will Fleming, Senior Lecturer in Marketing at Swansea Business School, and former marketer at one of Wales’s largest breweries, reflects on the challenges facing the Welsh brewing industry. Brewing beer is a human activity undertaken all over the world and Wales has always had a beer producing and drinking culture. Wales is well suited to producing beer with the type of water available, the weather and the type of crops that are grown. The Welsh are best known for brewing ales using top fermenting yeasts and high temperatures to produce distinctive flavours and a brown coloured product. In comparison to the Continental European brewing style using bottom fermenting yeasts and lower temperatures to produce a crisp, yellow coloured product called lager.
and their families. It was the labour intensive nature of mining, and subsequently the steel industry, that gave large numbers of working men some disposable income. It has been suggested that this type of work with its dusty environment, the sheer physical effort required and the need to trust fellow workers in such dangerous work and the camaraderie it then engendered created the demand.
The other huge change has been the rise of wine drinking and in particular home drinking. The rise of packaged sales at the cost of draught sales has accounted for a 42% fall in on-trade sales and all of which have been a factor in the demise of the pub, owning a pub was once an attractive proposition but not anymore. In Wales today the statistics reveal a trend of 7 pubs a week closing. The death of the pub has been one of the major influencing factors in the demise of the brewery. Many of these pubs and clubs have had to go as they were failed and failing businesses with owners not responding to their changing business environment. In particular price rises (a third of the price of a pint of beer is taxes), cheap imports and the smoking ban. This is not just an economic tragedy but also a cultural one. The pub is a part of the fabric of local communities, it has its
own conventions and behaviour norms, it is a part of our spoken language as we talk about “pub grub” and “pub bands” but probably its most important role is as a social meeting place. It is not possible to discuss all the reasons for the decline of this industry as some of them are marketled, some of which are customer-led and others government-led, but there is no shortage of solutions. In 2010 two important papers were produced for the Welsh Government, the first in February by CAMRA and then in July by the Rural Development Committee of the Welsh Government. Their own report produced eighteen recommendations covering many similar issues to CAMRA including more barley and hop cultivation in Wales, support the industry in a minimum price for alcohol, reform of the beer-tie or legislate for the right to stock a locally produced beer or cider, consistent planning guidelines for the industry, protection of pubs from conversion or demolishing, the maintenance of the progressive beer duty a distinct strategy for promoting and marketing Welsh drinks, a logo to recognise quality and one for products made in Wales, that the Welsh Government improve its own
expertise in this area, they create a forum for Welsh drink producers and finally provide funding support for identifying supply chain efficiencies. A detailed response was provided by the Minister responsible and in the main he would not commit further effort and resources and rejected in principle a number of the recommendations which provoked the Association of Welsh Independent Brewers to describe his response as “particularly disappointing”. It may well be that the drinks industry is becoming the new tobacco, a politically sensitive issue, and certainly the background of swingeing cost cutting by the coalition government is not conducive to supporting such an important industry in its hour of need. When the economic outlook and the retail sector predictions are also considered, it is clear that the Welsh brewing and pub businesses have yet another fight for existence and the future is likely to be similar to its recent past; overall further decline and one where small scale successes are driven by the entrepreneurial spirit within the industry, rather than political support.
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10 Minute Guide:
The Gross Value Added for Wales is £45.5 billion. This is £15,145 per head of population, the lowest rate per head for all UK regions.
England Wales Scotland
67.8% 70.3% WALES
44 59 2010 39 58 2009
up 4,000 (3%) in 2010-11
The Welsh Economy in Figures
down 9,000 (-2.8%) in 2010-11
Data source: Welsh Government (December, 2011)
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Point of View: The Death of the High Street
ever more time shopping online, with approx 10% of all retail sales, excluding petrol, taking place over the internet. We also have no need to rely on the famous John Lewis slogan that its items are ‘never knowingly undersold’ when we can price-check every single product online via comparison websites such as Kelkoo.
Antecedents for Decline As consumers, however, we want the best of both worlds. We crave the simplicity and convenience of shopping online and the discount prices available, but we also love customer-friendly High Streets filled with niche retailers, handsome bookshops, boutiques, butchers in striped aprons and greengrocers with fresh produce piled high. We bemoan the fact that our High Streets are now populated by Tesco Express, Sainsbury’s Local, charity shops, pound stores and countless takeaways and coffee shops.
Richard Dunstan, Senior Lecturer in Accounting at Swansea Business School, considers the rapid changes taking place in our town centres in the age of the online retailer.
Retailers of all sizes are under assault from a rapid shift to internet shopping, a slump in consumer confidence following the recession and from some chains having taken on too much debt and over expanded during the boom. Zavvi, Woolworths and the book chain Borders have all gone bankrupt and the music store HMV recently admitted defeat in its battle with Amazon and iTunes in its statement that it would, in future, focus on live music and gadgets. It is in the process of closing 60 of its 285 stores in the UK. Game, the computer retailer has also announced plans to close 70 of its UK outlets whilst Comet and Dixons, parent of Currys and PC World, are thought to be in financial difficulties.
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“Retailers of all sizes are under assault from a rapid shift to internet shopping, a slump in consumer confidence … and from some chains having taken on too much debt and over expanded during the boom.” Fashion is also an area where many retailers are experiencing severe problems. Henleys Clothing and the Officers Club chains both went into administration last March. Jane Norman, the youth fashion chain filed for bankruptcy in July and Mothercare has also revealed it is shrinking by one-third and closing 110 stores, most of which are on High Streets around the country. Other tales of woe include Thorntons, the chocolate maker, who in July revealed plans to shut up to 120 shops over the next 3 years. Carpetright has planned to close at
least 50 stores as it posted a 40% fall in profits and Habitat was another chain to go under in late June as the next rent payments fell due.
The Effect on City Centres in South Wales The impact is visible everywhere. In Swansea, for example, the new shopping centre which was built on the site of the closed David Evans store is still, even 2 years after the first shops opened, only approximately 50% full. Many empty shops are visible throughout the city centre and the proliferation of “pound stores” and charity shops is ever more visible. Traditional retailers are facing greater and far more destructive challenges than anything they have previously confronted. Firstly, there are the online retailers such as Amazon, which has soon moved on from selling merely books and CDs. It now sells practically anything, at great convenience to the consumer, becoming a £21 billion-a-year turnover online monster. We spend
Is a Revival Possible? So what can Swansea do to return the town centre to a buzzing, thriving and relevant consumer environment? Where there are new shopping developments, they currently seem to be in impersonal out of town centres such as Parcs Morfa and Fforestfach, where retailers are attracted by far lower rents and rates than in the town centre. Some cities, however, are bucking this trend and town planners are focusing on keeping the town centre alive. Cardiff, for example has the new St David’s 2 centre which, along with its Mill Lane “cafe culture” project has
“Lower rents allow the cycle of urban regeneration to begin. Alternatively, high street developers could make affordable space available to entrepreneurs.”
The tale is a familiar one to any city centre in the UK. High Streets, which once stood at the heart of the community and were a hive of entrepreneurship, are becoming cultural and social wastelands.
growth, higher fuel and food costs and higher energy bills. It is no surprise that confidence is still low. We may also soon see a further deterioration following sharp declines in world stock markets.
Secondly, there are the multi-national supermarket chains. Often credited with having destroyed the local greengrocer and butcher and having put the corner shop out of business, they are using their buying power and distribution channels to move into every other kind of shopping and impacting upon the lives of many other types of shop on the High Street. Sainsbury’s has marked 40% of its space for non-food items, Tesco 33%. They are also continually expanding with Tesco alone expecting to add another 292 stores in the UK next year. Thirdly, consumers have been hit by tax increases and the government’s austerity cuts. There is weak wage
regeneration to begin. Alternatively, high street developers could make affordable space available to entrepreneurs. Another option would have been for The Kingsway to have been pedestrianised as part of the city centre restructuring a few years ago. Richard Jones, owner of Moda Collections and M Bar on the Kingsway argues that “a traffic free environment, with outdoor space for cafes and restaurants would make the street a far more attractive and social prospect to consumers. It has worked for the Mill Lane area of Cardiff so why not Swansea?” Experiential shopping is about loving being in the shop, the smell, the light, the people and we like to imagine a town centre that is more social, with meeting spaces and diversity. However, things may well be worsening with the latest CBI retail survey finding that 46% of retailers suffered a fall in sales in the first half of August. With inflation currently running at twice the level of earnings growth and many forecasters predicting that the UK may soon be in the throes of a double dip recession, the picture may sadly get far bleaker.
completely revitalised that part of the city centre. The evidence is that small, expensive, inefficient shops are struggling to survive and landlords need to rethink the model. Phil Wainwright owner of Splitz Hairdressers on the Kingsway believes that “Swansea Coucil needs to offer rent and rates incentives to small businesses like mine if we are to survive”. Lower rents allow the cycle of urban Vol 3 Issue 2 2012 │13
SOUTH WALES BUSINESS REVIEW│
│SOUTH WALES BUSINESS REVIEW
Business Perspective: ‘Weathering the Storm’ at TATA Steel Many people believe that the steel industry is the best barometer for the state of the economy in Wales. As the largest private-sector employer, as well as being one of the major suppliers to so many supply chains throughout the country, and one of the country’s major exporters, it’s hard to argue against it. So when the economic storm hit in 2008, the survival of the steel industry became even more critical to so many other aspects of life in Wales. Here, Head of Communications at Tata Steel in Port Talbot, Tim Rutter, reflects on how the Company managed its way through those years, and what legacy has been left behind, as times remain turbulent. “The downturn wasn’t exactly unexpected, but the speed and severity, certainly were. Demand for steel products in Europe - Tata Steel in Wales’ main markets - fell off a cliff. Nearly all of the major steel-using sectors were affected: construction, automotive, white goods (washing machines, fridges and so on), and general engineering. The only sector that is traditionally counter-cyclical, and again seemed to stand up in the face of this storm, was packaging. In times of austerity, people tend to move from fresh and frozen food to canned food, and this counters any reduction in luxury or promotional steel packaging for items such as perfume or chocolates. Any organisation that depends on high volumes and low margins (as the steel industry generally does) gets hit particularly hard. At reduced volumes, the impact of fixed-costs are extraordinary. Very quickly, in Port Talbot and Llanwern, the challenge was to 14 │ Vol 3 Issue 2 2012
reduce costs wherever possible. The target was to make savings of more than £100 million by the end of the financial year. Within weeks, the target was revised, upwards, to £130 million! In 2009/10, this target was to soar to £250 million of savings. All across Europe, steel companies were taking drastic action in response to the whole new supply / demand dynamic. The same action soon became inevitable in Wales, as first the hot rolling mill at Llanwern was mothballed, and swiftly after that, Blast Furnace 4 in Port Talbot.
mean no cobwebs,” said Chaturvedi, and it was clear that he meant to bring these major manufacturing units back to life when the time was right. As history will show, his faith and vision were spot-on as both units returned to operation a little over a year later. His next challenge was what to do about some of the variable costs that had the potential to paralyse the business. What about the people that went with a hot mill and a blast furnace, not to mention reduced activity across all the units in his business? The pressure to reduce heads was intense, but Chaturvedi knew that keeping people in the business was critical to the business’s success. Not only did he see the opportunity for the people to make substantial savings in the shortterm, but he was also very aware of the need to keep critical and rare skills inside the industry. “Our people will make the difference,” he said (and put big signs up around the works to reinforce it!).
“The key to success was to get people to come forward with opportunities, and to take ownership of implementing and sustaining them.” Tim Rutter, Head of Communications TATA Steel
In 2008, three years after the start of a groundbreaking culture-change programme – The Journey – this was its biggest test.
‘The Journey’, Tata’s groundbreaking culture-change programme. There were many people who believed ‘mothballed’ meant ‘closed’, but this was 2008: a little over a year since Corus had been acquired by the Indian-based, and values-led, global superstar, Tata. And Port Talbot and Llanwern were lucky enough to have at their helm Mr Uday Chaturvedi who had spent some of his formative years in the steel industry in Wales. “Mothballed must
The business set about a two-year campaign called (appropriately enough) “Weathering the Storm” (WtS). All those people who weren’t directly involved in production, maintenance of the plant or critical support functions set about the task. A central “war-room” was set up to focus, co-ordinate, share, measure, and promote Weathering-the-Storm. Every single area of the business set up local WtS teams. The key to success was to get people to come forward with Continued >>>
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SOUTH WALES BUSINESS REVIEW│
│SOUTH WALES BUSINESS REVIEW
News and Reviews Events @ Swansea Business School 6pm, 23 February 2012
‘Mental Toughness’ and ‘Leadership’ in relation to coaching for success
6pm, 29 February 2012
The Annual St David’s Day Lecture: The Business Of Sport
6pm, 15 March 2012 6pm, 26 April 2012 6pm, 3 May 2012
This wasn’t management fighting against the unions – it was exactly the opposite - this was the combined and singular determination of 5000 people coming together to “Sustain the steel industry in Wales”. Within weeks, the billboards around Port Talbot and Llanwern were celebrating the capturing of over 5000 individual ideas to improve operational effectiveness and efficiency, and to reduce costs. The Tata Steel employees then set about prioritising these, assigning ownership, and measuring progress of implementation. Every two weeks, the billboard showing the progress of “Reg” climbing up a costs-saved “wedge”, showed that people really were starting to make a difference.
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“The business was developing a common language and the culture was becoming infectious.” Where steel workers (and their experience and skills) were being laid off across Europe, here in Wales, steel workers were making the most dramatic of statements by saving many times their own employment costs and remaining in work.
The Work of the ‘Micro Business Task Force Wales’
Robert Lloyd Griffiths
Robert Owen Cup, student business plan competition
CMI and Swansea Business School
As demand slowly returned, Blast Furnace 4 was brought back on safely in October 2009 following the restart of the hot rolling mill at Llanwern a few months earlier. With people moving back to more usual working patterns, the WtS programme continued as pressure remained on cost management and operational excellence. Successes were being recognised and
celebrated as a cautious industry moved forward through 2010. In two years, steel workers in Port Talbot and Llanwern had made savings of over £300 million.
Chwarae Teg Manager Wales
Institute of Directors, Wales
Business School Students Awarded for CIPD Success Congratulations to Nicola Jones (CIPD Foundation) and Louise Willis (CIPD Postgraduate) for being awarded 'Student of the Year' of their respective Chartered Institute of Personnel and Development (CIPD) programmes at the recent CIPD Chair’s lunch. Present at the lunch were the Lord Mayor and Mayoress of Swansea and Lord Mayor and Mayoress of Neath Port Talbot.
The business had not only managed to survive the storm and save millions of pounds, but its people had earned an exceptional reputation in the Tata Group and this may prove to be even more valuable in the long run, as plans for major capital investments that would sustain the business for years to come, would be next on the agenda.” Post Script: After a short respite in 2010, 2011 has proved to be as difficult as the height of the storm. Some of the habits learned during WtS have remained; some have not. As they say in sport, you’re only as good as your last game. The same applies in business. As the steel industry across Europe continues to struggle with poor demand, high energy and raw material costs, the workers in Wales cannot rest on their laurels. It’s time to get those habits back if the people and the industry are to grasp the opportunity that sits in recent investment announcements.
Professor Laura McAllister Chair Sport Wales
South Wales Business Review Relaunches in Style And every fortnight the works’ newspaper retold stories of costsaving ideas and how everyone was playing a part – the business was developing a common language and the culture was becoming infectious.
Women in Management – Successes and Challenges
Tata’s ‘Reg’ climbs the cost-saving ‘wedge’. opportunities, and to take ownership of implementing and sustaining them. It meant working in new areas with new people in new ways. It meant breaking old habits and developing new ones. It was an opportunity to train for new tasks and for the workforce to become more flexible.
For further details of these events and to register to attend please email firstname.lastname@example.org or call our Faculty Office on 01792 481132.
Pictured (left to right): Leigh Jenkins (Dean, Faculty of Business and Management), Tim Jones, Professor David Warner CBE (Vice-Chancellor), Lucy Griffiths (Editor SWBR).
High profile business leaders from across South Wales turned out in force to celebrate the re-launch of the South Wales Business Review at Swansea Business School. The guest speaker, Tim Jones, former Regional Director for Rolls-Royce, and Swansea native held the packed audience rapt with his tales of leadership at one of the world’s most well known and prestigious brands. Leigh Jenkins, Dean of the Faculty of Business and Management said ‘We’re delighted to be re-launching the South Wales Business Review at what is an exciting time of growth and development for Swansea Business School. The SWBR is a great way for us to share the knowledge we have here within the School with the wider business community.’
Head of the Centre for Professional and Postgraduate studies, Dr Maggie Inman said: "We are delighted that our students can be recognised in this way. The CIPD awards are extremely challenging and these students achieved outstanding results. We are very grateful to Joy Arkley of HR Department Ltd. and Toby Warren of HR Resourcing Ltd. for sponsoring these awards together with the continued support of the South West Wales Branch of the CIPD".
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SOUTH WALES BUSINESS REVIEW│
│SOUTH WALES BUSINESS REVIEW
Entrepreneurial Students Raise Cash for Children in Need
Bouncing Back after Business Failure
As part of Swansea Metropolitan University’s SMUDGE Enterprise initiative, more than fifty Business and Industrial Design students recently took part in an entrepreneurial challenge aimed at helping them hone their enterprise skills with the double benefit of raising funds for a fantastic cause – the BBC’s Children in Need appeal. The students were set the challenge of raising as much money as they could for BBC Children in Need just one day before the appeal day, and were presented with limited resources with which to prepare. They had access to the ‘Bank of Puds’ where they could exchange money and apply for a loan, and they were able to purchase official BBC Children In Need merchandise for resale from ‘Teds Wholesaler’. Quick thinking, creativity, resourcefulness and a gogetting approach were all required, and the challenge really put the students through their paces. The BBC filmed the event, which appeared on their Children In Need
Steve Griffiths compares two books on turning failure into business success Brown, S. (2008) Fail Better! Stumbling to Success in Sales & Marketing. 25 Remarkable Renegades Show How, London, Marshall Cavendish Ltd. Harford, T. (2011) Adapt: Why Success Always Starts With Failure, London, Little Brown. I am a fan of Stephen Brown, Professor of Marketing at University of Ulster, those of us who love his Postmodern Marketing books and pastiche of Harry Potter and the Da Vinci Codes might be a little disappointed with ‘Fail Better!’ which seems a dry read in comparison. Keep reading to get the humour. Pictured (left to right): Farida Rafizade, Babken Gharabaghtsyan, Vanessa Phillips, Kirtsy Joseph, winners of the ‘Most Creative Fundraising Ideas’ award.
highlights show, and those students who were judged to have been most innovative and successful in their fundraising won a range of prizes including enterprise start-up kits. The challenge was supported by the Welsh Government’s Dynamo initiative, and entrepreneur and Dynamo Role Model Ben Room of BRD Sports was on hand during the
event to support students in devising their strategies. In total, the students raised over £1500 in just one day, and feedback from the participants suggests they learned a huge amount about team work, strategy and the key considerations when starting up an enterprise, plus they had a great time doing it. Win-win!
Met Student Mentors Young Dragons to Success Final year Marketing Management student and entrepreneur Nick Harle recently mentored a team of young people from St Joseph’s Catholic School in Neath to win the prestigious title of Swansea Bay Young Business Dragons 2011. The winning team ‘PPP’ developed an innovative underfloor plate designed to gather and utilise kinetic energy produced by human movement in high-footfall areas such as the Olympic Stadium.
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Nick supported the team throughout the development process and several knock out rounds before the team pitched to the judges in front of a large audience at a prestigious dinner hosted by Siany from The Wave. Swansea Business School would like to congratulate Nick on his achievement in supporting the team so well and we hope to continue working with PPP and the other teams who reached the final to support them in developing their ideas further.
In reflecting on the experience Nick said ‘I was honoured to work with the highly motivated team members and teachers on this project. Their hard work and focus was key to the result, as well as their highly innovative product concept.’
The basic thesis, which is repeated by Tim Harford, is that to be great you often have to fail and learn from the experience. Unlike in the USA this is a relevant factor for the UK, where we seem to be under pressure to succeed at our first attempt and there is no respect for failures. Harford, an FT Economist, is a livelier read with more extensive references to the literature and examples ranging from Guttenberg’s loss-making (printing the Bible a bad idea?), to contestant risk behaviour on ‘Deal No Deal’. I do recommend both books. Some of the cases are very funny, especially if you like Brown’s dry style. Harford also blends academic references with popular culture examples. The references section at the end for each of Brown’s chapters are very amusing, including an admission that he used some examples from a self help book called “Fail Better”...honestly he didn’t steal the title! Harford gives a wider historical and psychological view point. He references all the usual suspects e.g. Porter, Peters, Waterman etc. I particularly like his account of the problems of 1st mover disadvantage, for those who lead technological breakthroughs. Perhaps 2nd mover advantage should be studied more by our entrepreneurship students. As in previous work, Brown celebrates ambiguity, the need for contradictory perspectives and suspicion of “4 Ps” type generalisations. In this context Ambiguity is the refusal to be type cast, “keep them thinking, don’t spell things out in too much detail e.g. Madonna’s changing image and persona”. However he does leave us with his “Double Triple A” (i.e. 6 bullet points) summary of the Fail Incredibly Betters (FIB) - those who succeed from failure: • Ambition • Activity • Astigmatism-they see what others cannot e.g. Chanel and the move to less formal fashion • Amplification-they are larger than life • Aphorism-they can sum up everything in a pithy sound bite e.g. KFC’s “Finger licking Good”. Both books worth quoting for the generalist or students of strategy. Brown is the respected academic, Harford the critical commentator.
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In the game From grass roots to the top flight, Welsh sport means business Out May 2012
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