CORRECTED TRANSCRIPT OF ORAL EVIDENCE To be published as HC 854-iii

HOUSE OF COMMONS

ORAL EVIDENCE

TAKEN BEFORE THE

WELSH AFFAIRS COMMITTEE

INWARD INVESTMENT IN WALES

MONDAY 4 APRIL 2011

(SWANSEA)

PROFESSOR RICHARD DAVIES, PROFESSOR IWAN DAVIES, DR GRAHAME GUILFORD and DR WEIXI XING

STUART BAILEY, ALED DAVIES, TONI EASTWOOD, NEIL O’DOHERTY and PETER SISHTON

USE OF THE TRANSCRIPT

Oral Evidence

Taken before the Welsh Affairs Committee

on Monday 4 April 2011

Members present:

David T. C. Davies (Chair)

Stuart Andrew

Alun Cairns

Geraint Davies

Mrs Siân C. James

Susan Elan Jones

Mr Mark Williams

Examination of Witnesses

Witnesses: Professor Richard Davies, Vice-chancellor, Swansea University, Professor Iwan Davies, Pro Vice-chancellor, Swansea University, Dr Grahame Guilford, Consultant Commercialisation, Swansea Bay Science and Innovation Campus, Swansea University, and Dr Weixi Xing, Director of the China Centre, Swansea University, gave evidence.

Q130 Chair: Good afternoon. I am David Davies, the Chairman of the Welsh Affairs Select Committee. Although we have your names, perhaps you could briefly introduce yourselves for us.

Professor R. Davies: We will introduce ourselves one at a time. My name is Richard Davies, and I am the vice-chancellor of this tremendous university, and I am delighted to see you here.

Dr Guilford: I am Grahame Guilford, and I am a consultant working with the university on commercialisation and developing links with business. My background is 30 years in the life science industry with Amersham International plc and GE Healthcare.

Professor I. Davies: Good afternoon. My name is Iwan Davies, and I am pro vice-chancellor here with responsibility for internationalisation and also for the bay science and innovation campus. My background is that I hold the Hodge Chair in law at this great university.

Dr Xing: My name is Weixi Xing, and I am a Chinese national. I got my first Masters degree in telecommunications in China, and then I worked in the telecommunications sector for more than 10 years. After that, I came to the UK and got my MBA at Cardiff Business School and then my PhD at Cambridge University. I am now director of the China Centre at Swansea University. My main job is to manage research projects with China.

Chair: That is great. Thank you very much indeed for having us. It certainly does look like a very good university. I will hand over to the local Member of Parliament, Geraint Davies, to say a few words.

Q131 Geraint Davies: Welcome again-it is a great joy that you have encouraged the Welsh Affairs Select Committee to come here for you to showcase what you are doing. As you probably know, we are doing a study into inward investment-basically, entrepreneurship and how universities can help as an engine of growth. To start with, I was hoping that Richard Davies and others could give us an idea of how you are positioning the university as a research-intensive university, what you see to be a knowledge economy and how the development of Fabian Way fits into your plan for Swansea and Wales. I am not looking for an encyclopaedic answer to that, of course. Over to you.

Professor R. Davies: Thank you very much. That is a considerable question, and perhaps a few of us can contribute to the answer, because to cover it we probably need to use the array of talent across the table. Swansea University was established at the behest of industry; that is what happened in the early 1920s. Heavy industry in this region recognised that it needed a university-it wanted skilled people, clever academics and it wanted science to be progressed. So, we do not recognise claims that working with industry is some new phenomenon in higher education in the UK-it might be new for some universities, but it goes back to the day that we were established as far as Swansea University is concerned; we have a long history of working closely with industry.

Over approximately the last 10 years, which takes us back to a time before I was appointed here, the governing body recognised that Swansea needed to up its game as a university. As there were more and more universities being created in Britain, we could not afford to be complacent if we were to compete in this much more lively university environment in the UK, and, of course, globally. We had to get better and we had to get bigger. I was appointed with that as a clear brief. We are hugely ambitious as a university. We do not see working with industry-creating wealth and creating high-paid jobs-as being in any way contradictory to our mission as a research-led university to develop world-class research, and to provide a very encouraging and challenging teaching environment for our students. We see those as mutually supportive activities, and that is the way in which the university has been developing and doing so extremely enthusiastically.

We have done some realigning to make it absolutely clear which academic areas of the university relate to which economic sectors of the economy, and how those different parts of the university can be supported in terms of growing and encouraging growth of hi-tech clusters in the region. We have a big strategy for that. We have also been putting in place the governance structures, the management and the leadership to make very big things happen. I am delighted that Geraint mentioned the bay science and innovation campus. That is a key part of our strategy, because we have a landlocked campus here-one of the smallest campuses in the UK. We cannot deliver on a big vision for Wales based on this small campus, so we have had to expand our thinking and, in our science and innovation campus, the whole concept leapfrogs ahead. We had fallen behind the pace in Wales, to be honest-unlike many English universities, we do not have science parks linked to universities in Wales-but we are now leapfrogging ahead to a more modern concept than a science park. We are listening to what industry wants. On the new science and innovation campus, we are going to intermingle academic research, industrial research and development, skills training and academic courses. They will all be intermingled, with everybody contributing to everything. That, we think, will be a global exemplar. That, in summary, is the sort of thing that we are doing.

Chair: Thank you very much indeed, Professor Davies, for that introduction. We have a number of questions that we will ask over the next 40 minutes. We are very grateful to you for hosting us, and we want to get as much out of this as possible, so I ask for some quick questions and answers.

Q132 Mrs James: You have already mentioned the way that you have been working in the city of Swansea and the region, and the unique role that you are developing here. I want to find out a little bit more about how you work with other organisations. How do you engage inward investors in this area? Do you seek them out, or do firms come to you? What happens next?

Professor R. Davies: That is very much Grahame’s area.

Dr Guilford: What I have been trying to do with the university is to build those links with potential investors-primarily business investors. My background in a large business is helpful there. We have been trying to develop links with large businesses to function as anchors, or a focus for the development of the critical mass that might come through building supply chains involving small and medium-sized enterprises and so on. I have tried to look at areas within the university in terms of research excellence, equipment capability, academic expertise-whatever it might be-that might be attractive to large businesses, ultimately leading to strategic links. Clearly, you have to start at a fairly small scale with some of those things, just as a normal business would do with its customers, developing an infrequent customer into a regular customer. In the same way, a university will try to develop an initial contact with a business into a strategic relationship over a period of time.

We started with some areas where the university had quite long-standing relationships-Rolls-Royce and Tata are two examples of companies that the university has worked with over a number of years. I tried to add to those existing research relationships a commercial element, whereby we could look at direct commercialisation of the research being done, in such a way that, over time, it would feed financial benefit back into the university to underpin continuing research, making the relationship more sustainable in the long term and so on. That would be one way that you would do it. Other ways might involve smaller-scale collaborations with companies that you try to build up over time into something more strategic. I think that Weixi might have some interesting examples of work that he has been doing.

Dr Xing: Huawei Technologies Co is now the No. 1 telecommunications wonder in China, with sales last year of around $27 billion. It is now second in the world. It is also a strategic partner of BT, supplying a number of telecommunications operators in the UK. I worked for the company for seven years, so I used my links to try to sell Swansea University’s strengths. Some professors have links with the company. At the beginning, we secured a number of small research projects from this company. Nowadays, we have a deal for three research projects with this company. We have a framework agreement with the company that enables Swansea University to collaborate with other UK universities and industries.

Q133 Mrs James: I am aware of the link with China, and I am aware that you have links with other countries as well, so does that model apply to other countries that you work with? How would you then establish a bridgehead into a country where you have a student population, and how do you then develop that? It would be interesting to hear a little more about that.

Professor I. Davies: There are two aspects to that. The first relates to our historic role. The global footprint of Swansea University goes back to its inception, and part of my privilege is that I have been able to speak to our alumni, some of whom have had a very significant impact upon their own countries. I came back from Malaysia recently, where I met one of our alumni who was responsible for the rural electrification of the entire peninsula of Malaysia, and also for the city of Kuala Lumpur. That person graduated in the same engineering class as a UK student of ours who was responsible for the nuclear commissioning of Wylfa, for example. So, there is a story around the historic role of the university, which is very profound, and we capture these alumni in various events. Only two weeks ago, I came back from an event in India where there were alumni, in order for them to understand exactly their role in promoting Swansea and Wales as an economy. The vice-chancellor has hosted two or three events in Hong Kong and China over the last six months. The whole idea is to engage with your people so that there is a sense of presence.

The second element of your question relates to how we deal with our current alumni. In India for example, we have a bridgehead there with fairly recent graduates who work in large multinational enterprises, and we are using them as an entry into providing internships for our students. The internships issue works in two ways. First, it works in respect of UK or European students who can have a global education experience, and, of course, global employment experience is a huge asset in terms of their employability. Secondly, in terms of international students, we have to be able to demonstrate that university education here in Swansea is transferrable globally back at home. Our ability to deal with, let us say, the equivalent of the Confederation of British Industry in India is as important as dealing with the CBI here in the United Kingdom. So, it is the ability to internationalise that is key. I can give you one other illustration. In Colombia in South America, which, in terms of the UK, is an undeveloped area, we work, through the Colombian Embassy, directly with the ministry of education in Colombia, and as part of that process, this university has developed a consortium with other UK universities, including Brunel, Southampton and Leicester. The whole idea is that we are presenting UK higher education and its advantages as a mechanism for promoting development around key knowledge economy sectors. These knowledge economy sectors have an international resonance, and those are issues that inform our policy.

Q134 Mrs James: Just a quick question: are there any particular countries that you are currently targeting? You have spoken about several, but are there any other countries that you would like to be working in? Where is it happening?

Professor I. Davies: We review our strategy every year. The key things relate to the emerging economies. India and China are huge; one sixth of the population of the world lives in China, and a similar amount, if not more within the next few years will live in India. It is about a shift in emphasis. We live in a multi-polar world and the centricity of where we sit here in the UK has shifted. One of our biggest strategies relates to how we identify the emerging opportunities, because they are invisible at the moment. The ability to have early intelligence through working with our alumni, with agents, and through research partnerships, is key as part of that process. We use the British Council, which has changed its remit so that it is now very much focused on knowledge exchange partnerships; we commission work from the British Council. So, we are looking at ways in which we can deal with Cambodia, Vietnam and Laos as emerging markets for us specifically.

Q135 Chair: I would like to butt in and ask Dr Xing a question, but before I do, I should make it clear that I have some family and business interests in China. Dr Xing, do you see your role as one of marketing the university to students who might potentially come to Wales, or is it more about marketing the university as an attractive place for Chinese companies, some of which are high tech, that are looking to locate in Wales-we have heard that that is already happening in Germany-or is it both?

Dr Xing: My role is not to recruit students; we have the international office for that. The China Centre tries to help the university and local business to set up links with the Chinese Government and with Chinese institutions and industry.

Q136 Chair: So, it is about helping Welsh businesses to sell in China.

Dr Xing: Yes, and it is also about bringing more investment opportunities. Recently, we have been discussing a larger project with the Beijing Government. It wants to set up a China-Europe standards institute at our Swansea bay campus-the project is subject to discussions at the moment, but it will be worth about £ 10 million.

Chair: I am going to appeal to everyone: I know that this is an interesting area, but we only have half an hour left-although, I am hopeful that the next witnesses will bear with me.

Q137 Susan Elan Jones: I represent a constituency in north Wales, so my point will refer more generally to Wales. I would be interested in your appraisal of how the Wales Office and the UK Government sell Wales abroad. I would also be interested in knowing whether you think that there are more opportunities for links between personnel. For instance, in the 1990s, I worked on the Japanese Government’s exchange and teaching programme, which the Japanese Government in the 1980s and 1990s saw as a way of making such links-I am sure that it brought some dividends. Do you think that there would be a role for the Government of this country in running a similar programme, to bring young people from China to work in this country?

Professor R. Davies: I will just jump in with a partial answer, because this is very much Iwan’s area in internationalisation and external affairs. I am delighted to talk to somebody from north Wales, as somebody who lived in north Wales for many years before coming here. Wales is small, and we imagine that our influence over the developments that we are talking about currently will stretch far beyond south-west Wales. Indeed, they are already involved in north-east Wales. The work that we do with Tata is leading to the major development that was announced last week by the First Minister. We are delighted that that is capitalising on technology that was developed with Tata here in Swansea University.

There is another important point to make, because we are trying to provide context as well as detail here. Our approach is moving towards an integrated, holistic way of driving forward big, strategic agendas. One thing that has been holding us and other universities back dramatically is the bitty nature of the support and funding that we receive from many different initiatives. Each one is arguably well intentioned, but together, they result in considerable confusion and uncertainty as to how people can develop their careers and be funded into the future to drive forward these big agendas. So, we are trying to be very strategic, and it is in that context that I would like to see the sort of initiatives that you are suggesting.

Professor I. Davies: The relationships need to be put within the context of the devolution settlement. Without doubt, the relationship must be one of legislature to legislature-that is clear. The business that we operate in is devolved, but international trade is not. Core research income is devolved, but project research-around Research Councils UK and the technology standards board-is not. The nature of impact research and the requirements of commercialisation need to be fully understood as part of that process.

The vision that we have as a world-class university is not one that can simply be based upon ‘Cymru fach’. If you look at some of UNESCO’s global higher education reports, they are about tracking an academic revolution, and for us, effective engagement with UK Trade and Investment is absolutely critical. The global outreach of UKTI, with over 100 offices overseas, along with the networks and the facilitation of international partnerships, is something that we would look to develop. We have already worked with UKTI on the Institute of Life Science, and UKTI’s engagement with the new bay science and innovation campus is critical.

If I can put it in context for you, two weeks ago President Hu of China talked about the role of universities in stimulating advanced innovation in engineering, and as part of that process he talked about funding first-class universities and their science parks. The science parks in Beijing, Guangdong province and Shanghai have research and development spin-outs from Chinese universities. We have heard from Weixi, and our key challenge has to be translating the research that we are doing collaboratively with leading Chinese universities and their science parks into commercial links here in Wales, particularly in our new campus.

Chair: I am ever so sorry to stop you, but I know that we will never get through this if we go into too much detail. I apologise for that. Could you sum it up in a sentence or two? I have to call Alun Cairns, and there is a danger that we will not get through our session.

Professor I. Davies: I will do so. Thomas Friedman wrote a book a few years ago called The World is Flat. He said that Bethesda, Bangalore and Beijing are just a mouse-click away, and that regions do not matter. We say that regions do matter, and that, in effect, the real challenge is the extent to which we can differentiate the offering that we have here through our research and make that globally attractive.

Q138 Alun Cairns: I want to stay with the same sort of theme, but take a slightly different angle. You talk about the importance of your relationship with UKTI, and the complexity that devolution has given to that. I remember speaking to a former Secretary of State some time ago who said that, when he was at the Welsh Office, we were punching well above our weight in terms of attracting inward investment. He said that Wales benefitted hugely from having a member of the UK Cabinet who could champion Wales. To an inward investor, that was a significant influence-that they could speak to someone at the heart of Government. I know that governance has changed completely since devolution, and that example was before the advent of devolution, but what would you like to see the UK Government do? Is that statement by the former Secretary of State for Wales still true? Also, is there an insistence in Wales on doing our own thing for the sake of doing it differently? For example, the Assembly Government has mini-embassies, as they call them, to promote trade and research and the benefits of using Wales. Could that work be done in a different way to be more effective, to help you and Swansea punch above your weight on an international stage?

Professor R. Davies: I will try to deal with those questions, because they are challenging, and they get to the heart of some of the issues that we struggle with. Certainly, as a university that has to work and compete globally, we do not recognise any borders anywhere in terms of working with students, recruiting staff and working with multinational companies. We have that international view, and I think that the whole sector is an important asset to Wales, because we have a responsibility to inform and assist Wales in delivering its policies, which may or may not differ in various ways to other constituent parts of the UK. We are enthusiastic about doing that because the sorts of policies on economic regeneration are ones that resonate with us. That leads to the point that I was making earlier, about the things that are getting in the way. I would claim that nearly all funding initiatives have got in the way in the past. There was a real problem with piecemeal funding, and some of it has always come more locally and some from a distance. You mentioned Cardiff and London, and, of course, there is Brussels. We do a lot of work with Texas, where we have American funding sources and so on. We have always had a multitude of funding sources. In terms of translating world-class research into income generation and into good, well-paid jobs, it has been exceptionally bitty.

So, I would say that the real challenge is to be strategic, and to be strategic whatever happens across several different areas of Government and locations of Government. In that regard, I would say that we are still maturing within the UK, and still maturing within Europe in terms of how we relate to Brussels. We are still maturing also in how we run relationships with the United States.

Q139 Alun Cairns: May I interrupt you there, because I want to pursue that point, particularly in relation to the role of the Secretary of State for Wales and how it has changed with the advent of devolution? To go back to what that former Secretary of State said, which is that it was a huge incentive for inward investors to know that they had a direct voice in the UK Cabinet, is that still the case, or has devolution changed it so that investors want a direct voice in the Welsh Cabinet instead?

Professor R. Davies: I would say that to transform the economy of Wales you need direct voices in every Cabinet, and that would include Brussels. I believe, however, that the situation has changed since the days you referred to. I think that inward investment is now a much more sophisticated operation. We cannot compete now with the relatively low-paid jobs that were a key part of inward investment in the past.

Q140 Alun Cairns: I accept that point. I would like to change the subject slightly. It is claimed that inward investors in Wales undertake very little research in Wales and in development and engineering, which means that universities often work with firms outside Wales. Do you have any examples to the contrary, or are there examples of what you would like to achieve if Government policy was different and allowed you to work better with firms, locally or internationally?

Professor R. Davies: I think that the situation is quite clear. There is a relative paucity of industrial research and development in Wales. Less than 2% of the commercial industrial research and development in the UK is in Wales, rather than the 5% it should be according to our population. So, the figures are stark and clear. That is primarily because we have so few large companies. Also, over 95% of research and development in companies takes place within large companies. So, you cannot compensate for the lack of large companies in Wales by doing more work with small and medium-sized enterprises; it is just not possible.

Q141 Alun Cairns: Are you saying that, if the Assembly and UK Governments want to grow the research and development base, parallel policies supporting purely indigenous business means that they are mutually exclusive?

Professor R. Davies: No. I think that what we have to do-this is a key part of our policy-is to bring multinational companies to Wales. We have to get them to establish research and development bases in Wales and build from that. With those research and development bases in Wales, and with the sort of negotiations that Grahame was talking about and the deals that we have already signed with Rolls-Royce and Tata, we can then begin to build supply-chain links with those companies. That takes us to the other problem with not having large companies, which is one of who small companies sell to. Your economy is seriously disadvantaged if you do not have large companies. We have to try to bring them in, and we can help with that. The example within Wales is Tata, where we have a very long tradition of very high-quality research. That is expanding now, with great enthusiasm coming from India.

Chair: We look forward to our visit to Tata tomorrow.

Q142 Mr Williams: I would like to thank you for your brief. For a long time, people have talked about the generality of using higher education as the focus for economic development, and it is good to see in your briefing, and from what you have said so far, that things are galvanising and beginning to happen in a very positive way. I have a quick question about the development of high-tech clusters. First, to the layman, what constitutes a cluster? Secondly, what led you to concentrate on the three specifics of engineering and computer science technologies, life sciences and medicines? What is the evidence of clustering in the Welsh economy to date? How successful are you beginning to be in those developments?

Professor R. Davies: The first question is very much for Grahame, but the second question goes back to developing policy within the university. We looked at where our links are with companies, and at the strength of those links. That led us to the three cluster areas. They are very important clusters, because depending on how you do the calculation, somewhere between two thirds and 75% of industrial research and development is covered by those three sectors, so it is very significant. Also, we were informed by consultants who undertook a major study for the City and County of Swansea some years ago called the Swansea 2020 vision. They were very enthusiastic about a cluster approach and felt that that was where universities should focus their energies and efforts.

On where we are, it is still very early days-it will be another four years before we occupy the science and innovation campus, but we have the Institute of Life Science as a small example. I am sure that Grahame can say a little more about cluster formation.

Dr Guilford: I would characterise clusters, as we envisage them-certainly for the purposes of the work that I am doing with the university-as the creation of critical mass that is capable of attracting further development and investment. The characteristics that you would see in those clusters include a strong research base, major industry partners, small and medium-sized enterprises, supply chains and spin-outs developing around that. The example of Rolls-Royce is quite interesting in this regard. As the vice-chancellor was saying, the university works with Tata, which is clearly a major company based in Wales, and the university does some research and development with Tata and it commercialises that in Wales. You might look at Rolls-Royce and say that Rolls-Royce is not in Wales, but, in many senses, from an economic perspective it is, and has been for a significant time, because it has been a major research partner with the university, and that has brought large amounts of research money in. The creation of critical mass in universities will be very important in the future, because research councils will increasingly focus their funding on larger quantums in fewer places. That funding will go to institutions that have built up the critical mass capability that I talked about earlier, which Swansea has done very successfully in terms of its work with Rolls-Royce, and which led directly two years ago to the Engineering and Physical Research Council and TSB awarding a 10-year, £50 million contract to three universities, of which Swansea was one, and Birmingham and Cambridge being the others. We have bolted onto that a commercial venture that takes the output of our research with Rolls-Royce and offers commercial testing services. That will be based on the bay campus and will employ people locally. That is an example of how a cluster can form. We are already receiving interest from other organisations that are keen to be part of that cluster. You can then begin to see something forming regionally that is perceived nationally, and, ultimately, internationally, as a cluster that is worth clustering around. That would be how I would characterise the clusters.

Q143 Mr Williams: You touched on the Brussels connection in one of your answers to Mr Cairns’ questions. Your evidence noted that you benefited from European convergence funding. How have you used that funding to date, and will you be bidding for more?

Professor R. Davies: We have bid for convergence funding in the past. Two of us on this panel have to declare an interest, because we are on the programme monitoring committee for convergence funding in Wales, namely Grahame and myself. We have evolved our policies for dealing with the convergence funding opportunities alongside the approach I was explaining to you of being far more strategic, rather than piecemeal. All the projects that we now go for for convergence funding are part of a long-term development, and convergence funding is used to grow capacity in the university that will be maintained and sustained into the future. So, we are creating a bigger engine.

One thing that really worried us in our original analyses six years ago, which underpinned this whole strategy, was that the successful universities-and there are many examples in the UK and around the world-in driving economic development are large and have absolutely top-quality research. We could demonstrate the top-quality research in our engineering and science, but we were rather small compared with the successful ones. We had to grow and, therefore, growing has been a critical part of our strategy. That is one of the really difficult things in Wales. Having a large number of relatively small institutions has been a big disadvantage to Wales.

Q144 Mr Williams: I am glad that you said that. That emphasises the need for partnerships between existing institutions, does it not?

Professor R. Davies: Well, it is not clear to me. There is a conventional wisdom that one overcomes the problem of having small institutions by collaborating with others. Industry has a very simple view that, when investing in a relationship, it wants evidence that it has complete buy-in from the management and the governing body of the institution it is working with and that the policy will not change a week later and there will not be some falling out between two universities so that everything collapses. We have to be able to demonstrate governance robustness to industry before it will invest.

Q145 Chair: This question is to either Professor Davies. Do you think that there are too many people going to university and doing courses that are not necessarily going to lead straight into a job? Just to give an example, do you think there are too many people doing cultural studies courses and not enough doing mathematics and science-based degrees?

Professor R. Davies: I cannot answer that question in totality. I work, and always have worked, when I have not been in industry, in research-led universities, and I do not see people in research-led universities who I think are wasting any of their time at all.

Chair: I am sure, and that is my point.

Professor R. Davies: I know that you did not ask that. [Laughter.]

Q146 Chair: I am sure that you do not, and I am trying to be helpful to you here. Do you think then, as a principle, that anyone should be able to study anything they want to for three or four years, or do you think that there should be some effort by the Government, which is still funding these courses, to try to tailor the number and type of courses to the number and type of jobs that might follow afterwards?

Professor R. Davies: There has to be a certain amount of manpower planning, but you cannot force young people to do things that they do not want to do. So, it is a balance.

Chair: That is a good answer. [Laughter.]

Professor R. Davies: What I do believe, and the evidence is there and we could provide detailed information to the committee later, if you wish, is that there is an imbalance in Wales. For historic reasons, we do not have as much science and engineering as you would expect. We have less than in England per head of population and dramatically less than Scotland. That is a disadvantage to us.

Chair: We would definitely appreciate that additional information. We have some other questions, but we have run out of time. I will, however, perhaps call a few Members to ask a few quick questions.

Q147 Stuart Andrew: I would like to come on to the issue of the Government funding of research. Sir Terry Matthews, in his evidence to this committee, said that the question that we should be asking is what parts of that research end up creating companies. How do you respond to that criticism? He was arguing that money should perhaps be given to companies to develop research rather than to universities. How would you respond to that, and what do you think you do better?

Professor R. Davies: Well, there is a great deal of evidence from around the world that strong, research-led universities do work that industry does not and cannot readily do, and which it does not want to do itself. Our evidence from Rolls-Royce and other companies is that they want to source that work from universities because of the talented people we attract. I know exactly where Terry is coming from, and it is arguable that there are gaps on the commercialisation side. We are not funded to commercialise research. We are a charity and we are funded for research and teaching, not to make profits. There have been major inefficiencies in the UK higher education system in translating research into products and wealth creation. So, to that extent, Terry and I see completely eye to eye. And he is a graduate of this university.

Q148 Geraint Davies: Briefly, on science versus art, is there a role for some integrating of the language offer-I am talking about modern languages-into the international global perspective of business networking? What do you feel about what has happened with regard to the technium business innovation centres in Wales, a number of which have closed? How do you distinguish yourself from that initiative and what do you think is right and wrong? Do you think that what you are doing in the bay could be replicated in the other universities in Wales? Finally, do you feel that pushing them all together, as the Welsh Assembly Government seems to want to do, to give critical mass, may not be quite the right strategy, as you have intimated?

Professor R. Davies: Oh, dear. There has been a lot of misinformation in the press about our intentions in languages. We want to extend and grow the teaching of modern foreign languages here in Swansea, but we are trying to modernise our offer with more emphasis on the use of language, whether it be in the media, business or what have you, and slightly less on traditional literature studies. So, the tension here is precisely about the issues that you raise, not about reducing our offering.

With regard to the technium, it is misunderstood. The technium was not set up as a traditional incubator; it is a modern rental facility and it is quite expensive for companies. Each one had a very narrow sector focus, but it was not always fully researched in terms of the demand for those facilities, and certainly not demand at the rental cost of those facilities. What we believe strongly in Wales, as part of our holistic approach here, is that we need genuine incubators. There are company incubators throughout England and most of the leading universities have high-tech incubator facilities. For some reason, we have never developed that in Wales. Incubators are not just the physical facility, but the set of support that small proto-companies need.

As to whether we can replicate the bay science and innovation campus elsewhere, we have to demonstrate how successful we are. We believe we will be; not only are we ambitious, but we have a degree of confidence now that this will work because we know how well discussions with companies are going. The difficulty of replicating it is that you only have two universities in Wales with the scale of science and engineering to be able to do something of this scale, namely Cardiff and Swansea. Can you get through the problems by amalgamation? Some of us would say that you should have far fewer universities in Wales.

Q149 Alun Cairns: Professor Davies, incubators is a term that many politicians like to use, but if you study the evidence you will see that it is pretty weak as regards what incubators actually achieve. Why did you say in your evidence that you were a fan of incubators? It is a nice term and gives this image that we are doing something, but, in reality, does the evidence internationally not show that they are pretty poor?

Professor R. Davies: No, that is not the evidence. If you go to Manchester, you will find incubators there, and several have made a significant contribution to the economy. This is small in comparison with the growth of large companies. That is where big growth comes, but some of those small companies will become the big companies of tomorrow.

Chair: Alun Cairns. I sense an argument, and I like that. [Laughter.]

Q150 Alun Cairns: There have been several studies in the Harvard Business Review for example that have completely lambasted what incubators actually achieve. I remember one of the economic development committee meetings in the Assembly completely destroying the argument for incubators, and the conclusion was that they were just something nice for politicians and people like us to talk about and to show that we were trying to do something. However, in reality, the economic value they add is pretty minimal, and the techniums are not far from that either, are they not?

Professor R. Davies: Techniums are nowhere near incubators. I was involved in incubation in the north-west of England before I came here. Staff here have been looking at incubator facilities in places varying from Finland to the United States. We disagree, because I think that they are part of the holistic approach to developing high-tech clusters. Not only do you need the large companies and help grow the SMEs, but you need to spin out high-tech companies that can join that cluster and be part of the growth strategy.

Q151 Mrs James: My last question on this concerns Terry Matthews’s comments that we have to be ahead of the curve. We cannot have these end-of-life products coming to Wales, being based here for several years and then leaving. What do you have to offer a small business that has limited amounts of money but brilliant ideas?

Professor R. Davies: There are a number of answers to that. The biggest value added for a university is to collaborate with large companies. There is no question about that, because they pay better wages, they are better for our graduates, they take a larger number of graduates, and they pay for research and development-they do over 95% of that. That is the big thing. We need to support smaller companies as part of our total offering and responsibility to the region, and that comes back to supply chains. Perhaps Grahame would like to add something to that.

Dr Guilford: One of the best things that the university can do for small companies is to help to create clusters and supply chains. Traditionally, the role of universities was seen as being to provide direct support to small companies, and that can be very difficult for both sides. Cardiff, for example, has had its innovation network for a number of years, and there have been some successes, but it is hard work to have that one-to-one relationship. If you can create the centres of gravity or the clusters, you get something that smaller companies can sell their products to and collaborate with and so on. That is really what we see the bay campus doing. There will be, probably not a huge number, but perhaps four or five, and eventually six, significant clusters based around companies such as Rolls-Royce and Tata, and then we will try to use those clusters to grow the SME base, in terms of the provision of graduates from the university and in terms of the natural factors that would grow business through collaboration and greater expenditure on research and development.

Q152 Chair: I have a final question. What percentage, if any, of the funding for the bay science and innovation campus has come from the private sector? Have private companies been putting their hands in their pockets?

Professor I. Davies: Significantly so. BP will be investing in the campus, and we have already heard about the involvement of Rolls-Royce in collaborative research, and Tata in the same way. There is also our work with the main developer, which will be-

Q153 Chair: Will the investment go towards ongoing revenue costs for research and development, or will it meet part of the capital cost of setting it up?

Professor I. Davies: In the context of BP, it is quite simply a gift. However, as far as the ongoing revenue elements are concerned, the hope is that many of the activities will lead to commercialisation of the research. That is, coming out of the capital spend will be the creation of facilities that will engender that type of activity.

May I just say one other thing? Coming back to what Ms James mentioned, the key thing is about the porosity of an institution and what it can offer. I will leave you with this thought, which is something that Kapil Sibal, the Minister at India’s Department of Higher Education said, namely that universities should not simply be about technology transfer or higher skills for graduates; it is the concept of magis that is the key thing-what more can we provide? It is the ability to look beyond the simple business-as-usual approach for universities. The philosophy that we are seeking to achieve here is this concept of magis; the additionality that is about being open and porous to opportunity.

Chair: Professor Iwan Davies, Dr Xing, Professor Richard Davies and Dr Guilford, thank you. I am sorry that we have to leave it there, but we just do not have any more time.

Examination of Witnesses

Witnesses: Stuart Bailey, Manager for Graduate and Apprentice Development, Cassidian Systems Ltd, and e-skills UK Wales Employer Board Member, Aled Davies, Skills Director for Wales, Energy and Utility Skills Limited, Toni Eastwood, Director of Academy and Talent, Morrisons, Neil O'Doherty, Head of Retail HR, Operations, Morrisons, and Peter Sishton, Manager for Wales, e-skills UK, gave evidence.

Chair: I thank our next set of witnesses for coming along today. Neil and I have met before, though I did not realise it before this afternoon. We are near neighbours, but I am sure that there is no conflict of interest there.

Mrs James: That is another vote in the bag for you, Chair.

Chair: I cannot guarantee that, because I think that we met at a fancy dress party.

Neil O’Doherty: I will not say what you went as. [Laughter.]

Chair: We are really short of time at the moment. I will ask Siân James to start, as one of the local MPs.

Q154 Mrs James: Croeso cynnes i Abertawe, a diolch yn fawr am ddod-a warm welcome to Swansea, and thank you for coming. As Geraint’s neighbour, what happens here at the university is very important for me, for local companies, for my constituency, for constituents and especially for small businesses. A lot of exciting things will be happening, and there will be lots of opportunities and thinking outside of the box; that is a good thing, and we should be encouraging and supporting it. I will go straight into my questions. This is a general one, to all of you-your starter for 10, as they say. Do you believe that specific skill shortages are either stopping firms coming to Wales or hindering the growth of firms that are already here?

Chair: Who wants to start with that?

Peter Sishton: I was just thinking that Stuart should start. I am Peter Sishton from e-skills UK, where I am the manager for Wales. Stuart Bailey is from Cassidian, and is a member of the e-skills employer board. I think that he would be much better placed to answer this question.

Stuart Bailey: There are areas like computer science skills, electronic engineering and communications engineering where we have specific requirements as a business. We certainly do not get sufficient candidates from the local area. We have to go to universities, and we particularly target the south-west, the midlands and the whole of Wales, but we are not getting enough candidates in those specific areas.

Q155 Mrs James: Is that because there is not a close enough link with schools? There are very good links at higher education level, but I am constantly hearing from small businesses in my constituency that they need to engage with young people earlier.

Stuart Bailey: I believe that that is the case. We work very much with science, technology, engineering and mathematics ambassadors, going into schools and trying to push all sorts of initiatives, whether it is CILT Cymru, which promotes languages and is extremely good, or working with Careers Wales in trying to influence the schools on STEM subjects in particular. We find it difficult-this is not pushing at an open door. However, like everywhere else, there are superb people out there, and if you get the right person and the right industry speaking to each other, a very good relationship can be built up. However, it is very much down to individuals in the education sector and within industry.

Mrs James: Does anyone else want to comment?

Neil O’Doherty: It does not stop us. We still come to Wales, and we are opening another two stores in Wales this year. Last year, we purchased a factory site in Deeside, which brought another 380 jobs, and has seen terrific growth. We are about to recruit another 200 people there because of the volume that we are putting through, so it is a big success story. We find the people of Wales as skilful and as talented as anyone else. What we believe in is growing and building on that skill, doing a lot of work within the business and with learning partners to grow careers for people here. The one area where I have most difficulty from a skills point of view, I suppose, is with pharmacists. That is the position that I find difficult to fill. I have jobs that I have been trying to fill in mid and north Wales for some considerable time. The issue there has been the supply of pharmacists going through the colleges. The problem goes back several years-there are more people there now, but they have not quite flowed out into the job market yet. That is a particular skills issue for me. It does not stop us coming here, of course, but we end up transporting people from different parts of the country to the pharmacies in our Welsh stores. That is what we have to do.

Q156 Chair: Would it be rude of me to ask what a pharmacist starting off at Morrisons might get? What sort of money are people missing out on?

Neil O’Doherty: It would be very rude. [Laughter.] I might want to ask our pharmacists before I answer. We have several pay levels. We have a number of what we call pre-reg pharmacists-they have qualified at degree level, but are doing their first year of training, and they are looking at a salary in the lower £20,000s. Once qualified and running one of our pharmacy departments, they will be into the £40,000 to £50,000 mark. It is extremely good money.

Q157 Mrs James: Do you have the same problem with STEM skills that other sectors and organisations have?

Toni Eastwood: No, not really, because most of the jobs around science, technology, engineering and mathematics are based in our head office. So, we tend to attract people quite easily to those jobs.

Aled Davies: I am Aled Davies from Energy and Utility Skills Ltd, which is the sector skills council for the power, gas, water and waste management sector, just to give some context. As far as employers in our sector are concerned, the feedback that we get is that the local labour market is a consideration when they consider investing in Wales. For example, wind turbines are feasible as we have lots of wind, and the topography of the country is appealing in some respects, but one of the things that employers consider is the local labour market. As Siân intimated, there is a skills shortage in our sector of people with qualifications in the required STEM subjects.

Q158 Mrs James: Do you think that we are producing too many graduates in Wales, or are we not concentrating enough on other areas? How could we ameliorate that?

Aled Davies: I could not comment on what we are producing, but to reiterate what Professor Davies from Swansea University said, we are not producing enough. We do not have the footfall with engineering expertise.

Q159 Alun Cairns: I have a question for Aled Davies. Your sector-energy and utility skills-is one of the sectors that the Welsh Assembly Government has identified in its economic renewal programme as one that it would like to grow in the coming years. However, some horrendously damaging evidence is coming out on education standards in schools and colleges, such as the evidence in the Programme for International Student Assessment report, which is a pretty damning indictment of what has happened over a large number of years-I do not want to get into a political argument about that. What I am trying to get at is that, in terms of inward investment, if I was an energy or utility company, I would think of Wales as a good place to be, because the Welsh Assembly Government has identified this as a growth area, so there would be Government support. On the other hand, is the lack of skills in that area and the educational standards that we are hearing about undermining the objectives of the economic renewal strategy, because you need both to invest?

Aled Davies: If we look at the provider infrastructure that we have in Wales in further education and the power sector engineering facilities, a lot of that training is done outside of Wales. However, we are working with providers in Wales to develop that capacity and expertise.

Q160 Alun Cairns: Who is ‘we’? Is it you as Energy and Utility Skills Ltd, your company or other companies that you work for?

Aled Davies: It is us at Energy and Utility Skills working with employers. For example, the Welsh Assembly Government has just funded new wind turbine qualifications for us. We have gone through a procurement process with providers, where employers helped to select providers in Coleg Llandrillo Cymru and Coleg Powys. We are now working to develop their capacity and expertise to develop the required people.

Q161 Chair: My question is to the representatives of the skills councils and Morrisons. I have already picked up from you that we are not producing enough of the right types of graduates to fill all the jobs-you both made that point in slightly different ways. However, I also note from current statistics that one in five graduates does not get a job in the area in which they graduated or do not get a graduate job at all in many cases. Logically, I look at that and think that we are putting too many people through universities to follow the wrong courses. Is that a fair summary of what is happening? Do you think that we are putting too many people through but not giving them the right courses to follow a career in Morrisons, for example?

Toni Eastwood: As I said, we look for graduates; we do not necessarily look at a particular background or qualification. So, you can sometimes come into the organisation with a generic degree and work all over our business. In other areas, we would be looking for a specific skill.

Q162 Chair: Twenty three years ago, I applied for a management trainee scheme with a supermarket-

Neil O’Doherty: Was it Morrisons? [Laughter.]

Chair: I think that it was Marks and Spencer, actually, so I had to become an MP because I did not succeed. [Laughter.] The point is that it was only looking for A-levels in those days, but I am sure that it looks for degrees these days, because everybody has a degree. However, 25 years ago-

Neil O’Doherty: We have a mix. We look at different entry levels: we have people who join us with no qualifications who do fantastically well, have great careers and get to the top; we have people who come in with degrees; and we have various graduate programmes in our different divisions. There is definitely a need for us to take those people. We also have a particular interest at the moment in looking at people who leave school at the age of 18 and who choose, for whatever reason, not to go on to higher education.

Q163 Chair: Can they enter at the highest level, if they are good?

Neil O’Doherty: They will come in and go through some form of programme, as does everyone. That programme will vary in length from an average of 12 months, and they will then go into our process of developing the managers and leaders of the future. How they get on from there will depend not on their degree, but on what they deliver for the business.

Q164 Chair: However, you do not rule them out just because they do not have a degree. You are quite happy to say that someone with good A-levels and who has the potential will-

Neil O’Doherty: People will come through different channels. Some people who come in with a degree will do very well, and some people who come in without an O-level-in my old language-to their name will equally do very well. We believe in opportunity for everybody; we certainly do not believe in constricting opportunity based purely on qualifications. We would rather build people up and give them qualifications that are related to retailing and to their success in terms of what they deliver for us. We send people to do Master of Business Administration courses at the highest level. That is part of what we do, but we believe that anyone can show their abilities through their work in our business, which is to sell food.

Q165 Geraint Davies: I was just wondering about the chicken and egg problem. Aled Davies is involved with the energy sector, which the Welsh Assembly Government has identified as an obvious growth sector, particularly green energy. If you are a graduate, or you are trying to decide what to study, you need to see an existing jobs infrastructure into which you could feed, if you want to continue living here as opposed to going to England or abroad. Do you feel that there is an opportunity in Wales to build more of an infrastructure in order to keep people here and to keep them focused on these scientific subject areas? Where is the problem? Is it an issue of supply and demand?

Aled Davies: Interestingly, if you look at the number of people entering electronic and electrical engineering courses in universities over the last 10 years, it is down 40% across the UK. One of the challenges that we have is one of sector attractiveness. People have a perception of these traditional infrastructures and industries, and they may not be as appealing as they could be.

Geraint Davies: Everyone wants to be a banker these days.

Chair: Not now. [Laughter.]

Aled Davies: They often see our historically nationalised industries that have been denationalised, with infrastructures in place, not as fast-moving industries and do not have the sexy image of some other sectors.

Q166 Geraint Davies: When we, as a committee, were in Germany, we were told, ‘We manufacture things in Germany; you do not do that anymore in Britain-you just have a load of banks’. They were talking about whether to invest, and the perception was that we were not gearing ourselves up for that. Your job is partly about trying to gear us up for that, and you are meeting resistance in terms of people’s perceptions of those paths.

Aled Davies: What we need is a better-value proposition and sector attractiveness. A National Skills Academy for power was established last year, and it is trying to change that perception. For example, it is working with pupils in junior schools at the age of eight or nine, asking them ‘What would happen if there was no power? You would not be able to use your PS3.’, or whatever.

Q167 Geraint Davies: Is there any success in that, Peter?

Peter Sishton: The issue for our sector, which is technology and business, is that applications for the computer science A-level have fallen 63% over the last 14 years, for example, and we have a huge gender imbalance within the sector. Our research shows that, by year 6-the end of primary school-girls have made up their minds that IT is not a career for them. That is an invidious problem: if year 6 kids are deciding that technology is not for them, where do they go? They go down a different pathway. A sector requiring 3,000 jobs a year, growing at 1.2% a year, is really important for Wales. Growing that future talent is critical, and, rather like you were saying, it is a case of career attractiveness and pipeline talent. We must have a number of interventions to ensure that we can get the message across that technology is growing and will provide the high-value jobs.

Q168 Mr Williams: To follow on from that, I spent 12 years in a classroom and I very much agree with that point and I am aware of the extent to which information technology has been debased by having a very general cross-curricular approach in primary schools. People have not seen the essential linkages that need to be drawn later on. You talked about the problem and I think that you know where the problem lies. Can you quantify the scale of the IT shortage problem and the ramifications of that? In your brief you say that, in the longer term, skills and recruitment issues often lead to delays in developing new products and services, to difficulties in introducing technological change and to the loss of business orders to competitors. That is hefty stuff and shows the real interface of the problem and reality. How big a problem is it? I find it very depressing to read that the most commonly advertised jobs in Wales require the specific technical skills needed to use SQL.Net, SQL server, ASP, JavaScript, Java, PHP, HTTP and Visual Basic. I must admit that I do not have a clue what any of that means, and that is worrying.

Peter Sishton: Those are essential skills that employers are crying out for right now in Wales. That is coming from IT recruitment consultants; it is coming from small to medium-sized enterprises within the sector that are turning down work because they cannot recruit the skilled staff into the business.

Q169 Chair: Then why have we got so many people going off and doing, dare I say it, media studies at university when we are crying out for people who have-

Peter Sishton: Again, there is not an easy solution. It is about getting the message out, frankly; it is a mantra that has to go out loud and clear to schools, teachers and careers advisers. It is about getting that sound labour market intelligence out into the marketplace.

Q170 Mr Williams: You mentioned in your note the need for ongoing professional development for teachers because the fact is that the IT component of many teaching courses is minimal. As part of postgraduate courses it amounts to two or three afternoons a week in a year-long course. Teachers have not been equipped, and many of the unions-and I am a member of a union still-would testify to that. They have not been given the professional knowledge that they need to deliver the curriculum.

Peter Sishton: There are two issues. One is the continuing professional development of teachers, and the elephant in the room is that employers-there are 15 of them-like Cassidian and Fujitsu, and the employer board for Wales are saying very frankly that they want to engage with local schools and offer CPD to teachers, but, in reality, the schools do not release the teachers because there is no funding to backfill the places, or, at least, that is the argument that you get. So, it is very hard when you have the likes of Stuart hammering on doors, as you were saying this morning, and having it shut; that is a very real reality.

Q171 Mrs James: It is the same for us as employers as well. I thought that a person who came for a job with a European driving licence could drive in Europe and it had to be explained to me that it was a computer qualification. We have no idea what it means.

Peter Sishton: That is an IT user qualification.

Q172 Alun Cairns: The Government clearly has had a responsibility in the past, and will have in the future, in terms of championing certain areas for strategic purposes, for good governance and for economic development in general, but there is a balance between Governments picking winners and saying, ‘This is a sector we need to grow’ and encouraging people to go in there. However, does more of it come down to what the industry can do itself in terms of championing an area? Let us take the energy sector as an example, because we have been quite explicit in that. Is it not up to energy companies to say, ‘Look, come and work for us; we have high levels of salary and good conditions of work’, because the demand is low? As you get a shift in that direction, there will be a gap elsewhere, which then creates a bit of dynamism to attract people. I am not saying that you are blaming Government, but is it unfair for some commentators to blame Government for not having planned, when there is a danger in Government planning because it ends up trying to pick sectors that it should be growing?

Aled Davies: I would not say that we are blaming Government. However, we are fortunate to have some very large employers, particularly UK-wide organisations, that do a lot of work with schools and a lot of work to promote their attractiveness-it is just such a big elephant to eat. However, we are trying to push a new value proposition through the national skills academy, but it is a huge task for us to change that perception. It is not only about inward investment: the age profile of our sector means that, within five years, 20% of the people will have retired, and by 2024, between 80% and 90% of the people currently employed in the sector will have retired.

Q173 Alun Cairns: Do universities communicate that kind of information? If I were an A-level student thinking about what subject to study, I would think, ‘Wow; this is a pretty good area to get into’, because of what you just said and because of the salaries that would be available. I might do that instead of media studies, to pick up the Chairman’s reference.

Aled Davies: We do provide all that stuff to Careers Wales, and we have a sector skills assessment, but I could not comment on the rest.

Q174 Geraint Davies: Stuart Bailey, you mentioned the elephant in the room, and then eating the elephant was referred to, but I am interested in this banging on schools’ doors to get them to take up the skills that you are offering. Could you just elaborate on that?

Stuart Bailey: Sure. It comes down very much to an individual relationship with one particular teacher. In any school, it could be the deputy head, it could be the head of the sixth form, or it could be the careers adviser-anybody in the school could be the right person. Often, the way into a school, to start interfacing with them, is through an individual introduction rather than in writing to schools-we wrote to five schools in Newport when we introduced apprenticeships, and we did not get a single response. We were trying to tell them that we were introducing apprenticeships in the area, but people were not interested at that stage. We now find that it is down to individuals, but, if an individual leaves for some reason, you might invite someone else, but that person might be disaffected and not see the benefit in what we can offer schools. We have a fantastic high-tech industry and a fantastic customer facility that we can demonstrate-it is technology five or 10 years in the future, and I can guarantee that every child who has visited has gone away totally enthused about the IT-telecoms sector’s work with Governments to secure critical national infrastructure and stuff like that.

Q175 Geraint Davies: Do you think that the Government-WAG in this case-should be more proactive in bringing both sides together rather than it being a voluntary exercise; that is, to leave the elephant outside the room? People have talked a lot about apprenticeships and the need for industrial growth. You seem to be saying that you have these apprenticeships to offer and the schools are not allowing you to make that bond. Is that right?

Stuart Bailey: I am not saying that they are not allowing anything; I am saying that we are getting limited take-up. Some schools are excellent, while other schools appear to be disinterested. I do think that it is schools so much as the individuals within the schools.

Q176 Geraint Davies: So what should happen? Should the Government intervene? Is that what you are saying?

Stuart Bailey: I think that Careers Wales has the responsibility at the moment. However, it would be good to see some means of pulling industry and education together, by which you get key people from industry talking to key people from schools to start developing this relationship. At the moment, it is done on an ad hoc and individual basis.

Q177 Susan Elan Jones: I will ask specific questions to the representatives from Morrisons. In terms of the economic effects of retail, beyond employment, which has a clearly important effect, what would you say are the main economic effects of the retail sector, and how would you rebut the criticism that some people might make that those effects were limited beyond employment?

Neil O’Doherty: We would argue that we make a big contribution to the economy of Wales and the rest of the UK. In Wales, we currently employ something like 6,400 people. I know that you refer to more than jobs, but it is important to note the point, and that number will be over 7,000 by the end of this year-it is an area that grows. Our payroll in Wales is at the thick end of £100 million, and that money goes into the Welsh economy, so it has a multiplier effect in the economy. That is purely within our own operations. We also contribute significantly in terms of the number of services that we use to run our stores and our factory, including local contractors. If you owned a JCB anywhere near one of our stores in December, you probably did quite well out of us from clearing our car parks. So, there are all sorts, ad hoc or otherwise.

We also get into technology. The systems that we use to run an operation such as ours, like those of any major retailer, are enormous. We have a project at the moment to replace or upgrade our computer architecture. It is one of the biggest IT projects in Europe at the moment, and it is a fantastically important business.1 So, that generates stuff.

We have impacts in terms of links with schools. Every time I go into a shop, I have a school in there having a look around, with kids visiting and seeing what retail is about. So I think that we play a major role in terms of the economy.

Q178 Susan Elan Jones: Would you say that it is a major role in terms of small and medium-sized enterprises in the areas where you have stores?

Neil O’Doherty: Yes. We are based in Yorkshire, so the impact around our heartland, if you like-and what a fine place to be based-is much more substantial, with professional services and all sorts of things. However, because we are nationwide, there is an impact in all areas across the UK.

Chair: Mr Davies wants to play devil’s advocate with you and ask you a tough question.

Neil O’Doherty: Thank you for the heads-up. [Laughter.]

Q179 Geraint Davies: This is the Chair’s fault, of course. We have an array of people here-skills providers and people in energy-but, in terms of Morrisons, which provides a lot of apprenticeships, given that the headquarters is in Yorkshire, are most of the jobs that you are providing in Wales stretching jobs that require qualifications?

Chair: The phrase I heard bandied about was ‘stacking shelves’.

Toni Eastwood: One of the issues in trying to attract people to the retail industry is the fact that people say that about the skills required. There are some amazing careers at Morrisons in all sorts of areas, so it is not just about stacking shelves. There is a wide range, from field to fork.

Q180 Geraint Davies: I appreciate that you have buyers and so on, and it is all very interesting, but, in terms of the jobs you are delivering in Wales, they tend to be more mundane, do they not, because your headquarters is not here? What sort of things are you talking about, other than pharmacy, of course, where you cannot get the people?

Toni Eastwood: We have the manufacturing side of the business in Wales, and we have transport and distribution in Wales, as well as the shops.

Q181 Geraint Davies: Do you manufacture in Wales, then?

Toni Eastwood: Yes.

Neil O’Doherty: We have a food manufacturing plant in Deeside, which we recently acquired. It is an issue for Morrisons, as well as for every other retailer, how people perceive some of the work available. I should say that some of our jobs are about filling shelves and replenishing, but most of our jobs are about serving customers, even when you are filling a shelf. That interaction and buzz, and the selling, which is the big thing that we do, means that it is quite an interesting and exciting job. I could point to numerous people around our shops, in Wales as much as anywhere else, who have university degrees in all sorts of subjects and who have ended up in a retail environment because they love it, find it exciting and find that what we provide, perhaps better than most industries-and perhaps we do not tell enough people about this-is the ability to progress rapidly. You can do well if you are good, if you take the opportunities and are prepared to develop yourself. We are growing all the time, opening new stores and creating opportunities for promotion. I think that we mention in our paper that we have promoted some 3,500 people within the business in the last 12 months. That is a massive amount of progress and opportunity for people, and that is what retail is all about. It is about dealing with people, selling and providing customer service, but it is also about career opportunities, which is an important aspect. We would like everyone to recognise that, whether at Welsh Government or UK Government level, around the country.

Q182 Chair: With your apprenticeships, you are training people to gain qualifications in baking and in your delicatessens and in butchery. Presumably, people could walk out after doing an apprenticeship with you and get a job on the high street.

Neil O’Doherty: Yes, and some do. With craft skills such as baking and butchery, we are fortunate to some degree that some of our competitors have got out of butchery and that their meat is all prepacked in factories and not butchered in-store. However, we still do that, and we are forever dealing with situations where a competitor down the road will offer a few extra pence per hour, which means that the baker will go, for example. We can get into a bit of a spiral in that regard. So, we have to compete on rates for those skills, and they are difficult, but we feel that we have cracked that one through a good apprenticeship scheme. We grow our own people.

Q183 Chair: Is it one of the biggest in the UK?

Neil O’Doherty: I think so. We put some figures in the paper, but I have updated figures that show that we currently have 54,000 people signed up on QCF level 2 and 27,000 people going for apprenticeships. The numbers are massive, but it is really important that we recognise and value what our people do. Our business is very different from the businesses of some of my colleagues on the panel here, but it is still important that we recognise what people do and build their skills. We want their skills to improve, and the better we are, the better our customers’ lives.

Chair: Susan Elan Jones has the next question.

Susan Elan Jones: No, I think that probably answers my question.

Q184 Geraint Davies: Could I ask a question on the balance? The Westminster Government needs export-driven growth to reduce the deficit rather than just making cuts, but, on the retail side, to a certain extent, there is no export market for you, is there? The area that we should be focusing on, surely, is electronically driven, skills-based stuff. Would you agree, Peter?

Peter Sishton: Absolutely. All our research shows that, if Wales, for example, can embrace technology, and the small and medium-sized enterprises and the managers and leaders in Wales can take it and apply it in the workplace then £1.2 billion in gross value added would be available to Wales over the next five years. We know that there is a big problem there. We also know that the large companies on the e-skills employer board are high-value research and development companies, and if we can grow the pool of talent there it is all to be had. I turn to you, Stuart, as the employers’ voice.

Stuart Bailey: I must admit that we are looking to expand within our markets, but we primarily operate in the Ministry of Defence and the defence market, and that market is shrinking-it has been cut by 7% in the last year. We also operate out of France and Germany, and there are similar situations there; I think that France is stable, but the German market has gone down by 7%, and Spain has gone down by 7.5%. As an organisation, the global family has to look to expand, and we are expanding into countries such as Brazil, Russia, India and China, as well as the middle east, on border security and things such as that. So, our area of growth is overseas.

Q185 Mr Williams: Turning specifically to the energy sector for a moment, you have touched on some of this before, but could you elaborate on the specific skills challenges that confront new investors in the energy sector in Wales? More generally, is the uncertainty over the direction and pace of energy policy having an effect on long-term skills development? How would you like the UK Government and the Welsh Assembly Government to respond to that?

Aled Davies: The answer to that is ‘yes’. There are two dimensions to this. One dimension that we have not really discussed is the impact that planning consent has on energy projects; I imagine that the situation is similar in retail, with the opening of new stores, or whatever. The feedback that we are getting is that there is a need to free up planning consent much more. Before I came here, I looked on the Renewables UK website, and there are currently 23 windfarms in planning, which would produce 1,228 MW of power-that is equivalent to supplying 689,000 homes. All that is tied up in different stages of planning consent.

Q186 Chair: How many nuclear power stations is that equivalent to? About one?

Aled Davies: I could not tell you exactly, but I suppose Wylfa would-

Geraint Davies: You need greater planning permission for a nuclear power station than a windfarm, as in Japan.

Aled Davies: It is not just the planning. The issue with planning consent, and all the things that need freeing up, is that it is hard for employers to plan their skills development because of the time taken to get people on the road to competence. When do you start training? If you do not press the button, they will not start the training and so might not be ready. What is the mix? When do you start that ball rolling? When do you start investing? You do not know when things will occur.

Q187 Mr Williams: Those of us in mid Wales who have a healthy scepticism about large windfarms are very keen nonetheless to talk about the opportunities of tidal power, turbines out at sea, biomass and geothermal-the range of renewable energy that will make up the mix. Put that into the context of what you have just said about the skills shortage, and the extent to which those skills can be generated within Wales, rather than generated outside Wales and bought in.

Aled Davies: What I said about windfarms also holds true for tidal energy. There is a tidal energy pilot scheme off Pembrokeshire currently awaiting consent. As I understand it, the Welsh Assembly Government can give consent to schemes of up to 1 MW, and the pilot scheme is 1.2 MW, so it is tied up with planning consent issues. The scheme is hoping for a way through that; it is not an issue. Tidal energy is not as mature as wind energy, but the whole planning process need to be freed up.

Q188 Mr Williams: Is there still a skills shortage in all those technologies?

Aled Davies: That is the challenge-we need to develop the people so that when the planning and everything is ready, we have the skills sets ready.

Chair: That sounds like a ‘yes’-that there is a skills shortage.

Aled Davies: Yes.

Q189 Alun Cairns: I think that the planning issue is important. I previously quoted a former Secretary of State; that person said that, when he could call a local authority leader to ask whether planning consent could be delivered on a project-whatever the industry might be-relatively quickly, it was a huge impetus in terms of attracting inward investment. We will all have our own views on wind energy and other renewable energies, but, for the industry, in relation to securing inward investment, do you think that a quick ‘no’ is better than a long wait for a ‘maybe’, which is what you seem to be getting at the moment?

Aled Davies: An employer’s answer, rather than mine, would be that clarity would be preferable.

Q190 Chair: That brings me back to Morrisons, thinking about the development that I hope will go ahead soon in Abergavenny. [Laughter.] We have heard evidence that some employers are concerned about the standards of basic reading and arithmetic among some school leavers. Some employers have said that they are lower than they should be. Is that a concern that you share?

Toni Eastwood: Yes, and it is true right across the UK. In certain job roles, there are real basic skills needs.

Neil O’Doherty: We do some work on it. Key skills form part of our apprenticeships, so we are able to help colleagues who have issues with their levels of literacy and numeracy.

Q191 Chair: Should Morrisons have to train people in key skills? Is that not what schools are for? It is good that you do, but-

Neil O’Doherty: We take the view that it is part of what we do, and that we need to do it. Away from literacy and numeracy, what often gets forgotten-and I think that we will become more and more of a service economy as time goes on-is service skills. One thing that worries us is the level of interpersonal skills of some young people when they leave school. I wonder what we could be doing to increase the level of interaction and educational activities to build that up. Do not get me wrong-we have some fantastic young people, but we also have some people who turn up for interview who are barely able to raise a smile and say ‘hello’. That is a worry, because that will not work in a service environment like retail. We have all probably been in places where we have seen it-

Geraint Davies: I have-the House of Commons.

Neil O’Doherty: In terms of growth and the basic skills levels that you accept, that is kind of important, and we see too much of it. Information technology is important, but I have three kids at home and getting them off the computer is a challenge, so that may be a wider issue.

Chair: We have run out of time. Thank you.