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Size matters

November 24th 2010

Understanding the shape and size of our private sector is critical if a range of government policies are to be effective.  From our skills policy to our economic and trade policy, if we do not understand our ‘customer’ we are doomed to failure.  A few weeks ago, the Office of National Statistics released a piece of analysis that should be on the reading list of all politicians, civil servants and business people alike. The study highlighted the economic contribution of both large and small businesses in Wales.

The report ‘Size analysis of Welsh business’ revealed a disproportionate reliance on the biggest companies.  Wales’ largest 1.7% of businesses have 52% of private sector employment- some 530,000 people. They also contribute 73% (£75bn) of Wales’ national turnover. Compared to 2003, employment among our medium and large companies has risen by over 40,000, or 8%. Add in their role in supporting supply chains and they clearly make a massive economic contribution.

Indeed, the report also proves that, contrary to popular belief, the Welsh economy is more dependent on these large businesses than England.  Wales’ largest 0.8% of businesses (some 1600 businesses, all employing over 250 people) contribute 60% (£61bn) to our national turnover, compared to 54% in England.

What does the report say about West Wales and the Valleys?  The area’s largest 1.7% of companies are surprisingly responsible for 48% of employment, some 279,000 people.  On their own, companies employing over 250 people, some 1,025 companies, are only 1.4% of the total number of businesses in the region yet they employ over 200,000 people.  Their number belies their importance to the area’s future economy growth. Their role supporting smaller local companies within their supply chain is sadly not captured in the report.

So what does this mean for the economic policy for West Wales and the Valleys? What it emphatically does not do is diminish the role of small businesses in Wales. We clearly need small thriving businesses being started and growing to join the ranks of the medium and large as part of a balanced business community.

What the study does highlight is that our largest businesses deserve our attention. They do contribute substantially to employment and economic development, far more indeed than is the popular understanding. Asked to name Wales’ largest private sector employer, few would pick Tesco.   Supporting the regions ‘anchor’ employers is likely to pay dividends for the community and the wider economy. As Welsh political parties warm up for the 2011 assembly election they should remember that size really does matter.


One Response to “Size matters”

  1. Victoria Winckler says:

    But doesn’t this say more about the failure to generate new, small, businesses? Larger firms are indeed more important than small, but this is largely a legacy of past inward investment policies – and just look how many have gone. Important though they are, WAG can’t rely on the continued presence of larger firms.


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