Economy, Trade, and Rural Affairs Committee

Felly, symudwn ni ymlaen at eitem 5 ar ein hagenda. Dyma'r sesiwn dystiolaeth gyntaf ar gyfer ein hymchwiliad undydd i weithgynhyrchu yng Nghymru, a gan fod Gweinidog yr Economi gyda ni o hyd, rŷn ni'n mynd i gymryd tystiolaeth ganddo fe a'i dîm. Felly, croeso unwaith eto i chi ac, fel arfer, cyn ein bod ni'n symud yn syth at gwestiynau, gaf i ofyn i chi a'ch tîm i gyflwyno eich hunain i'r record? Gweinidog.

It's still me, Vaughan Gething, Minister for Economy, and to my left—.

Aine Gawthorpe, deputy director, industrial transformation and foundational economy.

And Duncan Hamer, director of operations.

Thank you very much indeed. Once again, I'll kick off this session. Now, Minister, in your plan you state, and I quote,

'While there are indeed many challenges, these invariably provide opportunities and the way we address and overcome these together can give Wales a real competitive advantage.'

What do you see Wales's competitive advantage in manufacturing being in the future?

I think our competitive advantage for the future rests on a number of things. It rests on the fact that we already have a base. We have businesses that exist, we have a significant workforce, about 150,000 people, and it's a larger part of our economy than the rest of the UK. So, we have a sector that is already here and you have real strengths in that sector. So, I'm sure we'll talk more about the cluster around Airbus of genuine world-class manufacturing in north-east Wales, but you see high-value, impressive manufacturing in other parts of the country. So, that's the starting point. There is a strength to build on.

The second thing is the fact that you've got a workforce and are committed to invest in that workforce. The challenge, though, is—and we talked a bit about this earlier—about skills, and the ability to carry on investing in the workforce. The other side, I think, is that there are particular areas of strength in what we are already doing and what will definitely happen here in Wales. And if you think about not just the fact that Airbus are committed to being in Wales, you've got the Advanced Manufacturing Research Centre in north-east Wales that has a real value for a group of customers within a radius, and the potential to develop a technology centre there as well. So, you're building on what's there.

We've also got a further advantage in the compound semiconductor cluster. That's an advantage now that we need to see investment in, and that would help manufacturing businesses as well. You've also then got energy as a real factor for the future. So, not just the opportunities to generate power off our coastline, but actually where that power lands, the opportunity to manufacture near there as well. Lots of manufacturing businesses are power hungry, and if we're able to land the power in the right place, you can then develop businesses alongside that, or actually advantage current or existing businesses. And then you also think about, in the energy future, north-west Wales, Traws and Wylfa; I still think there's a significant future there as well, if the rhetoric starts to match reality.

And alongside that you've got the investment in the future of technology—not just artificial intelligence, but how we can equip our sector to take on board things that are happening now as well as in the long-term future, which is why our approach to innovation and working alongside the sector really matters. So, there's a whole range of different things that I think should give us proper confidence and optimism about the future for the sector.

And can you tell us what is the main difference in terms of the overall content and focus of this new, refreshed plan? And what informed the content of this plan?

Well, what informed the content of the plan was discussions with the sector themselves—so, businesses, trade unions, our key stakeholders—and also the reality that the context had changed.

When the manufacturing action plan was originally designed and delivered in 2021, it came from engagement. But, actually, within the last period of time, there has been significant and rapid change: the post-pandemic world and the changes that have taken place; the reality that technology has moved on apace as well; the difference in trading conditions that has crystallised too. And actually, it was right, I think, to refresh the plan to look again at where we are.

So, the six objectives are building on feedback and building on our understanding of how we can best support the sector, to say, 'Here are the things that we think will make a difference with and for the sector.' Some of those are for the Government, but lots of those are for us to work alongside partners, to actually make sure that everyone understands what we are trying to do.

A phrase I've heard used before is 'the power of the pulpit'. So, when you're in the Government and you can say, 'Here's what we want people to do, and here's the approach we're setting,' actually, that's often really useful for people in a whole range of sectors—'I understand what you want to happen. Having a plan and an approach for the future helps me to make choices about what I want to do in my business.' That doesn't mean that everyone necessarily agrees, but it does mean there's clarity about a future direction.

And what difference will this make to manufacturing businesses? What will they see as a result of this refreshed plan?

Well, I think that it refreshes and makes it clear about what we are looking for from them, and how Welsh Government resources will be used around this as well—clarity in the thinking about what we think is important, and, actually, clarity about investment choices for themselves; as I say, I think clarity in the future about what the plan is, but also clarity that we think that this is a sector with a future.

That's part of what I think businesses are very keen to hear—that Wales is a nation that values manufacturing, and the Government wants to value manufacturing today and in the future as well. I think that those are really important points, because there's a lack of that strategy and plan in other parts of the UK and other parts of the world, and I think it's a definite plus for us. And that does help with businesses investing in themselves, as well as opportunities for other people to invest here in Wales as well.

Okay, thank you. I'll now bring in Vikki Howells. Vikki.

Thank you, Chair. I'm just trying to find the right page in my papers at the minute. Sorry, there are so many papers this morning. Would you mind moving on to the next Member and I'll—

Not at all. That's okay. I'll come back to you later. I'll bring in Sarah Murphy. Sarah.

Thank you very much, Chair. So, my section is on key activity. I think that some of the key activity is—there has definitely been a flurry of interest in this over the last, I suppose, couple of weeks, really—around artificial intelligence. The phrase 'fourth industrial revolution' was created and first said, really, in 2015. Almost 10 years later, now, we have the Prime Minister, Rishi Sunak, going off to see President Biden to discuss the future of AI.

But I wanted to first of all just ask—. Matt Clifford, who is the interim and probably soon to be actual chair of the AI taskforce for the UK Government—so, a key figure in framing the Government's response to artificial intelligence—went on TND's talk show this week—last week, sorry—and warned that the AI technology will be powerful enough to kill many humans within two years. This was obviously then picked up by a lot of media, and has caused huge worry and concern and alarm, and, 'What does this possibly mean?' So, what are your thoughts on that comment? Is that the way that you and Welsh Government perceive artificial intelligence, especially for our manufacturing and for the future of our economy.

Look, there are obvious risks in deploying a new technology in any form, actually, but I don't think that it's helpful to have someone conjuring up images of a Terminator-style future. I don't think that that's very helpful at all. The risks also come with potential opportunities as well. So, in machine learning and AI, there are lots of opportunities, not just in manufacturing, but in the fields of health and social care as well. In my previous role, we were looking at lots of those opportunities to improve treatment options and outcomes and the experience for the person, either delivering or taking part in health and social care treatment.

But there is a need to understand what the regulatory framework could and should look like for how the technology is to be used and deployed. You can take a broadly permissive approach that says, 'We'll trust the industry to do the right thing, and they'll help us to write the rules, and that'll be fine,' or you can take, on the other end, an entirely cautious approach, saying, 'You can't do this unless you can prove to me there isn't a risk.' I think, realistically, you've got to try to develop a regulatory framework that looks at what are the benefits, what are the safeguards and expecting people to do that. You do have to talk with the industry about what's being done and why, but you've got to introduce the interests of the citizen in the middle of that as well.

I think it would be wrong for us to try to say, 'Actually, we should be innately suspicious of anything to do with AI.' But you've got to then listen to how do you deploy benefits to improve what you're doing, and that is already happening within the manufacturing sector. I think lots of people's concerns get into, 'Will choices be taken away from me in my life, will they be made by someone else, and will I not be able to interact with them, and what about my data and what matters to me, as well?' I don't think that's just an issue in manufacturing.

I'm optimistic about what AI and machine learning will be able to help us to do. I think it can help to improve productivity, it can help to make sure that people—where people skills are required, they are of greater value, so you're potentially taking out even more of the more menial tasks that might be used in the sector and others as well. That means you then need to equip people with the right skills to do the things that people could and should do as well. It's always the challenge in looking at the downside in something, rather than actually seeing what is the opportunity, and that's part of what we went through in the tech and cyber statement yesterday. I'd be more than happy to provide not just more information to the Chamber, but to this committee on what we're doing, the growth in those sectors, and the areas where there is real strength.

Thank you. It's also been reported that Britain is already playing catch-up when it comes to AI. After Brexit, UK Government has been locked out of key forums such as the tech and trade council, for example. There is now a grand plan, like an AI summit, which I know that Sam is going to come to later on, but there are also reports, really, that the UK Government AI strategy is already out of date two months later. So, with UK Government, it does appear, really being on the back foot here and this trip to the US being a grand plan to try to have a summit and invite lots of people to it and be seen as leading on this, where does Welsh Government fit into this? I know I've asked this many times this morning, and I'm predicting the answer already, but what conversations are you having with the UK Government around the AI strategy, and, specifically, how that could impact our industries, our jobs, and, as you so rightly said, which has not been said by the UK Government, people and our future and citizenship? How, ultimately, with this fourth industrial revolution, do we not end with what we've had in previous industrial revolutions, which is all the money gets sucked to the top and is not shared amongst the workers and amongst the people? So, how do you think you think that there is a way that we can be involved in these conversations?

Well, there's always politics when you call for a summit and you're going on a trip abroad and you want people to see what you're doing. I accept that; that's the same with people in any party occupying Downing Street. I recognise that. Part of the challenge is, though, about genuinely needing to catch up with developments in other parts of the world. That's both about your first question, about what's the right sort of regulatory framework to have a balance of the needs and interests of the citizen and the opportunities to generate genuine benefit for all of us. But it's also then about wanting to understand what other parts of the world have done to see the risks and benefits of that and to make sure that we're not left in the slow lane, because there's no guarantee that people have to invest in the UK for some of this. Lots of the larger tech companies that exist are doing this already, but there's a range of other people too. You've got research here, not just with the cyber hub on cyber itself—lots of this goes into a whole range of areas, including AI too. So, you've got some of that research and discovery taking place here.

I'm interested, again, with the innovation strategy, in how we apply that for benefit, and how we translate it into something practical and useful. I don't know if Aine wants to talk about conversations with UK officials, but it's all pretty nascent. This hasn't been a subject on a ministerial meeting about how we have a joined-approach, so it's not as strategic as I think you'd want to see it from a UK point of view. But we know there's opportunity, and every part of Wales and the wider world will have to engage in a conversation to decide where do we think we can benefit and how do we then make sure we're making the right investments in people, and setting a framework about the sort of benefit we want to see for citizens. And any time there's progress, and the opportunity to make more money, there's always a challenge about how that is shared and what an equitable share of that return looks like. That's part of the reason we engage with the sector and with both sides of it, those people who are running and leading those businesses, as well as people who represent workers, and the public wider interest as well.

Absolutely. And my final question on this, then, is: do you think there's any chance that the UK Government might be open to looking at this through a social partnership framework, as we have now in Wales? Is there any way that you might be able to discuss that with them, persuade them to get everybody around the table so that we can see some meaningful engagement on this and planning?

You might see a summit that involves businesses. I don't think you'll see what we would describe as a social partnership summit with the current iteration of the UK Government, so—. I think I am quite charming and persuasive sometimes, but there are limits to what I'm able to do. [Laughter.]

Thank you, Minister. Thank you, Chair.

And I know that Hefin David would like to come in on this. Hefin.

Yes. I just wanted to—. Just some of the global issues that were discussed there made me think of the foundational economy, and I'd just like to understand the Minister's commitment to the foundational economy. Is that still part of the Government's strategy, as important as the more global issues today that have been emphasised?

Very much so. So, I've protected not just the budget for foundational economy activity, but we're moving forward in what we're looking to then do. And actually, this area we're discussing, though, will have an impact in the foundational economy too. And I still think it's—. And I understand why the Member asked the question, but I'm really keen that we don't say the foundational economy doesn't matter, or we say that, actually, larger employers and foreign direct investment doesn't matter anymore, because, actually, we only need the foundational economy. We need to have an opportunity to build an economy that takes advantage of each of those areas. We need to make sure that public resources generate the best return for our local economy. We need to make sure that people understand they're able to use the economy that exists in their area and for those businesses to see improvement as well. And for lots of those businesses, actually, it's not just, if you like, the new world that is being created today that will matter; actually, there are things that are mature and exist already that would be innovative for that business to take on board, but a pretty standard practice in what we're doing. So, there's a range of improvements I think that could and should be made for that sector of the economy in what's here and now, and it will certainly be a continuing focus for the Government, and obviously for me as the lead Minister.

Thank you, Hefin. And I know that Sam Kurtz wants to come in on this as well. Sam.

Thank you, Chair. Diolch yn fawr. Sticking on the theme of AI, and Sarah mentioned the industrial revolution—one thing the industrial revolution gave us was increased life expectancy; it gave us the working week; it gave us a whole host of benefits like that. But what it didn't do, or what it also did, was change the types of jobs that individuals were having. And I think that's what AI plays a role in as well, is in changing those jobs. So, it doesn't mean mass unemployment, but it means those employment opportunities will be elsewhere. So, understanding that, and new businesses specifically, and start-up businesses wanting to kick-on in Wales, can you just outline your approach to how you see manufacturing, new manufacturing—it doesn't have to be multinationals coming in and investing in Wales; it could be a self-starter looking to start a cricket bat manufacturer in north Wales, or whatever it might be, but how can they kick on with your outline plan?

I'd be delighted to see a successful cricket bat manufacturer in north Wales. There are challenges around that.

Owens Cricket.

There we are. But I just—. The point about the previous industrial revolution, I think some of those changes—working week, life expectancy—came around through other things as well. Organised labour, I think, was really important in helping to deliver some of those. I'm sure you'll be delighted to recognise the role of the trade unions in doing so.

But when it comes to what we're able to do in the here and now, we are deliberately interested in supporting current businesses and in seeing new businesses grow and be supported and to thrive. So, it's both about the entrepreneurship side that Duncan can talk more about, and it's also about how the business support framework works as well, and it also goes into innovation as well. I'm really keen to see more of the research that comes from further and higher education help current businesses, help new ones, and actually to see businesses come from those ideas as well, to generally translate that knowledge into a purpose and a benefit. And to be fair, I was in Swansea yesterday in the University of Wales Trinity St David with the leader of the council, looking a some of the work they're already doing on what they're calling the innovation matrix, so building their creation, but it's more about how you bring people together to actually make sure you're genuinely translating that. I can see Make UK are in the room—their Wales team watching on—and actually I've seen some of the work they've already done there in supporting new and existing businesses to improve their activities, to improve productivity, to improve profitability. So, there's a story we already have, and our challenge is how we do more of it and how we support new entrants with really good ideas and really good businesses.

Yes. You've outlined the challenge there, so what are you doing to address that challenge of enticing new entrants into that?

Duncan, do you want to talk about our entrepreneurship and the link to Business Wales and the support they provide, and more about how the innovation strategy links into those as well?

Yes, focusing—. Sorry, Duncan; just focusing on the manufacturing sector.

Yes, on the manufacturing sector. I think what's really interesting about this conversation is that if we were having this four years ago we would be talking about the fourth industrial revolution. All of a sudden, we're arguably in the fifth industrial revolution. I think, to Hefin's point, there's a really interesting tie. If you look at the work of Business Wales and the innovation strategy, we're not making a choice between growth and opportunity alongside the foundation economy. The reality is that you need both in balance to be able to work really effectively, and that's the same for manufacturing.

We're seeing some really exciting developments. The Minister has mentioned the clusters around different parts of Wales, and I think AI plays a really important part in that, and so it's about embracing the opportunity but really being acutely aware of the challenge and the threat as well. I think that point you made around different types of employment is key. Our challenge will be, as with all parts of the UK and the globe, it is moving so quickly. How do we maintain our policy context, aligned and appropriate to those needs? But from where we see it now, I think there is without question a huge opportunity for the manufacturing sector, and we'd like to see that grow, and that's the principle set out in the innovation strategy alongside the manufacturing action plan. We have the steps, so it's really about being able to deploy those correctly.

The final bit I'd add that I think is important about this is that, in Wales, we're seeing really high levels of entrepreneurial attitude, so the role of the Government here in supporting that attitude to be able to become start-ups in manufacturing. It links back to the session this morning. One of our challenges is that if you want to take a manufacturing product from concept to deployment and sale, that is not an annual project; that is a multi-year project. So, there's a real link between these two sections where I think it's important that we're able to do this over the long term.

Fab. I won't press your patience any further, Chair.

Thank you, Sam.

I could have another hour on AI. It's incredibly fascinating.

We should talk about—. The Advanced Manufacturing Research Centre is a really big player, and actually they could still do something, for example, with the cricket bat manufacturing. Some of that will be handcrafted. Some of that, actually, you could do it on an automated basis. You've got to think about the different ways to do that and ways to help them improve their product and their process as well. And, you know, we see lots of food businesses in the AMRC as well, in food manufacture, and there's been significant improvement. It's about making sure that people know what's available and then taking advantage of it, and we're looking at what we might be able to do to build on that model in other parts of Wales as well.

Thank you. I'll now bring in Vikki Howells. Vikki.

Thank you, Chair. The 2021 manufacturing action plan was intended to have a 10-year lifespan. What's the intended timescale for delivering all of the actions in the refreshed plan?

In the refreshed plan, I would say that, rather than setting a 10-year time frame—because some of those things we may want to refresh before 10 years. I would, for example, be relatively surprised if someone sat in my position today didn't want to look at the level of achievement and progress that's been delivered within the next Senedd term. I think any economy Minister's going to say, 'Well, what have we done? What progress have we made?' The challenge, then, is—. Part of the reason why we've refreshed the plan now when it wasn't intended is about the pace of change that takes place around you, and actually you help to deliver and accelerate as well, so, understanding whether we're making progress, and that might lead to a relatively light-touch review, or it may lead to a more fundamental review. But I would expect that a future occupant of this role would want to review this within the next term, and I'd have thought that a future committee, a successor committee of this one, would also want to see what's happened and are you going to take account of change and progress that's been made.

Thank you. And what level of Welsh Government resource would you anticipate is going to be needed to deliver the plan, and will it involve increasing the amount of resource dedicated to supporting the manufacturing sector?

Well, we don't have a specific budget that is only for the manufacturing sector. Our economic future fund support doesn't just say, 'It's only one sector of the economy we're interested in'. It's the challenge, though, of our budgets and what we're able to do with them and how smart we are about deploying them.

It's not just about, if you like, the revenue support or the moneys that the Development Bank for Wales can provide; it is about the fact that there are both other actors and other assets that we support. We've talked about AMRC a bit as well, and if we had a development of that in terms of whether it's a manufacturing institute or whether we actually had greater engagement with the advanced manufacturing catapult in Wales as well, there are different things we can do to try to help support the sector.

And, of course, lots of actions of the plan are for businesses themselves to undertake. You know, this isn't a plan where the Government takes over and runs the whole sector from my department; it's about how we support those businesses to make lots of their own choices. And in the six objectives, some of these are about pointing out and highlighting areas where businesses themselves have choices to make. You know, in some of the points, we were talking about AI and other issues as well, one of the six areas is about what's happening. Have you considered what's happening? Are you doing something about it, or are you not considering it at all? What was really interesting was that lots of businesses haven't really considered the area and whether it's relevant to them as well. So, there are lots of points about not just how that business does that, but how we, collectively—not just the Government, but a range of not just Make UK and others as well—try to make information available for their members and for businesses, and to try to then say, 'How do you adapt and apply this to your business to make the biggest difference?' And, of course, there's a role for equity, there's a role for investments in traditional loan support, as well as what DBW does. And I'm very keen—that's part of the reason that I've deliberately called for engagement with the British Business Bank—to make sure that we do have engagement from the financial assets that are supposed to be deployed and are described as being UK or British assets, to make sure they have a presence and a value being delivered in Wales that works alongside what we have, as opposed to in competition with it. So, I'm pleased to see that, following my meeting and engagement with them, they have directly had conversations with DBW to make sure that they are adding to and not unhelpfully competing in areas where they're active in supporting and helping to grow the economy.

Thank you, Chair. Thank you, Minister.

Thank you, Vikki. And finally, I'll bring in Luke Fletcher. Luke.

Diolch, Cadeirydd. To what extent does the refreshed action plan set out what success looks like for the Government? I mean, coming back to the point you made earlier, in answer to Vikki's questions, future committees may want to come back and look at this refreshed action plan, so what does success look like?

I think success looks like whether we can describe the health of the sector, not just in terms of the number of jobs but the value of those jobs as well, and whether we still have a sector that has a strong future. The challenge, I think, is that if I were—and I regularly get this, not just from opposition Members but from Members in my own group who say, 'Set a figure. Set a figure with a target', and the challenge is that it takes a range of people to do that, so setting a target you don't have control of isn't always very smart, and it doesn't necessarily help people to get there. But to then understand, are we making progress, have we got not just more businesses but more jobs, and the value of those jobs, and how are we seeing the potential assets that we describe, whether it's a compound semiconductor, whether it's high-class manufacturing, whether it's opportunities around energy and what happens where that energy lands—are we seeing those opportunities actually realised with new jobs being created as well? And I appreciate that, from a scrutiny point of view, you'd much rather I said, 'Here is a hard target with a number attached to it'. I'm not sure that is always the most helpful thing to do. We look at the assets that we're using to try to do that—not just what Business Wales is doing in helping people; there are other programmes that we support to help businesses to get there.

I've been really impressed by the Toyota Lean Clusters programme. That's helped businesses of a range of sizes, and that, again, helps them to improve their productivity. Now, I wouldn't want to set a target of the number of businesses that deliberately have to go through that, or, indeed, to try to set out the level of productivity gain that I want to see from those businesses from that sector, but we definitely want to point people towards something that we think there's plenty of evidence that it helps your business, helps improve productivity and profitability, and you're more likely to see people in work and in really good work. And the good thing about this sector is it's an area where not every business is one where you'd say, 'I want to champion its cause', because in every sector, there are businesses you are less proud of. But, overall, this is a sector that provides good work, and provides work well above the real living wage as well. So, actually, growing this sector should be good for people, not just Wales plc.

But surely, setting some sort of target shows the Government's ambition in this sector, because without those targets, without being able to measure actually how successful the programme is, you could realistically just turn around and say, 'Well, we created 100 jobs, well done, it's a success', whereas, actually, in the long term, surely the ambition would be to expand the sector far more than just creating 100 jobs.

Yes, but if we try to say that creating 100 extra jobs is successful, I don't think anyone would take that seriously. So, it's about the scale of what we're able to do. So, manufacturing, about 150,000 jobs, about 16 per cent of economic activity here in Wales compared to what takes place—roughly about 9 per cent—in the rest of the UK. It's not just a proportion of the economy but how many jobs and what's the value of the job. So, I'm really interested in how much does manufacturing contribute to the economy overall, what does it mean for individuals employed in that sector, and with those obvious opportunities, have we taken advantage of them, and, if not, to understand why and what we do about that in the future.

On the point about power, KLA are expanding their business in Wales, and they expect to create 750 jobs with average salaries north of £40,000. So, that's really good news. But, actually, they came here because we helped them to make sure that we could deliver the changes needed to deliver power to the site, because if they didn't have the power they weren't going to go there, and there was a risk that that project wouldn't have gone ahead. And that meant we used our resources to do that. And so, they've got the confidence to invest and there will be lots of jobs coming. That's good news, but you then look at the fact that other businesses require power as well. So, when you see that renewable energy landing, it makes a real difference whether it's landed in west Wales, for the sake of argument, or whether it goes to north Devon, because the opportunity could be lost in power that's generated off our coastline to actually benefit us as well.

So, there's lots and lots here, and it's why the free-ports programme that I know you've had some scepticism on—and that's fair enough—but, actually, if you are going to see real value in that, you've got to see the manufacturing businesses being generated not just in creating the turbines, but other manufacture too as well, and not just saying, 'We've decarbonised the way that power exists', and how we then use it as well.

In terms of the free-port programme, one of the things I've consistently said is that the monitoring element of it is going to be the important part going forward. And there's another element—. The reason why we're focusing on monitoring here is if we look back on the 2021 manufacturing action plan, there were individual action points within that that were classified as either immediate, medium or longer term ambitions, and it was assigned then to a specific owner within Welsh Government. The refreshed action plan doesn't do this either. Is there a particular reason for this?

Aine, do you want to run through this, then I might come back to Duncan?

Yes, absolutely. So, the plan does still have specific owners in terms of lead officials or departments, and what's key is that that is overseen by a delivery group which is chaired by myself. So, we're really keeping an eye on that. The more important part, I think, is that the principle of the plan is about co-ordinating activity, so it is not necessarily about each individual business that wants to engage with this having to come to a specific action lead, but engaging with the overall policy leads on that area who can then put people in contact. That said, if it's helpful, we can provide a list to the committee of the short, medium and longer term timescales included, but there absolutely are lead owners for activities.

All I was going to add was that I'm the other half of that equation, so Aine leads the plan, so I have a responsibility to deliver against that. So, we've talked about start-up manufacturing, for example. One of the targets that I'll look to maintain through Business Wales is five-year survivability is doubled by supported business versus non-supported business. So, there's a whole—. As Aine said, it's very much orchestrating the overall actions of the Government—that we're held to account by the Minister, ultimately. So, I think there are particular measures that we will have to then deliver on.

Happy to write to the committee with that, if that's helpful.

That would be very useful. Thank you very much indeed.

I won't try your patience, Chair, but there are a couple of questions I wouldn't mind, though, if the committee could submit for a reply.

Yes, certainly. There might be some areas we haven't covered, so we'll certainly write to you then with those, but thank you for—

I always look forward to your follow-up correspondence. I assumed there would be.

I'm glad to hear it. Obviously, time has beaten us so our session has come to an end. Thank you for being with us for the two sessions this morning. A copy of this session's transcript, of course, will be sent to you as well, so if there are any issues with that, then please let us know. Thank you for being with us today, and we'll now take a short break to prepare for the next session.

It's very good to see you back, Paul.

Thank you very much. Diolch yn fawr iawn.

Croeso nôl i gyfarfod o Bwyllgor yr Economi, Masnach a Materion Gwledig. Fe symudwn ni ymlaen nawr at eitem 6 ar ein hagenda. Dyma'r ail sesiwn dystiolaeth ar gyfer ein hymchwiliad undydd i weithgynhyrchu yng Nghymru. Gaf i groesawu'r tystion i'r sesiwn yma? Cyn ein bod ni'n symud yn syth i gwestiynau, gaf i ofyn iddyn nhw gyflwyno eu hunain i'r record? Efallai y gallaf i ddechrau gyda Dr Llŷr ap Gareth.

Helo. Ie, fi ydy Dr Llŷr ap Gareth, pennaeth polisi, Ffederasiwn Busnesau Bach.

Janis Richards.

Janis Richards, Make UK membership director for Wales.

David Pickernell.

David Pickernell, professor of small business and enterprise development policy at Swansea University.

And Mary Williams, who's joining us via Zoom.

Hi. As you said, my name's Mary Williams, and I'm the acting political director for Unite the Union. Thank you.

Thank you very much indeed for those introductions. I'll kick off this session just by asking a general question, really. Now, the Minister for Economy has referred to the manufacturing sector facing a perfect storm of major challenges, including global economic shocks, labour shortages, energy price rises and supply chain difficulties. What are your views on the current state of manufacturing here in Wales? Perhaps I can start with Dr Llŷr ap Gareth.

I think the Minister put it quite accurately there, to be honest. It's been a perfect storm for manufacturing. I think, outside of hospitality and tourism, perhaps they have faced the most difficult time of all. We found that, last summer, for example, on the energy costs, manufacturing was, with tourism and hospitality, among those who are most worried about energy costs, from our surveys. I think it is important to note, perhaps, that our last small business index, for the first quarter of this year, seemed to point towards a rise in confidence. That was across the board for small businesses, but also for manufacturing. For manufacturing, that confidence level from the previous quarter of quarter 4 had risen by 25 points. So, it was now on -14. Now, that doesn't sound great, but it's much, much better than it's been, and, in the whole index, that survey is the best result since a year back, from quarter 1 in 2022. The hope is that we're hopefully turning a corner. There is more focus a little bit on growth, but it's early days to say that, and things are very, very precarious. So, I think it's important to note there is some light beyond just the doom-mongering, but, absolutely, the manufacturing sector in particular has difficulties with energy costs, with utility costs, with all the other issues around supply chains that are happening.

Janis Richards.

Just repeating some of what the Minister had mentioned, Wales employs around 150,000 people within manufacturing. We contribute around 16 per cent of national output, which is against the national average of 9 per cent. We are punching above our weight. We export globally from Wales, but we have the highest number of exports to the EU, so we are very dependent—around 60 per cent of exports to the EU—so we're quite dependent on the EU for exports.

Make UK undertake quarterly surveys that we've done for some 30 years. We update—going back a long time. And what we found in the last nine quarters is that manufacturers are having to raise their prices. Now, this is obviously against things like supply chain issues, supply chain costs, wages, the energy crisis and the overall increase in operating costs. But what we are also finding, much like Llŷr has just mentioned, is that confidence is looking strong. It is in a plus not a minus. So, confidence is looking quite strong. The big challenge is, overwhelmingly, skills and labour. I'm not going to say much about that now, because, I dare say, we will be discussing that a little later. But skills and labour are undoubtedly the biggest challenge that is facing Welsh manufacturers at the moment.

Okay. And David Pickernell.

What I'm going to talk about this morning is based on some research that we're undertaking for the Federation of Small Businesses into the future of—[Interruption.] Sorry, I thought I'd turned that right off—Welsh manufacturing SMEs and looking at the issues and moving forward. The perfect storm is one kind of analogy. You could also see it as being everything, everywhere all at once. The businesses that we have been talking to are businesses that, without exception, are looking to grow, but they are finding so much difficulty from actually looking at it from the day-to-day, being-there-tomorrow scenario. And that is making it very, very difficult for them to actually undertake some of the changes that they'd like to make when it comes to things like sustainability, decarbonisation, circular economy, which, again, they're all very positive about wanting to make changes, but are finding that there are things in the way in terms of the day-to-day situation—energy, infrastructure—but also the economic environment that makes it much more difficult for them to think about how they will make investments, and that, of itself, then means that, to some degree, there's less of a call on finance, but that's not a good thing, because, in a perfect world, they would like to be investing but they're finding that it's quite difficult to look beyond, in some ways, the shorter term for themselves. So, the current environment is not allowing them to actually make those longer term decisions. But, on the other hand, there is very much the positivity of wanting to make those changes, but it's about how that is facilitated over the next couple of years, which is, obviously, where the plan comes into play.

Thank you. Mary Williams.

Thank you. The perfect storm analogy is really correct here. It is about energy, it's about the supply chain issues. It's also about high inflation and high interest rates, and it's also, in terms of our members who work within manufacturing, for some of them it is the cost-of-living crisis and austerity, and it's ongoing. So, even this morning's news of that horrific incident in Ukraine with the dam bursting, in terms of food manufacturing, that's even going to be impacted, because that area that has been flooded is the fertile plains that produce grain. So, this perfect storm isn't just for now; it's ongoing, and, actually, being prepared for it is what I think this plan is about. Thank you.

Thank you. I'll now bring in Hefin David. Hefin.

Thanks, Cadeirydd. Can I ask Janis first of all, and anyone else can come in on this if it's relevant to them, but what was your role in developing the refreshed manufacturing action plan? Is there anything anyone else as well would like to see in the plan that isn't currently there?

We work quite closely with the Minister's team. We provide quarterly updates to them, and we work across various departments, be that high-value manufacturing, trade, skills—we have links into most of the departments within Welsh Government. So, when they started this process of refreshing it, I suppose we were the obvious choice to come to align with.

Our own policy team did provide some feedback on the plan itself. I work quite closely with James Davies at Industry Wales. And then, what we did more towards the end was provide face-to-face round-tables with the Minister. So, I was able to bring along manufacturers so he heard their views, he heard their challenges, and we got their feedback on the plan before it actually went to final print, if you like. So, we did several face to face, we did a few online, and then we were quite instrumental in the launch, where I'd got manufacturers along, so we had their voice there as well. Going forward, I am hopeful that we will also be working alongside the team there in communicating the actions.

Are you satisfied everything's in it that you want in it?

I brought together a few of our manufacturing members to look at the plan, and the one thing that came out from all of them was the lack of a clear communication strategy, going forward. I know that's going to happen, but it's not actually in there. It doesn't say how they will measure the actions as they take place. So, that was one thing, and, talking from a manufacturers' point of view, when they saw the plan, they would have liked to have seen something in there that said, 'This is the communication process.' Whether that's going to be a quarterly e-mail, face to face, I'm happy to facilitate things like that. But what they want is to be able to feed back; it's got to be a two-way conversation. What they don't want is something put in place where they are given feedback on the actions and timescales, et cetera, but are not able to then feed back, because we need to keep that document live and we need to keep it relevant.

Llŷr ap Gareth, you'd like to come in on this.

Yes. So, in terms of input in, we haven't done so much; we've left it, probably, to people who are better suited for that and keep to what we do ourselves—keep doing what we do well. There's not much we'd necessarily disagree with in there. Everything is right in principle. We largely agree on what we want. I think most people in this room would agree on the ideas of a holistic joined-up approach, developing skills, the mapping and data side of things, which is useful, and there seems to have been some progress there since the previous iteration.

On what's missing, it's perhaps that side of the 'how', as Janis was sort of pointing to there: where are the measures, how are we going to say how we get to this, how do we measure that the partnerships are having an impact, for example, between industry, HE, and businesses, what's the way to get to that. So, I think it sits quite well as a vision, but I'm not sure if we've made the link there with how it's seen on the ground.

On the communication and engagement side, I'd agree as well, and this is key, because in terms of communications, this plan is not how businesses, and small businesses in particular, will understand this plan. SMEs are incredibly busy at the moment; as everybody's noted, they're dealing with everything everywhere at once, and it's unlikely that they'll spend their time trawling through Government documents. So, in terms of the communications plan, it's really important that we understand how this gets out there, who are the people who are going to do that, and what's the method by which we understand what SMEs want, how do you get to the hard-to-reach people.

There are parts in the plan that do discuss some aspects of that, I think. I think the part on the retrofit programme is an interesting one that could possibly be developed and scaled up, whereby they've found a capacity and capability approach, and understood what amount of companies are able within Wales to deliver on the programme, and found 200, I think, companies, and the companies that ended up getting the contracts were companies that were previously unknown to the customer. That's a really useful thing for us to know, and I think it should be spread out further than retrofitting. It not only allows us to measure progress, but also allows us to measure where we have capacity within Wales, and that in itself is really useful, because it gives us an idea where to intervene.

So, I think that's an example of where there is stuff in the plan that needs to be teased out and developed, and I think there should be more around the idea of how do we measure these things. It's a little bit fluffy at the moment, some of it.

And Mary Williams, you'd like to come in on this as well.

Yes, just very briefly. In terms of engagements, there was a meeting facilitated by the TUC with some representatives where we talked about the plan and fed into it in that way. But a really practical point about what's not in the plan: I was surprised that there was no reference at all to free ports. At the time, I guess, of the refresh of this plan, with free ports, the application process was open, and by the time it was published, we knew that not one, but two, free ports had approved in Wales. So, in terms of the fact that they're meant to stimulate manufacturing, on a very practical point, I was surprised it wasn't in there. Thanks.

I can't see anyone else indicating. Was there anyone else, Cadeirydd?

No.

Okay. Just to move on fairly quickly, there was an initial plan published in 2021. Is it clear which elements of that initial plan have been kept in the new plan, and what the Welsh Government will be doing differently in the future? I'm happy to direct that to Janis or anyone.

I don't mind.

That's helpful. Thank you.

I'm being a bit brutal. The initial plan was launched, and I think very few manufacturers even knew it existed. When I've mentioned that this is a refreshed plan of an old one, they'd say, 'Well, where's it been since 2021? Sitting in a drawer somewhere?' That's what I'm getting back. But I also think the initial one, as the Minister mentioned earlier, the timing of that was a time when manufacturers were in crisis; we were still wearing masks, we were still socially distancing, we had the Brexit issues at the time. Since then, there's been a lot happened as well. So I think the initial plan has laid good foundations for the new one, but absolutely, the refreshed plan is a lot more precise. Having read the initial plan, the initial plan is quite woolly. It's a lot of words. There are a lot of pillars within it. This one is much easier to understand and be able to maybe get excited about, rather than a document that, for all intents and purposes, became a Welsh Government document that nobody knew about. But yes, the new one, absolutely is—. 'Refreshed' is probably the right word, actually, because it has kind of put—. The old one looks dated now compared to what we've got into the new plan.

I just want to pick up on the idea of the refresh. I think you can see where there are links from the previous plan and where it's developed, but I think it is important—. I think Janis just used the words 'live document'. Part of the reason for me pushing on the engagement side and how to do that is precisely so it's a living document, but also a living process, so that the feedback loop is there, so we understand, as we go on, what things are working, what things we can learn from, and that doesn't necessitate that we view it as a refresh every two years. It's a constant learning process, and the idea of a refresh tends to make me worry that when Ministers change or whatever, these things also change. I think it's important to note that it's really important that that engagement and reaching hard-to-reach groups is a constant process and we learn from it and learn how to do it well, and we learn what's missing as we go on.

Can I direct a question to Professor Pickernell? I should declare that I'm something of a fan. I've followed his work in my previous occupation—

I've got one, then. [Laughter.]

I like the work on entrepreneurship and innovation that you've done, and therefore it's a pleasure to meet you. To what extent do you think that the refreshed action plan and Welsh Government innovation strategy support the sector to maximise its contribution to research, development and innovation? Are there further actions the Welsh Government should take?

I think this is very much a team activity. Certainly, some of the things coming out, again, from the report that we're writing for the FSB were that there is some degree of frustration around the way in which clearly limited resources are distributed when it comes to things like research and development, because of the knock-on effect of things like the dreaded B word, Brexit, in the sense that obviously that then means there are fewer resources, and those will tend to be taken up by those larger companies and universities in terms of what they're doing, sometimes in ways that are further away from market, and then that leaves less available to smaller and medium-sized companies, who don't need great amounts of money to make big differences. But you can see there that if you've got a smaller amount of money, then you've got to make decisions about how to spend it, and there's certainly a feeling that SMEs get squeezed in that situation.

I think, more broadly, there's also an issue around a need to bring the role of universities as anchor institutions and utilise them to a greater extent, in the sense that there's a great—. Universities can be great resources when it comes to things like innovation and the ways in which you can kind of integrate what students are doing with what businesses are doing, which you do see, but I think there's a great deal of potential there that at the moment is untapped. In the document, it talks about anchor institutions, but it's focusing that on anchor large businesses, rather than thinking about the anchors that exist that you can relate in with the foundational economy, in terms of things like the NHS, like councils, like universities, which both provide a lot of demand, but also potential innovation partners, and I think there's a lot of untapped potential there that I think would be useful to explore as well.

Because time is moving on, I just want to ask one additional question. Do you feel that perhaps degree apprenticeships have a role to play as part of that?

Yes, personally. I'm speaking in a personal capacity here, but obviously with my experience. Yes, I think degree apprenticeships are a very good idea. I think they can be a good idea at a range of different levels. I will just give the example: at the University of Portsmouth, where I previously was, they were able to undertake degree apprenticeships at a higher level of leadership and management, and certainly some of the things coming out, not from the businesses, but certainly from the stakeholders, was a need for higher level education and training in some of those areas, but also in things like the circular economy and sustainability, so that the management of SMEs could also help facilitate what's in the action plan.

The other very quick thing I would say here is that in terms of actually looking at some of these aspirations and showing ways in which these can be built into business models of SMEs, I think that's really important, because where, for example, sustainability and the circular economy is part of your business model, the way in which you're selling your products, you do see a much more proactive heads-up, if you like, way of looking at things, rather than it being seen as something that you've got to do or a cost. I think there's a great deal of opportunity there to assist on the marketing—the way in which this can facilitate new markets for businesses in Wales to see this as a way in which it generates opportunities rather than it being a cost-focused activity.

The other thing is in terms of supply chains. There's clearly a need to increase the degree of effectively multiplier effects through supply chains, through the very good small and medium-sized businesses we have in Wales, and building back greater supply chains that are Welsh based, because that helps with resilience, it helps with sustainability, it helps with a whole wide range of things, and actually facilitating that through network development, through network brokering—information there that helps businesses meet other businesses in the supply chain. As an economist, you may assume perfect information; the reality is perfect information does not exist in that particular area. I think that is something that I would also highlight as something on a practical level that could really, really assist in this process.

Bridging social capital.

Yes, absolutely.

I'm just conscious of time, Chair. It's up to you whether you want to take some more.

I think Llŷr just wants to come in on this particular point, and then we'll move on.

Yes, just to pick up on one or two things that David said without picking up on all of it. The point around bigger businesses getting more of the pie, as it were, is an issue that we're seeing already. There's a report we're doing at the UK level on innovation, which isn't out yet, but I can give you a sneak preview. But one of the issues there that's been identified is the industrial and energy transformation fund, which, for example, has a minimum grant threshold of £100,000, which is beyond the scope of use for most small businesses. So, in practice, the Government is giving money to the likes of Toyota and so on—big, big businesses—to go green, whereas SMEs are sort of left behind in that process, and we do know that there's a will, as has been mentioned, by small manufacturers, to move to that space.

The other quick one was on network development. We agree on that. It sort of links to my point around getting to those hard-to-reach businesses, as discussed in the retrofit programme, but there's also the question of the role of intermediaries here in terms of that matchmaking thing, and we have a few good examples locally in different places that could be used there and scaled up, I think, and that would be something that perhaps should be explored further in the plan.

Lovely. Thank you very much.

Thank you, Hefin. I'll now bring in Vikki Howells.

Thank you, Chair. I've got some questions on the focus of the Welsh Government's business support. Firstly, what do you think is Wales's current competitive advantage in the manufacturing sector, and what do you think it might be in future?

Janis, would you like to start on that?

Wales has a greater proportion of SMEs than large corporates. It was kind of touched on earlier that the ecosystem of our SMEs is really strong, and when Welsh manufacturers talk about reshoring, for instance—you don't hear that quite so much now—but when they're looking at their supply chains and bringing it back, they will always look at Welsh manufacturers first—nearly always. They come to me asking, 'Do we have someone who can do x, y, z?' And the ecosystem that we have in SMEs is really very, very strong. They want to collaborate. My role is bringing those manufacturers together. One of the main parts of what I do is—I don't like the word 'networking', but—networking of manufacturers so that they can collaborate and work together, because we really do have a huge advantage being a compact nation, if you like, who want to do business with each other.

Llŷr.

I think that that thing of identifying winners by product or sector is difficult, and I could put my best guess out there, but to be honest, it wouldn't be worth that much. The point here, I think, is that we are discussing ecosystem and the capacity and capabilities within that ecosystem to take advantage of anything that comes up, and perhaps looking at trying to predict what will be the best product for the future is perhaps not the best way to go about it. But there is a need to steer that ecosystem, so that it has the skills and adaptability necessary to do that. And I think the point of it being a lot of small to medium-sized enterprises as foundational for that is a really good point.

A few years ago, my UK colleagues did a report on supply chains called 'Chain Reaction', which I think is the best title you could possibly have for a supply chain report, really. They were looking at the different types of models of chains, so, for example, those that are more peer to peer, businesses of the same size, and how they gain from working together, and the ones in terms of linking two anchors. Each of them have different strengths and weaknesses, but it's important to note that they are different, and what you're going to get out of them and how you focus it is going to be different. So, I think it's important to note, to work out what the strengths are by that ecosystem, and what's the role of that ecosystem and how we take the best out of it and develop it, rather than perhaps looking at the products and the particular areas that are the best to focus on. Because, to be honest, Governments and businesses will all get this wrong at some point, but it's the idea of who's in the best position at the right time to take advantage and exploit those.

Can I come back in?

Yes, of course. Yes.

Welsh Government, through Industry Wales, have recently undertaken a supply chain mapping exercise. I'm not sure if it's actually finalised yet, but most of the work has been done, and what that enables them to do, through the data it's collected, is find those gaps within supply chains within Wales. This has a much wider use in terms of inward investment and really showing the capability that we have here in Wales. It will be interesting to see, once that is completed, how we then use that data. Again, I've been involved on a very small level, but I've been involved in that. It'll be really interesting to see how we'll be able to use that data, going forward as well.

Anyone else on this particular question?

Just in terms of—again, this is feeding back from the report and from the SMEs—that community, there's a very, very strong sense of being loyal to the location. Obviously, sometimes they talk in terms of the negative, 'Ah but there are all sorts of things that also affect that', but there's a real strength of that location and of community, and that gives you a strong basis to build from. We've got SMEs and you've got, by definition, more adaptability. Because they're small, they're more agile, they can move into different sectors, and that obviously then mitigates the brand against a top-down choosing of winners, because that's much more difficult to predict.

I think as well it's almost like a nascent competitive advantage, where there are lots of good things happening in terms of examples of ways in which, for example, the innovation system can build. If you think about projects that are being supported, such as ION leadership, in terms of the leadership programmes there, in terms of AgorIP, in terms of what's happening there in terms of assisting SMEs to bring products to market. And that's starting to leverage, if you like, the potential that's there in the linkage between HE and business. I think it's around about now, probably, learning from that, scaling from that so that the full potential can come out from that, rather than it being 'Well, we've done it, we've ticked the box, let's move on to something else'. I think it's now about actually linking these together in more of a system so that it starts to become self-perpetuating.

And Mary Williams.

Thank you. The other advantage that we have here in Wales is that we actually do have a highly skilled workforce within manufacturing. And if we look at the broader manufacturing base, something like aerospace, there are 23,000 people employed in aerospace. And if you look at some of the bigger places like Airbus UK or GE Aerospace Wales, there are apprentices going through that, and they are high-quality apprenticeships and if they don't get a job within those bases, they can certainly then go into the supply chain in it. So, I think a huge advantage for Wales is our workforce here. Thanks.

Thank you, Chair. I'll ask my next question, then, which also involves an element of the crystal ball. So, what do you think are the greatest opportunities for growth in Welsh manufacturing, both in terms of sub-sectors and export markets? And perhaps the easier part to answer for that is: what role do you think that Welsh Government should play in maximising those kinds of opportunities?

Who'd like to start on that? Janis.

I'm going to focus on the skills element of this, because we have a fantastic opportunity in Wales; with skills being devolved, it's in our gift to drive the skills agenda and make changes. We talk about the skills of the future. We don't know what those look like, but we can hazard a guess. We know it's going to be digital—embedding digital skills within education, right down primary, secondary, through FE, HE. That's a long-term plan, but we need to start sometime. We need to start now. We need to embed those skills at a very early age.

One big thing with skills that I'm constantly being asked about is about leadership and management development. We have an ageing workforce, and manufacturing, in particular, has an ageing workforce. We need succession planning. We need schemes, be it tax incentives, something new and fresh that will revitalise the workplace. So, things like—. We've got the Help to Grow management courses. They're great. The numbers aren't huge and they're not sector specific. Schemes such as that—mentoring schemes; there are things that could be done to assist us and raise our skills to a level that we become a leading nation. It is within our gift; it's devolved. We can do that. Welsh Government need to focus. Through the net-zero skills action plan, they've got—. If all of that is realised, we will be in a different place within five to 10 years. And, as I say, it is in our gift. We need to be focusing on skills, and that will naturally bring the growth within every business out there.

Okay. Anyone else on this? Llŷr.

Yes. I think it's identifying the capacity and capability, as we've said, but there's a question here as well in terms of what we mean by 'growth' and what does Welsh Government mean by 'growth' within this plan. 'High-value manufacturing' is the term used in there, and I'd welcome that; it's a clear move from the foreign direct investment model that we had—the idea of growth being merely gross value added and around that side of things—but there is a question as well in what do we mean by 'high value' there. For us—and there is part of this in the plan, to be fair—that would be ascribing value to that foundational element of moving small businesses from being smaller to medium-sized businesses, from growing that missing middle, if you like. And that's completely within the parameters of what the definition is in the plan, but there are also many, many other possible iterations of that, which is not in itself a problem, we can hedge our bets and different things. But I think it would be useful to have a clear idea of what we mean by 'growth' there, whether it’s growth in—. It goes beyond employment, which is useful, within the plan, but what we also mean by it is less clear, I think. I think it’s clear what it isn’t, but not perhaps what we’re looking to achieve.

Anyone else on this issue? Yes, David.

Sorry, Chair. It’s highlighting again, I think, the role here of looking at how we then embed directions such as sustainability, the circular economy, et cetera, into the business models and the ways in which businesses are then selling. Because I think there are a lot of businesses in Wales that are doing incredibly good things, and actually they’re not letting the potential consumers know about them in ways that might attract consumers to purchasing their products, so actually taking that on and seeing what they’re doing. So it’s not just about an audit of, ‘Well, here are the various ways in which you can, say, improve on the use of carbon’, but also what are you actually doing, and what are the processes that you’ve got that might help you actually reach new markets?

And in terms of the markets, clearly the feedback that we’re getting is that the European Union market post Brexit is much more difficult to sell into because of the increased amounts of paperwork, et cetera, et cetera, et cetera, and therefore new markets need to be sought. What I haven’t got is, ‘Here is a specific market that multiple SMEs are going to be piling into’. It’s going to be much more complex than that for a wide variety of markets that they talk about at a disparate level. But it’s much more about: on what basis are they selling? Because trying to sell on the basis of cost is one of the problems that they are currently facing, because obviously they’ve been trying to work into broader views of value, views of innovation and technology, but one of the things that’s happening at the moment because of the perfect storm is that their customers are focusing much more on cost.

Now, that’s not a long-term viable thing for lots of businesses who need to be much more innovation focused, but then they need to actually be selling their products on the basis of that wider aspect, and actually marketing—. Speaking as an economist, clearly it’s tough for me to say this, but the way in which you’re marketing your products and organising your business model is really, really important, and I think it’s something that we need to emphasise a lot more, because there are lots of great things happening, but I’m not sure consumers are always aware of them.

Vikki.

Okay, thanks. My next question, then—one of the actions in the refreshed action plan states that the Welsh Government will, and I quote,

'Mobilise our business support for manufacturing around a targeted number of critical products that have strategic significance to the long-term prosperity of Wales.'

So, I'm interested in what the panel think about this approach, and how they think these critical products should actually be identified?

Who wants to go first on that? Llŷr.

I think I can say it's the same problem as I mentioned earlier, really: what’s the number of products, how are the critical products defined, and on what basis? Who’s best placed to identify those products and to act on that? And how is it going to be developed? Is it through that top-down idea that these are the products and we want you to fill these? Or is it done through that iterative learning as we go on, where we work out who the businesses are, working out where their strengths are, and so on. So the critical products side is almost at the end of that process rather than at the beginning, or it should be. So, we’re in danger of trying to pick out what the critical products are in a very complex world in which we might be good at those products, but there might be somebody who’s much better. It’s very difficult to pick winners on that basis. So I think, yes, there needs to be a steer, and perhaps, as we go through the process we identify some products, but that needs to be a process that we work out as we go on, and I think the idea of setting out what the critical products are at the beginning is the wrong way around.

Mary Williams.

Thank you. Yes, so, when I read about critical products and critical items, to me, that was very vast, and actually, the use of the word 'critical' here is really important, and what does that actually mean. I guess, within manufacturing, we could look in a much broader way at the idea of critical minerals, in terms of what's needed in manufacturing, going forward. I think it's at the forefront of my mind because I was recently on a visit to one of our workplaces, where we have members, called Vale Europe in Clydach, outside of Swansea, and they're very much involved in critical minerals and how that feeds into manufacturing. They refine nickel there. The nickel that they refine is exactly what's needed in the manufacture of batteries, particularly for electric vehicles, and when you think that there are only two sites in the whole of Europe that can produce that—one is in Clydach and one is in Finland—you suddenly see how critical this workplace is to manufacturing not just in Wales, but across the whole of the UK. If you think further beyond that, because I'm now thinking of Vale and what they do there, one of the things that we were looking at was Britishvolt, a battery manufacturer that was allowed to go into administration, and the idea of that, that there was a promise from UK Government of £100 million, and the strategy, to us, looked like it was a field of dreams strategy—if you build it, they will come—but there were no customers there and that was part of the problem for it. So, I guess, in terms of critical, it needs to be much more expanded and not just as the end product, but what is actually critical to get us to those products in the first place. Thanks.

Anyone else on this? David.

Clearly, it's very, very difficult to pick winners, and part of the reason for that is that, if you're trying to look at the things that are growing at the time, you're almost, by definition, behind the curve, and if you're then looking into the future, you're taking—. Obviously, there's a risk element to it. I would see it as a much more organic process where these—. To some degree, yes, you've got to see where there are particular critical parts in a supply chain where there's maybe a great opportunity, but that's also got to be seen then in the context of what do you already have that you can strongly build upon, that can then start to diversify in different areas. So, often, I think it's about identifying the successful businesses and the growing businesses that you already have, looking how you can maximise the value from those through developments of supply chains, and seeing how that then works via networking between those businesses to then generate future opportunities. So, it's much more organic and bottom up in a way in which Government is playing more of a facilitating role, rather than a, 'We have chosen this particular sector and then we therefore need to do the following things to try and, effectively, artificially create it.' It's not to say in every case that's the wrong strategy, but it's got to be a very, very focused strategy in order for it to have an opportunity to actually be successful.

Vikki.

Okay. Thank you, all. That was really interesting. Some very useful points for us to think about there. My final question: one of the actions in the refreshed plan is to improve the anchorage of manufacturing companies. So, I'm just interested in your views on the role of Welsh Government in anchoring those key manufacturing companies in Wales, and how effective you feel the levers are that Welsh Government has at its disposal to do that.

Janis.

I'll come back to the supply chain mapping exercise that Industry Wales has undertaken. I always find it amazing how many—. Think of your factory, especially in the more rural areas, and they're like the best-kept secret. No-one knows what they do, or what they make or what the inside looks like. And, I think, with the supply chain mapping exercise, once that data is there, that's going to be invaluable. We will have that for the nation, for Wales, showing us what our capabilities are. So, if we have that inward investment coming in, wanting to know what the potential is here, we have that data to present to them. Underpin that, as I say, with a skills programme second to none, and I think that puts us in a very, very strong economic position.

Anyone else on this? Llŷr.

I think it's good to welcome again the fact that the plan does note the mistakes that have been made in the past, in terms of just trying to bring in investment that basically then disappears when the funding ends. So, I think that's important.

Anchors are really important, but I think, as David mentioned earlier, there's also the public sector anchors. Those are really, really important, because those are the ones that are definitely not going to move.

In terms of the private companies, it is really important that we make sure that they're there to develop those supply chains, as Janis mentioned. That idea of what the capacity and capabilities are, the understanding going beyond a black box, if you like, of Wales is really useful and would also be useful to bring in that investment and to use that investment in a way to develop that side of things, rather than it being, 'Come in, create x amount of thousands of jobs, but only for the amount of time when the grants are there'. So, I think that's the way to approach it.

And Mary.

Thanks. Just in terms of levers and leverage within the plan, it does refer to something called the economic contract, and, to date, we would have had a lot of questions around the use of an economic contract. So, the whole idea of it is it's a something-for-something relationship between Welsh Government and companies and organisations. I know, from our point of view, we've had a little bit of a problem with it. So, just the term itself, 'economic contract', implies something that's legally binding; it's not. It's an agreement between Welsh Government and other parties.

The contract itself is made up of four pillars, and I think the question we've always had is: are those pillars equal? One of those pillars is fair work, and there's always been this question that we've asked, that if an organisation who has an economic contract meets one of the pillars but doesn't meet another, what happens in that situation? If you're producing a product that hits climate resilience, but, again, doesn't hit fair work targets, what actually happens in that case?

So, just in terms of the plan, and it specifically says that, we do have a lot of issues around what that is. We don't know who has an economic contract. I'm not sure if there's a list available of organisations who have it, and if you are employed in a company and they've signed up to the economic contract, how do people in the workforce know that they have and what is it? So, I think there needs to be some more work done around that particular area. Thanks.

Okay. Thank you, Vikki. I'm conscious of time, so if I can ask you all to be as succinct as possible from now on. I'll bring in Sarah Murphy. Sarah.

Thank you very much. I need to declare that I'm a member of Unite Wales. So, to start, I'm going to be asking questions about automation and artificial intelligence. As I raised with our economy Minister in the previous session, there has been a flurry of interest, I feel, over the last couple of weeks in particular, and the UK Prime Minister Rishi Sunak's adviser on AI has come out and said that AI could become powerful enough in the next two years to kill people due to the potential manufacturing of cyber and biological weapons. Do you think this is a helpful and accurate link between AI and automation in the manufacturing sector, and, from your perspective, what does that actually look like in our manufacturing sector at the moment in Wales? What are the opportunities and challenges, in your view, for the future?

Who wants to start on that? [Laughter.] Llŷr.

I'm going to go with the easy one of saying it's too early to tell, but, because it's the issue of the day, there's a danger when we discuss it in action plans and this sort of thing that we end up warping our priorities according to what the issue of the day is. That's not to say that there isn't an issue here, but it's important that we don't look at it both in terms of this side of it being the technophobic side or, indeed, the technophile side. The idea of it being Skynet is probably not a great way to make people think that they should engage with the process, either.

So, I think what we need to look at, really, is that it's the principles underpinning this, much like you would have in medicine and in terms of anything that's really complicated that is difficult to regulate. What are the principles in terms of how do you regulate a highly complex and quick-changing situation? Now, of course, you're always playing a bit of catch-up, but I think that's the way to look at it. There are, obviously, opportunities, and I'm going to fall back and say, much as I said earlier, that that will be for many businesses to work out, and we know of a few working that out from levels of using ChatGPT for doing press releases, to probably far, far further things that I don't understand. But that's the way to look at it, I think.

Thank you very much.

I think automation is something that probably every manufacturer is looking at; AI not so much. I don't think the emphasis is quite there yet. Our own research found that 77 per cent of manufacturers have increased their spend in automation, and, of those, 75 per cent expect a return on investment within five years. That's doable for most manufacturers. I think the whole AI subject is still a little out of reach. Some are, obviously, but they tend to be the large corporates rather than the SMEs. But there are things that can be done to assist this. For instance, the Made Smarter programme, which has been proven to be successful in England, rolling that out in Wales would make a huge difference. I do know we're doing a Made Smarter data hub. I've only had stuff on it this week, and I've been on holiday, so haven't read into that yet, so that's to come.

Yes.

But that is a support mechanism that really does assist with automation, and AI, ultimately, as well. Funding is absolutely the key thing for moving forward further with automation and AI, absolutely. I think there's also room for culture change within the workplace, so that employees embrace this. It's bringing your employees on the journey with you. There's a whole host of things that are going to assist the workplace in terms of moving into the future of automation and AI.

And Mary.

Thanks. In terms of automation, I'm reminded of an event I was at about 18 months ago, which was to do with automation and AI, and things like that. There was a guy there who was from a consultancy that dealt with automating systems, and he gave an example of how, somewhere in Wales, his company had gone into a distillery where there were 97 operatives employed there and by the time they had completed their automated systems, there were three. And I was told, 'Look, how amazing this is'. But when I asked the question, 'What happened to the 94 people who lost their jobs?' there was no answer. They didn't know. And I think that it's unreasonable to think that it won't impact on the workforce and potential loss of jobs in the future, and we have to be reminded of that.

In terms of artificial intelligence, AI data, big data and surveillance in the workplace, it is an area that the trade union movement is doing a lot of work on. Yes, there is loads of opportunity there, but also, in the same breath, we have to think of the disadvantages that come with that in terms of particularly, in something like AI and worker surveillance in the workplace, the health and well-being of the member involved, the negative impact of being surveilled, worker intensification, the kind of discrimination that continues. The TUC did a really good report a couple of years ago. It was called 'Technology managing people', and it said that, in 2020, 53 per cent of those that they surveyed said that they had experienced monitoring in the workplace. By 2021, that had gone up to 60 per cent, so I'm looking to see what the figures are for 2022.

But we have to be really aware that—. On one hand, yes, I can see the advantages to AI and to automation in the workplace, and particularly around jobs that are dangerous and difficult or repetitive, but we have to also be aware of everything else that that brings with it. I think somebody else talked earlier about where are the regulations and laws in this. At the moment, what we're looking at is the use of the general data protection regulation and how the collection of data is used, and how it's collected responsibly and fairly and in a transparent way, and I think that, actually, there does need to be not just an education of the workforce in terms of their rights, but also with employers about what's happening here, and I think there's a huge amount of work that needs to be done in terms of that.

Sarah.

Yes, and that just moves on to my final question, which comes back to the refreshed automation and AI plan from the Welsh Government. They have said:

'Manufacturing has transformed throughout previous industrial revolutions, with factory environments a microcosm for changes in the working environment, mechanised production, Health and Safety, Occupational Health and automation. The sector will once again be the epicentre for transformational change in the form of industry which will require partnership working with strong employee representation'—

as you've mentioned—'and Trade Union recognition' as well. So, my question is—. There's been a report to say that, when the UK Government asked about diversity in the AI sector, over half of firms—53 per cent—said that none of their employees were female, none of their AI employees were female, and 40 per cent said that none were from ethnic minority backgrounds. So, I suppose I wanted to ask your thoughts on this as well in terms of what you think the impact could have on the manufacturing workforce, and is this again something that we're seeing in Wales, and what can be done about it? Mary, if I come to you first on this.

I think that—. It's a really great point that you've raised there, because the danger with AI is about entrenching and perpetuating inequalities that already exist. It's not just us saying this. There are groups—. There's the Organisation for Economic Co-operation and Development report on the effects of AI on the working lives of women. The United Nations has done a special report on AI and people with disabilities. What we don't want is those further entrenchments, and I think that how you do that is by having trade union representation and to be there looking at it and working with the workforce.

Within Unite, we've developed this new technology agreement, which looks at all of this so that if AI or new technology or anything like that is brought into the workplace that it's done in conjunction and in consultation with the workforce there, and we do have those agreements in place in different workplaces around the UK. I think that strengthening of those relationships and having that is the way forward on this.

Thank you. Anybody else?

I think I—. Again, the organisations that I'm talking to, because they're so focused on what's happening now and dealing with the skills shortages where they face them now, a lot of what they're doing is doing it with apprenticeships and that kind of thing, and working with today's technology and not worrying about tomorrow's technology. So, there is kind of an issue there over longer term training, education, the roles of different organisations, be those larger businesses, be that Government, be that HE, in terms of providing the exemplars of what we want things to look like, because businesses—. They're going to need some support here, because, often, what they were talking about was, basically, 'Well, we're in a situation where we're using technology that isn't actually up for today, because we're using stuff that may be from 10, 20 years ago, because at the moment we don't want to take risk when it comes to investing the resources that we do have, because we know they're limited and we're not certain enough about the future to make that next step.' Now, clearly, in terms of some of the things happening, AI and automation may have great benefits, but because there's so much great up-front cost, there's obviously that way in which you look at risk and reward, and then that links in to what's been talked about in terms of that need to think about leadership and management and the way in which the system can support that—again, going back to anchors, the roles of HE, the roles of FE, the roles of different organisations that can support what is going on in order to get the best possible outcome, where you don't end up perpetuating the sorts of things you've been talking about.

Thank you very much. Thank you all.

I think, on the point of diversity, manufacturing has always been seen as a male role historically. Things are changing. Our own apprentice of the year happened to be a young lady from Airbus who won apprentice of the year last year—it was lovely. I do think things are changing. But those people have to apply for the jobs in the first place for them to get that diversity. There needs to be, as I've said before, the cultural change. The conversations in the lounge in the evening need to be around going into a factory to work, and not girls thinking that that's not for them. There needs to be a change of thought process to get that diversity. But I have never spoken to a manufacturer who has said, 'I don't want any women.' They don't. They actually do—they want that mix on the shop floor.

Thank you. Thank you very much.

Llŷr.

Just to come in quickly. The skills shortage, while certainly not good for the businesses, is an opportunity in that sense of developing that pipeline through FE, through HE and so on. So, that's a really important part.

Just on the automation thing, I think it's important to note as well—and this goes with the skills as well—if those skills are there for diverse groups, they can also be linked to entrepreneurial skills. So, that's an important part of start-ups and so on. But also the role of automation also means that quite a few types of businesses can actually work in much more disparate ways rather than being in a centralised factory, the same as it always was. So, there are ways to develop the smaller side of manufacturing on that basis as well. So, it's important to note that as an opportunity within automation.

That's a really good point. Thank you very much. Thank you, Chair.

Thank you, Sarah. I'll bring in Luke Fletcher. Luke.

Diolch, Cadeirydd. Picking up on the skills element here, and focusing down on it, as well as net zero, I'll come to Janis first, if that's okay, because you've already touched on the net-zero skills action plan. To what extent do you think that the plan actually meets the needs of the manufacturing sector? I would also like to come to Mary as well for a trade union perspective, because obviously we're not just talking about training up people who are already in education; we're going to be talking about as well quite a large-scale project in reskilling the workforce, particularly people who are in high-carbon sectors as well.

I have to say, I think, if the actions within the net-zero skills action plan are realised, Wales would be in a completely different place. It really does go right down from cradle to grave, doesn't it, and all those actions within each of the different pillars within the plan are really succinct—it will make a difference. We need to see that action; we need to see those changes made, but I do think that it's going to put Wales in a different place, and, as I said before, it's within our gift to do that, but I think the net-zero skills plan is fantastic. It really is going to put us in a different place.

I think the £2 million funding for the green skills on the personal accounts is a nice start. It's nowhere near enough; it's nowhere near enough, and it needs to be widened out as well. But I do think it's kind of laying the seeds now, and, hopefully, we can build on that.

Because that was the crux of what I was looking to get at: are we looking at the net-zero skills action plan as something that is good to go for the foreseeable future, or are we just talking about the basis of something here?

I think it's a basis.

Because the scale of the challenge, of course, is going to be massive, isn't it?

Absolutely. No, you've got to start somewhere. I think it is a foundation document that will grow. These are live documents, hopefully. What I do like is, of course, you've got the time frame within them as well. So, some of these actions can be done very quickly. There are going to be huge differences. This is going to change things, and you've got to look forward five, 10, even 20 years. If those actions are realised, we're going to be in a very different place in the future, absolutely.

Thank you, Janis. Can I come to you, Mary, on just a trade union perspective?

Yes. I think that this is a really interesting area. Unite did some research with members in our automotive sector. Now, this was with a region in England, but I think it's indicative of feelings across the UK. So, we questioned our members working within automotive about meeting net-zero targets and having the skills to do that. Thirty per cent of them felt that they weren't going to be able to reach those targets, and not only would their workplace not reach it, but they themselves. Amazingly, 85 per cent of our members said that they hadn't been offered any kind of training, skilling, upskilling opportunities to be able to meet those jobs that are required when we transition. So, I think that's really indicative of maybe where the workforce is at the moment.

I think that, in terms of skills and jobs, it's true, we don't really know what those skills are going to be for the future, but what we do know is that people have to get into that frame of mind where it's no longer a situation where you've trained to do something, or you're skilled to do something, and then that's it; it's a lifelong learning journey, I guess, that people are on at the moment, and that's the message that we have to get across.

For us within the trade union movement, the really key thing here is that it's a just transition, so that, when people are training and retraining and looking at jobs, the jobs that they're going to be moving into of the future are comparable to what they have now, so that there's no loss in terms of pay, terms and conditions, and that's really key for us and that we're involved in that. Does that answer your question, Luke?

Great. Thank you. Thank you, Mary. I'm not sure if Llŷr wanted to come in on that before I hand back to the Chair.

Yes. It's just a side on skills in terms of how that impacts on small and medium-sized enterprises. It's that side of—. We mentioned degree apprenticeships earlier, which are great, and, if they're able to do that, small businesses gain a lot, but our businesses are generally crying out for bite-sized chunks, things that can be done quite quickly, particularly now with skills shortages. Now, those need to be tactical, but they also need to be accredited, they need to fit within a wider strategy. So, it's just that side of those bite-sized chunks and that idea of lifelong learning, perhaps, having that side of being flexible and agile enough to react to what businesses need at the particular time.

Yes. Great.

Chair, just to say, just to respond to Llŷr, there's nothing to stop a degree apprenticeship being offered in a modular way that would allow that.

Yes. Yes, of course. It's a barrier that our members have faced, though, in terms of apprenticeships. It's access to apprenticeships and degree apprenticeships being seen as taking a long, long time and being a difficulty. We are going to be doing a report and interviewing around skills, by the way, for a report for this year as well, just to put another shameless plug in here.

Okay. Diolch, Llŷr. And finally, I'll bring in Sam Kurtz.

Diolch yn fawr, Cadeirydd. Thank you very much, panel, so far on your contribution. But, in terms of monitoring the impact of this, I was just wondering about your thoughts on the refreshed manufacturing action plan and whether it clearly sets out what we would see success to be and what success would look like, and allows Welsh Government, and us, to scrutinise Welsh Government accordingly. Does the plan do this? Llŷr, I'll start with yourself.

I think I've already said that I think it needs to be worked on to do that. I think that we don't see the read-across with an economic strategy, with the national indicators, in a clear, clear way. I think there's a lot of very nice aspirations and actions in there, and the actions are concrete, but, as you say, it's difficult to measure what's the impact, what's the intervention that makes these partnerships count as having had an impact, and what is the growth or high value that we're looking to get to. So, I think there is a need to work a little bit on that side of things. There's good stuff in there, but, for example, developing new social value measures is a good thing, possibly, but how does it impact on what the policy choices being made are? And I think that's the part that needs to be worked through and it needs to be underpinned by a clear economic strategy that focuses on exactly where we're looking to grow and what growth looks like.

Excellent. Helpful. Janis.

I completely agree with Llŷr. When you read the manufacturing action plan as an independent document with no other knowledge, there are a lot of gaps, but, when you put it alongside the innovation strategy, the net-zero skills plan, together, they are very powerful. It would have been quite nice, actually, I think, in the manufacturing action plan, to have reference to some of those, because it would have filled some of those gaps. Things around skills—not enough in that, but they are in the other documents. I dare say there are others—I'm just mentioning three—but those three together are very powerful documents. But, yes, we do need to see something going forward now; we need to know that these are live documents that are being actioned.

Can I just come back in quickly on some aspects? Similarly, documents not being referred to—one of the things that seems to be missing here as well is there's no reference to the roads strategy, there's no reference to a freight and haulage strategy that's coming up, and some of the infrastructure aspects, which will be key to driving investment into these areas. Whatever the roads strategy is and whatever it will be, I think there needs to be a reference to the freight and haulage strategy as a clear aspect, which is a dependency on which a lot of this action plan depends, actually. So, I think that's important to note.

That's helpful. David.

And I would add in—. If you think about this document, it will move over time, and it should move over time, in relation to the measurements of what's happening. So, in other words, that you're using those to inform the changes you can see: what's working, what's not working, where do we need to adjust things. That's one thing.

No. 2, I absolutely agree; ultimately, as Dirk Gently said, everything's connected, and, actually, having that understanding that these link into other things that can support what they're doing is very, very important as well. I think it's good that we have actually got an update, and then, hopefully, in a couple of years' time, we will have an update and an update, and it will adjust over time. But having those measurements to see what is happening that's moving us towards where we need to be is absolutely vital, and I think that's the bit where it's not absolutely clear at the moment what are the key things that we're measuring, what's our baseline. Obviously, these things have to be measurable in order for them to be done, but actually thinking about that process, and using that in a positive way, rather than something where you end up meeting the law but not the spirit of the target or the measure, but actually using it in a way that allows us to learn from whatever information is coming back whether we're moving quickly enough, and if we're not, what else we can do and bring people in to look at those issues as they develop over time.

That's helpful. Mary, on Zoom.

Just very quickly, in terms of measuring success, a strong manufacturing sector feeds into a good economy, which, in turn, means that it's beneficial for society. So, for me, it's about being able to look at jobs that have been retained, growth in jobs—not jobs for themselves, but in terms of job pay and conditions and those high-value jobs. And also, just in terms of attracting more investment here and more companies here. I think that there are ways that you can definitely measure it, but, for me, that's a very simple one to actually look at the workforce, and the analysis and statistics about how they are a couple of years from now.

That's helpful. I'm conscious of the time, Chair. I'm happy to follow up these two further questions—

Yes, there are a couple of issues that we wanted to cover but I'm afraid time has beaten us, so we will probably write to you with those areas that we want to cover. But thank you very much indeed for being with us today. Your evidence, obviously, will be very useful to our inquiry. A copy of today's transcript will be sent to you in due course. If there are any issues with that, then please let us know, but, once again, thank you for being with us. Now we'll just take a short break to prepare for the next session.

Croeso nôl i gyfarfod Pwyllgor yr Economi, Masnach a Materion Gwledig. Fe symudwn ni ymlaen nawr at eitem 7 ar ein hagenda. Dyma'r drydedd sesiwn dystiolaeth ar gyfer ein hymchwiliad undydd i weithgynhyrchu yng Nghymru. Gaf i groesawu ein tystion i'r sesiwn yma? Cyn ein bod ni'n symud yn syth i gwestiynau, gaf i ofyn iddyn nhw gyflwyno eu hunain ar gyfer y record? Efallai y gallaf i ddechrau gyda David Hoare.

Good afternoon, everyone; good afternoon, Members. My name is David Hoare. I'm the senior communications and site compliance leader at GE Aerospace Wales, based up at Nantgarw.

Keith Ridgway, chair of Industry Wales. I was the founder of the advanced manufacturing research centre in Sheffield and AMRC Cymru in Broughton.

Thank you very much indeed for being with us today. I'll kick off this session just with a general question, a question that I asked the previous panel. You'll be aware that the Minister for Economy has referred to the manufacturing sector facing a perfect storm of major challenges, including global economic shocks, labour shortages, energy price rises and supply chain difficulties. What are your views on the current state of manufacturing here in Wales? Shall I start with David?

Yes, I'm happy to start. Thank you, Chair. I think, first of all, I would agree with the Minister's assessment of the global events being a perfect storm. I should also caveat what I'm going to say by saying that GE Aerospace, in the context of Wales, may well be somewhat of a bad example in terms of how we're able to weather such a storm, given the size and scale of our operations, and our global footprint and corporate oversight, as well.

But that being said, we're not immune from the challenges that have faced the business, particularly from our perspective COVID and the impact on the global aviation industry, which has been well publicised. I would say that has been perhaps more of a shock and a challenge than, relatively speaking, Brexit. We see the ripples of COVID particularly in our global supply chain, and I know that's not uncommon across manufacturing companies in Wales. I think COVID continues to have a long tail of impact in terms of the resilience of companies in our supply chain and even internal suppliers within GE as well. So, that’s a bit of a snapshot of us and how we’re experiencing things.

In terms of the wider sector in Wales, those issues and challenges will have hit people in different ways depending on how they’re exposed, obviously. One of the things that we have seen through conversations with stakeholders, et cetera, is, to take Brexit as an example, the readiness in terms of the fact that not every manufacturing company in Wales will have a legal function ready to step up and support in that way. So there’s been a gap analysis in terms of what manufacturing companies would need. Summing up, I would say overall the industry is better than it was, but still in recovery; slow in parts, quicker in others.

I think there are two parts. One is that I agree with the Minister; generally in the UK, everybody's the same: the impact of Brexit, high energy costs, the need to increase productivity, and probably a lot of people are unsure of the costs and implications of industry 4.0. I think that's true. Resilient supply chains, and particularly availability of materials and lead times, is a problem right across the manufacturing industry, and skills is a major issue. That's a UK problem.

Specific to Wales, I think we've got a large number of SMEs, a disproportionately high number of SMEs, which makes it more difficult. And there's a very large decarbonisation issue—we're either No. 1 or No. 2 in the league table for decarbonisation with Neath Port Talbot, so it's a big problem. Fewer original equipment manufacturers anchored in Wales is an issue. I think the innovation support is very dispersed and could do with bringing together a little bit—I think that's an issue. There are comparatively low levels of innovation support, particularly as European funding has finished. It was heavily reliant on European funding, and that's had a bad impact on Welsh industry.

From the good point of view, decarbonisation can be focused and a big opportunity. There are some big opportunities in Wales around decarbonisation, renewables and so forth.

Thank you for that. I'll now bring in Hefin David.

Thanks, Cadeirydd. I'd like to ask first Keith Ridgway what involvement he and his organisation had in the development of the refreshed manufacturing action plan. And to both panellists, is there anything not in the plan that should be? I'll start there and then we'll move on.

GE Wales has a good relationship with bodies such as Aerospace Wales Forum and Industry Wales as well, so feedback and the positions that we've shared have been elevated through those challenge and sometimes directly with the civil service team. I myself personally was not available to contribute directly to the policy sessions organised due to a business requirement to be on site.

But in terms of the refreshed plan, I think that revising the plan in light of the global challenges we've discussed was the right approach, given when the original plan was published. There are a couple of things that may be missing or that we might talk about in terms of the refreshed plan. One would be around net-zero decarbonisation infrastructure. For example, a move towards hydrogen et cetera is all well and good and to be applauded, however, we're just now seeing the roll-out of infrastructure for EVs and charging points. New fuels will require even more new, different infrastructure requirements, particularly if we're talking about decarbonising logistics fleets. From our perspective at GE Wales, we rely heavily on trucks and shipping to be supported, but there's a step change requirement in terms of the infrastructure that's needed, because, obviously, something like hydrogen is not as simple and straightforward as electricity infrastructure.

Similarly then, if we're looking, selfishly, at the aerospace or aviation industry, or if we're looking at things like sustainable aviation fuel, or SAF, again, it's an infrastructure ask: are there going to be storage opportunities, transport opportunities? Where are the companies coming through in those sectors to support that? Yes, there's a part to play for primes such as GE, but also public sector involvement there as well.

And then finally, and I'll give up the mic then, I would look at and think about the part that the Welsh Government can play in terms of regulation. So, as business, we want, obviously, the right amount of regulation to be competitive and successful globally. Aviation is already a fantastically regulated and heavily regulated industry worldwide, but in terms of the new challenges that are coming up—Keith has mentioned industry 4.0; there's automation, AI, big data—I would suggest that the Welsh Government and Welsh public policy wants to position Wales in the best possible way from a regulatory perspective so that companies aren't penalised or discouraged from coming to Wales, operating in Wales and investing in Wales because of the regulatory climate.

Can I just ask you, David, before you move on, did you say this to the Welsh Government when they were developing the plan?

In terms of the regulation side of things?

Well, the issues that you've raised—

We put our feedback through groups such as Aerospace Wales Forum.

Okay, thanks.

From an Industry Wales point of view, we worked with the Welsh Government and also businesses to refresh the health of manufacturing survey—I think 2017 it was originally done. We reviewed the map with various industry stakeholders and the refresh and saw if everybody was in agreement with it. We ran a number of round-tables, particularly with the unions and with SMEs to get their feedback. It was five round-tables that went on. So, we had good industrial feedback into the report.

Therefore, are you happy with the outcome and does it do everything that you wanted it to do, or are there gaps?

The refresh is useful in the change of things and the of prioritisation or focus on things like net zero and decarbonisation. It would have been useful to highlight the opportunity a bit more of renewables, nuclear and hydrogen, and also the opportunity and the challenge of those things. Renewables are a massive opportunity, but it's a massive challenge.

I'm conscious of time, so I'm going to skip through my questions, but I'd like to just understand whether there are things that are in this most recent plan that weren't in previous iterations. Also, can you tell me what the Welsh Government's approach to innovation strategy is and whether you think that they are doing the right things on research, development and innovation?

On innovation funding, I think the model that I know the industry, certainly in the aviation sector, likes and works well with is the ATI, Aerospace Technology Institute, which whilst operating at a UK level, it does seem to be fairly fleet of foot and able to react to and respond to the needs and changes of business. And I understand from colleagues in different parts of GE Aerospace, who have been successful at unlocking funding from ATI, that ATI do seem to be quite good at getting the money out of the door, as it were, which is, I know, one of the challenges that's referred to in the paper, in terms of moving at pace with innovation funding.

The challenge—and I don't suppose that it will be new news to Members—in terms of innovation funding is the point at which you have the funding. Do you have it very early when the technology or the solution is early doors and nascent, or do you let the companies find their feet and work through the problem, and then have the funding to take it to scale? That is a hardy perennial in terms of a challenge, but it's one of those ones that Welsh Government will have to have to grapple with, and as I say, I would reference the work of ATI, which I know colleagues are big fans of.

I think drawing attention to the net-zero industry of Wales and decarbonisation and various things like use of timber and different materials are all good stuff. I think from an innovation point of view, I think there is a problem in Wales, I think it's too dispersed. There are too many centres trying to do things. I'm not saying competition, but 'where do I go for assistance?' It was very well funded under the European social fund, and that's gone now. There is no catapult centre in manufacturing in Wales. The AMRC is an offshoot at Sheffield. If you look at the innovation support funding coming to Wales, it's comparatively low. I don't believe we get our fair share of it, and I do think we should have a national centre closely working with the Government on that strategy and implementing the strategy that's been developed.

Thank you, Hefin. I'll now bring in Sam Kurtz. Sam.

Diolch, Cadeirydd. Thank you, both. Just to jump forward slightly, with the refreshed action plan, do you think it clearly sets out what success looks like, and gives backbenchers like us enough to be able to hold Welsh Government's feet to the fire on what success is? Keith, I'll start with you.

It's got a lot of aims and objectives, but it doesn't actually—. I don't think it does give you what success looks like. I think that's the weakness of it. It refers to the indicators, which you can go through, but that's not clear to many people, unless you go and dig for it.

Okay.

So, I think, yes, a better description of what 'good' would look like would be useful.

Okay, that's helpful. Thank you, Keith. David.

Yes. I would broadly agree with that. I think the aims and objectives and the balance that the Welsh Government is trying to strike between traditional economic impact and other measures in the context of the future generations Act, et cetera, economic contract, it's the right balance to go for, but it's a hard balance to strike, because there are various parts of the revised plan that talk about priorities versus other priorities, and that's going to be difficult to do, and even more difficult to do without some hard targets, which I appreciate are difficult to put in place.

Okay, helpful. So, each individual action in the 2021 manufacturing action plan was classified as intermediate, medium, longer term, and was assigned to a specific owner in the Welsh Government, but the refreshed plan doesn't contain any of this information. I just wanted to know the witnesses' thoughts on this approach. Keith, I'll start with you, then.

That's a really difficult one. I think if you assign it, it's good to assign it, because then you know who is responsible for delivering it, but you almost take the responsibility away from everybody else.

Right.

So, one thing about not assigning it is that you give that responsibility wider. And if you're talking about decarbonisation, it isn't only the net-zero industry of Wales's problem to deliver it.

No.

It's an industry-wide problem. So, it's a difficult one to answer, really. I think probably leaving it as it is, because the refresh is wider on decarbonisation and so forth, and net zero. It's probably right to leave it as everybody's responsibility. You're not getting out of it by not having your name against it.

Yes, so, the refresh is the better way forward, you—.

I think so, when we're talking about things that have such a wide—what's the word—impact and wider involvement. Skills is industry's problem. It's higher education's, it's further education's, it's the decarbonisation industry's problem. It's Net Zero Wales's.

Cross-sectional.

It's cross-sector, yes, so let's have it that way.

David, I could see you nodding along at points there.

Yes. Sorry, I was looking for my notes on this, but yes. I would tend to agree with Keith. There are puts and takes on both approaches. I understand that if the named owners were taken out or omitted from the refreshed version because they were the same, well, okay. If they were taken out because they want to make it a broader responsibility, it's long been the case that the Welsh Government has had cross-cutting, cross-departmental responsibilities. Keith has mentioned skills in terms of being a priority for multiple parts of the Government and that is important. The bit that would be missing, then, for me, would be accountability. Government would say, 'Well, it all rolls up to the Minister'—fine, but it would be possible for some parts of the action plan to be progressing faster than others and you perhaps would want some measures or some targets around those kinds of things.

Okay, helpful. I'm going to quote directly from the refreshed action plan now, by saying, quote,

'Going forward, the contribution of the manufacturing sector...will be tracked through our National Well-being Indicators. But this is not enough.'

End quote. What further work should the Welsh Government be doing to develop a more detailed approach to monitoring the impact of the plan? I'll start with you again, Keith.

I think simplifying the indicators. You've got to dig to find them, and I think simplifying those indications or the impact of what actually do we want, and fewer, deeper, measurable, quantifiable things.

Our previous panel mentioned how there is reference to strategies and other bodies of information, but it seemed to be somewhat in silo. Is it more of a bringing together of all these plans and strategies?

Yes, and giving some good indicators or strong indicators, I think, would be—. You're digging through an Excel sheet just to find out what you're trying to do. I think that's not brilliant.

Okay, understood. David.

One of the practical challenges, which kind of demonstrates your point, is that, again, I work at a company where I am afforded the opportunity to do some of this work, go through some of this work, work with organisations like GE Aerospace Wales, and have the time, but if you're an SME in aerospace or an SME in manufacturing, to Keith's point, it's not possible to pick up either the original or the revised and read one document and fully understand everything the Welsh Government is going for, because there is the reference to the net-zero skills plan—'fairer, greener, more sustainable', et cetera. If you're not familiar with the Well-being of Future Generations (Wales) Act 2015, you've got to go and check that, and those kinds of things. So, to make it more holistic would be beneficial, I think. As I mentioned, going beyond traditional measures of GVA and economic impact, okay, good, it's a good aspiration to have, and relevant for the future generations Act, et cetera, but the issue with that in terms of a manufacturing strategy or an economic strategy or an industrial strategy is: how would you measure cultural impact in that game, in that balance? Those kinds of things would need to come out, or be highlighted—excuse me—not 'come out', in terms of making it more accessible to industry and to manufacturers.

Very helpful. There's some uniformity in answers there across sections, so that's very helpful. Thank you, Chair.

Thank you, Sam. I'll now bring in Vikki Howells. Vikki.

Thank you very much, Chair, and good afternoon to our panel. I've got a series of questions around the focus of Welsh Government business support. Firstly, what are Wales's current competitive advantages in manufacturing in your opinion, and what do you think they might be in the future?

Keith? David?

Thank you. Yes. I think I would share, first of all, the same messages that I share with our colleagues in the headquarters in the US, which is that Wales is a great place to do business. The potential for small, nimble, reactive, supportive policy making in a devolved setting and, in the vast majority of cases, combining that with accessible Ministers and officials, and access to the public realm, the public sphere, and the public sector, is a selling point for manufacturing, and these elements, these ways of working—particularly tested and valuable during times of global crisis and unrest that we've seen recently. So, I'd definitely be a cheerleader for not losing those elements of an approach. I think Welsh Government has worked hard to build that.

I think the other element is to not underestimate the importance of brand Wales and activities like Wales Week in London, enabling SMEs from different sectors to get on the international stage. For example, I know, through Aerospace Wales, there are any number of SMEs who are able to go to, in simple terms, trade shows and global events that they perhaps wouldn't otherwise be able to do, so that focus and reputation externally is important. So, I think that that's one of the competitive advantages that we have. I think as well, a well-worn track record in terms of innovation, and I think the way that we would not lose that is, what I mentioned before, about how we combine that with successful funding programmes, and putting that at the right time for funders as well as, to Keith's point, making it accessible.

Keith.

From an industry point of view, yes, we have a very large number of SMEs, a high proportion of SMEs. I think that gives, particularly in things like food and drink, opportunity for branding and competitive advantage within that food sector and high-quality fine foods, type of thing. I think that's one competitive—. I think the other is the opportunity that we've not really got yet, which is renewable energy. I think that's a huge opportunity and it'd be a big competitive advantage, because we've got the Celtic sea. Nuclear sites, we've got probably the two best nuclear sites, or at least one of the best nuclear sites, in the UK, up at Wylfa, and a smaller one down at Traws. If we can capitalise on those, I think that's important. I think that, within, if you look at the renewables, I keep asking this, 'Do we want a massive amount of steel?' So, almost every floating wind turbine is 4,000 to 5,000 tonnes. As somebody pointed out, the Eiffel Tower is 10,000 tonnes, and we're going to do 150 a year, so there's a lot of steel. We've got a big steelworks in Neath Port Talbot. The opportunity, the competitive advantage, is to go to green steel, but it needs investment. But there is a big opportunity there for steel production across the UK.

Thank you, both, and a related follow-up question, then: where are the greatest opportunities for growth in Welsh manufacturing, thinking both in terms of sub-sectors and export markets? And what role do you think the Welsh Government should play in maximising those opportunities?

I'd go back to renewables—a big opportunity in renewables, particularly floating wind turbines. That's a big opportunity. I think steel and green steel is a huge opportunity. The Welsh Government really needs to pressurise the UK Government into investment into Neath Port Talbot, into electric arc furnaces—I think that's absolutely vital in that area. Hydrogen is obviously another one, the potential to generate hydrogen from offshore wind. Probably the biggest one is nuclear. My big concern would be, nuclear up in Wylfa, you could easily put in 16 SMRs, small modular reactors, up in Wylfa. The danger is that all Wales gets out of it are some cafes on the A5. We have got to have the manufacturing capability, the supply chain, to attract the people in who are going to put those reactors together. So, that's the opportunity, but it could be missed. It could be missed.

David.

Thank you. I think, if it's okay, I'll focus particularly on aerospace, aviation. I think one of the things where there are opportunities is cluster and partnership working. So, one of the successes that we've seen, working in the sector and with the sector, is on innovative commercial contractual solutions for customers, but we're only able to do that because of the conglomeration of aviation, aerospace companies in south-east Wales, south-west Wales that we can partner with. So, the development of those opportunities and being able to have forums where those groups can come together are very, very useful. I've already mentioned the opportunities for international trade and export. Through organisations that I've previously mentioned, I've met companies in Wales that do a roaring trade with GE Aerospace, but they don't do it with GE Aerospace in Wales; they do it directly with headquarters in the US, which is a great story. It makes communication and back and forth a bit challenging sometimes, because they think they're talking to different people, but that is a real benefit of having a devolved Government that is willing to support an international brand and an international presence as well.

I think, as Keith has mentioned, in terms of other opportunities, funding—again, I've mentioned things coming at the right time in the right way, making it simple and accessible. I know that Business Wales does a great job in terms of being a one-stop shop; there's always more improvement that can be made. And then, particularly on things where Wales could seek to be a leader, Keith mentioned SMRs in north Wales, but also looking at things in the digital space and data space as well.

And the foundational economy is another area where we could do much more in Wales, and Welsh Government has got that procurement and purchasing power to spend more in Wales.

Thank you, both. My next question is about the idea of critical products. So, one of the actions in the refreshed action plan states that the Welsh Government will

'Mobilise our business support for manufacturing around a targeted number of critical products that have strategic significance to the long-term prosperity of Wales.'

So, I'm interested in your views about this approach and how you think that critical products might be identified.

Keith.

I think I can try and pick your winners and big opportunities. So, I'd suggest that those are probably those things that we are not, at the moment—hydrogen, but particularly offshore renewables, renewables and nuclear power. I think those are areas we should back, developing the supply chain inward investment towards those opportunities.

David.

Yes, thank you. I was looking for the reference in the refreshed plan. I actually had a different view on this from Keith. The challenge that I would have with that approach is that we'd need to properly understand by what measure are strategic and critical products, or critical products with strategic significance, being identified and defined. So, are they strategically important from the economic perspective? In the document, there are frequent references to the well-being goals in the Well-being of Future Generations (Wales) Act 2015, which is important. So, if we assume that the metric will be more than economic, and given the Welsh Government's approach under the FG Act and ways of working, et cetera, we'd need to understand more about how those 'critical products' are going to be selected. Because, as I mentioned to a colleague, having a wholly economic metric or metrics for success is clearly not the approach the Welsh Government is having, but that will need to be a factor in terms of consideration.

To an outsider or an organisation that's perhaps not able to be as versed in public policy as some of the people around the table, I think there's potential for confusion there in terms of a mix of foundational sectors in the economy, which are obviously important to the long-term future of Wales, but also there's a reference to how Wales can be made more resilient in the face of global conflicts. So, it's important, but we'd need to see more—. I'd like to see more to understand what is meant by that.

Okay. Thank you, both. So, my next question and my last question is about the anchoring of key manufacturing companies. Again, in the refreshed plan, the Welsh Government says that it wants to improve anchorage of manufacturing companies, and encourage greater decision making in Wales. So, what are your views on the role of Welsh Government in anchoring key manufacturing companies, and how effective do you think the levers are that the Welsh Government has at its disposal to actually achieve this?

Keith.

I think there are a number of things that attract people and anchor people. We have seen, in Wales and in Scotland, a loss of companies that are not anchored, so it’s getting the finance, administration and headquarter facilities in Wales—that’s an important factor. Getting large infrastructure equipment involved and anchored, where it's difficult to move, is important. If you look at the things that attract people, they are availability of space and factory facilities, availability of skills, supply chains—resilient supply chains—and support for research and development. I think that in all those areas the Welsh Government is putting the effort in, it's part of its plan to support those things, so just more of those things, really, those are what I’d say are important to anchor it.

David.

Yes, thank you. So, I think the building up of, and supporting the growth of, indigenous Welsh businesses and also attracting significant inward investment is obviously the right balance to strike. One of the challenges may well be that the factors in terms of a company staying or investing are manifold, and some of those factors may be outside the scope of the Welsh Government in terms of competence. We might be looking at hard-and-fast measures around tax policy, corporation tax and that kind of thing. The skills and the talent pool are a critical deciding factor, I think, in terms of where a company's going to be based and how they're going to be anchored. Recruitment and skills is one of the key priority focus areas that we are working on with Welsh Government at the moment. It is a challenge for us, and I think that that is something that people will continue to look at, notwithstanding, even if you have a largely or even partly automated process, you will still need people, and skilled people, in and around you to run that factory. Strengthening indigenous supply chains: yes, good. I would add to Keith’s list, I would add transport infrastructure and connectivity, both physical and digital. Even though it is shipping and trucking, and we can talk about emissions, et cetera, the relatively good connectivity between south Wales and outer London, inner London, Heathrow, is very good for us. The connectivity with Cardiff Airport is good for us as well, so those are factors.

Okay, thank you, Vikki. I'll now bring in Sarah Murphy. Sarah.

Thank you, Chair. I'm just going to ask a couple of questions around automation and artificial intelligence. So, to start with, could you just give us your views on how advances in automation and artificial intelligence are currently affecting the manufacturing sector in Wales and how it might change in the future? Pros and cons, opportunities and challenges, what's your understanding of the landscape at the moment?

I think fear. I think 'fear' is a good word to put into it. I think there is a reluctance. We've managed to scare people into thinking there's going to be a massive cost of artificial, automation and digital. I think that's been encouraged in some respects by some of the vendors. I think there are a number of programmes now that are encouraging low-cost automation, low-cost digital. The Smart Manufacturing Data Hub that's coming out of Ulster involves industry in Wales and across the UK. There's a good opportunity to see low-cost sensors, monitors and feeding back, and then moving on to artificial intelligence and getting better solutions. So, I think taking it a step at a time, developing good case studies and good demonstrators is important, because if we don't do that, we're going to scare the life out of people, and they'll not go for it.

Absolutely, thank you very much. That's really helpful. David.

I think the important thing in what you said there is 'pros and cons' and 'opportunities'. I think if we look at digital and big-data solutions, that is something that many companies, including ourselves, are already well-engaged with in terms of everything from capacity planning to labour force analysis, predicted maintenance, real-time analysis of what we're doing, how we're doing it, labour hours, costs, et cetera. And undoubtedly some companies, depending on where they are and what they do, will be able to move quicker than others. I think that it is also important to note that, for some companies, the introduction of, for example, a smart board, a smart whiteboard or a digital iPad or whatever, in place of a manual, is a digital solution. So, it's not the case that all companies are going to switch to ChatGPT overnight, but they may well go paperless, which obviously has other benefits as well.

Specifically from a manufacturing perspective, it will be key in terms of how solutions and changes are introduced; when change is introduced for employees, and working with the workforce on that; and what internal structures companies have in place to ensure that things like communication, flow-down, training and briefing happen in the right way and at the right time, so that the workforce aren't put off and the workforce understand that there are benefits to it, and all those kinds of things as well. So, there's more work to do, but there is huge opportunity.

Okay. Thank you very much. That kind of follows on very nicely to my last question as well, just to drill down a little bit more. Are you content, then, with the degree of emphasis that the refreshed manufacturing action plan places on automation and artificial intelligence, particularly in terms of the impact that this might have on the manufacturing workforce?

Yes, but are we doing enough? Are we doing the right steps after that? It's important that we want to go there, and there are great advantages in competitiveness in automation. We accept that. From a skills point of view, if we haven't got the skills, automation helps us to recover that.

In a number of cases, it would be useful to look at what other countries have done. I think that, in the States, the Inflation Reduction Act placed a lot of emphasis on changing behaviour through tax credits. I think that seems to be quite a good idea, to have a look at that, from a skills point of view and from an automation point of view, and decarbonisation. It would be quite useful.

Absolutely. Thank you. That's really helpful.

Just to build on some of the things that I said before as well, automation, AI, big data and data science, et cetera, are clearly going to have a place in manufacturing. To a previous Member's questions, there is going to be a competitive edge for companies in Wales.

I have also previously mentioned the importance of regulation here as well. From an aerospace and aviation industry perspective, we are heavily regulated, and rightly so. The regulation and the ways of working drive us to ensure that we put safety first, and that we put the safety of the flying public before all else. But I think that it is important that things move in tandem—so, improvements in processes or ways of working are supported by AI and digital solutions and automation.

It's certainly, in the current state, unlikely that—and this my personal view—tomorrow, certain processes will be wholly replaced by robot automation. It will be a hybrid model for the foreseeable future, particularly if there is regulation governing how work needs to be done. So, the balance is going to be important.

I think that, where there are benefits—and it would perhaps be good to see more of this in the document from the Welsh Government—is in terms of where improvements have been made. I have already mentioned that for some companies and industries and workplaces, a 'digital solution' will be a change from something manual or a hard copy to an iPad or a digital display. So, a digital solution, or the introduction of digital solutions or automated processes, doesn't necessarily mean a negative impact on workers. I think that that is a dangerous precedent to set, and a worrying tone to lead with, as Keith has mentioned.

So, if everything is considered in the round, that's important because, if new solutions are introduced sensibly and sensitively, in partnership, then there are huge benefits to have because the individuals who are doing the work will understand more how, if we are able to automate A, B and C, then that will free me up to do X, Y and Z. While there is not a huge amount of detail in the plan to date—and I understand that, at the pace at which, particularly, automation or AI moves, it is difficult to put a line in the sand for that—I think that it will be important that the Welsh Government and the relevant Minister are fleet of foot and nimble enough, from a policy perspective, to be able to respond and encourage as well, because there will be huge benefits for companies. I know that there are case studies in the document itself. I think, for example, freeing up human capability to do the creative problem-solving, thinking element if you can replace or support small, repetitive, manual, for example, measurement tasks, that will be a huge benefit as well.

Thank you, both, very much. That's the—

There's a skills element as well, obviously, to this, and we find quite often that the digital side of this is picked up by somebody who is a gamer or who has come through the system a different way, which can be exciting and bring different people into the industry. I think that's good, but we have to think about how we add that bit to apprenticeships and skills training to make it wider.

Thank you very much. That was referred to in our previous panel, about degree apprenticeships. My colleague Hefin David raised that and about ensuring that we're incorporating that into our future planning for the workforce. So, thank you very much. Thank you very much, Chair.

Thank you, Sarah. I'll now bring in Luke Fletcher. Luke.

Diolch, Cadeirydd. Just focusing in on the net-zero skills elements of the manufacturing sector, we've had the Welsh Government's net-zero skills action plan. To what extent do you think that that action plan actually meets the needs of the manufacturing sector?

I think that the key to the success of any action plan is going to be one that directly relates to the skills and jobs that companies in the sector actually need. So, it's good to see a certain level of engagement with industry in that way. However, I remember previous action plans and plans for things from the Welsh Government, such as the green jobs strategy and stuff. One of the things that that struggled with was definitions. I've mentioned definitions before. So, is it a skills action plan that includes net zero, or is it a net-zero skills action plan that is specifically focused on, and, if it's the latter, what are net-zero skills and how's that going to be understood internally within the Welsh Government, but also by industry, as well? I think that—and this is a point that has been made previously in the session—this isn't something that can be done in isolation, so it's not just something for manufacturing, it's not just something for transport and housing; there is a read-across across all the departments in Welsh Government, and that's going to be an important part of making that action plan a success, I think.

So, the key thing about the action plan is that the definition of what we actually mean by 'net-zero skills' is too vague.

I think there can always be more, and if there's industry input in how we're aligning to this, because the challenge with skills training will be the lag and the lead time—. So, we can train for something now, but that may well be a different requirement in a few years' time. So, that forward-looking element is going to be important as well.

Keith, did you want to come in?

I think it's the same as the indicators we mentioned before. With some of these documents, you've got to go and find another document and read through the document. So, the net-zero skills action plan is very comprehensive, but, coming down to what do we mean and what do we actually want to do, I'm thinking of up in Dundee, where one of the colleges up there has actually gone for net-zero skills training. What does that mean? It means bringing in and selling off a wind turbine and teaching people how to work on that and the assembly. It's solar panels, it's electric vehicles. It's recognising all those technologies that we don't have and they're not in the apprenticeship at the moment. So, I think, in some respects, simplifying it and being quite specific would be quite useful.

Chair, I'm conscious we're about to go into overtime, so I'll skip to my last question, if that's okay. Looking at the refreshed manufacturing action plan, I'd be keen to understand your views on the decarbonisation and energy efficiency aspects of the plan. Do you think they go far enough?

Firstly, I think it does. I think the action plan is right. It comes down to actually making it happen. So, there is the housing, there's the infrastructure, there's actually decarbonisation of industry. There are a lot of things in it that are covered, and I think that's all correct, but it's getting down to the 'how'. I think it's the 'how' we need to get—the next stage. And I think that's where we need to involve the stakeholders, in the next stage of taking that plan forward.

And that's where the monitoring side of it will be key, moving forward, yes.

Yes. But the people who are actually involved in those industries, getting their involvement is now the stage, really.

David, did you wish to add anything?

I would probably return to a couple of themes I've mentioned previously, which are, for example, joining up across Government. If the priority is decarbonisation of the logistics fleet or the transport network, that's all well and good and something to be applauded, but that will require, before we get to that point, fuel infrastructure, charging infrastructure—I know there's been an announcement on charging infrastructure recently—and that needs, then, to fit in with the life-cycle of where the industry is at as well, and skills as well. For example, if there's a different skills requirement to drive a hydrogen artic lorry and we haven't been training for that previously, then that's going to be a challenge, because we'll have a fleet of hydrogen artics with no-one to drive them, for example. So, the joining up across the Welsh Government departments will be key, and then making sure that there's good, say—your word—monitoring, alignment to, listening to the industry to understand where they are so that the timelines all match up. Otherwise, you'll end up with something you can't run.

I think the only other issue is the steel industry. The biggest decarbonisation problem we've got is in Neath Port Talbot. It's relatively easy to solve with electric arc furnaces, but very expensive to solve. So, is that the route that we go down, and make green steel? And who is going to make that investment?

Grêt. Diolch yn fawr.

Diolch yn fawr iawn, Luke. Our session has come to an end, but thank you, both, for being with us today. Your evidence will be very useful for our inquiry. A copy of today's transcript will be sent to you in due course, so if there are any issues with that, then please let us know, but, once again, thank you very much indeed for being with us today.

Thank you.

Diolch. Thank you.

Symudwn ni ymlaen, felly, i eitem 8 ar ein hagenda, a dwi'n cynnig, o dan Reol Sefydlog 17.42, i benderfynu gwahardd y cyhoedd o weddill y cyfarfod. A yw Aelodau'n fodlon? Ydyn, dwi'n gweld bod Aelodau’n fodlon, felly derbynnir y cynnig ac fe symudwn ni i'n sesiwn breifat ni.