Covid: How the pandemic is changing Welsh and London economies

The Welsh economy will “hugely” benefit from the outsourcing revolution prompted by the coronavirus pandemic, an industry expert believes.

Guillaume Vergnaud is convinced that just as technology firms have moved away from Silicon Valley in America, the same will happen to London.

He said cities such as Cardiff and Swansea, with their universities and skilled workforces, were ideal.

However, he said it may take several years to happen.

Mr Vergnaud, managing director of outsourcing specialist New Horizons Global Partners, said cheap rents and quick, reliable access to England were a “win-win” for firms looking to escape London’s sky-high rents.

“So far, Wales has been hit particularly hard economically by Covid-19 lockdowns,” he said.

“This, in conjunction with a history of local jobs being outsourced overseas, means there is an understandable sensitivity in Wales to global expansion.

Cardiff University
image captionCities like Cardiff and Swansea have universities and skilled workforces in place, said Guillaume Vergnaud

“In the new remote-first work environment, we are seeing businesses thinking not just about their goals internationally, but also rethinking their distribution of staff internally. 

“Just as in the United States, major tech firms are reducing their presence in Silicon Valley, we expect to see a redistribution of staff out of the UK’s south-east.

“This is likely to hugely benefit strong, middle-sized cities, such as Cardiff and Swansea. Areas with a sizable and educated potential workforce.”

He added: “While there is still demand for a certain amount of office space, UK businesses would like to avoid crippling London commercial rents.

“Many businesses are still waiting on the resolution of the pandemic, and ongoing Brexit uncertainty, before making long-term plans. 

“But we can expect to see these changes occurring within the next year.”

Guillaume Vergnaud
image captionGuillaume Vergnaud said changes will not happen overnight

Mr Vergnaud said the lockdowns sparked by the Covid-19 pandemic had done little to stop the trend of firms outsourcing overseas.

His firm, which helps companies run their overseas operations, said this move to “remote-first” work environments meant businesses were more sceptical of the need for expensive office space in the UK.

And while some operations will move overseas, he said there would always be demand for a physical presence in the UK.

Mr Vergnaud also believes that as the middle class continues to expand in Asia there will be lots of opportunities for Welsh firms to meet their “insatiable demand for e-commerce products and services”. 

“By way of illustration, Wales has a worldwide reputation for advanced manufacturing expertise,” he said.

“Increasing consumer demand in the travel and transport industries in Asia creates opportunities for niche aviation and automotive firms in Wales.”

Outsourcing goes both ways, he said, and he believes that many Asian firms could invest in Wales as they seek to establish a foothold in the UK.

“Many successful enterprises in the Asia-Pacific see the United Kingdom as a desirable expansion target,” he added.

‘Thriving tech scene’

This view was supported by Dylan Jones-Evans, a professor at the University of South Wales where he is chair in entrepreneurship and expert in business.

He said: “South Wales can certainly benefit from not only greater outsourcing of staff but also relocation by businesses from London and the south-east of England. 

“With a thriving tech scene, strong universities and strategic investments by the Cardiff Capital region into sectors such as compound semiconductors, medtech and fintech, there is a real opportunity to not only attract large employers but also new entrepreneurial businesses that would benefit from lower costs, access to talent and having some of the most beautiful coastline and countryside on their doorstep.”

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Commercial rents in Cardiff are about a third of the cost of premises in the City of London. 

South Wales also has a number of universities which provide a regular stream of skilled workers. 

A relatively short travelling time to and from London was also a selling point pre-pandemic.

These were the reasons that some large financial and professional services companies created bases here.

But cities like Cardiff are in competition with other UK cities including Bristol, Leeds and Glasgow to attract businesses. 

At the moment, nobody really knows the extent to which the rapid, enforced changes to how we work will remain in place after the pandemic is over.

Greater use of technology and more remote working seem likely to be here to stay, but offices might not be abandoned entirely.

By Ollie Pritchard-Jones
BBC News

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