The Thales Investment in Ebbw Vale

It must be Ebbw Vale week on the Gwlad Blog this week.

In amongst the Brexit noise which has dominated the week’s media reporting, Monday’s headlines featured the announcement of a new £20 million cyber technology research centre – the ‘National Digital Exploitation Centre’ – being opened this month in Ebbw Vale by Thales, the €15 billion French defence company. On the BBC Wales News website the headline was “Thales unveils Ebbw Vale cyber security research base”.

Naturally this grabbed my attention; Thales (named for the 6th-Century BC Greek philosopher and pronounced Tal’-ess) is a company I know well, and until I started my new project at the end of last year I had spent the last three years working in the Welsh cyber-security industry. In case anyone’s wondering, cyber-security is the technology of keeping computer networks secure from attackers who may otherwise steal data or take control of the networks for their own purposes. This is one of the fastest-growing sectors of the technology industry, with good reason, and without question it is a Good Thing for more people to be working in this field here in Wales – even more so in a part of the country where good-quality white-collar jobs are hard to come by.

And yet…

We’ve been here before

Thales employs around 6,500 across the UK, in the aerospace, defence, rail and motor-racing sectors, and this isn’t its first venture into Wales by any means. Between 2001 and 2005 its was the owner of Wales’s flagship optical technology company in St. Asaph, the former Pilkington Optronics Ltd. It wasn’t a great time for them; historically one of the company’s biggest customers had been the US military, and in the early 2000s there was little chance of those orders being won by a French-owned company. By 2005 the facility was on the verge of closure. It was saved because the local management – entrepreneurial Welshmen – put together a business case for acquiring the facility and running it once again as a standalone company. They raised £151 million from the London-based private-equity firm Candover Investments, and bought Thales out to re-establish the company as Qioptiq Ltd. It was a great success – the moment they ceased to be French-owned, they were inundated with US defence orders. It affected me directly – I was running my own startup optical company at the time and was about to place an order with them, but they ran out of capacity: so I had to get my optics made in Munich instead.

Under local management Qioptiq has gone from strength to strength. It was acquired by the US-based Excelitas group in 2011 for £400 million, though it retains the Qioptiq name, and continues to be a prime example of a successful Welsh technology company, all achieved with remarkably little government interference.

The small print

Ken Skates, the Welsh Government Minister for the Economy, with representatives of Thales and the University of South Wales.

One has to read all the way to the bottom of the BBC News article, or visit Thales’ own website here or here, to get a clearer idea of what’s going on in Ebbw Vale. It’s not exactly a £20 million investment into Wales by Thales. To be fair to them, it does seem that they are putting in £10 million of their own but the rest is coming from that generous benefactor of foreign companies, the Welsh Government. That’s the same Welsh Government which dropped £1.6 million into Ford’s lap just three months ago, only to have them announce this week that there’ll be major job losses in Bridgend even so.

I stress, this isn’t a criticism of Thales: they are putting cash of their own in, cash that could have gone elsewhere. I suspect that quite apart from the Welsh Government’s generous endowment, they’ve been influenced by the fact that their Vice President of Secure Communications, Gareth Williams, is a local lad who used to work down the road at General Dynamics (where they have terrible trouble recruiting skilled staff and bring large numbers in from Bristol).

Essentially, what this really seems to be is a training centre where Thales puts in some infrastructure, the University of South Wales provides training, and the opportunity exists for other companies to move in alongside Thales to use the facilities, possibly hire the trainees, and hopefully grow and prosper. On paper it’s a good idea, with a great deal in common with Airbus’s ‘Endeavr’ programme (that really is how it’s spelt) in Newport.

However, I can’t help seeing a strong resemblance to the Techniums that were set up in the early 2000s in St. Asaph, Pembroke, Baglan and various other places in the early 2000s. The programme was launched with similar fanfare to this, only to be abolished ten years later after £100 million of public money had been spent with very little to show for it. As Prof. Dylan Jones-Evans wrote in his post-mortem of the scheme, recalling the ambition to nurture a Welsh Google or Nokia,

That was highly unlikely to happen when there was preference for spending nearly £100m of taxpayers’ money on shiny new buildings rather than focusing on attracting the best scientists to Wales while, at the same time, encouraging a greater entrepreneurial spirit among students and graduates as they do in the great universities of Stanford, Cambridge and MIT.

And so we come to the nub of the problem. Wales actually has quite a thriving cyber-security sector as it is, as witnessed by the South Wales Cyber-Security Cluster, and its North Wales counterpart. I suspect that £20 million, or even £10 million, invested in these largely home-grown companies would yield great dividends for the companies themselves and the communities they’re located in. But the Welsh Government has never been able to resist the lure of big, shiny, headline-grabbing projects. “If you build it, they will come”; only often they don’t.

In Gwlad we advocate a low-key but high-value approach to supporting business, recognising that successful businesses are as likely to originate in a garage or a disused squash court as in an architectural landmark – probably more so. We’d prefer to invest in infrastructure and education rather than bricks and mortar, following best practices from places like Finland and Israel. Even so, no-one will be happier than I to see Thales’s venture in Ebbw Vale prosper and flourish, and I wish them well.

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