Page last updated at 15:51 GMT, Thursday, 9 April 2009 16:51 UK

Will wage subsidies help Wales?

Nick Servini graphic
By Nick Servini

Wage slip
Wales' Proact is the only wage subsidy scheme in the UK

BBC Wales' business correspondent gives his latest assessment of the state of the Welsh economy.

There's no question that out of the five economic summits we've had in Wales so far the most significant outcome has been Proact - the only wage subsidy scheme now in existence in the UK.

Companies which have gone to short-time working and were financially solvent before the recession can apply for up to £4,000 per worker to help them out. Half goes to the cost of extra training, the other half goes towards a wage subsidy.

So far politicians in London have resisted the calls for a similar scheme from organisations like the Federation of Small Businesses.

First Minister Rhodri Morgan has championed Proact from the start, but will it work?

The theory goes that good companies will be carried through any temporary problems and put in good shape for the upturn by allowing them to not only retain their staff but improve skills at the same time.

Split opinion

Wage subsidies have always split opinion and critics argue that they do not deal with the root causes of weak consumer demand and a lack of finance.

In Wales, there are managing directors of Welsh car companies who insist that without the payments they will have to make people redundant. One told me there are very few lights at the end of the tunnel at the moment, and this is one of them.

Of course, what no-one knows yet is what will happen if the recession continues into next year and the assembly government is asked to protect jobs by signing another £48m cheque.

If they don't, more people could end up in places like the Llanelli job club I visited recently. The manager there has helped knock 126 CVs into shape in one month alone.

The centre is busier now than it has been for many years, not with the usual long-term unemployed, but with people who have been with the same employer for over a decade and have just found themselves looking for work.

To finish on a negative and a positive note, here are two interesting points that were recently published in the latest report by the property consultants King Sturge.

On the negative, it said that south Wales had started to stop the trend of manufacturing shifting to low-cost economies.

However, it said any benefits had now been outweighed by the downturn.

On a better note, the report also said that Wales had not suffered to the extent of other parts of the UK because in recent years it had avoided some of the worst excesses of speculative development and creative investment.

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