7. Statement by the Minister for Economy: Tech and Cyber Sectors

– in the Senedd at 4:47 pm on 6 June 2023.

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Photo of Elin Jones Elin Jones Plaid Cymru 4:47, 6 June 2023

(Translated)

The next item, therefore, will be the statement, again by the Minister for Economy, on the tech and cyber sectors. Therefore, the Minister to make his statement. Vaughan Gething.

Photo of Vaughan Gething Vaughan Gething Labour 4:48, 6 June 2023

Diolch, Llywydd. Today, I'm pleased to talk to Members again about the tech and cyber sectors in Wales, areas in which Wales has developed a global reputation for our expertise. Improving the well-being of everyone in Wales is the economic mission that drives this Government's approach. Our mission sets out how we're building a stronger, greener economy, based on the principles of fair work, sustainability and the industries and services of the future.

However, we recognise there are many challenges along that path, which is why we constantly look for opportunities to develop areas of strength in Wales. The Welsh Government has long recognised the benefits and opportunities associated with the tech and cyber sectors. That includes more established areas like fintech and medtech, as well as more emerging areas, such as lawtech.

The UK is a world leader in cyber security and Wales is home to one of the largest cyber ecosystems in the UK. We already have numerous assets and achievements to be proud of. There are around 100 companies across Wales delivering cyber-related products and services. As part of the wider ecosystem, the National Digital Exploitation Centre, ResilientWorks, Cyber Wales, Technology Connected and FinTech Wales are all supporting the Welsh tech sector to grow. Companies like Tramshed Tech, with a footprint in Cardiff, Swansea and Newport, are providing vital spaces to help incubate new businesses in the tech, digital and creative sectors. They're working with global businesses like Microsoft and Google, regenerating disused sites across south Wales to transform them into co-working spaces, and I'm sure we'll hear later of the plans for Swansea's Palace Theatre, and, indeed, Newport's Innovation Station. With these partners and others, we're developing the talent and the skills required for the industry's current and future needs.

Through Tech Valleys, the Welsh Government is creating a sustainable technology campus, working in partnership with Thales and Blaenau Gwent council, alongside academia and industry. This partnership is helping to provide world-class, cutting-edge facilities that will research solutions for the cyber resilience of our critical national infrastructure. Over £16 million has been committed by the Welsh Government for the delivery of the technology campus. This is a key, strategic investment for the Welsh Government, and the largest from the Tech Valleys programme budget.

Photo of Vaughan Gething Vaughan Gething Labour 4:50, 6 June 2023

I'm delighted that Thales, a world player in the cyber industry, has recognised that Wales is a great place to invest, and has anchored in Ebbw Vale. Not only is Thales providing much-needed high-quality jobs, but its presence is also helping to revitalise the community in Ebbw Vale, using local suppliers and supporting community organisations. Thales is also committed to developing a more diverse cyber-skilled workforce of the future, from schoolchildren to budding scientists.

Across the different tiers of education, partnerships are forming. I was pleased to speak at the launch event formalising Airbus and Cardiff University's strategic partnership last year. In Newport, the Airbus Endeavr Wales joint venture is inviting applications from SMEs and academia to support technology challenges within Airbus Defence and Space. The Welsh Government is funding this in partnership with Airbus on a 50:50 basis, with support from Cardiff University.

I'm particularly proud that the Welsh cyber and tech sectors have supported initiatives to attract more women and girls to take up careers in these industries. Cyber Wales is driving forward the Women in Cyber Wales programme, while the CyberFirst Girls competition aims to support girls interested in a career in cyber security. This was recently rolled out in Wales, and the winning teams for the 2023 competition included St Joseph's Roman Catholic High School in Newport. And Dirprwy Lywydd, may I offer my congratulations to all participants? And indeed, I see the local Member in the Chamber as well.

As I mentioned, we have one of the biggest cyber ecosystems in the UK, and Wales is already home to global players in the industry. We have a great story to tell on cyber, and our new cyber action plan, which I launched at the start of May, helps to tell it. The plan sets out a clear belief that Wales prospers through cyber resilience, talent and innovation.

We're not resting on the strength of the sector currently—we're going further. The cyber action plan sets out our intent to maximise the benefits of these investments. To support the plan, I was proud to commit, on behalf of the Welsh Government, £3 million of investment into the cyber innovation hub over two years, helping to put Wales firmly at the core of cyber security excellence worldwide. The hub's mission is to train more than 1,500 people with cyber security skills, to help create 25 high-growth companies and attract more than £20 million in private equity investment by 2030. It brings together industry, academia, Government and the defence sector to lead the transformation and growth of the cyber security cluster. One of the many benefits of the hub is its co-ordinated approach to skills. This should ensure that we have a pool of talent ready to meet the demand of a growing sector and address under-representation along gender, race and social class lines.

As well as our strengths in cyber security, Wales is home to approximately 128 fintech companies, employing around 16,000 people. Wales has already attracted a number of leading fintechs to grow their operations here in Wales, including the challenger banks Monzo and Starling, as well as international companies, such as US-based Bipsync and Netherlands-based Backbase. Fintechs based in Wales are experiencing strong international growth, with over 1,000 jobs created in the Wales fintech sector during 2021, including companies like Sonovate, Delio, Pepper Money, Wealthify, Credas and, of course, not forgetting the Principality Building Society.

The FinTech Wales accelerator programme the Foundry has also created over 100 jobs in the last year. Since it launched in 2021, 16 start-ups have gone from strength to strength, raising over £20 million of investment. Our strengths in fintech offer an opportunity to attract further investment, create high-value jobs, and grow the Welsh economy. This is supported by a range of partners, including FinTech Wales, which aims to establish Wales as a globally recognised hub for fintech excellence. It is led by industry, and has representations from Welsh companies like Confused.com, Admiral, the Principality again, and Capital Law. As well as driving forward developments in the industry, we also recognise the importance of manufacturers within Welsh cyber and tech sectors. From chip developers to photonics and wafers, they're all vital parts of the industry going forward, and that is just one of the reasons why I've just refreshed the manufacturing action plan.

(Translated)

The Deputy Presiding Officer took the Chair.

Photo of Vaughan Gething Vaughan Gething Labour 4:55, 6 June 2023

The manufacturing sector is facing challenges akin to a perfect storm: global economic shocks, labour shortages, energy price rises and continuing supply chain difficulties. The refreshed plan is designed to ensure the sector can embrace and benefit from technological change brought about by the fourth industrial revolution. It will help Wales to remain a leading manufacturing nation as part of a more prosperous and equal economy. It will also help to futureproof existing capability, take advantage of future opportunities and respond to some of our biggest long-term challenges. A number of those challenges result from global factors, which is why our international activity is focused on making sure the world knows that Wales is a great place to invest, and to support our cyber and tech companies to export their goods and services.

The Welsh Government continues to promote the tech sector at home and abroad, and has used this platform to showcase Welsh tech businesses to a global audience, as indeed I was able to do at the St David's Day celebrations at the World Expo in Dubai. That's why we continue to support industry events like Wales Tech Week, which attract a global audience to Wales. In 2020, over 4,500 registrations from 900 companies came from across 17 countries. We're looking forward to welcoming those global businesses to Wales again this October.

The trade missions programme provides tech companies with access to new markets and opportunities around the world. The recent delegation of tech businesses that I travelled with to San Francisco were part of this programme on what was a successful visit. We've also established six export clusters, including one for the tech sector, to bring businesses together to share knowledge and overcome barriers to successful exporting. 

Dirprwy Lywydd, this statement sets out just some of the ways that the tech and cyber sectors are thriving in Wales. This Welsh Government will continue to support the sectors to help ensure that they play a major role in ensuring a prosperous Welsh economy for both today and tomorrow. 

Photo of Natasha Asghar Natasha Asghar Conservative 4:57, 6 June 2023

Thank you, Minister, for this afternoon's statement. There's no denying that the tech and cyber sectors are two important industries, and it's imperative that we all do what we can to help them flourish. I'm very pleased to hear you list so many of the great tech companies here in Wales. Quite a few, I must stress, do fall in my region of south-east Wales, so I did have a smile on my face as you were saying those. 

Only recently, I visited Tramshed Tech in Newport to see some of the work that they're doing, and I'm very much looking forward to seeing what new, exciting businesses will grow as a result of them being in place in future. There are a lot of exciting things happening in the tech and cyber sectors here in Wales, Minister, I've got no doubt, as you've set out a few of the things that the Welsh Government is going to be doing in this area, but I want to actually specifically focus on the cyber action plan. The plan sounds incredibly promising on paper, but the proof, as they say, is always in the pudding. 

The objectives set out in the plan are strong, and I hope that we can all work together to deliver them, because we all want to see a stronger and greener economy. The new cyber innovations hub in Cardiff, which has received, as you mentioned, £3 million of Welsh Government funding, is really a welcome move. This new centre, as you said, which will create a co-ordinated approach to skills, innovation, new enterprise, promises to train 1,500 individuals with cybersecurity skills. It’s music to my ears. I know it’s still early days, Minister, but can I get a commitment from you that you will keep the Senedd updated in terms of the hub’s progress going forward? I would also be interested to know if the Welsh Government has given any consideration to establishing similar hubs elsewhere in the country. I, alongside my Welsh Conservatives colleagues, would really like to see an institute of technology in north-east Wales to support the next generation, so it would be good to get your thoughts on that as well, Minister. It seems a key feature of this plan is around education, which, I must admit, given Labour’s bad record in this area, doesn’t really fill me with much confidence.

However, are you confident, Minister, that young people in Wales will be fully able and equipped to take advantage of the tech and cyber sectors, given your Government’s track record? As far as I’m concerned, getting young people more engaged in science, technology, engineering and mathematics subjects would be a good place to start. Minister, have you had any conversations with companies like Amazon, which runs the AWS GetIT programme—a scheme designed to inspire 12 to 14-year-old students, especially girls, to consider a future in STEM? Amazon also has a second scheme, called AWS Spark, which provides students aged between 13 and 18 years of age with content design that inspires them to explore future cloud careers. I'm sure you'll agree, Minister, that initiatives like this are a very good way to get youngsters involved in tech and also cyber sectors from a very early age. So, if you haven't already had discussions with Amazon, will you commit to engaging with them, to see if they can play a part in delivering this plan? The cyber action plan for Wales will, and I quote,

'help people, businesses and public services reduce the risks of cyber-attacks'.

As I'm sure you'll be aware, Minister, the BBC, British Airways and Boots, amongst other companies, were this week caught up in a cyber incident, exposing thousands of employees' personal data to hackers. This incident alone should highlight the serious need for robust action. Like I said, Minister, this action plan sounds really promising, and I welcome genuinely the principles of it, and I look forward to seeing how this and everything else you outline in your statement progresses, going forward. So, Minister, will you now commit today to keeping the Senedd up to date with any future developments in this area? And it would be really good to hear about them, going forward. Thank you.

Photo of Vaughan Gething Vaughan Gething Labour 5:00, 6 June 2023

Thank you for the comments and questions. I am, of course, more than happy to continue to update Members on progress in both the cyber and tech sectors. There's lots to be proud of, and I think lots of room for further growth into the future.

I'll just deal with your points around cyber innovation, of whether you could replicate something like that in north-east Wales. Actually, what we're looking to do is, building on the work we've done with the Advanced Manufacturing Research Centre, where we worked with the university sector, including the link with, obviously, the University of Sheffield, we'll also engage with the wider defence sector on proposals for an advanced technology centre. You will have heard Jack Sargeant, who isn't in the room, but he regularly talks about that development, what that will mean, and the range of similar skills we will need. So, this isn't just an activity within one part of Wales. And I think that, whether there is a named institute or not, I am confident that we will see more growth in this area in north and south Wales.

On Amazon, the Member will be delighted to know that we do have engagement with Amazon Web Services. I met them recently in Swansea. That's distinct, of course, from the fulfilment centre. Web services, actually, there's been a real success in attracting people to come to Wales and to stay in Wales. And, actually, it's a really important platform for small and medium businesses to take advantage of the breadth of the Amazon platform, but all the things that need to work behind it for it to work, and it's just one example of a major company that has taken an interest in Wales. And, interestingly, the jobs there are not jobs that differ significantly in terms of the pay you can achieve in other parts of the UK. It's one of the points about the mobility within the sector, about where you can work with good connectivity.

And I know the Member made a point about Welsh education, but, actually, the reason why people like Amazon are interested in coming here, the reason why other companies in this sector are investing in growing here, is because they don't take the Member's view on the benefits of Welsh education or otherwise, both for those people with further education qualifications, those people who can leave school as well, indeed, also the graduate programme as well. You're actually seeing people wanting to locate here because of the supply of graduates and, actually, it gives us a good reason not just for people to come to study in Wales, but to stay in Wales and to be successful, and to be able to come back to Wales, if they've gone elsewhere earlier in their career. So, actually, I think there are good reasons to be optimistic about this sector continuing to grow, and it's a matter of credit to both further and higher education establishments in Wales that those businesses see a direct future here with a pipeline of talent.

And when it comes to the other reason why people are interested in coming here, it is both the points the First Minister made earlier about the stability that the Government provides, being a reliable partner here in Wales; it's also about the quality of life people can have as well. For some people, if you're used to working in London and the south-east, the ability to work in a different environment and have all the benefits that a life in Wales provides are things that are attractive to lots of people within this sector. I met a number of them when I've been in Swansea and in west Wales previously, and, indeed, here around Cardiff and Newport as well. So, I look forward to further improvements in the number of people who are looking to set up and create and grow their businesses here, and I'll be delighted to keep the Chamber updated.

Photo of Luke Fletcher Luke Fletcher Plaid Cymru 5:04, 6 June 2023

We welcome the Welsh Government's recent publication of its cyber action plan. It is right that the growing threat posed by malicious actors in this sector is addressed in a way that seeks to harness Wales's enormous potential as a global leader in cyber security.

Artificial intelligence has become a prominent issue of late, with increasing calls from industry experts for more robust governmental regulation of this burgeoning technology. Could the Minister therefore explain how the cyber action plan will sit alongside current Welsh Government thinking on AI, and whether the Welsh Government is considering specific action to regulate AI usage in Wales?

I also note the Welsh Government's aim to enhance cyber security in the public sector through the Cymru security operations centre, and engaging with local authorities on the implementation of the National Cyber Security Centre's cyber assessment framework. Could the Minister explain what specific support is being offered to local authorities to progress this work, especially given continued pressures on local authority finances? 

Of course, while the ambitions of Government are laudable, the reality is that the digital foundations that are needed for successful implementation remain somewhat shaky here in Wales. Wales has the lowest coverage of ultrafast gigabit broadband of any of the home nations, just 52 per cent compared with 71 per cent in England and 87 per cent in Northern Ireland. We also have the lowest coverage of full fibre broadband at 40 per cent. We also know that the level of digital exclusion in Wales is higher compared to the rest of the UK, with up to 7 per cent of the population, or 180,000 people, not using the internet.

We should also consider the regional and socioeconomic disparities that underpin these figures, with rural and poorer households particularly affected in this respect. And it's also apparent that while the Welsh Government's current digital strategy delivery plan outlines specific targeted intervention in the public sector, there is a lack of clarity at present on how this could be co-ordinated with initiatives for digital improvements in the private sector. In this respect, we need a more integrated top-down strategy for digital transformation of the Welsh economy. 

At this point, I'd like to draw the Minister's attention to the Irish Government's Digital Ireland framework, which stakeholders have identified as a particularly effective example. So, on this basis, will the Welsh Government commit to reviewing its current digital strategy to facilitate faster improvements in our digital ecosystem in both the public and private sectors?

And then finally on the Tech Valleys, I'm interested to learn how many jobs have been created as a result of Welsh Government's investment, and how much of the investment has gone to Welsh tech companies in the Valleys. 

Photo of Vaughan Gething Vaughan Gething Labour 5:07, 6 June 2023

On Tech Valleys, I don't have the information available to give him. I'll happily look at information we can provide not just on the spend, but on employment outcomes as well, and where that money has typically gone and the radius within which it's been spent.

On the digital action plan, the digital action plan is about two years old, a bit over two years old, so within that two years we've seen an awful lot of change and churn, not just within what's happened through that two years with lots of businesses moving to having a digital footprint when they didn't before, because of course they had to go online through 2020 and 2021, but that has meant that there are opportunities in the cyber sector, as well as real risks to those businesses. If you've not had an online presence and you suddenly develop one, you need to protect yourself and your customers, and that's a risk to you and your business and your customers. It's also an opportunity as well.

And in lots of this, we're talking about what for a company might be an innovation, but actually is pretty standard for lots of other partners. So, we will be reviewing and looking at the progress we've made with our digital action plan, and, indeed, what that might mean for the future. I won't commit to a time frame for a formal refresh, but we're having to at the same time take account of some of the points the Member made in his first set of questions. That is about the journey of AI and the acceleration of it—the acceleration of public awareness, I think, rather than the acceleration of AI per se—because, actually, until recently most people wouldn't have been aware of AI, but now they are. Yet, actually, that progress has been taking place for some time. 

When I had the pleasure of being the health Minister, we talked lots about how AI and machine learning was already making a difference in a range of areas beneficial to the health service, to help diagnose, to help understand treatment options, and then to make it a more rapid way of research and innovation as well. So, the story of AI isn't simply one about greater risks; there are opportunities. And I think that comes back, though, to the challenge the Member put out about what are we doing with our cyber action plan that links to AI opportunities and the wider tech sector as well. Actually, that is both seeing that this is an opportunity to help improve the productivity of businesses, what they can provide, the way that services can be responsive to what we are likely to want and need from them, and at the same time the very real challenges around innovation, or rather around regulation.

And there's an uncomfortable challenge for all of us as decision makers in an area that moves so rapidly, whether we have a regulatory framework—and just put to one side for a moment whether that's devolved or a reserved responsibility—but actually to have a regulatory framework that is fit for purpose and can keep up to pace with the changes that are taking place around us. It's a genuine conundrum that I don't think we've honestly resolved, about how to have a framework that protects the interests of the user, and of the public, and our information and how that's used, and how we choose to interact with services to look for the improvement that is obviously there to be gained, together with the risk about who ultimately owns and controls the way that AI will work in a range of our areas of life. And I don't think it will be a comfortable place for Members to simply say, 'Ministers should have wide-ranging powers to change regulations when they think there's a need to.' Our processes don't work necessarily in the way that the digital world around us is making progress.

Finally, on the Member's point around infrastructure, I dealt with this briefly in the previous statement and Jane Dodds's question, but we know that these are reserved responsibilities. We also know that we have regularly, through the history of devolution, used devolved resources to invest in infrastructure, and we're going to need to do that again. So, as well as engaging with the UK Government so that they meet their own responsibilities, we will have a programme looking to make sure that we do even more to try to provide the sort of connectivity that will allow businesses to work in different parts of Wales and to generally take up the opportunities that exist. But the positive point is we do have a good story to tell. Our challenge is how more of the country is able to take part in writing the future of that story.

Photo of Mike Hedges Mike Hedges Labour 5:11, 6 June 2023

I welcome the statement by the Minister. I'm pleased the Welsh Government has recognised the benefits and opportunities associated with the tech and cyber sectors. I keep on going on about the tech sector in here; I'm glad that I'm the one raising it and I'm not responding to it. I'm very pleased with our strengths in cyber security, and that Wales is home to over 120 fintech companies, employing around 16,000 people.

Tech and cyber are not geographically constrained. Tech is one of the highest paying sectors and we need more of our population in higher paid sectors. A recognised problem is not a lack of employment, it's a lack of permanent, full-time, well-paid employment. As Nokia and BlackBerry have shown, you can be at one stage the most advanced company in a tech sector, which can be followed by losing most of your market. IBM dominated the computer market for many years, up until the early 1980s. 

In Swansea we have Technium 1, Technium 2, and the Ethos building, and the local university supporting high-tech businesses, one which I believe the Minister's visited recently. Will the Minister outline the role of universities in developing and supporting the tech sector?

Photo of Vaughan Gething Vaughan Gething Labour 5:13, 6 June 2023

I thank the Member for that. I think it's helpful Mike has given us three examples of companies that were previously tech giants that are now no longer seen in that way: Nokia, BlackBerry and IBM. For those Members in the room who are old enough to remember when they were genuine giants in the sector, they've now been overtaken by a range of others. It's a point about the need to carry on innovating and keeping up pace, and actually the university sector do have a key role. If you look at the cyber innovation hub, Cardiff University host it together with the Airbus and Welsh Government Endeavr programme, but actually they're taking a co-ordinating role on behalf of Welsh higher education.

I'll be in Swansea tomorrow, looking at a range of things that are actually taking place in the university sector there as well. And part of the strength of what Tramshed do is working with both the local business sector and having very practical and applied relationships with the university sector, too. So it's part of what we're looking to do with our innovation strategy, and we're talking about translating research into something that will make a practical difference in line with the mission. So, I think, Mike, you should hopefully see more in this sector that applies the learning and the research from universities in a way that will benefit your constituents, mine and others, and I'm sure you will continue to make the case for a continued focus on recent development and innovation and the benefits of the wider tech sector.

Photo of David Rees David Rees Labour 5:14, 6 June 2023

It wasn't that long ago when they were major companies. [Laughter.]

Photo of David Rees David Rees Labour

(Translated)

And finally, Jayne Bryant.

Photo of Jayne Bryant Jayne Bryant Labour

Diolch, Deputy Llywydd. Thank you for the statement, Minister, as well. It's great to hear of so many positive developments in the tech and cyber sector. Newport's Airbus collaboration is of particular interest. I recently visited Airbus, once again in Newport West, and I've seen first-hand the fantastic high-tech work that they are doing. I'd also like to congratulate St Joseph's RC High School on their fantastic achievements, and I'd also like to acknowledge the work of KLA and their work with schools and the community and their commitment to diversity. 

It's also clear that the Welsh Government have a plan and are ambitious, but what's ultimately disappointing, however, is in certain areas our ambition is not being matched by the UK Government. In fact, I'd go as far as to say that their stance is actively stifling it. In my constituency in Newport West, our semiconductor cluster has historically grown because of support from the Welsh Government, local government and UK Government. We have a skilled workforce base that's specialised and eager to expand. I've met and spoken to many of the highly skilled and dedicated workforce in Newport, and they're always positive about the Welsh Government and what the Minister wants to do, but they are completely frustrated at the lack of detail, long-term thinking and engagement coming from the Westminster Government. Minister, for Wales and UK to lead on the semiconductor and tech sector, we must ensure that everyone is working off the same page. Resources must be utilised as effectively as possible. What conversations are you having with your counterparts in Westminster to ensure that we have a joint approach, so that industry and Government are all working co-operatively towards the same goal?

Photo of Vaughan Gething Vaughan Gething Labour 5:16, 6 June 2023

I thank the Member for the comments and questions. I'm more than happy to recognise again the success of St Joseph's high school and, indeed, the work that is taking place in and around Newport. It's a genuine hotbed of activity, and I think there is potential for more, not just the work with Airbus and Endeavr, but the soft landings programme that we're developing around the innovation station in Newport to have companies who will want to invest in Wales, the support they'll be provided with, and Newport will be their first port of call.

The Member makes a point around KLA and the fact that the help and support we provided them with to provide a power solution for them was a key factor in them looking to expand their operations, with hundreds of additional well-paid jobs coming to the Newport area, but more than that the stability in relationships provided with the Welsh Government.

We've had to wait an awfully long time for a semiconductor strategy from the UK Government, and when it came, it was a little underwhelming, I think it's fair to say. But we do now have a strategy. The difficulty is it sets a very low bar of practical support to match a high level of ambition. The advantages we have at present will not last forever. The compound semiconductor cluster we have could and should be a real competitive advantage for us. We continue to look to have more deep and meaningful conversations with UK Ministers in both the departments for science and innovation as well as business and trade, because, actually, this is an area where both Governments could do more by having a more fruitful and constructive relationship with each other. That would mean that UK Ministers would need to respond to us and make sure that we're genuinely engaged in the work to develop a real plan for the future.