DECLINING PERFORMANCE OF WELSH EXPORTS A CAUSE FOR CONCERN

Last week, I examined the export performance of the UK economy during 2009.

Today, it is the turn of Wales.

According to government statistics, the value of exports in Wales in 2009 was £9 billion as compared to £10.6 billion in 2008.

This represents a decline of 15.4 per cent over the last twelve months as compared to a fall of 9.8 per cent across the UK.

Only three other regions (Yorkshire and Humberside, Northern Ireland and the West Midlands) had a greater fall in export performance over this period, with Scotland actually increasing its export performance by 4.8 per cent in 2009.

However, it is not all bad news for the Welsh economy. Some sectors did actually grow their exports during the worst recession since the 1920s. For example, oil and gas (41.7 per cent), agriculture (30.4 per cent), creative/media (20 per cent), food and drink (18.9 per cent) and transport (17.2 per cent) have all shown considerable improvements in performance since 2008.

Both the creative/media industries and agriculture have grown at a time when overall UK exports have declined in both sectors although their overall impact is relatively low. For example, the creative/media sector accounts for 2.6 per cent of all UK exports but only 0.2 per cent of Welsh exports. Similarly, agricultural exports account for only 0.9 per cent of the Welsh total as compared to 3.1 per cent of total UK exports. This demonstrates that there is still considerable work to be done in terms of developing the export capacity of businesses in those sectors which currently show considerable promise.

Unfortunately, these growth sectors only account for 9 per cent of total exports coming from Wales. Indeed, four declining sectors – metals, engineering, chemicals and metals – accounted for 70 per cent of Welsh exports in 2009. At a UK level, the same four sectors made up 48 per cent of all exports.

The sector which showed the largest drop in output in Wales was biotechnology/pharmaceuticals, which went down from £456 million in 2008 to £238 million in 2009, a decline of 50 per cent in export performance. This contrasts with the performance of same sector at a UK level, which actually grew by 17.6 per cent over the same period. Similarly, Welsh exports in telecommunications declined by 21 per cent as compared to a growth of 11 per cent in the UK.

Given the emphasis on high technology industries by Welsh policymakers, this finding is worrying as it may suggest that Wales is focusing on areas within these critical sectors which are not growing at an international level.

In terms of destination, 53 per cent of Welsh exports currently go to European Union countries, similar to the UK level, although exports to the EU have declined by 21 per cent for Wales in 2009 as compared to 13 per cent for the UK.

The statistics also demonstrate the importance of North America for Welsh companies, which accounted for 24 per cent of all exports in 2009 as compared to 17 per cent for the UK as a whole, although the fall in export activity to this vital territory has been 12 per cent since 2008, three times the level of the UK decline. In the emerging economies of Asia and Latin America (which account for 13 per cent of Welsh exports), the picture remains mixed, with exports to Asia declining by 8 per cent in 2009, but increasing by 4 per cent in Latin America.

Therefore, what does this tell us about the Welsh economy?

It shows that, during the recession, our export performance has been considerably worse than the average for the UK as whole. Whilst there is positive news from some home grown industries, the picture remains one of overdependence on a few sectors that are dominated by large firms.

More worryingly, it shows that high technology sectors such as biotechnology/pharmaceuticals and telecommunications are actually declining at a time when both sectors are growing across the rest of the UK. Whilst we are outperforming the UK in terms of exports to North America, we have yet to achieve a similar performance within emerging markets, although Latin America looks promising.

Given these statistics, it seems surprising that there has been little discussion about improving the international performance of Wales PLC as part of the discussions during the economic renewal programme, especially given the fact that we remain one of the few regions in the UK which still has a sizeable manufacturing sector.

More worryingly, rather than investing in supporting the internationalisation of Welsh business, the Assembly Government has actually cut its budget for international business support by 31 per cent since 2005.

For a small nation on the periphery of Europe, the export performance of companies is critical in gaining a competitive advantage in the marketplace. Simply put, we have to sell outside of Wales because our home market is far too small.

As the world’s economies emerge out of recession, these statistics demonstrate unequivocally that Wales needs to up its game quickly to ensure that every support possible is given to those Welsh companies, particularly in emerging sectors, that want to sell their goods and services all over the World.