THE WELSH ECONOMY 2018

Last week, the Office for National Statistics (ONS) released its latest data for regional gross value added (GVA). This is an estimate of the economic performance of different parts of the UK by measuring the increase in the value of the economy due to the production of goods and services.
For politicians and policymakers, it has become the standard by which the Welsh economy is compared to the rest of the UK and, unfortunately, Wales has had the lowest GVA/head for the last two decades.

The headline figures from this year’s release of the statistics on regional GVA for 2017 shows that, unfortunately, nothing much has changed. 

London remains the most prosperous part of the UK with a GVA/head of £48,857 whilst Wales is the poorest with £19,899. This is despite the fact that the Welsh economy is now, overall, worth £62 billion.

Whilst Wales was the fastest growing part of the UK in 2016, there has been a considerable slowdown in the following year.  Between 2016 and 2017, the UK economy has grown by 3.6 per cent although Wales has only expanded by 3.1 per cent. Only Yorkshire and the Humberside, and the South West of England having lower growth rates across the UK.

But what is interesting for this new set of statistics from the ONS is that it gives academics and policymakers the opportunity to explore, for the first time, this GVA data at a detailed geographical and sectoral level.

As a result, this will allow a study to be made, in detail, of the relative prosperity of Wales at both county and industry level.

I hope that statisticians will provide a more detailed analysis in the very near future but an initial examination does provide some fascinating insights on some of the changes in the Welsh economy since the height of the recession in 2019. It also has some surprisingly positive trends.

For example, during the period 2009-2017, Wales was the fourth fastest growing region of the UK (30.2 per cent) growing from £47.8 billion in 2009 to £62.2 billion in 2017.

Only London (42.3 per cent), West Midlands (36.9 per cent) and East Midlands (31.4 per cent) had a higher level of economic growth and these four were the only regions and nations which had a better growth rate than the UK average.

If we look at growth by Welsh local authority area, then fastest growing part of Wales since 2009 is Flintshire (65.8 per cent) followed by Neath Port Talbot (43.2 per cent) and Blaenau Gwent (38.1 per cent).

Anglesey (16.0 per cent) is the slowest growing part of Wales and given the performance of Flintshire, demonstrates some of the real challenges that the North Wales Growth Deal could have in the future in ensuring prosperity across all parts of the region.

Of the three cities in Wales, only Cardiff (30.8 per cent) has grown at a faster rate than Wales with Swansea (23.5 per cent) and Newport (22.8 per cent) considerably behind the Welsh average.
If we examine the sectors that have grown since the recession, it gives an interesting picture of how Wales may be changing as an economy.

Again, it may be unexpected to find that manufacturing (52 per cent) has been growing far more quickly than the whole of the Welsh economy over the period 2009-2017. It has also grown at a faster rate than UK manufacturing over the same timescale (29 per cent) and has been responsible for a quarter of all Welsh economic growth during this time.

In fact, after years of decline (from 22 per cent of the Welsh economy in 1998 to a low of 14.8 per cent in 2009) manufacturing’s share has now grown to 17.3 per cent in 2017, generating £3.67 billion in GVA as a result. In particular, the manufacture of transport equipment has grown by 115 per cent and represents a quarter of all manufacturing activity, demonstrating the importance of the aerospace and motor industries to the economy.

The performance of three other sectors are worth noting. The first is the public sector and despite the policies of austerity since the beginning of the decade, its share of the economy has only gone down from 25.6 per cent in 2009 to 24.7 per cent in 2017 although this remains at a far higher level than for the UK (17.6 per cent).

The accommodation and food services sector – which makes up a large part of the tourism industry has also grown by 52 per cent since 2017 and is now worth over £2 billion to the Welsh economy. However, there is certainly room for further growth as Wales is only 3.8 per cent of this sector across the UK and, since 2009, has grown more slowly than for the UK as a whole. Certainly, the new concention centre being built in Newport should begin to change this.

And whilst only accounting for 2 per cent of the Welsh economy, agriculture forestry and fisheries have collectively grown by 127 per cent since 2009.

Therefore, whilst it is again easy to roll out the depressing headlines about Wales being bottom of the UK prosperity league table, the latest ONS data on economic prosperity shows a slow but positive transformation of the economy to one that is increasingly focused on the high skills and export potential within a growing manufacturing sector and which bodes well for the future.

Certainly, that finding should not be ignored and it is a policy area which both UK and Welsh Governments could build upon to help ensure that Wales closes the gap with the rest of the UK.
Nadolig Llawen. Merry Christmas.