Skip to main content

Wales poorer than Poland



Earlier this week, many would have been horrified to read that some parts of Wales are officially worse off economically than areas within the former Soviet Bloc such as rural Poland.

A report from the Organisation for Economic Co-operation and Development (OECD) showed that Wales remained one of the poorest nations in Europe and that, despite billions of pounds of European funding, the wealth gap between Wales and the rest of the UK had actually widened.

Drawing on the latest GVA data - which track the prosperity levels of the various nations and regions of the UK and which this blog has reported on previously – the OECD reported that the GVA per head for London in 2007 was 152 per cent of the UK average as compared to Wales at 75 per cent, the worst performance of any UK region. A decade earlier, London was 138 per cent of average prosperity of the UK in 1997 whilst Wales was 80 per cent.

Ironically for those who lambast the previous government’s regional policies, the average annual GVA growth rates for all regions apart from London was higher between 1989 and 1997 than over the last decade.

Therefore, the analysis of Gross Value Added (GVA) rates between 1997 and 2007 reveals that the gap between London and other parts of the UK has actually widened under the current Labour administration, with Wales among the hardest hit.

During the period 1997-2007, the London economy grew in overall terms by 91 per cent as compared to a growth of only 54 per cent for Wales. The UK economy grew by 69 per cent. This suggests that if the Wales’ growth had kept pace with the UK average over the last decade, an extra £4.2 billion would have been generated in the Welsh economy.

What on earth has gone wrong?

After all, devolution was supposed to give Wales the powers to determine its own policies for economic development that would be separate from Whitehall? More importantly, the creation of a new devolved body coincided with the financial bonanza of billions of pounds of European funding being made available to boost the Welsh economy.

Rather than admitting that there remain deep rooted structural problems within the Welsh economy and, more importantly, developing strategies to address them, it is becoming clear that successive Assembly Governments have been in a constant state of denial about the declining state of the Welsh economy for years.

One visible example is the fact that our once powerful manufacturing industry has lost tens of thousands of jobs and yet politicians are happy to take a ‘not me guv’ attitude and simply blame globalisation for our ills. The fact that they could have encouraged greater productivity, higher levels of research and development, more skills and training and higher levels of investment in process technologies for the industry, seems to have completely passed them by.

Rather than working with and listening to the private sector, the Assembly Government seems content to continue with the current status quo which has resulted in the disastrous economic performance of our economy during the last decade.

The most visible example of this inability to make the most of business expertise and experience is in the management of the European Structural Funds, where there has been minimal involvement by the private sector in the development and delivery of regeneration programmes such as those provided through £2 billion of European funding.

In fact, during the last major funding programme (known as Objective 1), statistics show that only 13 per cent of the £1.3 billion programme earmarked for the poorest parts of Wales went to private sector projects between 2000 and 2006. In contrast, over half of the available funding went to public sector backed projects.

Whilst promises have been made to ensure greater interaction with the private sector, this has not materialised with the £2 billion programme of funding for the period 2007-2013. To date, only 19 per cent of the expressions of interest for money under the current Convergence funding scheme have come from the private sector i.e. 34 expressions of interest in new projects have been received from the private sector as compared to 30 from the public sector, 66 from the Assembly Government and 46 from the voluntary sector.

More worryingly, many are now concerned that the majority of European funds, rather than adding anything additional, are being largely used to subsidise existing Assembly Government programmes and that private sector organisations, who could and should be leading innovative new projects that could make a difference to the Welsh economy, are being turned off by the massive bureaucracy and increasing delays in making decisions on any applications.

Given this sorry state of affairs where the businesses – the wealth creators in our economy - are essentially being crowded out by public sector bodies such as the Assembly Government, it is no wonder that the gap in prosperity between Wales and many other parts of Europe is growing.

Certainly, that needs to change, and change quickly, if we are to start closing the prosperity gap with the rest of the UK over the next few years.

Comments

Colin Chapman-Finch said…
Are you sure you are an economist, or you part of some kind of elaborate hoax?

Some of the stuff you write is positively void of any understanding of the basic laws of economics and a total lack awareness of how the global economy works and hangs together.

To compare Wales to Poland is like comparing a tootbrush to a lawnmower.

God help your students.
Anonymous said…
"Some of the stuff you write is positively void of any understanding of the basic laws of economics and a total lack awareness of how the global economy works and hangs together."

It's a report from the OECD, you troll.
Peter said…
Your comments regarding the role of the private sector in European programmes are spot on.

This is what the CBI said prior to the launch of the Objective 1 programme

"Given that a number of Objective 1 regions failed to fully use their quotas in the past, the Assembly must ensure a clear and accessible application process within which the private sector can be directly involved. It is the role of the Assembly to ‘educate’ the private sector as to the means by which they can become active in new programmes and measures. This has not been the case previously, as past structural funding has been
predominantly for public sector projects.

In the past, the private sector has hardly been engaged in the process of analysing the problems, or in identifying programmes that
would actually work for business, particularly SMEs. Expertise in the private sector should not be overlooked, as was the case with the formulation and delivery of many Objective 2 projects in South Wales. Business has a vested interest in business infrastructure development: business views must be sought in the determination of projects.

EU Technical Assistance Funds should be made available to facilitate private sector involvement in relevant projects. Only through the enhancement of new partnerships that cut across the public and private sectors ill effective and efficient evelopment action occur".

Prophetically, the private sector has been shut out of Euro programmes in Wales and, as you rightly state, it is no surprise that the Welsh economy is faltering.
Anonymous said…
The report was referring to Anglesey and when you see the mess in the Local Authority mind you can see why.
No offence boys but move over and let some people who know about development and the economy have a chance - make experience and qualifications top the list , not whether or not they can sing Calon Lan
Welshwalker said…
I don't understand why you are calling for more private sector involvement in seeking and disseminating EU funds. Who and how is this involvement going to work?
People in SME business do not have time or incentive to get involved in this way -they have to earn a living, pay wages and stave off creditors on a daily basis.
So this basically means involvement by senior people (lobbyists) from multi-national companies who have little interest in Wales and who are looking for grants and subsidies which are then mopped up before moving to the next cheapest area to exploit. That's business.
The solution is not more private business involvement it is more (public & political) investment in improving the business climate by building a decent transport and digital infrastructure.
Of course, as you imply, long term investment in education and research is the key to all this and cutting that is slowly cutting our own economic throats with a blunt hacksaw in full public view. Sad.

Popular posts from this blog

THE IMPORTANCE OF FRANCHISING

When we talk about start-ups and entrepreneurship, rarely do we discuss the potential of franchising not only as a way of establishing new ventures in the economy but also as a method of growing existing businesses. According to the British Franchising Association, franchising is the granting of a licence by one person (the franchisor) to another (the franchisee), which entitles the franchisee to own and operate their own business under the brand, systems and proven business model of the franchisor. The franchisee also receives initial training and ongoing support, comprising all the elements necessary to establish a previously untrained person in the business. This enables individuals to start their own businesses without having to develop their own ideas and utilising an existing brand and established market. Of course, whilst each franchise business is owned and operated by the franchisee, the franchisor controls the quality and standards of the way in which the business is

Answers on a postcard

Is today the day that the Welsh political landscape is finally changed forever? Blamerbell seems to think so and his post is supported by the Western Mail's first political article this morning, in which Plaid have set Labour a deadline of 2pm to come up with a deal. It also reports that Rhodri is still in denial that only 32% of the electorate voted for him. “We want to know what the public in Wales now thinks should happen. They voted. They produced two possible outcomes and we really need to know, as the French public did when they had a run-off between Sarkozy and Ségolène Royal what their real views were when it came down to it. What do the public of Wales want now? Do they want a Labour-led administration or do they want a Plaid Cymru-led administration? Answers on a postcard please!” Given the anti-Labour feeling I experienced during the campaign, if there was a run-off between Plaid and the Tories, how many of the 22% of the vote gained by the Tories do you think would

THE MANUFACTURING STRATEGY FOR WALES

Last night, I received the following comment on the previous post relating to a piece I had written back in early 2007 about the state of the manufacturing sector in Wales. "Dylan, you seem to be ignoring the fact that manufacturers in Wales have written the manufacturing strategy. Small and large manufacturers, all represented at the Manufacturing forum, have co-written this strategy. WAG has recently supported this strategy and have funded a co-ordinator with resources. Manufactures are happy with this progress as they are following the strategy they wanted. I know that the Conservatives have attacked the strategy as they seem to think that WAG wrote the strategy. They couldn't be more wrong. The Manufacturing Strategy was written by manufacturers, for manufacturers and is supported by WAG. If you don't agree with this, then I can invite you to the next Manufacturing Forum and you can explain to the manufacturers how their strategy is wrong....I appreciate that there is