THE PERFORMANCE OF THE WELSH ECONOMY 2019
At the end of every year, the Office for National Statistics release a whole raft of data that demonstrates the state of the Welsh and UK economy.
This year, following a general election where a new UK Government has promised to transform the fortunes of the nations and regions outside of London, that data is even more pertinent to where the focus should be within the Welsh economy over the next decade.
According to the latest data on Gross Domestic Product (the standard measure of economic growth) which was released last Thursday, Wales has finally lost its status as the poorest part of the United Kingdom swapping places with the North East of England.
This is despite the fact that our economic growth between 2017 and 2018 was slightly below that for the UK as a whole and that we remain at only 75 per cent of the UK economic prosperity levels.
Indeed, with London (171 per cent) and the South East of England (107 per cent) being the most prosperous parts of the UK, it is not surprising that there have been calls from areas such as the West Midlands (85 per cent) Yorkshire and the Humber (81 per cent), the East Midlands (81 per cent) and the North East of England (74 per cent) for greater government investment to grow their economies.
And within Wales, there are certainly economic challenges at a geographical level, in particular for the city regions.
For example, whilst the counties of Cardiff, Newport and Monmouthshire are the most prosperous in Wales, those next to them, namely the Central and Gwent Valleys, remain amongst the ten poorest areas in the UK even though the Gwent Valleys have grown by 2.5 per cent in the last year (as compared to an economic decline of 4.0 per cent for the Central Valleys).
As MPs voted yesterday on the EU (Withdrawal Agreement) Bill, one of the key issues to be considered would the impact on any trade deal on manufacturing, which accounts for a higher proportion of the economy in areas such as the Midlands, Yorkshire and the Humber, the North of England and Wales.
In fact, Wales now has the most manufacturing intensive economy in the UK having grown from 15.4 per cent in 2009 to 16.9 per cent in 2018 and manufacturing has made a greater contribution to the growth of the economy since the recession than for any other part of the UK.
However, given that 61 per cent of Welsh exports go to European countries as compared to 44 per cent for the UK, Welsh manufacturing is likely to be hit harder than any other nation in the UK if there is any obstruction to trade when we leave.
And whilst there are small signs for optimism that other markets (such as the USA) are growing, any substantial difficulties in the next twelve months with the future trade agreement with the EU could have a major impact on the £11 billion of Welsh goods exported annually.
Another key commitment of the Conservative manifesto was to create a vibrant science-based economy post-Brexit with a commitment to double research and development funding to £18 billion in the new Parliament.
However, with data released last month showing that half of all private sector research and development (R&D) taking place in the golden triangle of London, East England and the South East of England, will the new government focus their efforts on improving R&D in the poorer regions of the UK?
In Wales, such a move would certainly be welcomed given that R&D expenditure by the private sector, at £430 million in 2018, remains the lowest in the UK. With various studies having shown how Wales could improve its research position over the next few years, there may finally be an opportunity to get access to those resources to turn those strategies into reality.
Therefore, with a new UK Government in place that promises to share the proceeds of wealth creation beyond London and the South East of England, there is now an opportunity for the Wales Office and the Welsh Government to put any differences aside and to work together to ensure that we get our fair share of any additional funding that the new UK Government will allocate to any new economic renewal programme for the regions.
However, given the higher dependence on manufacturing and the low level of R&D spending within the region, there must also a focus on ensuring the resilience of our high quality and high skill-based manufacturing firms whatever happens with a future trade deal with Europe.
And with R&D being the fuel that drives any innovative economy, any future allocation of support must ensure that those parts of the UK, such as Wales, that have not benefited in the past, must be given the financial support to develop their innovative potential in the future.