Sunday, December 12, 2010


There has been some discussion on the state of the Welsh economy following the release of the GVA data. Much of this has been on the state of the overall Welsh economy, although given my academic interest in regional economic development, I am starting to examine the data for West Wales and the Valleys which, unfortunately, is only available to 2008.

Two of the more interesting long term findings are discussed here.

As suggested last week, West Wales and the Valleys is the only region previously in receipt of Objective 1 funding which has seen its relative prosperity decline during the last decade. In contrast, Cornwall has now overtaken the region, despite being well behind us in 1999 and is continuing to grow.

The question is why?

In 2003, I was appointed as a special adviser to the Welsh Affairs Select Committee to examine European Structural Funds. At the time, the committee took evidence from representatives from the other three  regions on how they were managing the funds and, if my memory serves me right, what stood out from the Cornish evidence was the way that they were fully interacting with the private sector.

Could it also be that Cornwall demonstrates that a more local approach to the spending of European funding works better i.e. at a county level. I have made this point on several occasions - that the majority of the next round of Convergence funding should have been allocated on a  county basis in Wales rather than managed centrally by WAG. Unfortunately, it was ignored.

Perhaps the question is why the prosperity of West Wales and the Valleys which grew between 2004 and 2005, began to decline again after this period. Could it be that this is linked directly to the decision to abolish the WDA back in 2004, especially as the WDA were responsible for many of the support programmes at that time?

Certainly, it may be time for another inquiry into the spending of European funding by the Welsh Select Committee (although I doubt that I will be asked to advise this time round!)

Secondly, if we look at what has actually happened to the components of the West Wales and the Valleys economy between 1999 and 2008, we see that the overall regional economy has grown by 46.6 per cent, or £7.7 billion. However, we must not forget that a quarter of that growth would have come directly from the £2 billion of European and match funding provided for the Objective 1 programme.

Indeed, if we look at the impact of the public sector components as a whole during this period, they account for 40 per cent of the total growth in the West Wales and Valleys economy. Whereas the public sector was 25 per cent of the region's economy in 1999, this had grown to 29 per cent by 2008. This is despite the fact that Objective 1 was predominantly available to grow the private sector.

The region, of course consists of the largely rural West Wales and the industrialised Valleys, both very different areas economically. In the rural areas, there has been a catastrophic decline in agriculture of 75 per cent during the period 1999-2008. Compare this to a growth of 22 per cent in the agriculture sector in Cornwall during the same period.  Whilst hotels and restaurants have grown by 41 per cent, this is still below the growth of the region despite the funding available through the Wales Tourist Board and European grants.  In Cornwall, this sector grew by 60 per cent despite contributing far less to the economy as compared to West Wales and the Valleys (which may surprise many given the Rick Stein type image of the Cornish resorts).

Manufacturing has declined by 2.5 per cent during this period in West Wales and the Valleys. Whilst some may point to the long term decline of manufacturing being reflected in this data, it must be pointed out that, across the UK, manufacturing GREW by 2.5 per cent during the same period. However, given that the European Structural Funds largely ignored the sector during this period, that should not be surprising.

More analysis later this week as I go through the data (if the Ph.D exam in Sweden doesn't take too much time!)