Monday, December 19, 2011
THE RELATIVE PROSPERITY OF WALES 2010
It showed that this measure of prosperity had, following the recession of 2009, increased in all UK regions.
The good news for Wales is that, along with the East Midlands, it had the fastest growth in GVA/head of population in 2010 at 3.3 per cent. Before anyone gets excited about this news, it can probably be explained by the fact that both regions are the most manufacturing intensive in Britain and that the brief export led recovery experienced in 2010 was beneficial, at least in the short term. In fact, the bad news was that Wales is still the poorest part of the UK with a GVA/head of £15,145. In contrast, the richest part of the UK – London – had a GVA per head of £35,026.
And if we look at the growth of London since 1999, the year of the establishment of the National Assembly for Wales, the economic prosperity of Britain’s capital city has grown by 73 per cent. In contrast, the Welsh economy had only increased its wealth by 48 per cent.
So what has been happening by industry, where data lags regional GVA by one year? It shows that, despite the fact that Wales is still one of the main regions for manufacturing, its importance has decreased from being 22 per cent of the Welsh economy in 1999 to 15 per cent in 2009. In contrast, the public sector has grown from 23 per cent to 27 per cent over the same period. And ironically, given the way that the First Minister suggested this week that financial and insurance services was only important to the City of London, it is this sector that has experienced the largest growth in Wales since 1999, expanding by 125 per cent during this period.
What about the different parts of Wales? Has growth been even over this period? As many of you are no doubt aware, two thirds of Wales of Wales has qualified for around £4 billion of European Structural Funding since 2000 as one of the poorest regions in Europe. The aim of this funding was to close the prosperity gap.
The question is whether this has happened?
Unfortunately not, at least compared to the UK economy, with West Wales and the Valleys declining from 65 per cent of the UK average prosperity to 63 per cent since 1999. That is not to say that the difference between the richest and poorest parts of Wales has not been reduced. It has, but that is only because the growth in East Wales, which includes Cardiff, Newport, Wrexham and Flintshire, has been slower.
On a more local level, the good news is that Anglesey is no longer the poorest part of the UK. Unfortunately, it has been replaced by the Gwent Valleys, which now has a GVA/head of £10,654 in 2009 as compared to a UK average of £20,000.
So what does all this tells us.
Obviously, it shows that Wales remains the poorest part of the UK despite billions of pounds in additional European funding and a so-called devolution dividend. Not surprisingly, there remains the argument that the Welsh economy has suffered from long-term structural issues for decades, especially in relation to manufacturing.
Yet, the evidence suggests that the decline in this important industry, so critical for high value activities such as exporting, has actually declined at a faster rate in Wales since 1999 after actually growing during the early 1990s. There is also the issue of whether the Welsh Government could have done more or whether all the economic levers lie with the UK Government?
Certainly, some will look enviously at the growth rate of the Scottish economy, which has expanded by 60 per cent whilst Wales has demonstrated the lowest growth of any of the four nations. Critics may also argue that most of the effort of politicians and civil servants has been equivalent to shuffling deckchairs on the Titanic, bringing in a new economic document every few years rather than taking a long term view of how to truly transform the economy. From “A Winning Wales” in 2002, to “Wales: a Vibrant Economy” in 2005 to the “Economic Renewal Programme” in 2010, what we have seen is policymakers tinkering at the edges of economic development rather than coming up with a real vision for the future of the nation’s prosperity, one that truly changes the way that this country’s economy is managed.
Certainly, the lack of real and consistent strategy has had a major impact on the nation’s economic potential and, consequently, much of the billions of European Structural Funding, as well as the money available from the Welsh Government’s own funds, has been largely squandered, despite having the highest proportional spend of any region on economic development.
Back in 2001, the then Assembly Government under the leadership of Rhodri Morgan set targets to increase Wales's GVA to 90 per cent of the average for the UK by 2010. Unfortunately, we have gone nowhere near that target with Wales’ prosperity being 74 per cent of the UK average in 2010.
Rather than writing yet another grand document, what is now needed is real action to drive forward entrepreneurship, innovation, productivity, exporting and skills to ensure that, in the next decade, the Welsh economy can make some major strides towards closing the prosperity gap and finally get off the bottom of the UK economic league table.