Monday, March 19, 2012


Last week, there was a political storm over the latest GDP figures to emerge from the European Union and which measure the relative prosperity of its regions.

As expected, West Wales and the Valleys – consisting of 15 local authorities – lost ground on nearly every other part of Europe despite being given £1.2bn of European funding for the period 2000-2006 under the Objective 1 programme.

Not surprisingly, the opposition parties went straight on the attack to accuse the Labour Party of failing to use what it once termed a “once-in-a-lifetime opportunity”.

In riposte, that anonymous individual known as the Welsh Government spokesperson responded by noting that GDP per head in West Wales and the Valleys has broadly kept pace with the UK as a whole since 2001.

Was he correct in dismissing such arguments?

Technically speaking, yes he was, as the rate of growth in West Wales and the Valleys is approximately the same as that for the rest of the UK for the period 2000-2009. But given that only London and Hampshire has shown any positive growth out of all the regions over that period, as compared to an overall growth of 23% across the European Union, it does beg the question of what the last UK Government was doing in terms of regional economic policy. That is a discussion for another day. Instead we should focus on the main reason behind European Structural Funding such as Objective 1 and the current round of Convergence funds.

Let’s be clear, Structural Funds are a mechanism for reducing the disparities between regions in Europe. Their role is not, per se, to close the gap between West Wales and the Valleys and the United Kingdom. In that respect, we should focus any analysis on the economic impact of the programmes on a European level, especially the performance relative to the other Objective 1 regions supported by the European Commission during the last decade.

So what do these statistics tell us?

Back in 2000, when we first received European funding, West Wales and the Valleys was the sixth most prosperous Objective 1 region in Europe with a GDP per head of 17,300 euros. However, by 2009, the region had fallen to 42nd out of 50 regions with a GDP per head of 15,700 euros.

And, given our emphasis on high quality tourism, I am sure it would surprise many to find that both the Canaries and the Algarve have a higher level of relative prosperity than West Wales and the Valleys.

Indeed, in relative terms, nearly every other Objective 1 region in Europe has performed better economically during this decade. Some have argued that the economic decline in West Wales and the Valleys is down to the world recession during 2008 and 2009, and the data suggests that the other Objective 1 areas in the UK, including South Yorkshire, Merseyside and Cornwall, were not as resilient as other poorer areas on the Continent.

Yet even if we only consider the growth in GDP per head for the period 2000-2007, we find that Wales’ poorest region had the worse growth rate – at 21.4% – of any disadvantaged area in Europe. In contrast, the Spanish region of Galicia grew at 63.6% over the same period.

So what went wrong?

Certainly the evidence, contrary to the statements from the Welsh Government, suggests that West Wales and the Valleys, relative to other areas in receipt of Objective 1 funding, has performed badly. Some have suggested that this relative failure is down to the fact that there were too many projects being funded through this programme and resources were spread too thinly across our poorest region.

As a result, the new £2bn Convergence programme, which replaced Objective 1 funding, has focused on fewer strategic projects. Yet others would argue that the failure to engage properly with the private sector, in conjunction with the dominance of public sector-driven projects, is a trend that has actually increased under the new round of European funding.

While the next few rounds of GDP statistics will tell their own story of the relative economic success of current Convergence funding, it is becoming clear that West Wales and the Valleys will now qualify for an unprecedented third round of financial support from the European Structural Funds programme.

Given the way that other regions of Europe in receipt of such support have grown economically while West Wales and the Valleys has floundered, I would suggest that Welsh policymakers should start looking at how other poorer parts of Europe have grown their economies, as it seems we still have much to learn in ensuring that our disadvantaged regions become competitive again.