Across Wales a lively debate surrounds both the health of the Welsh economy and its future prospects. It is widely accepted that the performance of the Welsh economy lags behind the UK average and a range of comparator regions in other parts of Europe. There is some good news. In recent years unemployment has been low and Wales performs better than other ‘peripheral regions’ on measures like Gross Disposable Household Income per person and average household wealth. But the economy faces significant challenges including comparatively low levels of GVA, higher levels of worklessness, poorer health outcomes and spatial concentrations of poverty and multiple deprivation. The statistics have fuelled competing narratives about the Welsh economy. Some economists argue that it is performing as well as can be reasonably expected given the hand Wales has been dealt. Others argue that it should and can do much better.
To understand what lies behind the economic data and the competing interpretations of it, it is worth considering how the legacy of the past moulds the economy of Wales today. In this blog we identify seven distinct episodes, each of which has left an enduring imprint on Wales, which shapes the current state of the economy but also casts its shadow over the possible paths for future development.
The pre-industrial phase of the Welsh economy is often overlooked. Analysts of this era draw a distinction between the rural economies that existed in fertile coastal areas and upland Wales. They emphasise the historic importance of strong trading links to English markets (symbolised for many by the Welsh Drovers). Like much of the UK at this time, land ownership was concentrated in the hands of a small elite, many of whom lived outside of Wales. Living conditions for much of the population were precarious as regular outbreaks of riots in protest at a lack of food and the export of what little was available testify, and the early 18th Century witnessed a rising tide of social protest including the Rebecca Riots, the Chartist Movement and the Newport Rising.
The 19th Century marked the second chapter of the Welsh economy, which came to be dominated by the mining of coal, the quarrying of slate and the production of iron. Symbiotically tied to the growth of the British Empire, these industries not only shaped the economy of Wales but also its settlement pattern. The rapid growth of the ports of Swansea and Cardiff, and the docks at Barry, was powered by the need to export the industrial outputs of South Wales to the wider reaches of the British Empire. New towns also sprang up across the Valleys of South Wales, housing the labour force for the coal and iron works, where previously Welsh towns had been largely restricted to the fertile coastal plain of southern Wales or in North Wales around the fortifications constructed by Edward 1st (Dimmock, 2005). Similarly, in West Wales, the opening of the Royal Dockyard at Pembroke Dock in 1814 stimulated the growth of a new town on the outskirts of the older settlement of Pembroke.
As the 20th century opened, the first signs of the decline of the industrial cornerstones of the Welsh economy began to appear. As competition increased and traditional markets declined so Welsh industries became less competitive. Nationalisation of some of the key industrial sectors in the 1940s and 1950s left their mark on the political culture of Wales. But the economy was not just about coal and steel, this was the age of the large firm and inward investment from other parts of the UK and further afield. Major investments by companies such as Hotpoint, Ferodo and Courtaulds provided new employment opportunities for both men and, increasingly, women.
The 1970s and 1980s witnessed the fourth economic chapter of Wales, ushering in the spectre of de-industrialisation. Global competition and reductions in state support for traditional industries led to wave after wave of redundancies and closures. From the laying off of 6,500 workers on a single day at the Shotton Steelworks in 1970, through to the closure of once thriving coal mines, the Welsh economy was battered by the winds of economic change. Industrial policy sought to attract new firms, such as Sony and Panasonic, and relocated public sector employers to Wales. The legacy for Wales has been low levels of entrepreneurship amongst a workforce more used to working for major employers, declining levels of GVA as capital intensive industries with high levels of productivity per capita retrench and close, and a reliance on the public sector jobs. Yet, those firms that remain provide a foundation of skilled manufacturing activities.
The 1980s and 1990s was an age of further economic decline but also of regeneration and redevelopment. Coal mines and factories closed with devastating effects on local communities. The Cardiff Bay Development Corporation was launched in 1987, charged with regenerating the derelict docklands and surrounding areas of Cardiff Bay, in 1999, West Wales and the Valleys were granted ‘Objective 1’ status by the EU, a rating that the area has retained to the current day. The Welsh Development Agency, which had been established in 1976, embarked on major programmes of land reclamation, advance factory provision and the attraction of foreign investment, which shaped the industrial landscape of Wales. In particular, a policy of inward investment was vigorously pursued, leading to later accusations of Wales becoming a ‘branch plant’ economy.
Devolution in 1999 handed Wales greater control over economic development and coincided with the beginnings of a new approach that emphasised innovation, entrepreneurship and the development of the service economy. Cardiff reaped many of the benefits of this new approach and the city has acted as a magnet for both investment and labour. In the early twenty first century it was one of the fastest growing cities in the UK and had a greater proportion of high-growth firms than any other ‘core’ city in the UK. However, other parts of Wales have struggled to match this activity and West Wales and the Valleys remains one of the more economically disadvantaged parts of Europe. This has led researchers to suggest that whilst Wales may have gained a degree of economic self-determination it has yet to become economically self-reliant.
There has been growing recognition of the importance of moving towards a more sustainable economy and, following the passing of the Wellbeing of Future Generations Act in 2015, Welsh Government ministers have a statutory duty to promote sustainable development, both now and into the future. This leads us to the beginning of a possible seventh chapter for the Welsh economy, one which is predicated on decarbonisation and emphasises local activity in the form of a ‘foundational’ economy. Economic strategy making is also being decentralised with the agreement of two ‘city-deals’ and two ‘growth-deals’ and the creation of a new ‘Arfor’ economic region which indicates a recognition of how economic policies might support wider social and environmental objectives, rather than vice versa.
Like any good book, the next chapter for Wales’ economy will build on what went before, but it does not have to be determined by the past. Public policy can play an important role in crafting new directions that embrace Wales’ heritage and potential. Too often in the past economic policies have been tied to existing trajectories and approaches. In writing the next chapter in Wales’ economic development we need to create new narratives and new paths which champion the values that are important to its people, rather than mimicking approaches from elsewhere. This is an important and a shared challenge that calls for boldness and fresh thinking by government, business and local communities.