Regional Economic Inequality — Mike Hedges AM
We have in Britain London and the South East of England amongst the wealthiest regions in Europe with West Wales and the valleys amongst the poorest. The only regions and nations to make a net contribution to the treasury are London and the South East of England.
We also know that Cardiff provides substantial employment for the surrounding areas. You only have to listen to the radio in the morning to hear about the traffic jams coming into Cardiff and talk to people travelling into Cardiff on valley lines trains. The future of South Wales has to be more than becoming commuter towns and villages for Cardiff.
If we were discussing the Welsh economy 50 years ago we would be in a country where coal and steel employed hundreds of thousands of people, where there were other major employers such as Hoover in Merthyr and BP in Neath Port Talbot across Wales.
The decline of steel, coal and major manufacturing companies has left a gap in the Welsh economy which has not been adequately filled.
We know three things about the Welsh economy
Firstly that we are poor at developing medium-sized companies into large companies but Admiral has shown it can be done.
Secondly that we underperform in terms of employment in key economic sectors associated with above average wages such as ICT and Professional services.
Thirdly that economic wealth is not evenly distributed across Wales or even within cities and regions.
As someone who has enthusiastically supported the Swansea City deal I am pleased in the way it is generally progressing.
The aim of the Swansea city deal is to address the integrated universal themes and challenges of energy, health and well-being and economic acceleration by harnessing the transformational power of digital networks and the asset base of Swansea Bay.
It is estimated that the City Deal investment could lever in total around £3.3bn of output and £1.3bn of gross value added for Wales, while supporting around 39,000 jobs in the region.
Even if the city deal fulfils every ambition and all the investment and jobs materialise it will not solve the economic problems of the Swansea Bay City region. It is a good start but not the whole answer. I write as someone who believes in endogenous growth using the Universities and colleges as the nuclei. The enhancement of a nation’s human capital will lead to economic growth by means of the development of new forms of technology and efficient and effective means of production. Knowledge-based industries play an important role especially ICT as they aid economic development.
One key industry that is not geographically constrained and has the ability to generate huge wealth is ICT. There is a tendency for ICT companies to cluster together, not just in Silicon Valley in California, but also around Cambridge University and computer games manufacturers around Dundee. In Wales, medium-sized enterprises in the sector have performed strongly with a 92.8% increase in turnover between 2005 and 2013. There is a need to turn some of the medium-sized ICT companies into large ICT companies. We know that ICT is a high paying sector and that superfast broadband rollout across the Swansea Bay region is making it possible for ICT companies to develop.
With the quality of ICT graduates being produced in the Welsh universities, it has to be a severe disappointment that Wales has a lower proportion of its population working in ICT companies than the rest of the UK. If we are to make the Swansea Bay City region an obvious home for such ICT companies, then we need to look at providing the same support that has been available for the life sciences sector.
The area where the Welsh economy lags behind the UK is in Professional, Scientific and technical services which according to Stats Wales October 2018 update shows Wales has over 45,000 less than it would have if it had the same share of this sector as it does of total employment.
Developing an economy is about developing and promoting high-value economic sectors. We will not develop a successful economy and high GVA on low pay and seasonal work. We, therefore, need a strategy for targeted economic sectors capable of producing substantial economic growth.
Why does Mannheim in Germany have a GVA approximately three times that of West Wales and the valleys?
Why does Aarhus in Denmark have a GVA approaching twice the GVA of West Wales and the valleys?
Remember if you keep on doing the same things you will get the same result.
Mike Hedges is the Assembly Member for Swansea East.