Written evidence from Professor Peter
Gripaios, South West Economy Centre, University of Plymouth
1. Wales, like everywhere else in the UK,
has benefited from the strong performance of the national economy
over the last decade. Even so, there are indications that the
Welsh economy is not in the rudest of health and that it is perhaps
more vulnerable than most UK regions to changes in the location
of production and service delivery now taking place.
2. In fact, Wales performs poorly against
the rest of the UK on a whole range of economic indicators. One
important one is GVA per head, for which the Welsh figure was
just 78.8% of that of the UK in 2001. Only Northern Ireland and
the North East had lower ones. Moreover, the position of Wales
relative to the UK in terms of this indicator has gradually worsened
over the last decade or so, for GVA per head was 84.6% of the
UK average in 1989.
3. To some extent, the Welsh problem is
longstanding for poor performance relative to the UK goes back
at least to the 1920s. From the early 1970s, the Welsh Economy
faced massive restructuring with large numbers of jobs in coal
and steel disappearing and being replaced by new ones in light
manufacturing and in services.
4. Even so, it might be considered surprising
that Wales has not fared better. There are three main reasons
for taking this view. The first is that the headline successes
of Wales in the 1980s and 1990s in apparently attracting an above
average share of FDI should have engendered a major revitalisation
through direct and indirect impacts. The second is that the
large amount of money allocated by the UK Government and Brussels
to address Welsh economic (and other) problems, should have
treated underlying weaknesses. The third is the fact that the
economic powerhouse of Wales and most of its population are located
not all that far from London and the South East and very close
indeed to some economically dynamic locations just across the
Severn Bridge. Surely, Wales could have utilised the positive
image associated with the M4 Corridor on the English side of the
Severn Bridge.
5. Beginning with FDI, there is no doubt
that Wales was very successful in securing FDI in manufacturing,
attracting a range of operations from the EU, America and Japan.
Up to the late 1990s, there was some confidence that the effect
was highly beneficial and it cannot be denied that FDI provided
some breathing space to replace jobs being lost elsewhere. Closer
examination demonstrated, however, that the new jobs were considerably
less well paid than the old, were going to females rather than
males and required relatively low levels of labour skill. Moreover,
there is little indication that the new plants became "embedded"
in the local economy. Goods and even services were brought in
from outside with the inevitable result that much of the
money going into Wales leaked straight back to England. Even auditing
services, for example, were very often performed by international
practices based in Bristol and London. Banking functions too were
often supplied from outside. Moreover, the Welsh branch assembly
plants never seemed to progress beyond that. R & D, marketing
and other higher order functions always seemed to be carried out
elsewhere in the UK or in some other country.1
6. It should be emphasised that the situation
in manufacturing in Wales has also tended to be replicated in
services. Wales tends to have got the call centre rather
than, for example, the head or regional office. And all too often
where private sector companies have amalgamated operating regions,
a new super region encompassing say Wales and the West is run
from Bristol.2 It is interesting, for example, that GVA per head
in the City of Bristol was 135 in 2001, whereas, in Cardiff, it
was only 111.
7. Turn now to public expenditure, Wales
is perceived to do quite well. Quoted figures relate to "identifiable
public expenditure" defined as "incurred on behalf of
a particular population".3
8. In 2001-02, such expenditure for Wales
was 13% above the UK average and 17% above the figure for England.
That on "trade, industry, energy and employment" was
40% more than the UK average and nearly 60% above that of England.4
9. However, Wales gets a far less generous
settlement than Scotland, particularly given the rather worse
economic state of the Principality. Perhaps the main point, however,
is that Wales does very poorly from the "non identified"
component of public expenditure principally defence.
10. The latter dwarfs expenditure on items
such as regional preferential assistance to industry across the
UK and even in Wales which has the lowest defence spending of
any UK region. It is interesting to compare the adjacent regions
of Wales and the South West. The latter has 1.7 times the population
of the former but receives more than eight times the level of
expenditure on defence and regional preferential assistance combined.5
To sum up, therefore, there are hidden forms of regional policy
which Wales does not do well from.
11. I turn finally to the fact that Wales
does not seem to benefit as much as it might from the prosperous
image of the M4 corridor. Arguably, perhaps it is the very proximity
of the Bristol sub region which is the problem. Bristol is larger
than Cardiff, is perceived by some to be on the right side of
the Severn Bridge, may have a better image, and has always had
the edge in the provision of business services to what might be
considered a Greater Severnside economic region. Improved communications
between South Wales and the West of England have almost certainly
increased specialisation and the concentration of regional office
functions at locations such as Aztec West, as well as Bristol
City Centre.
12. However, an intriguing possibility is
that, in economic terms, Wales may be too keen to emphasise its
distinctiveness sending out the wrong image to many on the English
side of the border.
13. Whether Wales should have done better,
economically, is, of course, arguable. Either way the dangers
of excessive reliance on branch plant manufacturing FDI and on
routine service functions are becoming ever more apparent. Many
jobs have already gone and what has so far been a trickle could
all too easily become a flood.
14. New policies focusing on harnessing
innate potential will have to be tried and, for those to be successful,
aspiration levels will have to be raised on the part of both policy
makers and the Welsh population.
15. There also perhaps needs to be an increasing
recognition that policy making cannot reasonably be undertaken
in a Welsh vacuum. Cross border inter-dependencies are too significant
for that.
6 February 2004
REFERENCES 1. Gripaios
P (1997) The Welsh Economy: An Outside Perspective, Contempory
Wales 10, 32-39.
2. Gripaios P and Munday M (2000) Uneven
Development in UK Financial Services: the Case of the South West
and Wales, Service Industries Journal, 20,1,153-180.
3. HM Treasury (2003) Public Expenditure,
Statistical Analyses 2003, ONS.
4. Ibid.
5. Gripaios P (2002) Regional Spending:
A Comment on Mackay, Regional Studies, 36,6, 685-689.
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