Why Wales’ own economic strategy must deliver a devolution dividend
The publication of the UK industrial strategy on Monday signalled a major shift in the UK government’s approach to economic growth.
Whether you agree with the approach or not, the process for developing the strategy – from dozens of expert reviews to roundtables across the country – is in contrast to the rather muted progress of the Welsh Government’s own economic strategy. We now have a clearer economic strategy at a UK level than we have in Wales.
The 254-page industrial strategy is full with ambition and evidencebased policymaking. The strategy promises locally-led growth strategies with funding to support a range of innovative approaches to economic development.
While this is clearly an opportunity for collaboration, this should also concern the Welsh Government. While we have always been a country of competing regions, these regions now have a promise of more powers and resources to attract private sector investment. Until recently, the Welsh Government had to outperform just three other UK administrations – which it hasn’t managed to always do. With local industrial strategies being developed and mayoral regions gaining control of their adult education budget from 2019, this competition will only increase. Is the Welsh Government ready for the realities of greater competition for limited private sector investment?
We are already seeing an example of the impact of choice with the recently-introduced apprenticeship levy. Putting aside the merits of the four different levy systems that exist in Wales, England, Scotland and Northern Ireland, we are told employers currently have more certainty in England, this is despite the Welsh system having many other advantages. But, as a result of this employer certainty, we are seeing some employers gravitate to the digital accounts offered by the demandled English system. How the Welsh Government reacts to this will be an early test of their ability to respond to increasing regional competition and greater employer choice.
The UK and Welsh governments need to recognise that the economy is no respecter of political geography. From Chester to Cardiff, the Welsh and English economies are cross-border, interlinked by history and convenience. Some 30% of the population of Wales and England, or over 16 million people, live within 50 miles of the border between the two countries. We should embrace this economic reality and use it to our advantage.
The creation of a cross-border north Wales Growth Deal is an excellent example of this pragmatic approach. The announcement of a mid Wales Growth Deal should begin a similar exploration of the potential to work with the neighbouring Local Enterprise Partnerships and the Midlands Engine. I also agree with the Welsh Secretary’s statement on Monday that it makes sense to identify more opportunities for cross-border working. Developing a digital cluster between Cardiff, Newport and Bristol, for example, would strengthen both regions.
At the heart of the industrial strategy are four grand challenges that promise to put the UK at the forefront of the industries of the future.
They are: AI, clean growth, mobility and the ageing society. A few months ago, the Cabinet Secretary for Economy and Infrastructure Ken Skates outlined his six big challenges for the Welsh economy: Brexit, productivity, inequality, automation, models of care and climate change. As these closely align with the industrial strategies’ four grand challenges, the Welsh Government should embrace the UK government’s offer to work in partnership with the devolved governments to ensure grand challenges and sector deals benefit all parts of the UK. In the coming months, each grand challenge will appoint expert advisers and a business champion to work closely with ministers to set priorities and direct funding. It is important that firms in Wales active within these four grand challenges are included.
There are many other exciting elements of the industrial strategy, from increasing research and development funding to 2.4% of GDP to boosting 5G connectivity for Wales. But there are other initiatives that don’t apply to Wales. From the government paving the way for self-driving cars, establishing a future sectors team to ensure policy and regulation supports new disruptive innovation and allocating £1.7bn to support projects to drive productivity and connectivity within English city regions. The Welsh Government will need to be confident it has similar or better policies in place if it is to keep pace with the growth of English regions.
But the industrial strategy is not perfect. The hard work starts now. This week’s announcement must be the beginning of a strategic race, not a tactical sprint. And it needs to last. This is a time for consistency and determination, not perpetual change with the political winds. The creation of an independent council with teeth to monitor progress will help ensure the UK government delivers on its bold pledges.
For the CBI, the Welsh Government should respond to the UK industrial strategy by ensuring their own economic strategy delivers a devolution dividend.
This means embracing as much of the UK industrial strategy as it can, seeking to collaborate and align where it makes sense to do so and channelling its limited resources to support additional growth measures while not introducing any disincentives to doing business in Wales.
What we know of the Welsh Government’s approach to the economy – to be found in the programme for government – is positive.
A combination of a sectoral and regional approach, along with targeted support for innovation and infrastructure renewal are all welcome steps in the right direction but we await an overarching economic plan for Wales that both business and government can truly get behind and deliver.