Five ways to meet Wales’ economic challenge head-on
As the Welsh Government prepares to unveil its new economic strategy this week, Llanelli Labour AM Lee Waters says it’s time for a new approach to face the challenges ahead
THE metaphor of the perfect storm has become overused, but it is difficult to think of a better one to describe the potentially calamitous confluence of a hard Brexit and the disruptive destruction of automation. Both automation and Brexit will transform our communities. The choice we have is whether we try to shape these forces to support people who have been largely left behind by globalisation, or whether we try to struggle on to preserve the status quo. In the past our obsession with following conventional templates has meant we’ve fixated on roads, business parks and attracting foreign firms to Wales. And the results have been clear – in nearly 20 years of devolution, the wealth gap with England remains the same.
Turning this around is not going to be easy. But the lesson of the past two decades is that we need to ruthlessly focus on a small number of interventions that will make a difference. There are five things I think we must do to enable the new economic strategy to stick.
First, we must be alert to challenges. The robotic and digital forces being unleashed will reshape our world of work, and the speed of change is unprecedented.
The automation we’ve witnessed replacing workers in our factories is turning to new professions. Finance officers, admin workers, pharmacists, doctors, accountants and lawyers are all at significant risk – an estimated 700,000 jobs are predicted to be lost in Wales alone over the next 20 years.
This technological innovation is something to harness. Our window of opportunity is short – we are already behind many other countries, and reversing our reputation will require significant investment.
Not every emerging technology will prove lucrative – countries, and other regions of the UK, have established early dominance in some. The new economic strategy must be supported by a clear analysis of where we have existing expertise – agriculture, car manufacturing, compound semiconductors, insurance, creative industries and bonded composites among others – and how best these will be leveraged in emerging markets.
The second area for focus is efficiency. I welcome the regional approach the strategy is said to be taking. The ability of the Cardiff area to attract investment has left wider parts of Wales scrabbling for scrap ends. And it’s right that regional teams will be best placed to decide what the priorities of their communities should be.
But in an era of increasingly pressured budgets, the pursuit of new opportunities will require a rationalisation of existing investments. Economy Secretary Ken Skates has spoken about the need to slim down the nine “priority” areas that feature in our current nationwide economic plan – but this hard-headed approach could well be stymied by devolution of decision-making to regional areas.
The disparity in the quality and creativity of the Cardiff City Region and Swansea Bay City Region bids demonstrates how Welsh Government, while able to facilitate innovation, has to date failed to drive it.
And it is deeply worrying that just one of the three Regional Skills Partnerships, tasked with analysing the economic challenges their region faces, references automation as a source of future risk. And equally troubling that when tasked with setting out plans under the Future Generations Act, none of the Welsh councils identified automation as an issue.
A truly efficient approach to growth will mean grants to private businesses must only be used in the rarest of circumstances. Instead we should prioritise lowcost favourable loan agreements that are easier to access. Partnering with firms by taking an equity stake and having a representative on the board ought also be encouraged.
The third test for this new strategy is its relevance to those left behind when heavy industry departed. A number of my Welsh Labour colleagues have called for a greater focus on the so-called foundational economy, the “mundane” industries and businesses that are there because people are there – the food we eat, the homes we live in, the energy we use and the care we receive.
The drive to reduce administrative budgets has led to the domination of large-scale privatised companies in the delivery of our public services at the cost of small, localised businesses. And the consequence of a focus on attracting foreign direct investment has also meant too little emphasis and resource has been placed on spurring indigenous growth.
Brexit offers an opportunity to exploit the £5.5bn the public sector spends every year buying in goods and services to Wales to boost our foundational economy.
But to achieve this we will need to urgently address the skills shortage in public procurement. And we need to face up to the fact that working with multiple local, smaller suppliers will be more expensive in the short-term.
To achieve such a radical shift in economic policy we need to be honest about the scale of the challenge and ready to admit failure. This is the fourth test for the strategy to achieve meaningful change.
In unpredictable times we need to focus on rapid, agile approaches which adapt easily to changed circumstances. But with this will come risk, and with risk will come some failure. The new strategy should prepare us, and should have a clear, consistent and transparent monitoring strategy to enable us to quickly scale up initiatives seen to be working, and quickly put an end to those that are not.
The final element the new strategy must embrace is that it must have a positive impact on the things we actually care about. Success that is only measured by increasing GDP or jobs figures fails to consider the quality of the jobs generated or the extent to which national wealth is shared.
Rising levels of in-work poverty and inequality in Wales demonstrate how inadequate this approach has been to date.
Most families in Wales don’t give two figs about Wales’ GDP or GVA figures. People care that they have decent jobs, their families are healthy, communities are closeknit, town centres are lively and that their kids go to a good school.
Some of the biggest economic challenges Wales has faced are coming at us at an alarming speed. We have an opportunity to prepare, to cushion the blow of harmful knocks and position ourselves at the forefront of emerging opportunities. But to achieve this we need to be brutally honest – about the state we’re in, the challenges coming our way and the risks we need to take if we are to emerge not just unscathed but strengthened.
Lee Waters is the Welsh Labour and Co-operative AM for Llanelli.
The automation we’ve witnessed replacing workers in our factories is turning to new professions...