Wales held back by slow growth and low output
THE Welsh economy will grow at one of the slowest rates of any part of the UK next year, with poor productivity remaining a major issue, according to new research from professional advisory firm PwC.
Its UK Economic Outlook research predicts the Welsh economy will grow by just 1% this year and fall back slightly in 2020 with a meagre growth rate of just 0.8%.
The projections for Wales are among the lowest for any nation or region in the UK, joined by Northern Ireland and the North-East at the bottom of the rankings.
For the UK as a whole, PwC is projecting the economy will grow by around 1.2% in 2019 and 1% in 2020 – significantly below its long-term average growth rate of around 2%.
While its growth rate is sluggish, the bigger issue for the Welsh economy, says PwC, is addressing low productivity. Output per job in Wales is the lowest in the UK at £44,780, some 18% under the UK as a whole at £54.330.
For London it is 40% higher than the UK average at £77.125.
John-Paul Barker, regional leader for PwC in Wales and the west of England, said: “In terms of growth, Wales suffers from having a greater reliance on manufacturing than many regions. This has been adversely affected by global trade tensions and the slowdown in Eurozone growth. But the productivity issue faced by the country is a longer-term challenge.
“Wales needs the combined power of local and central government plus business to deliver more investment in skills and infrastructure. The upside of tackling this productivity problem is huge – if those areas performing below the UK average can close 50% of the gap in productivity performance with the UK median, it could boost UK GVA by around £83bn, equivalent to nearly 4% of GDP. Wales would see the secondlargest percentage increase of 10.7%.”
The report suggests a number of strategies that could be employed to help boost productivity across the UK. Notably, businesses could promote workplace training and upskilling, a recommendation that is reinforced by PwC’s recent global skills survey, which showed that the desire of UK employees to learn new skills is not being met by employers.
In addition, investment in local infrastructure could boost connectivity (and therefore productivity).
Ben Cottam, head of external affairs for FSB Wales, says the findings are disappointing, but the particular challenges of productivity within the Welsh economy are longstanding.
Mr Cottam added: “The Welsh economy has obviously undergone a significant shift away from heavy industry and this transition is difficult for businesses and communities.
“However, Wales is blessed with a wealth of dynamic smaller businesses and the conversation about boosting productivity needs to focus more on understanding and responding to these businesses and their needs.
“Responsive, future-proofed infrastructure is one the essential ingredients in boosting SME productivity and joining economies, particularly in rural areas. Only when we start to tackle these strategic issues can we expect to see a significant upturn in productivity in Wales. This is why FSB Wales recently released an important report which looks at the imperatives for infrastructure in
Wales to develop our economy “
Ian Price, director of CBI Wales, added: “Productivity may not be politically fashionable but a sustained improvement in macroeconomic levers – like road infrastructure – and microeconomic levers – like firm-level management training – will deliver a sizeable return to Wales in the shape of a more prosperous and competitive nation.
“The UK Government and Welsh Government should pay close attention to these findings and recommit to working together to tackle our nation’s low productivity problem head on.”
John Hawksworth, chief economist at PwC, said: “Places that are better connected physically and have access to skilled workers tend to have higher productivity levels.
“We find, for example, that a 1% increase in skills is associated with a 2% increase in productivity in a local area.”