The Welsh Economy II: An Economic History of Wales (In Brief)

(Title Image: via Nation.Cymru)

Right, here’s a brief history of how the Welsh economy changed, adapted, declined and developed until 1999.

That Period of Time Nobody Talks About

Contrary to popular political opinion, what we now call Wales existed before the industrial revolution, before Nye Bevan was born and had done so relatively “happily” for the best part of 2,000 years.

Nevertheless, a common theme throughout the economic history of Wales is the extraction of our natural and human resources to benefit great powers and global industrialists. The first great power to do this being the Roman Empire, which mined gold, copper, lead and zinc whilst concurrently Romanising local Celtic tribes through formalised trade, infrastructure and fortified settlements (mainly in coastal areas).

This doesn’t mean Romans introduced these concepts to the natives. There’s evidence of both sophisticated ironworking and the importing of goods from continental Europe long before the Roman occupation.

By the time the Romans withdrew in the 4th Century, the social structures they introduced has been adopted by the local tribal/kinship systems. Some aspects of Roman life became an ingrained part of Brythonic Celtic/Welsh society, particularly the law.

The economy, however, reverted to a more modest format, being primarily based on agriculture and land management – but this doesn’t mean it was unsophisticated.

While Normans eventually took most of the good crop-growing land for themselves and forced the Welsh into the uplands (just 10% of the population of Wales lived in towns at the time), Dr John Davies’ History of Wales says there’s evidence of external trade, with materials like stone as well as iron and weapons being imported in exchange for Welsh goods such as “cattle, skins, cheese, horses, wax, hawks, dogs, fleeces and flannel” – all everyday staples.

Hawks were considered a luxury item at the time (the modern equivalent would probably be a sports car or thoroughbred horse) and there were a number of professionals such as goldsmiths, bards, cobblers, fishermen, clerics and physicians serving Welsh royal courts.

The Welsh at the time did, of course, have a nasty habit of rebelling. Edward I tried to put a stop to that in 1282 with the conquest of the last independent Welsh principality of Gwynedd, which turned out to be a costly enterprise for England.


One of the most expensive defence procurement exercises in history. (Pic:

Edward I had to borrow more than £120,000 from Tuscan financiers to pay for the “Iron Ring” (2017 project economic cost: £45.3billion) and in total it cost around £330,000 (£124.5billion) – 10 times his annual income. While effectively bankrupting the English crown, John Davies considered the construction of the Iron Ring to be a major factor in the growth of international finance.

Periods of relative prosperity (particularly the growth of coastal trade and the wool industry) were interspersed with periods of economic decline, either caused by plague or as punishment for rebellion.

The last of the great rebellions led, of course, by Owain Glyndwr – a respectable lawyer and squire – enjoyed initial success. However, the war of attrition it turned into – and eventual defeat – was economically devastating. Famines, emigration, trade blockades and a power vacuum forced what was left of Welsh aristocracy to “become English” to survive. By doing so, they were awarded large estates to work and derive an income from in exchange for fielty, creating an Anglicised Welsh “landed class”, who made their fortunes as administrators and courtiers for the English crown rather than as merchants.

By the 1480s, the “upland Welsh” had started to reclaim lowland areas, with demand for Welsh meat and wool from the English court and Europe driving a revival in the rural Welsh economy. But it remained rural; a tool of the gentry, relatively under-developed and agrarian for a long, long time. Until….

Engine of Empire


(Pic: University of South Wales)

By the mid-18th Century, the Welsh population stood at around 500,000. It was predominantly Welsh-speaking and the economy remained rural-focused (with some brief forays into piracy and colonialism).

One example of this were the drovers – what Americans would call “cowboys” – who took livestock on foot from west Wales through to markets along the English border or further afield. This was a vital development in Welsh banking, with the likes of the Black Ox Bank in Llandovery set up by former drovers (who often made substantial sums of money).

While the Romans didn’t really know what to do with Welsh coal and slate deposits, the new industries in northern England and the emerging British Empire did. Nevertheless, it took some time for heavy industry to establish itself – whether copper smelting in Swansea, Neath and Llanelli, slate mining in Gwynedd or coal-mining in the Valleys and north-east (which supported the iron, copper and eventual steel industries).

Copper-lining of ships secured global trade routes and the dominance of the Royal Navy by making vessels less prone to leaks and more manoeuvrable.

For a time, this made Swansea the most important port in the world. The copper trade stretched globally, linking Wales to Australia and South America and, less spectacularly, probably the most concrete link Wales had to slavery (imported copper ore often being mined by slaves).

Heavy industry was labour intensive, prompting mass migration from rural Wales, England, Ireland and elsewhere into the new industrial heartlands. At the start of the 19th Century, Wales had less than 600,000 people; by the end of the century, it was 2 million.

The iconic terraced house made its first appearance and with people came the infrastructure and innovations needed to support them. Wales had the first steam locomotive and fee-paying passenger rail service, a Welshman invented the first powered loom for spinning textiles and Wales also pioneered mail order and batteries. But not everyone benefited from this new age.

The harsh working conditions, low pay and rural deprivation led to a number of clashes between the working class and the ruling class – from the Rebecca Riots to the Merthyr Rising to the Chartists – forming the foundations for the first organised labour movements.

It’s often said that many of these industries were only there because of English and Scottish industrialists, but that’s not entirely true. Of course, the more well-known industrialists – William Crawshay, Samuel Homfrays, John Crichton-Stuart – were English and Scottish, but the Welsh played our fair share: Lucy Thomas, the Mackworth family, the Talbot family, William Lewis etc….If you live in south Wales there’s a good chance there are streets in your town or village named after them.

The Welsh industrial period enjoyed its golden years during the late 19th Century and early part of the 20th Century. Demand for coal had increased not only to power steam railways but also electricity power stations and steam-powered ships. The first £1million (2017: £8.6million) cheque was signed for a shipment of coal from Cardiff – which had overtaken Swansea’s importance as a port and was at the time the global coal hub.

Increased global trade wasn’t necessarily good news for the Welsh slate industry, which endured a period of industrial unrest and competition from France.

By the time the First World War started, 232,000 men worked in the Welsh coal industry, mining 57million tons a year. Welsh industry had enjoyed a captive market in the British Empire, but that Empire was on its last legs.

Coal Age to Dole Age

(Pic: ITV Wales)

Despite the country having lost 40,000 men in the First World War, the Welsh coal industry peaked in 1920 with 271,000 workers. It was about to change very quickly.

Some of the changes were brought about by politics. With the rise of trade unions in the heavily-populated parts of the country, Labour displaced the rural-focused, Nonconformist Liberal party as the dominant force in Welsh politics – a status they’ve enjoyed ever since. A series of industrial disputes, culminating with the 1926 General Strike, hit Welsh mining as the ideological battle between public and private ownership intensified.

Unemployment was rising long before The Great Depression hit, compounded by increased competition for coal and iron from the United States and Australia. After a century of continuous population growth, the Welsh population declined by around 390,000 between 1925-1939 and unemployment hit 15%+. It seemed like both capitalism and imperialism were dying.

The solution was more state support for new infrastructure and industrial techniques. Ironworking was gradually supplanted by steel production at Ebbw Vale and Port Talbot – later joined by Llanwern and Shotton. The first industrial estates started to appear, like those at Treforest and Bridgend – the latter originally founded as a major munitions works during the Second World War with a majority female workforce.

After the Second World War, the (surprise) election of a Labour government led to state support going further. During the late 1940s and early 1950s, health services, coal, steel, the railways, Bank of England, electricity boards and gas boards were all nationalised, accompanied by an extensive state house building programme.

The 1950s and 1960s also saw the rise of the modern consumer and service society as the UK and Wales emerged from post-war austerity and rationing. More home appliances were invented, reduced in size and became affordable (particularly on catalogue hire-purchase schemes). Car ownership increased. Women entered the workforce in greater numbers (but were still legally allowed to be paid less than men until the 1970s). People started to take more holidays abroad due to the increasing availability of air travel – once such airline being Cardiff-based Cambrian Airways.

As Harold Macmillan famously said, “People have never had it so good”. But there was trouble brewing.

Demand for petrol (caused by higher car ownership, the construction of motorways in the UK and a shift from rail to road freight) had increased to the point that coal was no longer the fossil fuel of choice beyond steel-making and coal-fired power stations. The Royal Navy had long abandoned coal for diesel under Winston Churchill in the 1910s, while even the railways were switching from steam to diesel.

Heavy industry was also leaving a horrific legacy of industrial disease and disaster – the most infamous of which being the destruction of Aberfan’s Pantglas Junior School by an industrial landslide in 1966. Heavy industry’s dominance of the Welsh economy was coming to a brutal end.

50 coal mines closed between 1957 and 1964. In March 1971, 6,500 workers at Shotton steelworks in Flintshire were laid-off by British Steel in the single biggest one-day mass redundancy in western Europe. The Welsh slate industry was employing fewer than 1,000 workers by the 1970s.

The reliance on oil was a double-edged sword. While coal was unfashionable and heavily-subsidised, it was still vital to the UK’s energy mix. When Arab states cut off oil supplies following the Yom Kippur War in 1973, the energy crisis – combined with very high inflation throughout the decade and weak UK governments – led to a number of prolonged industrial disputes. Unions often demanded wage increases of 30%+ to end strikes and coal miners rejected a 16.5% wage increase in 1974.

The public eventually had enough and in 1979 elected the free-market conservative, Margaret Thatcher, while Wales also rejected devolution by a 4:1 majority – two decisions that all but guaranteed the end of Welsh coal mining, end of nationalisation and the end of trade union influence in domestic politics.

Following the announcement of a new round of mine closures in March 1984, miners went on strike again. Lasting more than a year, it turned into one of the most bitter and divisive industrial disputes in history. Unlike the 1970s, the UK Government were prepared, stockpiling coal and drafting large numbers of police to confront miners in often violent clashes. The Valleys coalfield held firm, with 93% of miners still on strike at the end of the dispute in 1985, compared with just 10% in the (much smaller) north Wales coalfield.

Nevertheless, the UK Government won. Many communities – particularly in the Valleys – lost their only major local employer as mines closed one by one. With the mines went many of the supporting businesses and supply chain companies. In came welfare dependency, substance abuse and the breakdown of families and communities – a legacy we’re still living with.

On the more positive side, the end of mining brought with it an end to very harsh working conditions and industrial disease, while greater competition for jobs placed a re-emphasis on the importance of education, with qualification levels amongst the population gradually improving over subsequent decades (Part XIII).

Within five years of the strike’s end, there were only 7 deep mines left in Wales and coal production gradually shifted from state-owned deep mining to private open casting, which employs only a fraction of the number of workers.

One example which ran contrary to this was Hirwaun’s Tower Colliery, which was bought out by the workforce in 1995 and remained operational until coal seams were exhausted in 2008. Its closure brought down the curtain on the best part of 200 years of deep mining in Wales.

Wales Goes Global

(Pic: Wales Online)

While some heavy industry still remained – namely steelworking – something had to replace coal mining, not only because of the economic reliance on those jobs but also increasing awareness of the impact carbon emissions were having on the climate and air quality.

The planning for the post-coal era (though it might not has seemed likely at the time) started long before the 1984-85 Miners Strike.

In 1975, the UK Government established the Welsh Development Agency (WDA). The WDA’s goals included supporting economic development in Wales, increasing global competitiveness, creating and safeguarding jobs and supporting the environment wherever possible.

The WDA – a quasi-autonomous non-governmental organisation (QUANGO) – was a dominant player in Welsh political and economic life for the next 30 years. While money and investment from the rest of the UK mainly focused on infrastructure (such as improvements to trunk roads) and quickly dried up as attention turned from regional development to regeneration of London (such as the Docklands redevelopment), the WDA focused on attracting investment from overseas (foreign direct investment- FDI).

The WDA opened up large tracts of land near motorway junctions and on former colliery sites. This was the welcome mat for multinational corporations, which established branch factories and subsidiary companies manufacturing components, light machinery and general products for larger global supply chains in the automotive, aerospace and consumer electronics sectors.

Japanese, French, German and American companies were the primary drivers of FDI in Wales, bringing with them the likes of Sony, Calsonic Kansei, Toyota, Hoover, Bosch, Panasonic, TRW, Airbus and Ford as well as countless other smaller outlets – many of which are still here in some way, shape or form. This was aided by the UK – then the “Sick Man of Europe” – joining the European single market (a prelude to the EU) in 1973 which removed trade barriers between member states.

A ready supply of low-wage labour – including large numbers of women willing to work part-time – made Wales an attractive proposition for investment.

The service sector – particularly public services like the NHS and local government – was also on the rise as traditional industries declined. Through the 1960s and 1970s, the UK Government relocated many central agencies to Wales including the DVLA (Swansea), Royal Mint (Llantrisant), Office of National Statistics (Newport) and Companies House (Cardiff).

The Conservative privatisation programme through the 1980s led to the break up of former state-owned monopolies and the establishment of new companies – though very few were set up or headquartered in Wales.

In addition, the wider availability of consumer credit, deregulation of financial markets and the start of people seeing property as an investment saw the beginnings of the “shopping boom”, with more hypermarkets and out-of-town shopping centres being built. Welsh players in the industry who experienced growth over the period included Iceland and Peacocks, adding to previous examples like (the long-defunct supermarket) Kwik Save.

Post-mining unemployment in Wales peaked at around 15% in 1990 before falling to closer to 7-8% by the end of 1991. However, earnings and economic productivity remained relatively low and between 1989 and 1999, Welsh GVA-per-head fell from 85% of the UK average to just 77%.

The WDA wasn’t a cure for Wales’ economic ills; far from it. There were accusations of cronyism and corruption amongst leading board members.

Some of the foreign investors the WDA originally attracted began to look to eastern Europe and further afield following the collapse of the Warsaw Pact and the Soviet Union in the late 1980s and early 1990s. Cheaper to employ, better-educated labourers were available to them and newly democratised governments were crying out to build a free market economic base. Some of the companies the WDA first attracted started to shut up shop and leave.


(Pic: Wales Online)

The biggest embarrassment was the LG plant in Newport, which was at the time (1996) said to be one of the largest single foreign investments in Europe (£1.7billion) promising 6,100 jobs manufacturing semiconductors/microchips.

The Conservatives – who had lost their reputation for economic competence following a severe recession in the early 1990s – hailed it as a “vote of confidence in the Welsh economy“. However, serious economic problems in the far east led to thousands of jobs being lost at Asian-owned electronics factories across the world and the “dream” of LG never materialised.

It’s a bit ironic that more than 20 years on, a semiconductor cluster is set to be developed in Newport.…led by Welsh companies. Anyway….

After hundreds of years, in 1997 the Welsh – by the narrowest of margins – said they had enough of the UK Government, unaccountable QUANGOs and unelected Welsh Secretaries holding sway over our own economic development, and voted in favour of creating a pared-back county council on steroids in the form of a directly-elected National Assembly.

And that’s where I pick up next time….