The next five parts will look in more detail at specific sectors of the Welsh economy. They’ll all follow a familiar template – an explanation of what each sector does, an analysis of what the sector does for the Welsh economy, putting things into an all-Wales context and an analysis looking at 3 key strengths, weaknesses, opportunities and threats for each sector.
Introduction to the Primary Sector
The primary sector is focused on the extraction of raw materials. It’s usually the first economic sector that develops because it’s essential to survival at an individual, family and community level. The primary sector supports the rest of the economy by providing it with the raw materials needed to produce more advanced goods and services.
This means that in developing countries, the primary sector is usually the largest economic sector. As the economy develops, workers become more productive and the raw materials are readily exploited by industry and capital which leads to industrialisation.
The primary sector includes agriculture/farming, fishing, mining/quarrying, forestry and other forms of extraction such as the oil industry.
Historically, primary industries have been very important to the Welsh economy – farming in rural, upland areas; slate quarrying in the north-west; mining in the industrialised south – but like the rest of the developed world, the Welsh economy is now dominated by services (Part VI, Part VIII).
Utilities (gas, water and electricity generation) realistically fit within the secondary sector (Part V) because it’s making use of raw materials rather than directly extracting them, but I decided to include them here.
Agriculture – According to Welsh Government statistics (xls), in 2016 there were 37,282 farms in Wales covering a total land area of 1.68million hectares – about 81% of all land. 42.3% (15,942) of farms were dedicated to livestock, 4.7% to dairy and just 1.4% to crops, with the rest dedicated to horticulture, mixed operations or various specialist tasks such as grasses/feed, horses and other domesticated animals like goats.
Livestock consisted of (xls):
- 9.81million sheep and lambs
- 7.83million poultry birds (of which about 97% were chickens)
- 1.13million cattle
- 298,000 dairy cows
- 23,204 pigs
Welsh farmers also produced 140,000 tonnes of wheat, 26,800 tonnes of barley and 91,000 tonnes of potatoes – gradually increasing year on year. Crop production was worth £12.3million in 2016, while egg sales brought in £41.2million, lamb/sheep £267.1million, cattle/beef £358.5million and wool £5.8million; total £684.9million.
The total farming labour force in 2016 (xls) was 53,524 (74.6% of whom were farmers or directors) – a decline on a peak of 59,621 in 2014. The average farm income in 2017-18 (xls) was £31,000, with dairy farmers (£65,000) making almost three times as much as lowland cattle and sheep farmers (£24,400). These figures don’t include income from non-farming sources (like holiday lets)
Fishing – According to fishing statistics for 2016 (pdf), there were 451 boats (of which only 31 were longer than 10 meters) registered at Welsh ports, supporting 753 fishers. Fishing is a devolved responsibility, but the industry and Welsh maritime waters are both tiny, with catches focused on shellfish. Total catches landed at Welsh ports were worth £16.6million in 2016 (xls) the majority of which were whelks (£7million), scallops (£2.7million), lobsters (£2million) and crabs (£676,000) – the vast majority of which, up to 90%, are exported.
Forestry – Woodland and foresty covers 306,000 hectares of Wales (about 14.7% of Wales’ land) split roughly equally between broadleaf and conifer trees. The forestry industry is estimated to be worth just under £529million to the Welsh economy and supports up to 11,300 jobs. Natural Resources Wales is the agency responsible for managing Welsh forestry and offer 850,000 cubic metres of over-bark timber each year. The rate of planting of new forestry and under-development of the Welsh timber industry has been subject to criticisms from the Senedd’s Environment Committee.
Mining & Minerals – The days of deep mining are long-over and coal is now far more likely to be extracted via opencast mining, alongside aggregate and other minerals mined in quarries.
According to UK Government figures (pdf -2016), in 2014, 3,273 people employed in Wales extracted:
- 14.8million tonnes of crushed rock
- 11.3million tonnes of limestone and dolomite
- 2.5million tonnes of sandstone
- 2.2million tonnes of igneous industrial stone
- 1.1million tonnes of sand
- 378,000 tonnes of gravel
In 2014 (pdf), Welsh opencast mines produced 2.49million tonnes of coal across 8 sites, with an estimated 12.9million tonnes still extractable. At 2014 prices the extracted coal would be worth around $232million (£148million) and the reserves worth just over $1billion (£657million). With the winding down of a number of opencast sites (and a presumption against licensing new ones), the phased shutdown of Aberthaw power station, cheaper and cleaner sources of energy (like gas), concerns over greenhouse gas emissions and cheaper imports it’s likely coal mining in Wales will end by the mid-2020s (if not sooner).
Water – The water and sewerage industry in Wales is served by three companies – the not-for-profit Dwr Cymru (Welsh Water) which is headquartered in Nelson, Caerphilly county; Hafren Dyfrdwy/Seven Dee (a subsidiary of Severn Trent which serves Wrexham and Flintshire) and Severn Trent Water itself which provides water to some areas of northern Powys. These geographical anomalies are primarily because the water companies were established around drainage basins of major rivers, meaning an English company controls a proportion of water supplies from Wales to key English markets.
Dwr Cymru’s turnover in the 2017-18 year (pdf) was £757million with an operating profit of £77.2 million – once finances and tax are included there was a loss of £39.4million. It’s the fifth largest company in Wales by turnover and employs around 3,000 people.
It supplies 800million litres of water to customers daily and according to its 2014-2019 resource plan (pdf), areas under its control are expected to have water surpluses until at least 2050 – the only long-term worry being Pembrokeshire.
Gas & Electricity – Wales is a net exporter of electricity, producing 38.8TWh and using 16.1TWh in 2016; 6.9TWh (17.8%) of all the electricity generated in Wales came from renewable sources. The Welsh Government has set a target for 70% of Welsh electricity demand (~11.2TWh) to be produced from renewables by 2030.
Aside from community-scale projects, most electricity in Wales is generated by non-Welsh companies (including RWE nPower, Innogy, Falck Renewables, General Electric, Uniper, Centrica), though Newport-based Calon Energy (Turnover 2017: £471.7million) run three gas-fired power stations in Wales and England.
The only “Welsh” energy supplier, SWALEC, is a subsidiary of Scottish & Southern Energy (SSE) and headquartered in Perth, Scotland. It’s unclear how much SSE’s Welsh operations are worth. Western Power Distribution is responsible for maintaining electricity infrastructure in south Wales (Turnover 2017: £251.1million) and Scottish Power is responsible for most of mid and north Wales.
Newport-based Wales & West Utilities (Turnover 2017: £433.9million) are responsible for the gas distribution network in Wales and south-west England, while British Gas has a major regional office in Cardiff.
As is the case in most developed countries, the primary sector is a small part of the Welsh economy.
In 2016, agriculture, forestry and fishing made up just 0.7% of the economy while mining and quarrying just 0.2% ( which is remarkable given Wales’ past). Utilities, on the other hand, were more significant, with electricity generation, water service and related industries making up around 3.8% of the Welsh economy.
Compared to the rest of the UK – and in spite of popular stereotypes about Wales – agriculture, forestry and fishing made up a smaller proportion of the Welsh economy than Scotland (1.4% of GVA) and Northern Ireland (1.4%) but slightly more than England (0.5%).
It’s also no surprise that rural parts of Wales are more economically reliant on agriculture and utilities than urban parts. This means that while the all-Wales figures are relatively small, in some parts of Wales – like Gwynedd, Powys, Carmarthenshire, Anglesey and Pembrokeshire – the primary sector is a major contributor to the local economy and may well act as a key foundation industry that supports everything else in some counties.
There’s no better way to demonstrate that than jobs. Agriculture, forestry and fishing is a major employer in northern, central and western Wales, even if (in terms of GVA) those areas aren’t particularly reliant on any of those industries economically. Flintshire, for example, has one of the highest proportions of workers in agriculture, forestry or fishing, yet as a proportion of GVA, the primary sector’s contribution to the local economy is relatively low.
As demonstrated earlier, the business activity of farms is often higher than the value it adds to the economy, which suggests the primary sector’s contribution to the economy in Wales may be underestimated because we’re not processing enough food, timber and fish into end products within Welsh borders.
SWOT Analysis: Welsh Primary Sector
The good reputation of Welsh produce at home and abroad – Welsh meat, but particularly Welsh lamb, is regarded as a premium product. A report on the “Value of Welshness” by Food & Drink Wales (pdf) found that Welsh produce was associated more with “freshness” than British-branded produce. There’s also, generally, a higher demand for Welsh produce within Wales – but shoppers in the rest of the UK also hold Welsh produce in a relatively high regard, with around a fifth willing to choose Welsh butter, cheese and water over others.
Secure water and electricity supplies; the potential for renewables – Wales is a net exporter of both water (around 1 billion litres a day) and electricity (8,419 Gwh), primarily to England. Secure water and energy supplies are essential not only for industry but for food processing and agriculture. In 2010, it was estimated Wales had the potential to generate twice our annual domestic consumption from renewables; as of 2018, Wales produces around 48% of our domestic energy from renewables.
Low food miles – If Welsh shoppers purchased Welsh produce it’s likely to have travelled less and been processed much closer to home that imports, whether from the rest of the UK or abroad. The fact Welsh produce often has much shorter supply chains is good for both the environment and the local economy. Though it’s worth being cautious with this, as there are suggestions that New Zealand lamb, for example, is actually more sustainable than Welsh lamb because it’s produced more efficiently.
Lack of high-quality arable (crop-growing) land – As highlighted earlier, the majority of Welsh farmers are pastoral or dairy farmers mainly because of a lack of high-grade (Grades 1 & 2) agricultural land across Wales (due to topography and underlying geology). Pastoral and dairy farming is often more resource intensive than arable farming and more things can go wrong. While dairy farming often generates the highest incomes, the inability to grow large quantities of staple crops in Wales makes us more reliant on imports of feed and basic staple foods, while pastoral farming and meat consumption have a more negative effect on the environment.
Poor deals for Welsh suppliers – This is particularly evident in the dairy sector, where fluctuating milk prices and (you could certainly argue) exploitative contracts with supermarkets often mean many farmers make a loss on production and actually survive on agricultural subsidies. This was subject to a BBC Wales documentary in 2017. There have also been complaints from lamb farmers that they don’t get a fair share of profits for what is, as said, a premium product.
Lack of investment in renewable energy – We have all the renewables potential in the world, but the investment isn’t there; the latest example being the cancellation of the Swansea Tidal Lagoon. Scotland has hoovered up a lot of this and has been far bolder in pursuing and supporting renewables than the Welsh Government. In 2016, only 18% of all Welsh electricity was generated from renewables compared to 54% in Scotland (which has since risen to 68.1% in 2018).
Reforestation of upland areas – By this I don’t mean the green-lifer “rewilding”, which would pretty much end upland farming, but a carefully-managed reforestation of relatively unproductive areas with native trees. Not only would this provide a locally-sourced supply of wood, but it could also aid tourism, provide additional outdoor recreational areas for little cost, allow the reintroduction of long-absent wildlife and help prevent flooding. The most productive upland areas for sheep farming could be retained and new types of farming and land management would provide highly-skilled jobs that would secure the future of the rural economy for generations to come.
Full control over natural resources (via independence) – Based on the metered price of water from Dwr Cymru, Severn Trent and United Utilities (£1.35-£1.78 per m3), the commercial value of water “abstractions” (~366million m3 annually) from Wales could be anything between £500million and £600million a year. Dwr Cymru currently gets paid £2.5million for it and is locked into a contract until the 2070s (pdf) to continue doing so. Commercial charges for electricity exports (18.419billion Kwh at ~12.4p per kWh) would be at least £2.28billion a year. It would make practical sense for all water and electricity generated or stored in Wales to be supplied by Welsh companies (i.e. the English West Midlands served from the Severn river basin coming under Dwr Cymru).
Diversification and carving out niches in food – Diversification of farms is already supported by the Welsh Government, helping farmers to make money from something other than food production (in particular tourism). There’s no reason why there couldn’t be further diversification in food production too, such as wines, goat produce, increasing pig farming and making much more domestically of the shellfish caught off the Welsh coast.
The future of farming subsidies and long-term economic sustainability of farming – This is probably the biggest short-term threat to farming; what happens to agricultural policy and subsidies after Brexit. The initial signs are that the Welsh Government’s future schemes will be broader and focus just as much on land management as farming, as well as a greater focus on quality. This may mean some traditional smallholders may be at risk, but it may also present more opportunities for farmers to become custodians as much as producers which might put them on a more secure long-term footing.
Negative impacts of climate change – There may well be some positive knock-on impacts from climate change, such as making more land suitable for growing crops, but there are likely to be outweighed by the negative impacts, such as longer, drier summers, more extreme winter weather and – even in Wales – the possibilities of droughts (we came close to one in 2018). The biggest barrier to reforestation (as mentioned earlier) is the increased risk of deliberately-started wildfires, as we’ve seen this summer and summers past.
Private foreign ownership of Welsh natural resources – Foreign ownership of Welsh energy, water and other natural resources means jobs, money and economic growth leeching out of the country for absolutely no reason. It’s something of a national embarrassment that state-owned foreign companies like Vattenfall are building and maintaining wind farms in Wales, with pitiful efforts made to bring local control back to the domestic utilities market (including Welsh water and electricity “abstraction”).