The Welsh Economy XV: Where’s Wales Going Wrong?

(Title Image: ITV Wales)

At the business end of this examination of the Welsh economy, we reach the penultimate article and the chance to consider in more detail some unpalatable home truths.

Here are ten areas where civil society, the Senedd and Welsh Government are perhaps getting things wrong economically – some of it subjective opinion, others based at least on a fact-backed hypothesis or correlation.

1. Jobs at any Cost

“What’s the price of a job?”

That might be a rather odd statement to make, but it’s a question we should be asking ourselves and our politicians more often.

Work is, by most definitions, an inherently positive thing: self-worth through a feeling of usefulness, upward social mobility and standing on your own two feet by being a net-contributor to the central pot etc. Wales has been ravaged by periods of high unemployment on-off for the last century, so it’s natural that quantity of jobs takes precedence over quality; the prevailing attitude being that it’s better for people to be doing something rather than nothing and the more doing so the better.

This is the same attitude that brought us some of our most familiar anchor companies, whilst also doing more to keep the economies of many communities afloat than any other form of government intervention. We have a very strong work ethic and have been more willing than most to put up with some terrible working conditions to put food on the table.

It’s brought with it poor career progression, under-employment (Part VII) and the concentrated production of intermediate goods in branch factories (which artificially stunts Wales’ economic output statistics).

It’s meant zero hour contracts, work capability assessments, public proclamations that nuclear submarines are a good thing and being told we have to throw out any ideas we have on sustainable development (and supporting smaller and medium-sized local businesses) in order to reel in the most number of jobs we can scramble to get.

Shovels in grounds, shorter dole queues – but what of personal ambitions? What of matching talent and skills to jobs and business support? What of socially useful, unpaid, voluntary and unrecognised work? What of ensuring people have happiness and pride in what they do and how they got there? What of succession planning and supporting the businesses we already have?

Is it any wonder young people leave when Wales is sold at such a cheap price?

2. Grants Culture & Corporate Welfare

There’s nothing inherently wrong in giving grants to businesses, particularly if they’re in an early stage of development and/or have a potential to grow quickly. The creation of the Development Bank has been a positive step in the right direction, swapping grants for loans of varying sizes.

What Wales shouldn’t be doing is giving very sizable grants to multinationals with turnovers in the hundreds of millions (or billions) at the expense of our own businesses. There seem to be different approaches to business finance depending on the political expediency of it; a government would obviously want to keep anchor companies and major employers onside to avoid the potential for substantial loss of jobs, tax revenues and international prestige, but the government owes them absolutely nothing – if anything it’s the other way around.

The government educates and trains the workforce, provides and maintains the infrastructure and helps the company grow and make huge profits through trade and economic development policies; I don’t think it’s unreasonable to expect re-investment of their own resources back into their own businesses and, where they can’t, that any significant public investment is either on the basis of equity, match-funding, asset finance or a loan.

The government would be better off creating the environment for businesses to have enough confidence to invest in their own workers. The government shouldn’t act as a crutch or a welcome mat to be walked on by big businesses after stumping up the cash, then walked on again when they inevitably leave – and there are far too many examples of both.

3. Playing it Safe

This isn’t the same as “not being entrepreneurial” – the facts and figures prove that you’re just as likely to start a business in Wales and make a success of it as you are in most of the rest of the UK. Many communities have fallen back on public sector employment (Part VIII) to fill the void left by the exit of heavy industry and you can’t blame them – the jobs tend to be more secure and pay better than the Foundational Economy (Part XIV) private sector jobs.

The fact Wales has been so heavily buffeted by exploitation, economic turbulence and deindustrialisation lends itself to a reluctance to take risks, both by the private sector and the public sector.

That could take the form of, for example, neglecting to invest in a major piece of infrastructure because officials are unsure whether it would prove to be value for money or not. Another example would be a company failing to invest its own money in skills training, succession planning or marketing because either they’re quite happy where they are or they know that they can expect help from the government.

4. Too Many Eggs in Too Few Baskets


Tourism isn’t the future, it’s a Plan B. (Pic: Wales Online)

This is a legacy problem rather than a modern one – the Welsh economy as it is now is far more diversified than it was in the previous two centuries. However, there are still many examples around the country of there being “one big employer” for which everyone in a town or village knows at least one person employed there.

In most cases it’s a general hospital or local authority – the main problem there being cuts to public funding. In the private sector, examples would include Ford in Bridgend, Admiral in Cardiff, the Port Talbot steelworks, Airbus in Flintshire and the likes of Calsonic Kansei in Llanelli. There are also the major supermarket chains and the tourism industry in rural and coastal Wales.

If the entire supply chain and a big chunk of the local economy are geared around feeding the “one big employer”, then as soon as there’s a shock or some sort of knock-back, the impact goes much deeper and wider than the employer themselves.

We should have learned this lesson of not putting so many eggs in one basket after the deindustrialisation of the Valleys, but I think we’ve convinced ourselves that something like that won’t happen again when we’re perhaps closer to it than we think.

5. Few Finished “Made in Wales” Products & Services

Putting culture/the arts, sport, food and drink to one side, what’s Wales known for?

Admiral, Redrow and Iceland (supermarket) are probably the closest you’re going to get to an answer, though I’m willing to bet most people don’t even know Redrow and Iceland are Welsh-headquartered companies and none of them will be known outside the UK.

We produce the engines for Ford and Toyota, but we don’t make cars (though that’s set to change with TVR and Aston Martin).

We make wings and various parts for the aerospace industry – to a very high standard as well – but we don’t build or design any aircraft.

We’re likely to be at the forefront of developing the necessary components for next-generation 5G technology, but we don’t yet have anywhere building 5G appliances and we don’t know what sort of skill gaps need to be filled to make sure it happens.

We have one of the largest insurance companies in the UK headquartered in Cardiff, yet very few others have joined them beyond customer service centres.

Many of the things we actually make and are good at probably don’t count as much as they should towards our economic productivity figures.

The question, as always, is “Why?” Maybe it’s too much competition, the legacy of the WDA, as well as Wales’ reputation as a “parts-maker and tool-maker” that has put companies off developing products from start to finish here. Or, there’s a level of scepticism over Wales’ creative and technical skill base. Maybe that’s starting to change, but it’s not going to happen overnight and requires longer-term thinking.

6. The “Missing Mittelstand”

The “Mittelstand” is a German term used to describe family-owned small and medium-sized companies (employing up to 500 people) that retain their independence, are focused on long-term sustainable business practices, are willing to invest in their own workforce, take risks and are firmly embedded in their local economy.

Wales has companies like this, but not as many as we should and it’s a serious problem that’s seen money and talent drain out of the country. As I’ve covered in previous parts, Wales has a lop-sided business demography – lots of small/micro businesses and a small number of very large (often foreign-owned) employers and anchor companies (Part X).

There are notable gaps in the Welsh economic offer of a kind that don’t exist in the Republic of Ireland, Northern Ireland or Scotland, namely: high street/personal banking, investment banking, private pensions; life, home and contents insurance, a major consumer goods brand, an energy company, a telecoms company and a commercial airline.

Why? Wales has actually had some of these in the past – and has some embryonic versions of them now (for example, Spectrum Internet in telecoms) – but as soon as they reach a certain size and turnover they’ve been sold off and subsumed into larger companies instead of supported to reach their full potential independently (unlike, ironically, the companies which acquire them).

7. A Weak “Brand Wales” & Poor International Recognition


(Pic: Business News Wales)

This is about more than literal branding – a recent inquiry at the Senedd found that this area has improved in recent years. It’s more about international recognition and aborted attempts to come out from under the shadow of Scotland and Ireland. Perhaps we’re not doing enough with our diaspora (though the Global Welsh initiative is making up for lost time there).

Our emigrants have perhaps integrated too well; there are famous sayings such as, “Good Welshmen make good Americans“. Other believe that the loss of the WDA saw us throw away a strong brand when the WDA’s inward investment record towards the end of its existence was less than brilliant.

Maybe, within the UK, we’re not doing enough with the resources at our disposal via the UK Foreign Office (something picked up by a number of Senedd inquiries), but equally so, independence and the requirement to establish diplomatic relations and diplomatic missions could lead to an increase in international engagement and put things like trade missions on a permanent footing, not an occasional one (see also: Wales & The World IV).

8. Silo Mentalities, Parochialism & Pork Barrel Politics

I touched on this in The Seven Deadly Sins of Modern Wales. They’re three distinct, but inter-connected, issues with perceptions and attitudes within the Welsh public sector, its relations with business and in Welsh political life. It seems to be a “small country problem” as the same thing happens in the Republic of Ireland and rural parts of the United States, Australia and central Europe.

We can all perhaps point to examples of projects which shouldn’t have received a single penny of public money, but it was done to keep a local councillor, MP or AM happy and “prove” to people that the central government are listening.

In the public sector, various agencies are resistant to reform – particularly anything that might result in a downgrading of responsibilities in the name of efficiency and improvement. We continue with systems where you have, for argument’s sake, 10 managers and administrators overseeing 5 frontline staff. They don’t want to share information or expertise and always think about what’s going to happen in the next financial year, not in the next decade, 20 or 30 years.

Political control and consideration of grants to companies and bodies is another example – and, oh boy, there are plenty of shockers down the years; some paying off, others drawing the ire of the Wales Audit Office and Senedd’s Public Accounts Committee.

9. Spatial Policy & The British Goldfish Bowl

We all know how the Welsh economy flows – west to east and east to west. It’s a geographical truism and in part the result of having two densely populated areas located at opposite ends of the country to each other, divided by a mountain range and effectively being seen as overspill or a rural hinterland (especially in the north) of English conurbations.

There’s a case for a federal or quasi-federal system for Wales after independence and some powers can be devolved out of Cardiff Bay now, but we shouldn’t get caught in a trap of rubber-stamping the colonial partition of Wales to suit English economic interests.

Instead of seeking to address the population imbalance (for example, increasing the population density of rural Wales by focusing development on existing large settlements and developing new towns – not twee retirement settlements in picturesque villages) – we’ve perpetuated it by over-stressing the importance of Anglo-Welsh economic and migration flows, creating the impression of a “Welsh Wilderness” and ignoring our place in the European and wider global economy.

We’re always comparing ourselves with the rest of the UK and seeing the UK as the standard by which we should set ourselves by. On nearly all global measures, Wales – even as it is now – will be towards the top with some room for improvement.

We rarely compare ourselves to the rest of Europe or the world and when we do it’s usually only when there’s a negative context – “Parts of Wales are as poor as eastern Europe” etc.

We’re not as small, poor, stupid or insular as we’re told by the British media machine. There are plenty of nations out there who have faced similar, or perhaps even greater, challenges to the ones Wales faces both now and in the immediate future – and they’re all smashed it. We can too if we put our minds to it, we’ve just convinced ourselves that we’re not allowed to and that we will always be the poor relation.

10. Defeatism (….as well as an unwillingness to admit defeat when it counts)

The Welsh can be a very gloomy and pessimistic people – and you can’t blame us for that; there’ve been so many let downs, false dawns and decades of managed decline it creates an expectation of failure when we’re faced with doing anything beyond our comfort zone.

We’ve been taken in too easily by flashy artist impressions and promises of riches that never materialise. Our politics is lazy, managerial and lacks consideration beyond the next election. We perhaps fear uncertainties when questioning how to look after our own interests, so we exchange that for the supposed security of letting others make decisions on our behalf.

Yet, paradoxically, we’re more than willing to keep doing the wrong things for the sake of stubborn pride or to prove an imaginary point borne out of an inferiority complex: “Doing the wrong things better”, as it was once described.

The sooner we realise that making mistakes isn’t a bad thing as long as you learn from them, and the only help we can rely on is when we help ourselves, the better.

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