Wales' economy bottom of GVA table again

Hi-tech manufacturing is associated with adding value to Wales' economy

Wales is again at the bottom of a UK table measuring the strength of the economy.

The Office for National Statistics (ONS) has published regional gross value added (GVA) figures for 2015.

They measure how much money is generated through goods produced and services delivered.

Wales had the lowest GVA per head at £18,002 but its growth per head between 2014 and 2015 was the highest of the UK nations at 2.8%.

But Wales' GVA is still behind Northern Ireland on £18,584 per head; Scotland on £23,685 and England with £26,159.

It has been bottom of the table of UK nations since 1997.

Plaid Cymru said problems were spreading and there appeared to be a . "contagion in economic decline".

First Minister Carwyn Jones said the figures were improving and showed Wales was "on the right track".

The north west of England saw the highest growth, while Anglesey and the Gwent valleys were the parts of Wales where the economy is weakest.

Meanwhile, comparing the capital cities, Belfast (4.7%) and Edinburgh (4.5%) were showing the strongest annual growth in GVA per head, outstripping Cardiff (2.6%) and London (1.6%).

CASE STUDY - HI-TECH RESEARCH AND MANUFACTURING

Hi-tech company Renishaw moved into the former Bosch car components plant in Miskin, Rhondda Cynon Taff, four years ago and has invested £40m.

It is now a very different plant with high levels of research and development carried out there.

The company began with 25 workers and now has 280. The skills range from the development of new products, designing new precision engineering and work in scientific and medical technology.

For instance, it is the only company in the UK to make metal products using 3D printers, with one customer using the technology to develop new racing yachts.

The workforce earns more than average for Wales, especially its engineers.

The work is of high value and since it is taking materials from a relatively simple to a complex form, it has a significant impact on Wales' GVA figures.

The annual GVA figures are important. They are a measure of productivity - in other words what is produced in Wales when we go to work.

Wales has been at the bottom of the league of UK nations. The 2014 figures showed that while Wales accounts for 5% of the population, it only counts for 3.4% of the UK economy.

It is also generally recognised that the UK would benefit if it had higher productivity.

Most of Renishaw's machines and techniques are exported; customers include aerospace and automotive companies.

At the highest end, its products include metal 3D printing machinery costing up to £400,000 - which are being used to build racing yachts.

Chris Pockett from the firm said: "In the UK things are very good for us, especially our core markets. We've grown strongly here.

"We employ people from right across south Wales, the M4 corridor is really important to us but also the heads of the valleys and into Monmouthshire too, as far away as Mumbles, so we're spreading wealth evenly across south Wales.

"Ninety five per cent of our business is export but we do all the R&D ourselves, sell all the products around the world ourselves and do the manufacturing primarily ourselves in UK and Ireland and the only reason we can do that is that we sell a very high value-added product."

A regional map of GVA in Wales - and the split between west Wales and the valleys and eastern Wales

GVA - DO THE FIGURES MATTER?

Wales has one of the lowest rates of unemployment in the UK at 4.3% and has been lower than the UK average for many months.

Put that together with the GVA figures and we can see that in simple terms there are lots of people working in Wales but on the whole there are not doing relatively high value, high skilled work.

It is equally misleading to put too much emphasis on either the unemployment figures or GVA.

It would be wrong to say Wales has a strong economy purely because unemployment is relatively low. Only 72.9% are employed - lower than the UK figure of 74.4%.

Similarly it is important not to put too much store on GVA figures without using a mix of statistics to give context.

For instance, on Anglesey, GVA figures can look weaker than they are on the ground.

GVA is calculated where the work is carried out so people living on the island but working in Bangor are not counted.

Also, Anglesey has a larger proportion of retired people who may have significant spending power within the community but would not be counted in GVA figures unless they are continuing to work.

In some ways, the GVA statistics can be a blunt instrument in a nation with communities and businesses as varied as they are in Wales.

However, they are used to assess whether regions are entitled to extra help.

West Wales and the Valleys has benefited since 2000 from considerable funds from the European Union precisely because the area's GVA figures have been below the 75% EU average.

The latest figures show this area with an average GVA per head of £16,059 - nearly £2,000 less than the all-Wales figure; a widening gap since 2000 when the difference was £1,600. It is 63% of the UK average.

This is despite Objective One funding and extra cash from subsequent programmes.

CASE STUDY - SMALL STILL ADDS UP LOCALLY

Timberkits is a toy-maker based in rural Powys in Llanbrynmair for nearly 25 years.

It was founded by husband and wife Eric and Alison Williamson and Eric still runs the company with his daughter Sarah Reast, who is now a director and designer.

Recently they teamed up with Aardman Animation on a Shaun the Sheep range.

The business creates model kit designs and prototypes but manufacturing switched to China in an effort to save the company.

Mr Williamson says the intellectual value of what they do has remained in Llanbrynmair and in terms of GVA that is the most significant part.

The company still provides a nucleus of skilled jobs locally and also employment in a cluster of businesses - including a cafe and shop - on the site.

Ms Reast said: "The decision to take manufacturing to China allowed the company to continue operating. Without that, it would have folded and there would be nothing here.

"The company has grown and now across the whole site we employ more people than when we ran the factory, so ironically it has turned to everyone's advantage."

She said it was not just about the jobs within the building but the local supply chain and spending on local services.

The GVA figures for rural areas are often lower because people have to commute outside their communities for work - and it is here where the GVA is counted.

Often, work within rural communities is lower paid and lower skilled.

But Sarah Reast said the proportion of employment Timberkits provides within a small community was as significant as a big business in a city.

POLITICAL RESPONSE

Plaid Cymru urged the Welsh Government to call an emergency economic summit to address the "deep structural crisis" at the heart of the Welsh economy.

Economy spokesman Adam Price AM said: "These are amongst the worst figures for Wales relative to the UK average since records began back in 1954.

"Not only is there a crisis but that crisis is spreading.

"There seems to be a contagion in economic decline with areas such as Cardiff and the Vale of Glamorgan dropping from 100% of the UK average to 90% over the last decade.

"Eastern parts of Wales are now also dipping into relative poverty typically found in West Wales and the Valleys."

Welsh Conservatives leader Andrew RT Davies said much more needed to be done.

"Constantly delaying important infrastructure projects such as the M4 relief road are not helping matters, and the Welsh Government must now put its money where its mouth is," he said.

Welsh Secretary Alun Cairns said: "The latest GVA figures show that Wales is the fastest growing economic area per head outside of London. We are closing the gap on the rest of the UK and you see that mirrored in our strengthening jobs market.

"North, south and west Wales are all contributing to what is an improving and country-wide picture."

Economy Secretary Ken Skates said: "We recognise there is more to do and we will keep working hard to grow Wales' economy.

"Developments such as our Valleys Taskforce, Wylfa Newydd and our plans for the Third Menai Crossing will all help to drive up GVA in some of Wales' less prosperous communities.

"There is absolutely no room for complacency but these figures do show that our pro-business approach is driving growth and making a real difference to the lives of ordinary people across Wales."