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Welsh economy has reached a new low, warns academic and former MP Adam Price

16/12/2021

Adam Price, a Fellow at Harvard University’s Center for International Development and the former Plaid Cymru MP for Carmarthen East and Dinefwr, fears Wales' situation will only get worse

The Welsh economy has reached a new low. Official figures released this week showed that Welsh GVA (or income) per capita had reached 74.0% of the UK average.

This would be the lowest figure since records began – except last year’s figure was revised down to 73.3%.

Carwyn Jones may crack open a can of Brains at this rare sign of progress – but we are actually worse off now than where we thought we were last year.

We are as a nation going backwards even when it appears we are going forwards.

The Welsh economy is now well into its third Lost Decade.

See also: Women bearing the brunt of UK's economic slump and Interactive average debt infographic for Wales and rest of UK

In Japan “the lost years” since the collapse of the property and equity markets in the early ’90s have been the subject of agonising political debate and painstaking academic inquiry.

But in Wales we seem to casually accept the signs of our economic decline as the “new normal”. In other countries governments would have fallen and people taken to the streets.

Yet the second poorest country in western Europe (after Portugal) has the second longest serving Government, after Luxembourg, which is the richest.

It would be amusing if it weren’t quite so tragic.

Since 1990 real terms Welsh per capita growth, expressed as a compound annual rate, has been 0.98% compared to 1.58% for the UK as a whole.

This doesn’t sound that bad.

But the difference is exponential.

This means that average income for the UK will double, on current trends, between 1990 and 2033.

In Wales though, at the current rate of growth, we will have to wait another 28 years, till 2061, to double our money, by which time most of us reading this article will be dead. The sub-1% growth club to which we belong is a very select one.

In the 34-member OECD only four countries have managed the same feat as Wales, growing cumulatively below 1% a year for more than 20 years.

They are: France and Italy, beset by credit rating woe; Switzerland which is so rich to begin with that nobody much has noticed, and, of course, Japan.

The conventional narrative is to see this as part of a century-long process of economic decline as oil replaced coal as the dominant energy source worldwide.

While this is undoubtedly a big part of our history, the Welsh economy managed to recover from the deep trauma of the inter-war years and by the 1970s and ’80s had stabilised around 85% of UK output per capita.

As can be seen from the chart (inset) the slide into the low 70s is a recent phenomenon which has little directly to do with coal as most of the industry had already disappeared to all intents and purposes by the time it had begun.

Looking back, the ’70s and ’80s were in actual fact a period when the Welsh economy held its own with the rest of the UK.

It’s only in the last two decades that the familiar story of Welsh decline has emerged with a vengeance.

In the 20 years to 1990, Welsh output per head grew by 46.3%, just 1% shy of the UK figure.

In the two decades since then Welsh prosperity has grown by 20 percentage points less, while the UK has continued to lodge a perfectly respectable figure of 42%.

Something really big and really awful has happened to our economy, but we seem to have adopted an air of quiet acceptance. The Welsh Government once had a target of reaching 90% of UK GVA by 2010. We missed by 16%.

One might have expected a resignation or two.

But Wales is a land where nothing succeeds like failure.

While all around have been losing theirs, a Labour First Minister’s job seems even more secure than ever.

And when Carwyn warns of the dangers of a race to the bottom if Wales is given the power to vary corporation tax, he can be pretty sure that no-one around him will have the temerity to point out it’s a race we’ve already won.