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Economic Austerity


Blog gwreiddiol | Originally posted: December 15, 2014

This week Gofal Ceredigion announced that the economy in mid Wales was becoming an economic 'dust bowl' as a consequence of a lack of investment by Welsh Government. I would argue that it is not the economy of mid Wales which is on its knees but that of the whole of West Wales and that the reasons for this are not down to lack of investment but rather to the lack of business support mechanisms to enable the benefit of the investment to be felt.

Welsh Government ministers sitting in their palace in Cardiff think that throwing money at a problem can solve it. They are misguided in their thinking and need to go back to basics. Worryingly, despite twelve + years of European investment in our infrastructure and in various measures aimed at improving competitiveness Wales generally and the Objective 1 areas particularly have fallen further behind the rest of the UK and Europe and Ministers need to recognise and address the real reasons for this.

The economy of West Wales under analysis is probably best described as narrow and targeted being almost entirely dependent upon tourism and to a lesser degree - agriculture. Additional income generating opportunities include the work and investment generated by the public sector which until the advent of procurement legislation meant that millions of pounds of additional investment could be further used to support private companies operating in these areas. These investments drive other economic generators like construction and retail thus driving forward investment in these areas. Figures recently released by Barbour ABI and noted in the charts above show that over the last 12 months Wales at 3% has the joint lowest construction activity in the UK!

Recent procurement rules and regulations as interpreted by public sector organisations dictated that the majority of investments were directed to larger practices and companies better able to show the range of expertise and resourcing required by these organisations - many of which were from across the border. These companies brought with them their own support services and supply chains. The loss of this direct and indirect investment and income generation has led to the current stagnation of economic conditions in rural areas and more importantly has also led to a downward spiral of further decline in opportunity, investment, resourcing and expertise as local companies cut back on staff, apprenticeships and investment in an attempt to address the changes in economic conditions as public sector opportunities dried up and companies from other areas moved in! The lack of support for local companies over this period has led students who had left for University to consider work opportunities in the cities rather than return to rural areas leading to further depopulation and brain drain. A consequential effect of this has been to further destabilise the Welsh language in these areas as companies and operators from non Welsh speaking areas moved in.

Ministers have felt either unable or unwilling to assist - recent conversations with an elected representative has convinced me that ministers are in denial as to the effect of such policies preferring instead to blame it on 'European regulation' when really it is the way in which such policies are interpreted which is at the root of the problem. In recent years millions of pounds have been pumped by Welsh Government in trying to kick start the economy by assisting companies to tender for public sector opportunities. Although well meant, the investment in rural areas has been at best misguided. Having attended two recent construction related events arranged by Construction Excellence and Construction Futures Wales in which attendance by private sector companies was minimal it is clear that the messages put out by Welsh Government is not reaching its target audience or that the audience itself is fed up with undelivered promises. Both events emphasised the positive effect of recent investment in individual companies and of Welsh Government policy on issues such as apprenticeships, training and support without addressing the inherent problems within the system. The need for such support only arises because of the negative effect of procurement generally and the fact that there has been a considerable decline in public sector investment in local businesses as a result of government policies. Urgent action is needed to address these issues and the message for government is clear - companies from within the private sector don't want or need handouts - what they need is for government and public sector organisations generally to ensure that investment meant for rural areas remains in rural areas and is not directed to other more economically advantaged areas of the UK because of procurement rules and regulations.


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