Taking a chance on the Circuit of Wales

Adam Price and Nigel Copner argue that investing in the Circuit of Wales project could be a strategic bet for Wales.

We Welsh have the habit of being the nearly men and women of economic opportunity.

The first hydrogen fuel cell, steam locomotive, and yes, first Dyson prototype, were all built here – but the opportunity to cash in all went begging.  The difficult geology of the south Wales coalfield made it a test-bed of innovation in coal-cutting technology.  But the National Coal Board gave away the knowledge for free to engineering companies based in the Midlands.

When we realised that there wasn’t much future in digging things out of the ground, we adopted the textbook economic strategy that pretty much everywhere else adopted – investing in things like roads, advance factories and offering grants to make ourselves attractive to footloose foreign firms.  This is often called the “Field of Dreams” approach to economic development after the Kevin Costner film in which a sports-mad farmer builds a baseball pitch in an Iowa cornfield.

Superficially, the proposal to build a world class racing track on heathland above Ebbw Vale sounds every bit as speculative.  Build it and they will come is the mantra (and in the famous case of that LG factory down the road, of course, they didn’t).  

In fact, the Circuit of Wales turns everything we have done for the last fifty years on its head.  Until now, we have been all Field and no Dream, focusing on what economists call the supply-side (the Heads of the Valleys Road, for example, and the massive investment in skills at Ebbw Vale’s The Works) with no clear idea about where the demand for those skills or that infrastructure would come from in the future.   

A demand-side strategy, by contrast, deals not in generalities but in specifics.  In which particular markets are there opportunities for us as a country and what do we need to do to make it happen? The Circuit of Wales spotted the gap – the fact that the UK lacks a modern, purpose-built, world class motor sport facility – and saw an opportunity to leverage our existing strengths in the automotive industry, our good transport connectivity and home-grown motor sport tradition (bikes and cross-country rallying) to build a new home for a high-end engineering cluster with the circuit at its centre, a vast open air show-room that doubles up as test-rig.

The prize in economic terms is potentially transformational.  At over £430m, if it gets the go-ahead it will be the biggest ever development project in Wales that is 100% led and funded by the private sector (the Welsh Government stands to completely recoup the seedcorn support it has provided initially by year three of operations).  

Private sector-led is not a phrase that often pops up in the Welsh economic lexicon and it has been refreshing to see recognition of this opportunity and positivity for the project and its exciting consequences for Gwent in the pages of the South Wales Argus. However, it may perplex all of those who’ve read elsewhere all the headlines about the “waste” of public money.  To get Aviva – one of Britain’s largest institutional investors – to show any interest in the south Wales valleys is more than a coup; at this massive scale it is nothing short of miraculous.  The fact that Kleinwort Benson are also on board shows the highest level of confidence in private investment appetite for the project.

Of course, a lot of confusion has been created by talk of a Government guarantee, a sort of repayment insurance for investors. This approach to infrastructure investment is an essential part of the economic armoury of governments worldwide.  It’s how Birmingham built the NEC and how the UK Government plans to kick-start about £40 billion of infrastructure investment between now and 2021.  It’s a tool the Welsh Government has used itself (though usually under the cloak of commercial confidentiality) – and it’s absolutely crucial in getting investors to consider “non-traditional” areas i.e. anywhere outside the M25.  Compared to the UK scheme, which is very generous to lenders, the Circuit of Wales deal has limited exposure:  with only 50% of annual repayments covered and none of the construction risk, in return for an annual fee repaid to the public purse.  

Let’s be clear about one thing. The Circuit of Wales is a strategic bet about a possible future, and there are limits to the number of these we can make at any one time.  But all the due diligence conducted by investors and the Government’s own advisers have, to my knowledge, confirmed the strength of the underlying business model.  Jaguar Land Rovers’ attempt to buy the ailing Silverstone Circuit as a test-track for customers – before having to back out after opposition from Porsche that also have a driving centre on site – shows the level of interest among motor manufacturers in this kind of facility, even when it’s a converted World War II airfield.  

TVR has confirmed the circuit was critical to their decision to lay down roots in Wales, and Aston Martin are rumoured to be seeking a presence on site.  As rural Northamptonshire’s great chain of motorsport companies, snaking its way from Silverstone itself through to neighbouring Oxfordshire demonstrates,  it’s proximity to a circuit that makes the difference. Indeed, MEPC’s new business and technology park built on land adjacent to the track is already 50% pre-committed. Motorsport is the car industry’s laboratory and circuits are their workbench.

Of course, the biggest prize of all is Formula 1.  Silverstone, having narrowly secured the rights to the British Grand Prix until 2026, is struggling to meet its fees to Bernie Ecclestone’s Formula One Group, hampered by the fact that it’s about the only Circuit in the world that gets no government contribution whatsoever.  Ecclestone could break the contract at any time, which has led some industry insiders to talk about a move to Wales as early as 2020.  Formula 1, with its 400 million-plus television audience, would give us a global stage like no other- but it’s the cluster we could build around it that’s the key.  

In case people think that doubling down on the combustion engine sounds a bit backward looking, it’s Formula 1 companies that have been at the forefront of low carbon innovation from energy recovery to ‘lightweighting’ in design and materials.  Maybe Riversimple’s Rasa – another Welsh-made car to be road-tested soon, powered by that original Welsh innovation, the fuel cell – could be mass-manufactured at Rassau, making us the Motorsport Valleys, plural, of the 21st century.  

Environmentally, the project also has fascinating plans to not only offset and replenish the land taken for its construction but to positively invest in, engender and succour a wider diversity of natural resource, livestock farming and outdoor pursuits that can help to fling open to domestic and international visitors the previously locked southern approach to the sprawling spectacle of the Brecon Beacons National Park.

Let’s be positive and give this project a chance.  

One thing’s for certain. If we don’t dare to build anything, if as a nation we are paralysed by risk-aversion and a chronic self-doubt, our dreams of a better future will remain forever nothing more than that; just dreams.

6 thoughts on “Taking a chance on the Circuit of Wales

  1. The CoW plan is very ambitious. I say this not as a negative, but simply to highlight that everything done in motorsport is very ambitious as so much of it ends in failure. So far very little about what has been said by CoW suggests this proposal is going to be a success.

    On top of that this article appears to get a lot wrong about motorsport and as such makes a lot of claims I would call untrue. I’m not going to get into any Kevin Costner based economic models as I’m not an economist. Instead lets look at the claims made about motorsport.

    Above Adam and Nigel claim that it’s a “fact that the UK lacks a modern, purpose-built, world class motor sport facility”. This is simply untrue. But more than that it’s a misleading claim to make about CoW.

    Why? Because the plan has never been to make it a truly world class facility. The plan is for a second tier track known as an FIA License Grade 2 circuit. This means the track could not run a Formula 1 race, nor would it have the best facilities and safety features Grade 1 status require. The developers have made this point several times, which is why I find talk of F1 misleading no matter how much I would love there to be a Welsh GP.

    If the developers have changed their plans to make the facility Grade 1 i’m happy to be corrected. I can see nothing online that says they have changed their plans to build one. If so i’d also like to know how they intend to build one for so little money – I’d invite people to look up how much people around the world are spending to build F1 tracks these days.

    So the track won’t be world class. It will be second class. This immediately puts it behind Silverstone (UK’s only grade 1) and on the same level as the UK’s other Grade 2 tracks: Brands hatch; Donington Park; and Rockingham. All of these are modern and purpose built (often several times over) otherwise they would not have the status. Indeed the FIA are very strict about this kind of thing as lives are at risk.

    Put simply the statement that it’s a “fact that the UK lacks a modern, purpose-built, world class motor sport facility” is simply wrong, and does not mean CoW would be one. I’m shocked it was used.

    Now unless you’re motorsport mad you may not have heard about all of the tracks above. That’s because they are all struggling to make ends meet. And that’s with the level of motorsport heritage most of them have in their favor. Indeed, tracks all around the world are struggling to stay in business. This is because so much of the money for hosting big events goes back to the organizers, and the teams. The tracks themselves have tiny margins.

    But what if the track got built anyway? What if it then got rebuilt in order to obtain the “biggest prize” of F1? Here the article again appears way off.

    Bernie Ecclestone has recently negotiated the sale of F1 to Liberty Media. This was only completed in the last few weeks so nobody knows what the long term role of the 86 year old billionaire is going to be. Given this, even making reference to him suggests a lack of research. Rumors are he is supporting the transition for a few years but will have a much more diminished role in the deal making. As such throwing in conjecture on the future of Silverstone does not help. And as above, CoW could not jump into replace Silverstone without a major redesign.

    In short there is a lot which does not make sense here to me (unless CoW have changed their advertised plans for the kind of track they want to build). If they have we can then get onto why building a Grade 1 track does not mean you get an F1 race, nor that a load of new companies just move in.

  2. It’s already been pointed out how the authors aren’t exactly clued up on motor racing but then I don’t think we could expect them to be. However I would expect them both, Nigel Copner especially to know something about the sort of weather Glyn Ebbw gets.
    I’d be very surprised if those who award races to circuits wouldn’t know details of how often races would likely need to be postponed or cancelled due to rain and low cloud cover at a site in a rainy part of the UK and at a high altitude when compared to (all ?)other UK circuits.

  3. @CapM

    The best comparison location/weather wise is probably Knockhill Circuit in Dunfermline. The track is of a lower standard than what CoW is planned to be. Rain and low cloud would be ok for most Touring Car events, but bikes could be more of an issue.

  4. @Alexander Phillips
    I’ve just looked up altitudes for both sites and at about 450 meters the Circuit of Wales would be nearly twice as high up as Knockhill (232meters). As I understand it the site is peat moorland so the circuit of Wales would require enormous quantities of soft substrate to be removed before it could be built. For me the proposal has little sense.
    Now on the other hand if they were selling Ebbw Vale a Monorail. Monorail! Monorail!!
    (see Marge vs the Monorail Simpsons episode)

  5. You are all too polite. This scheme is a monstrous load of nonsense. A company is proposing to build a facility for nearly ten times what it would cost to buy an existing better one. Welsh government guarantees would be money down the drain. I am truly surprised that Price and Copner fell for this. Perhaps they would like to buy Brooklyn Bridge and transfer it to Ebbw Vale as a tourist attraction.

  6. It is not like WG has a reputation for backing winners is it ?

    The shrewd will identify a business proposition propped up by the funds of the gullible and run the other way.

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