Two years ago the Welsh economy faced the bleak prospect of thousands of job-losses because of a decision made in a boardroom in India.
Through the determined response of the Welsh Government, and no thanks to UK Ministers, the jobs at Tata were saved. But it underlined the vulnerability of our economy to forces beyond our control.
A few months later, voters shocked Welsh political elites by opting to leave the European Union.
Many did so because they thought that they had nothing to lose. But as the negotiations have unfolded, the realities of what Brexit could mean for already struggling post-industrial communities in Wales are becoming clearer.
Our ‘anchor companies’ are mainly global multinational firms who were attracted to Wales in-part because of the easy access to the Single Market.
It’s not surprising that companies like Airbus have raised the alarm. They rely on their workers hopping on a plane to Toulouse in the morning and returning later in the afternoon. If that was no longer a quick and easy thing to do, under a worst-case scenario of trade barriers and tariffs, they could easily up-anchor and leave our shores.
If you really want to get gloomy, as well as the consequences of Brexit, let’s add in the likely impact of automation. About one third of all jobs risk being impacted by artificial intelligence. Our largest employers – Tesco, Asda & Sainsbury’s – are all in one of the sectors most likely to be first hit; what’s more, retail employs large numbers of women in communities still scarred by the last wave of deindustrialisation.
Added to this is the pressure of demand on our health and social care services from the needs of a population living longer, and from the UK government’s austerity policies denying us the resources we need to keep up.
We know we can’t rely on UK Ministers to help us meet these existential challenges – their failure to tackle the threat to steel jobs last year is compounded by their recent recant on the tidal lagoon.
But this isn’t a counsel of despair, it’s a call to action.
Instead of simply trying to replace lost jobs we need to re-shape the economy to help us withstand future shocks. The Welsh Government’s recently published Economic Action Plan contains a recognition of this, but the challenge now is to create an alternative economic model – a Plan B – that strengthens the economy whilst also meeting society’s everyday needs.
So how do we take each of these profound challenges and try to shape their impact on Wales in a way which causes least harm, and gives us the best chance to make the Welsh economy more resilient in the longer term?
Our approach to Brexit offers an illustration of how this might be achieved. Let us be clear, we wanted to remain in the EU and deeply regret the result – a hard Brexit will cause huge damage to our economy. But if we’re leaving the EU, let’s make sure we design policies which give us the best chance of flourishing outside.
Replacing the Common Agricultural Policy will allow us to develop our own approach to food and farming – a chance to see more locally-produced food in schools and hospitals. This wouldn’t just be a significant public health win, it’d cut food miles and would support our food producers.
It could be made all the easier if the terms of future trade deals give us the opportunity to fashion our own rule book on the public purchase of goods and services, to better support local firms. This is crucial for nurturing the so-called Foundational Economy – the neglected everyday ‘mundane’ sectors which account for some 40% of the economy. As Professor Karel Williams observes, there are nearly as many people in Wales making sofas as there are making steel, but they’re hidden away.
Automation similarly presents opportunities. Thousands of jobs will be replaced by algorithms and machines, but this digital transformation will also create new roles and industries, too. People will need new skills to do these new jobs and a universal right to lifelong learning is more important now than ever before.
To harness developments in artificial intelligence, Government needs to actively encourage businesses to adapt. The new Welsh Government Economic Strategy deserves credit for including automation as one of the areas where firms will get Government support. We now need to identify sectors where Wales has existing strengths to help them break into these emerging markets.
Take health and care, the Life Science ‘Wellness Village’ in Llanelli – one of the flagship projects featuring in the Swansea Bay City Deal – offers us a chance to position Wales at the forefront of developing health-tech.
Genomics, the future of healthcare, will allow every patient to have their genetic code mapped, and to receive personalised medication and treatment, enabling us to combat diseases at an earlier stage with drugs 20 times more powerful than existing regimens.
However, when you consider that each person’s genetic code generates one terabyte of data, we are going to need some serious investment in digital infrastructure to power this life-changing technology.
The Swansea Bay Metro is another example of where we can innovate. In developing our blueprint for this idea, we should think how the embryonic public transport system serving the Swansea City Region might be able leapfrog existing models of mass transit. Fast-approaching technological innovations will fundamentally shift how we travel – Uber only came to London six years ago, now almost half the population of London use the app. And the UK government thinks that driverless cars will be on our road in three years. So instead of being dependent on expensive and disruptive heavy-rail and light-rail infrastructure, the Swansea region could employ fast-emerging technologies and become a test bed for driverless, low carbon bus transit systems, with smartphone-based real time journey information.
Crucially, this impending digitalisation will be as much about culture as it is kit. Rather than tweaking our current way of working, we need to be open to a bolder approach. A truly digital mindset will enable us to transform the design and delivery of public services to better meet people’s needs.
But whilst we focus on innovations, it’s also important we don’t lose sight of the everyday. Affordable housing, care, cheap energy and reliable transport are today’s most basic unmet needs. Is there anything which the Welsh Government could do which would be more effective at stimulating the economy than a large scale affordable eco housing programme?
As well as providing much needed homes it would also develop a skilled workforce, reduce energy costs, and bolster Welsh businesses and local supply chains.
These new homes should be self-sufficient from renewable energy from the outset, and could even generate excess energy for their communities. This would need us to rethink local energy networks in a way which could create an extra source of income for our towns and villages.
And while we’re rethinking homes for families, let’s think how about building care facilities too – even co-locating childcare and elderly care, to break down barriers. We can change the way these services are provided by making it easier for locally-based care cooperatives, and small and medium sized businesses, to have a greater role.
The key to all this is that it needs to be at a big enough scale to have an impact.
Investment in these publicly-owned assets will deliver massive social benefits but also a long term, stable return. The Welsh Government doesn’t have the resources to fund this alone. But a Public Assets Investment Fund, with Welsh Government, local government, the investment market (maybe even the UK Government), could achieve that sort of scale – providing long term, steady returns to investors. But it requires a set of strategic priorities, over a clear timeframe.
This would be a vision of the economy fundamentally delivered in partnership with local government and inspired by the tradition of “municipal socialism” which is being reinvigorated now in parts of Wales – with councils looking at local delivery of energy and bus services, some even digital infrastructure, to address the punitive cost of these modern essentials.
This local partnership could enable us to make sure that economic development focuses on strengthening our local economies, with local producers and suppliers at its heart, so that our “anchor companies” become those anchored in Wales.
That is not to say that we won’t want to attract overseas investment, increasingly challenging though that is going to be in a post-Brexit world. But our foreign investment strategy should be focused, targeting overseas companies which can bolster sectors where we are strong or have a competitive advantage, and supplement existing local supply chains.
And why not look at bold ownership models with foreign investors? Large foreign renewables companies for example, should be required to joint venture with local communities, with an ongoing share of profits staying locally, so that we can create capital funds for communities, not just “community benefits”.
This could signal a clear intent to shift the economy of Wales from an “extractive” economy to one which invests in communities and rooted businesses.
All of this can be taken forward within the principles of the Welsh Government’s recently published Economic Action Plan but it is up to us to choose the urgency we give it, and the scale of our ambition.
In January, Wales will have a new First Minister, just shy of our 20th anniversary of running the Government of Wales. This is an opportunity to refocus our economic opportunity that we will not be forgiven for missing.
All articles published on Click on Wales are subject to IWA’s disclaimer.
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