Join more than 165,000 subscribers and keep yourself informed with the latest financial news, insights and expert analysis to help you understand what really matters when it comes to your finances.
You are now subscribed
Your newsletter sign-up was successful
Want to add more newsletters?
An account already exists for this email address, please log in.
Celebrate the Welsh renaissance
Don't listen to the doom-mongers over British steel. The Welsh economy is doing perfectly well, says Matthew Lynn. But it could do even better.
The steel industry is shutting down, with thousands of people thrown out of work. Old industries are getting hammered. Public-sector cutbacks are ravaging local economies. To listen to the hysteria around the possible closure of Britain's last major steel works in Port Talbot, you'd think Wales was turning into another Greece, except with fewer olive groves a hopeless economic basket case, stuck in permanent depression.
The trouble is that this account simply isn't true. In fact, the Welsh economy is doing perfectly well. Take a look at some statistics from the Welsh government. The employment rate for the region is hitting all-time highs of above 70%. That's up by almost one percentage point in the last year alone, which tells you that lots of new jobs are being created. Disposable income per household has risen substantially, and is now up to 87% of the UK average, up from 84% in 2000. Average earnings are up to 92% of the UK-wide average, compared to 87% back in 2008.
And it's not just statistics there's plenty of evidence on the ground that the Welsh economy is finding new opportunities to replace dying industries. For example, luxury carmaker Aston Martin is to build its new DBX model in Wales, creating 750 jobs in the process, while TVR is also opening a car factory in Wales. Slowly the region is creating an automotive industry, just as Japanese manufacturers created one in the northeast 30 years ago.
Try 6 free issues of MoneyWeek today
Get unparalleled financial insight, analysis and expert opinion you can profit from.
Sign up for MoneyWeek’s free twice-daily newsletter.
Join more than 165,000 subscribers and keep yourself informed with latest financial news, insights and expert analysis to help you understand what really matters when it comes to your finances.
Join more than 165,000 subscribers and keep yourself informed with latest financial news, insights and expert analysis to help you understand what really matters when it comes to your finances.
That's not to say that a major closure such as the one in Port Talbot does not create problems. Not all the new jobs that are being created will be right for the people who are being laid off. Many people will have to retrain to gain new skills, and some will have to move their families to find work. But that is hardly unique to Wales. In a flexible, dynamic economy, people have to expect to move for their work, and to retrain if necessary.
The days when you could spend an entire career working for the same employer are long gone. But the controversy around Tata's decision does not reflect the reality of the wider economy something that often happens at times like these. Any particular plant closure receives a great deal of publicity. So do cuts to the public sector, which hurt more in a region such as Wales, which had grown excessively dependent on state spending. By contrast, the new companies created do not get any coverage, because they are small and not very significant in the greater scheme of things. Hence we hear about 4,000 jobs disappearing, but not about ten opportunities that have just opened up.
Yet this cycle of destruction and creation is part of a normal process in a healthy economy. Old industries die and new ones spring up to replace them. The worst thing that we could do is stand in the way of this by trying to keep failing industries alive and throwing public money at them, which could be better spent on other things.
We could certainly do more to encourage the Welsh renaissance. For example, it would be great if Wales could also get Northern Ireland's new 12.5% corporate tax rate, scheduled for next year. A lot of companies might decide that the Severn Bridge was not so much of a barrier if they paid five percentage point less in tax on the western side of the river.
And if Wales and Northern Ireland thrive with low taxes, that will give the high-tax Scottish nationalist something to think about as well. But we shouldn't think that keeping old steel mills going will do anything to benefit the Welsh economy in the long term. It's simply not true and a lot of money would be needlessly wasted in discovering our mistake.
Sign up for MoneyWeek's newsletters
Join more than 165,000 subscribers and keep yourself informed with the latest financial news, insights and expert analysis to help you understand what really matters when it comes to your finances.
Matthew Lynn is a columnist for Bloomberg and writes weekly commentary syndicated in papers such as the Daily Telegraph, Die Welt, the Sydney Morning Herald, the South China Morning Post and the Miami Herald. He is also an associate editor of Spectator Business, and a regular contributor to The Spectator. Before that, he worked for the business section of the Sunday Times for ten years.
