#1South Wales Valleys - An Economic Overview Jonathan Price Chief Economist, Welsh Government T#2· • • There are major challenges in developing a sound evidence base for economic development policy, and this is as true in the case of the Valleys as elsewhere: There is a wide range of factors in play, making it difficult to identify causes. Causes may interact and play out over a long period. Causal pathways may be specific to particular times and places. Evidence is often produced by lobby groups or others with a partial perspective. In general, economic evidence is more reliable when it: - is derived from a broad range of studies; - is consistent with the wider evidence base; - - takes explicit account of deadweight, displacement and other offsetting effects; - establishes results which are both statistically and quantitatively significant. Weaker evidence is often based on single studies (frequently with cases pre- selected to demonstrate "success") and/or is applied in an inappropriate context. "Expert" opinion is often of limited value unless based on evidence of the more reliable kind. Hard evidence in the area of economic development is quite limited in scope - but the role of some relevant factors is reasonably well-established....the trouble is that they are deep seated and difficult to change. 2#3Context: over the whole period since devolution, the economy in Wales has broadly kept pace with UK (and therefore had real growth per head of over 20%). The big "gaps" opened up over the 1980s and 1990s. Welsh performance relative to UK, 1997/9=100 110 108 106 104 102 100 98 96 94 92 22 90 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Welsh relative employment rate Welsh relative GVA Welsh relative household income Source: Own calculations Welsh relative weekly wages 3#4This initial analysis is mainly based on statistics available for standard geographies, with the Valleys identified in red. But wider economic linkages, especially those within Cardiff and Swansea city regions are very important. Local authorities NUTS3 areas City regions Swansea Neath Port Talbot Swansea Swansea Bridgend and Neath Port Talbot Cardiff Bridgend Rhondda Cynon Taff Central Valleys Merthyr Tydfil Caerphilly Blaenau Gwent Torfaen Gwent Valleys Vale of Glamorgan Cardiff and Vale Cardiff Newport Monmouthshire and Newport Monmouthshire Note: Limited economic data can be produced for bespoke geographies, including the Valleys, but was not generally available at the time of preparation.#5Historical background - long run decline in mining employment (and, as elsewhere across developed world, in manufacturing): 160,000 140,000 Mining employment in South Wales coalfied 120,000 100,000 80,000 60,000 40,000 20,000 0 1940 1945 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 Source: Coalfields Regeneration, Policy Press for JRF, 2000 5#685 90 Source: ONS 95 100 105 110 Demographic trends reflect out-migration - note "recovery” of Merthyr, continued underperformance of Blaenau Gwent: 115 Valleys LAs: population aged 16-64 (1991=100) 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Bridgend Wales -Caerphilly Neath Port Talbot Valleys (incl NPT & Bridgend) -Merthyr Tydfil Rhondda Cynon Taf Torfaen Blaenau Gwent 6#7Current economic performance of Valleys: Note: GVA per head is misleading at this scale - does not reflect commuting, demographics or industrial structure Valleys NUTS 3 areas: Latest Economic Performance (UK=100) Gwent Valleys Central Valleys Bridgend and Neath Port Talbot Wales 71 67 64 56 92 94 95 96 96 84 86 84 87 87 84 83 85 83 78 79 GVA per head 2014 GVA per hour worked Employment rates 2014 2015 Source: ONS, Welsh Government Weekly wages (f/t) 2014/15 Household Income 2014 7#8Trends in relative GVA per head - slight improvement?: Note: does not reflect any changes in commuting, demographics or industrial structure Valleys NUTS3 areas: GVA per head (UK=100) 80 75 70 65 60 60 55 50 45 40 Wales Bridgend and Neath Port Talbot Central Valleys Valleys (incl NPT and Bridgend) Gwent Valleys 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Note: Workplace based Source: ONS 8#9Trends in household income - some evidence of relative deterioration: Valleys NUTS 3 areas: Household Income (UK=100) 95 90 85 80 75 70 65 60 60 Wales Bridgend and Neath Port Talbot Valleys (incl NPT & Bridgend) 2014 2013 Central Valleys Gwent Valleys 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 Note: Residence based. Source: ONS 6#10Trends in employment rates - relative improvement across the Valleys: 105 100 95 90 85 80 Valleys LAs: Employment rates (UK=100) (ranked on level 2013-15) 75 Bridgend Torfaen Wales Rhondda Valleys (incl Caerphilly Blaenau Cynon Taf NPT & Gwent Neath Port Merthyr Talbot Tydfil Note: Residence based. Source: Welsh Government Bridgend) 2001-03 2013-15 10#11Trends in pay - relative deterioration across Valleys, partly offsetting (reflecting?) the improvement in employment: Valleys LAs: Wages (UK =100) (ranked on level 2013-15) 100 95 90 90 85 80 75 70 65 60 55 50 Bridgend Caerphilly Wales Neath Port Valleys (incl Talbot Rhondda Cynon Taf Torfaen Merthyr Blaenau Tydfil Gwent Note: Average gross weekly earnings, workplace based, Source: ONS NPT & Bridgend) 1997-99 2013-15 11#12Best evidence indicates key drivers of an area's relative economic performance are skills and access to centres of economic mass. Qualifications profile of (adult) population in Valleys is weak, and partly reflects out- migration: Local authority: district/ unitary (348 in Wales & England) No quals Apprenticeship Level 4 quals and above % Rank/348 % Rank/348 % Rank/348 Top ten for "no quals" Blaenau Gwent 27.1 Merthyr Tydfil 26.2 Sandwell 25.4 Knowsley 25.3 123+ 3.4 192 16.6 343 3.4 179 19.4 321 2.5 297 17.7 336 4 3.2 226 17.5 338 Stoke-on-Trent 24.5 Walsall 24.3 Kingston upon Hull, City of 23.4 Rhondda, Cynon, Taff 23.0 5698 3.2 223 17.4 339 2.7 282 19.0 330 7 3.8 111 16.9 342 3.2 214 21.8 288 Caerphilly 22.9 9 3.5 169 20.7 307 Barnsley 22.8 10 3.9 88 19.3 326 Other South Wales Neath Port Talbot Bridgend 22.0 22 4.9 9 20.8 304 20.8 32 3.8 113 24.3 246 Torfaen 20.3 40 4.0 81 22.1 285 Newport 19.4 45 3.4 173 25.6 223 Carmarthenshire 17.5 81 4.0 83 26.0 214 Swansea 16.6 100 3.8 115 27.9 179 Cardiff 14.8 149 2.3 306 34.8 74 Source: Census 2011 12#13Chances of being in employment are much more closely linked to qualification level than (current) location: Indications of extra (modest) "penalties" in upper Valleys/SE Wales Employment rate, age 16-64 (ex students), 2015 100 90 90 80 80 70 60 60 50 40 30 20 20 10 0 All NQF level 4+ Below NQF level No quals 4 Source: Annual Population Survey, ONS Heads of the Valleys Rest of the Valleys I South East Wales exc Valleys Rest of Wales Wales London UK 13#14No sign that the premium on qualifications is lower in Wales than elsewhere: Regional earnings premia, unadjusted, year ending June 2015, % 90 76 80 73 70 65 60 50 40 30 20 10 77 84 75 North East Wales North West Yorkshire and the Scotland UK Humber ■NQF Level 4 and above NQF Level 3 Trade Apprenticeships Other Qualifications Source: Annual Population Survey, 2016 14#15Out-commuting, including to the wider "city regions", is high and playing increasing role: Net commuting relative to working residents (%) 30.0 25.0 20.0 15.0 10.0 5.0 JL 0.0 Blaenau Caerphilly Gwent Rhondda Neath Port Valleys (incl Torfaen Cynon Taf Talbot NPT & Bridgend) Merthyr Tydfil Bridgend Source: Welsh Government 2001-3 2013-15 15#16- Private transport is the dominant modal choice for commuting – perhaps partly reflecting geography... 100 90 80 70 60 50 40 30 20 10 Cardiff city-region: commuting by mode, exl foot (%) ■Tyne and Wear Greater Manchester Average T&W and GM ■Cardiff city region 0 Light rail and train Bus etc Private road Population density Note: Greater Manchester and Tyne and Wear are the two English sub-regions with the longest established light rail systems. Source: Census 2011 16#17A key dilemma: • Is the focus on "people" or "places"? Data for places can improve as a result of in-migration, without benefit to the existing residents Improved outcomes for people can be associated with out-migration and no improvement in data for places A better skills profile for individuals is a key factor in making an area more attractive to business - which effect wins out? Evidence suggests the well-being of residents, if not their economic outcomes, can be increased by improving the quality of place. 17