The State of Britain

APD not devolved, Ineos chooses Bridgend for its new 4×4 and Welsh average property prices rise the fastest in the UK

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UK ministers have declined to devolve powers over air passenger duty (APD) to the Welsh Government despite a unanimous recommendation by Westminster’s Welsh Affairs Committee in June. The Committee had recognised the move would adversely impact Bristol airport but decided the economic benefits of devolving the tax would outweigh this. UK Ministers attached more weight to the threat to Bristol. Passengers on economy class outbound flights of more than 2,000 miles pay air passenger duty of £78, with those on long-haul business class charged £172. Although the latest ONS figures below show that the Welsh economy outperformed the South West, generally, or when compared with the Bristol economy, it lags behind. In terms of government spending, the South West costs the Treasury £868 per person (the lowest deficit in England) compared with £4,395 in Wales, although any additional revenue raised from APD would likely reduce the Welsh block grant. An additional complexity is that the Welsh Government owns Cardiff airport.

Is it worth it? Recent analysis by Northern Ireland’s Department for the Economy has suggested cutting APD would not deliver value for money. APD does not apply on long haul flights from NI but the Province’s airports have lobbied for it to be abolished altogether. Civil servants and their consultants acknowledged that cutting the tax could help develop new air routes and there would be economic benefits, but Northern Ireland’s block grant would be cut to reflect the reduced revenue going to the Treasury, as mentioned above, this would also likely happen in Wales. An implicit subsidy to already commercially viable routes might also raise state aid problems. The Scottish Government has the power to set APD but recently declined to abolish APD on environmental grounds, although Inverness airport remains exempt.

Ineos Automotive has chosen Bridgend for the production of its new 4×4 Grenadier vehicle, creating around 200 jobs with up to 500 possible in the long-term. Ineos is investing c£600m in a manufacturing and assembly plant at Brocastle, near to Ford Bridgend, which will close in September 2020. Production should begin in 2021 and will enable Ineos to employ some of the Ford workforce. At full capacity, it is hoped 25,000 vehicles a year will be produced at the new 23,250 sqm site which the firm is buying at market value from the Welsh Government. Key parts for the vehicle, which is inspired by the original Land Rover Defender, will be built at a second factory in Portugal before being brought to Bridgend for assembly. BMW will supply the engines, and engineering assistance will be provided by another German company, MBTech. Taxpayer support from the Welsh Government and funding from the UK Government as part of a competition to develop new technologies has not been disclosed.

Up to 380 jobs could be lost with the closure of the Tata steel plant in Newport although the firm hopes to offer jobs elsewhere in Wales where it employs over 6,000. The factory, which makes electrical steel used in power transmission, has not been in profit for four years and was put up for sale in May 2018. The firm said it would have cost £50m to upgrade the site to make it competitive. The plant is in Tata’s Cogent division, part of which is being sold to the Japanese steel company JFE Shoji Trade Corporation. The sector has been suffering from over-capacity in recent years, with UK firms struggling to compete with big volume producers in China.

A claims management call centre, We Fight Any Claim, in Cwmbran, Torfaen, is cutting 130 jobs following the end of the claim window for mis-sold payment protection insurance. In 2013, the firm received a £290,000 grant from the Welsh government.

The Stats
For the first time, the ONS has published quarterly GDP estimates for Wales and the other nine English regions. GDP figures have been available for the UK since the 1940s, for Scotland since 2002 and Northern Ireland since 2013. The latest available figures, which are for the year ended 2018, showed the Welsh economy grew by 1.8%. This ranked the ‘region’ fifth of the twelve UK ‘regions.’ The East Midlands topped the table with growth of 3.4% whilst at the bottom the South West economy declined by 1.1%. UK growth over the same period was 1.5%.

The quarter to Dec 2018 showed education grew by 3.3% and had the highest contribution to growth. This was followed by construction, which grew by 3.3%, and transport and storage, which grew by 5.0%. Manufacturing fell by 0.6%, public administration and defence fell by 1.2% and human health and social work industries fell by 0.9%. These industries made the largest negative contribution in Wales. Overall, the construction sector was the main driver of GDP followed by services. More recent estimates (six months later) for the year ended June 2019, published by ESCoE last month, ranked Wales eighth with growth of 1.3%, which suggests the Welsh economy has marginally weakened this year relative to other parts of the UK.

More data from the ONS showed unemployment in Wales fell by 11,000 to 58,000 between May and July, the drop of 0.6%, took the overall rate to 3.8%. The South West had the lowest rate at 2.4% with the UK rate at 3.8%. The highest rate was 5.0% which was recorded in the North East. The South West also had the highest employment rate at 80.8% which compared with 74.7% in Wales. UK employment was estimated at 76.1%.

Welsh average property prices increased by 1.0% to £165,303, which meant annually prices had risen the fastest in the UK by 4.2%. In comparison, UK prices grew by 0.5% to £232,710 during July, an annual growth rate of 0.7%.