The State of Britain

The Welsh labour market in focus, debates about ‘Northshoring’ and Welsh Government interventions in the spotlight

Reading Time: 4 minutes

Unemployment in Wales fell by 2,000 to 68,000 between November and January; moving the rate by 0.2% down to 4.3%. At 2.9% and 5.2% the SW of England and Yorkshire & Humberside had the lowest and highest unemployment rate in the country respectively. The UK unemployment rate stands at 3.9%.

In March average earnings in Wales increased to £564 per week. London had the highest average earnings of £846 whereas the North East had the lowest of £523. In the UK average earnings grew by 3.4% or by 1.5% after inflation.

Welsh property prices fell by 1.3% to an average of £160,232 during the month which trimmed the annual growth rate to 4.6% – the highest in England and Wales. In comparison UK prices dropped by 0.8% during March which cut the annual growth rate to 1.7%.

The drop in the unemployment rate and the increase in the employment rate to 76% – up 0.8% – were welcome but masked the disparity in earnings between other parts of the UK where workers earn on average £637 per week and Welsh earnings of £564. This disparity was used as a sales aid in a tweet by an inward investment agency which lauded ‘up to 30% lower salary costs’ as a reason to invest in Wales. The tweet by Trade and Invest Wales – a Welsh Government marketing initiative – drew widespread criticism which ignored so called ‘Northshoring.’ This occurs where lower wages are one of the key reasons why firms move operations out of areas with higher labour costs such as London. For example Deloitte located its delivery centre in Cardiff four years ago and KPMG put its tax compliance centre in Glasgow, to pretend that lower wage costs were not a factor in these decisions is disingenuous. On this theme, a Welsh Government appointed academic has pointed out that a proposed post-Brexit salary threshold for migrants – a minimum £30,000 salary for skilled workers seeking five-year visas – would hit Wales harder than the rest of the UK. Prof Portes, a professor of economics at King’s College London, highlighted that although average full-time earnings for the UK as a whole are not far off £30,000, in Wales they’re significantly below £30,000 and that the possible hit to the manufacturing sector was a concern.

The Welsh Government continued to have a bad PR month when it was revealed it had lent £3.5m to Swansea’s Dawnus, a construction firm that went into administration still owing £1.5m to the state. The £12m Kingsway redevelopment in Swansea was halted as a result, with Swansea council hoping to complete a deal with Welsh civil engineering contractor Griffiths to allow work to restart. Dawnus employed 700 people and its failure will have an impact on its Welsh supply chain.

Independent TV producers Bad Wolf are taking over the troubled Pinewood Studio Wales as tenants of the Welsh Government. The Welsh Government was recently severely criticised over the project to convert the warehouse into the Pinewood facility. It originally spent £9.5m on buying and fitting out the studio for Pinewood, then a Wales Audit Office report estimated that the Welsh Government was paying £392,000 a year to run the place. Bad Wolf and the Welsh Government will each pay £600,000 for improvements to the studio. The firm will shoot the second series of the Sky TV series A Discovery of Witches at the 180,000 sq ft complex followed by an HBO series, Industry. Bad Wolf has agreed to rent Pinewood for the next 12 months with an option to extend the lease for a further two years.

The £1.6bn Stronger Towns Fund targeted at stimulating jobs and growth in England – largely in the north and midlands – has sparked debate whether it will result in any new funds for Wales. Under the Barnett formula new cash on English public services generally results in more money for Wales, but it was not clear whether the Stronger Towns Fund is new cash or comes from an existing English budget.

On Welsh development, plans for a £200m adventure resort on forestry land near Port Talbot have been approved. The project promises alpine sports and white-water rafting along with a hotel, spa, apartments and restaurants. About 535 construction jobs and the equivalent of 700 operational jobs would be created at a 325-acre former forestry plantation at Pen-y-Bryn; an area in decline in population terms since the demise of the coal industry. A £15m indoor water park in Rhyl has opened five years after the closure of Rhyl Sun Centre. The project is part of a regeneration plan which has seen derelict properties flattened and two hotels, a restaurant and a pub opening. It is hoped that some of the 8m visitors who visit Rhyl annually can be enticed to stay longer.

An opencast coal mine in the south of Powys could be re-opened after it was mothballed in 2016 following a drop in demand for anthracite coal from Aberthaw power station; 100 jobs could be safeguarded. Celtic Energy said it needed to resume mining at Nant Helen for another three years to replace supplies running out at nearby East Pit. Powys councillors are due to consider the bid to resume mining in what is one of the most deprived areas in Wales. Bridgend based Cellnovo Limited – which developed, manufactured and marketed the first mobile all-in-one diabetes management system – has appointed administrators; about 70 staff have been made redundant with 20 retained to oversee the wind-down.