It’s a commonplace that the UK has the least well-balanced economy in Western Europe. While London and its region, dominated by financial and allied services, continue to grow and thrive, the rest of the country is bogged in post-industrial depression, suffering still from the effects of George Osborne’s planned ‘austerity’ (still very much with us, of course) and Brexit blight. London can almost be regarded as a separate city-state. Its economy shares little in common with the rest of the UK. To add insult to injury, it swallows the lion’s share of large-scale public investment, with projects like Crossrail, the third Heathrow runway and HS2, and it sucks in many of the most skilled of our young people.
What’s less remarked on, but increasingly obvious, is a similar split in Wales. Even the most fleeting of visits to the centre of Cardiff is enough to show that the city and its region seems very different, these days, from the rest of the country. Smart shops fill the streets – shops you’ll find nowhere else in Wales. Its economy looks much more like that of thriving cities in England than other centres in Wales. The private service sector – insurers, lawyers, finance and media firms, and the like – dominate employment and output; only 9% work in manufacturing. Most Wales-wide bodies have their headquarters in the capital, which is also the site of most ‘national’ attractions and sports venues. Cardiff is the home of the biggest and strongest of Wales’s universities, and in general the city attracts talented young people from elsewhere in Wales, drawn by well-paid jobs and social opportunity – so depriving their home towns of much needed energy and enterprise.
Contrast Swansea, where the centre now begins to resemble that of a third world city, with its air of neglect, dozens of closed shops, and half-completed roadworks, abandoned by their bankrupt contractors. And while a few towns, like Narberth, Cardigan and Llandeilo, have succeeded in building small pockets of prosperity, many Welsh towns look depressed and purposeless (unless as dormitories for Cardiff).
Since the establishment of the National Assembly for Wales in 1999 Cardiff’s dominance has increased, as the city has attracted disproportionately more investment and tourism. Its GDP per capita stood at €33,000 in 2016, far ahead of any other county (Anglesey’s was a mere €18,600). There have been very few attempts to counter the process. Edwina Hart devolved some Welsh Government jobs (though not senior posts) to other parts of Wales (Merthyr, Aberystwyth and Llandudno), but otherwise movement has been centripetal rather than centrifugal. A telling case is Glamorgan County Cricket Club, which since the development of Sophia Gardens has all but abandoned its other grounds around Wales. Likewise, when the BBC decided to move from its central Llandaf site it apparently gave no thought to the possibility of moving out of Cardiff, which would have had a powerful effect on media and economy alike. (To its credit, S4C has moved part of itself to Carmarthen.)
There used to be a strategy and a mechanism for trying to mitigate increasing economic centralisation in Britain. It was called regional policy. But UK regional policy was effectively abandoned by Margaret Thatcher, and ‘devolved upwards’ to the European Union. For many years Wales has benefitted, if that’s the word, from successive programmes of regional assistance. In the current round, from 2014 to 2020, £2.1 billion will have arrived from Brussels in the form of structural funds, mainly for West Wales and the Valleys, an EU area identified as earning 75% (or less) of average GDP per capita. In addition Wales has received funds through other streams, especially the Common Agricultural Policy.
It’s arguable that without these funds Wales outside the Cardiff region would have fared even worse than it has. Swansea University’s new Bay campus, for example, would not have happened without them. (Though public perception of their benefits has hardly been obvious, since all but five Welsh counties voted in favour of Brexit in the 2016 referendum.) The effect could have been stronger if central UK capital funding had supported Welsh schemes. But its recent record has been woeful, as decision after decision has gone against Wales, including the Swansea Tidal Lagoon, railway electrification beyond Cardiff and – if you regard it as a good thing – the Wylfa Newydd nuclear power station. Cynics might suspect that the current Secretary of State for Wales is actively working against Welsh interests rather than on their behalf.
True, other packages are on the way. There are two mixed (public-private) ‘City Deals’ intended to boost jobs and GDP: £1.2 billion for Cardiff over 20 years, and £2.3 billion for Swansea over 15 years. But the former will exacerbate the ‘Londonisation’ effect, while the second is mired in controversy, and both have been criticised in advance for failing to distribute benefits widely enough in Welsh society, or even geographically. And then there’s the infamous plan to build the M4 extension, which, if it goes ahead, will again privilege the south-east fringe of Wales at the expense of other parts of Wales.
Brexit, if we ever reach it, will abolish all the EU funds. The UK government plans to establish a ‘Shared Prosperity Fund’ in the place of the EU structural funds. In theory, it could provide an opportunity, shorn of the Byzantine complexity of the EU’s schemes. But the details of how it will work are completely unclear. For Wales there are two critical questions about it. First, how much money will flow from it to Wales? The EU structural funds were assigned on the basis of need, but need is a consideration that rarely bothers the current UK government. Second, who will distribute the funds? It’s not clear that the Welsh Government will have that role, or whether the UK government will keep all control. But a secondary question is whether new ‘prosperity funds’ will be used to rebalance the Welsh economy towards those areas, outside the Cardiff region, that have most need of it. In other words, what will be the criteria for use of the replacement money?
Luckily, Cardiff isn’t yet a Welsh London. It doesn’t have Russian plutocrats lounging in basement swimming pools. There are no Walkie-Talkies, Cheese-Graters or Shards. Few multinationals have their HQs there, and large-scale research and development is thin on the ground. It’s also true that Cardiff’s affluence masks plenty of poverty, thanks to the chronic UK addiction to economic and social inequality.
But there is a Cardiff problem, and it’s likely to worsen. Unless governments, both the Welsh and UK governments, wake up to it, more and more wealth – money and people – will gravitate to the city and its region, and the economic gap with the rest of Wales will grow.
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