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The Growth Of The Welsh Economy


I begin with what we call, in the jargon, the ‘gross domestic product ‘—that is, the total wealth produced in Wales year by year, disregarding entirely the question of the ownership of the various enterprises operating in Wales and, equally, any Welsh-owned enterprises operating outside Wales. Since we live in an inflationary era with prices rising year by year, the monetary value of either income or output is liable to grow over time purely on account of this, and because this rise is, so to speak, pure optical illusion it is best to reduce everything to a constant price-level (in our case the 1958 level of prices) so that changes from year to year are real changes and not just the reflection of the well- known fact that nowadays everything is always going up.

In terms of 1958 prices, then, the total value of wealth produced in Wales rose from about £693 million in 1948 to about £1,143 million in 1964. These are rather astronomical figures: let me try to make them a little more digestible. Per head of the working population, in 1948 the output of Wales was about £660, or some 31 per cent. below the comparable figure for Britain as a whole; by 1964 it had risen to about £1,030, or about 6 1/2 per cent. above the national average.

At first sight this seems a startling and immensely gratifying achievement, and indeed in some ways it is. But there are three things to be said in qualification of it. The first is this. The mere fact that output per head is now higher in Wales than in Britain generally does not necessarily mean that the income of the average Welshman is now more than that of the average Englishman-as I shall mention in a moment the facts are indeed otherwise. To a large extent it merely reflects a well-known peculiarity of the Welsh economy-its relatively great dependence on highly capitalistic industries: those where an unusually large amount of plant and machinery are involved per worker. In such industries, of course, output-per-man has to be high because a substantial slice of the production cake is preempted for the costs of purchasing, maintaining and ultimately replacing that plant and machinery. I need only add that in 1964, for every £ 100 of total production the steel industry accounted for about £2.10s. in the U.K. as a whole but nearly £ 14 — well over five times as much-in Wales.

The second qualification I want to make is that while the growth of the Welsh economy has been greater than that of the country as a whole taking the entire period 1948 to 1964, this greater momentum was confined to the earlier years of that period. Between 1948 and 1954, output rose 23 per cent. in Wales compared with 18 per cent. in the U.K. generally: since 1954 the rate of expansion in Wales has been almost identical with that of the rest of the country.

Why is this? The most obvious reason is, of course, that 1954 marks the end of the post-war peak in coal; for every hundred tons of coal produced in Wales in 1954 there were only 86 ten years later. But this is not the whole story by any means. Between 1948 and 1954 the manufacturing industries other than steel were growing, on average 14 per cent. more rapidly in Wales than in Britain generally; during 1954 to 1964 this differential shrank to a mere 2 per cent. There can be no doubt at all, I think, that only the continued, phenomenal expansion of the Welsh steel industry prevented the growth of the Welsh economy from falling below the national average during the last decade.

My third qualification is in a sense related to this. Rapid though the growth of the Welsh economy has been since the war, it has not been as rapid as the potential growth of its labour force would have permitted. Regional statistics published last year by the Ministry of Labour indicated that the number of employees at work increased by 9.4 per cent. in the U.K. between 1951 and 1963 but by only 5.3 per cent. in Wales; astonishingly enough, they also showed that the number of men at work in Wales in 1963 was actually smaller than twelve years previously. Another Ministry of Labour analysis has revealed that over the decade 1954 to 1963 a total of 42,000 employees on balance moved out of Wales. Hence my remark that, rapid as growth has been, it has not been rapid enough.


Having made our estimates of the production of wealth in Wales we are able to move on to consider the balance of income and expenditure in Wales­that is, to discover the relationship between the flow of goods and services produced in Wales and the goods and services used up in various ways in Wales. We are, statistically speaking, on much less sure ground here, for reasons with which I will not bore you, but the issue is one of such interest that I feel a certain amount of chancing of one’s arm may be justified.

In our earlier estimates we reached the highly tentative conclusion that during 1948 to 1956 the wealth used up in various ways in Wales-public and private consumption plus capital investment–exceeded the wealth actually produced in Wales by an average of some £41 million a year. Our revisions and extensions for the whole period 1948 to 1964 now put it at about £ 39 million. The scope for error in this particular estimate is very large indeed, but that, for what it may be worth, is what our figures throw up.

Personally I do not find this sort of estimate prima facie unreasonable. It does not imply, of course, that in the fastnesses of mid-Wales we pass the dark winter evenings in riotous junketing at the expense of the British taxpayer. On the contrary, it implies that Wales, experiencing as it does a well-above-average rate of capital investment, draws part of its capital finance from outside it own borders, a proposition which will scarcely come as a clap of thunder to anyone. Indeed, there is a striking-and statistically significant-correlation between this ‘net import’ figure-our balance-of-payment deficit, if you like-and the rate of capital formation within Wales: when one is unusually high, so is the other, and vice versa. And in Wales, as I have said, we have a relatively large share of highly capitalistic industries: steel is the obvious case, but there has also been a marked expansion in recent years of oil-refining and nuclear power, both of which are prodigious consumers of capital. What further interpretation you place on this consistent tendency of Wales to import capital is, of course, a matter of personal taste. Some will hail it as a reflection of the dependence of Wales on English generosity; others will claim it as a reflection of the inherent superiority and attractiveness of Welsh industry; I will leave these treacherous swamps of emotive interpretation to those whose feet are more adequately webbed than mine. We economists are simple souls.

May I finally say a word about personal incomes? Mainly because a smaller proportion of the population of Wales is at work-only about 48 per cent. of the adult population compared with a U.K. figure of 57 per cent.-personal income per head of total population in Wales amounted in 1962 to some £374 a year, which is only 83 per cent. of the national average. Virtually none of this gap is due to a lower level of average earnings amongst those who are actually employed. Leaving aside our dower activity rate, to which I have just referred, two factors are responsible for it. On the one hand, the average income of self-employed people in Wales is much lower than the corresponding U.K. average-nearly 50 per cent. lower: the ranks of our self-employed are crowded with small farmers but, alas, distinctly light on the highest echelons of the professions. On the other hand, the average Welshman collects a much smaller income from property than the average Englishman-something more than a third less. If Taffy is a thief, as our English friends are occasionally wont to tell us, he has not succeeded in being one on a scale sufficient to bring him into the ranks of what are called the propertied classes.

It is interesting to note, I think, that the loss of impetus in the Welsh economy, relatively speaking, to which I referred a little earlier, is also to be observed in the growth of personal incomes in Wales. In 1948 personal income per head in Wales was about 83 per cent. of the national average; by 1954 it had risen to nearly 88 per cent. of the national average; bv 1962 it was back down to 83 per cent. again.


May I summarize all this very briefly? Our investigations show, first, that over 1948-64 the economy of Wales grew, in terms of output, somewhat more rapidly than that of Britain in general. Secondly, however, it failed to grow rapidly enough to absorb its full labour potential. Thirdly, there were signs of slowing-down in some sectors after 1954, the full effects of which were moderated by the continued expansion of the steel industry.

Now in contemplating the outlook for the future, certain facts are immediately apparent. On the one side, the decline of the coal industry is certain to continue, and, indeed, accelerate, while the expansion of steel is equally certain to be very much more modest in the next decade than it has been in the past decade. (Our latest strip mill is not yet producing at 50 per cent. capacity.) On the other side, however, regional economic planning in this country is at last passing out of the rather passive, hit-and-miss, after-the-event phase in which, through no fault of its administrators, it has languished for so many years in this country.

The challenge to economic policy is great enough in the frictions and stresses inherent in a growing economy; we see evidence enough of them in Wales today and we shall see an increasing volume of it in the years immediately ahead-the trickle of people squeezed out of rural areas as the old crafts die out. the redundant colliers for whom alternative provision has not been thought of soon enough, the school-leavers drawn to the newer, more exciting avenues which their home environment cannot offer. It is the task of policy not only to foresee these things in advance but to diagnose the proper reaction to them.

Prof Edward Nevin, 1966

These are selected exerts from a lecture by Prof Edward Nevin, which were published in the Transactions of the Honourable Society of Cymmrodorion. The full lecture can be found here.

1 Comment on The Growth Of The Welsh Economy

  1. These historical articles really bring home how much we’re dealing with the same issues decades and decades later!


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