Welsh 'firebreak' sends recovery hopes up in smoke
Supermarket Iceland may have its headquarters in Wales, but chief executive Richard Walker has little time for its political leaders as the principality prepares to crash back into lockdown on Friday.
The grocery chain is the biggest Welsh-based business by turnover and has 2,800 of its 28,000 staff working there, including 850 in its Deeside head office.
“They never talked to us, and we’re the biggest business in Wales," Walker says. “Politicians seem to forget the immutable economic law that it is the private sector where all the money is generated to provide things like furlough.”
Yet Walker is one of the lucky ones: at least Iceland can still trade in Wales. That option won’t be available to non-essential retailers or countless pubs and restaurants – except as takeaways – as First Minister Mark Drakeford readies a 16-day shuttering of the economy.
Drakeford’s caution has angered many in the Welsh retail and hospitality sector struggling for survival and often watching in anguish as the rest of the country welcomed back customers.
Pubs and restaurants finally opened indoors a month after their “Super Saturday” counterparts in England, on Aug 3. The Welsh Assembly is also sticking more closely to the 2m rule, which was loosened at Westminster as far back as the end of June. Wales has the “rule of six” like England, but it is stricter across the border: the six must be drawn from extended households.
Simon Wright, a restaurateur representing some 300 independent eateries in Wales through the newly formed Welsh Independent Restaurant Collective, reckons some 12,000 of 60,000 jobs in his sector have already gone.
Wright has been at the sharp end as trading is at around 25pc of pre-Covid levels at his restaurant in Carmarthenshire, and he has made the “heart-breaking” decision to let half his staff go.
“This lockdown is sort of illusory in that we have been in a virtual lockdown for months. Restrictions piled on restrictions have ground down our customer base. It is like strangulation,” he says.
In the context of the wider UK economy, the shuttering of Wales will have little effect. The principality has a population of 3.1m – around a third of the size of London – and accounts for just 3.4pc of overall gross domestic product, or around £75bn.
The impact on growth will therefore be “modest” according to Kallum Pickering, senior UK economist at Berenberg. If Welsh output were to fall by 10pc in the next fortnight, that would translate into just 0.3 percentage points shaved off national output over the period, and a de minimis effect on the quarterly figures. Just 195,000 jobs in Wales were put into the Government furlough as of July 31.
Unemployment of just 3.9pc so far during the crisis, compared to a national average of 4.5pc, is also a reflection of Wales’s bigger share of production in its economy. Services – where much of the pain has been felt from Covid-19 –accounts for 71pc of Welsh output, compared with 80pc in the UK, according to 2018 figures.
Overall production amounts to 14pc of UK output; in Wales the share is 22pc thanks to the presence of manufacturing bases such as the UK’s biggest steelworks in Port Talbot, owned by Indian conglomerate Tata Steel.
Wales is still blighted however by longer-term problems such as one of the lowest employment rates in the UK, at 72.7pc. Only Northern Ireland and the North East have a lower rate.
Wales also is among the UK’s poorest regions. In 2018, it had the lowest GDP per head of all the regions and devolved countries except Northern Ireland at £23,866, almost £8,000 lower than the national average and less than half that of London. Public sector jobs also account for a bigger share of employment while the economic hangover from the disappearance of much of the heavy industry still lingers.
Covid-19 landed just when Wales was beginning to turn a corner, according to Professor Dylan Jones-Evans, chair in entrepreneurship at the University of South Wales.
He says: “There was the structural issue with Wales in that it was dependent on heavy industry. When the overseas manufacturers came in Wales was doing well but it did not make up for that – Wales has been closing the gap but it hasn’t closed it enough.”
Tourism has been filling some of that lost growth in recent years, accounting for 4.9pc of output compared to 3.7pc across the UK overall, according to the Welsh Assembly’s Economy, Infrastructure and Skills Committee.
But then came the pandemic. Prof Jones-Evans, who labels Drakeford’s administration “over-cautious”, stresses the tourism blow and warns: “Wales is lagging behind many parts of the UK on the recovery. Businesses spent a lot of money preparing having to deal with Covid over the next few months.
“I know from my own conversations with business, people were thinking, ‘we’ve had a pretty bad summer but we’ll make it up over the next two months’. People were booking into October and even November. That has gone out of the window now. It has probably killed any hope of financial recovery for any of those businesses.”
For Wales, the hard yards are only just beginning.
