New Economic Muscle

In a piece for GCRE recently, former Welsh First Minister Carwyn Jones looks at the Global Centre of Rail Excellence opportunity and sees potential for the development to support long-term, innovation-led growth that could have lessons for the wider UK economy.

By Carwyn Jones

Perhaps one of the most significant policy developments we’ve seen in the last few years is the re-emergence of ‘place’ back into the debate about the UK’s economic future.  

A rising number of people now recognise – what many of us have always believed – that sustainable and long-term growth in the UK cannot be achieved by simply focusing on one area of the country or a single sector of the economy, it needs to be done by building stronger engines of growth in all parts of the union.

The reasons for that are obvious. Research has long suggested that major areas of the UK outside London have persistently lagged behind their European peers like Munich, Amsterdam, Lyon, Barcelona, Milan and Copenhagen. The Resolution Foundation’s recent Economy 2030 Inquiry put the case quite starkly finding that income inequality in the UK is now higher than any other large European country, with income per person in the richest UK local authority now over four times that of the poorest.

As Rachel Reeves said during her recent Mais lecture we cannot move the UK  economy forward relying on just a few pockets of the country to drive growth and productivity; regional inequality robs us of potential inventors and innovators.

That fundamental weakness in the economy has left us lacking both resilience and economic muscle. It’s also impacted our confidence to break out in a new direction. Sluggish economic growth only reinforces a difficult public spending environment, which in turn deters bold approaches to the long-term capital investment that stimulates the economy across the wider UK.

But for me, leadership is about finding hope when the moment looks darkest. It’s sometimes at the most challenging of times that new approaches and new thinking can emerge. I think a generational opportunity to think differently about the UK economy is now upon us. Greater attention is turning to how we can grow the UK economy outside of its traditional areas of strength. This isn’t about pitting nations and regions against each other, it’s about seeing – and supporting – in a more strategic way opportunities to make the economy stronger and the UK a fairer and more equal place to live and work.

For a nation like Wales where de-industrialisation has created significant and long-term structural challenges, the return of place-based approaches to economic thinking holds out opportunities for the future. In Wales we have some strong foundations on which a new UK Government could build a new approach and help draw in new private investment.

Newport has for many years been growing an internationally significant reputation as one of Europe’s most important areas of Semi-Conductor technology. North Wales has a cluster of aerospace expertise and capability that brings huge benefits to the North East Wales economy. Pembrokeshire has an expertise and capability in energy and an increasing focus on renewables that is critical to South West Wales. From floating offshore wind to new hydrogen technologies industrial South Wales is developing new strengths and capabilities in net zero transition.

What these examples have in common is commercial potential – the opportunity to grow and expand as the industrial activity they support becomes more important, particularly to the decarbonised economy of tomorrow. The opportunity to develop clusters of new economic strength in Wales is something the Welsh Government recently highlighted in its new Innovation Strategy published last year:

‘The challenge for Wales is to recreate some of this success; opportunities exist around clusters such as Compound Semiconductors, FinTech, Digital and AI, steels and metals and health tech in South Wales, agri-tech in Mid and North Wales, optics, photonics and optoelectronics pan-Wales, and nuclear in North Wales’

One area where I think Wales has an important opportunity to develop a new cluster of innovation strength is through the Global Centre Of Rail Excellence. The project had its start during my time as First Minister and was designed to create a facility for world class rail research, testing and innovation here in Wales – one that could serve not just a UK rail market, but a European and global one, too.

The Global Centre Of Rail Excellence is an important ‘magnet’ project for Wales, with the potential to create high quality jobs and new skills in a de-industrialised area at the head of the Swansea and Dulais valleys. What makes GCRE attractive is that as a piece of economic infrastructure it would be unique across Europe – the continent’s only purpose built site for rail infrastructure testing, creating demand for more of the talented engineers, technicians and researchers that we help train up every year across our higher and further education sectors.

Critically, GCRE would help develop new and distinct economic muscle for Wales. As Europe’s premier site for rail R&D, it would give Wales the chance to secure a greater share of competitive research and development funding for Wales  – something that has been a nagging structural weakness of our economy for many years.

The UK Government recently committed to increasing domestic public investment in research and development (R&D) outside the greater south east of the UK by at least 40% by 2030, but to take advantage of this opportunity Wales needs to develop a greater diversity of distinct and investable projects into which research councils can invest. GCRE could help us do that.

With a Technology Park located on site creating space for new companies, incubator labs for tech start-ups and partnerships with local universities and colleges, GCRE could be a focus for European rail and mobility innovation and help turn that high quality R&D into new economic potential. The site would create strong foundations for companies to take advantage of their new innovations and commercialise them for the future, including supporting new exports and headquartering opportunities for start-up Welsh firms on site.

But perhaps of most immediate concern is that GCRE lies just 15 miles from the Tata Steelworks in Port Talbot, which recently announced more than 2,000 job losses over the next eighteen months, something that will be devastating for the local community and the local economy. While not a silver bullet for the area, GCRE is a shovel-ready scheme that could be part of the answer to building a sustainable economic future for such an important area of Wales, through building new strength in net zero decarbonisation.

This approach to growing the economy through more distinct ‘magnets’ of strength is important because a sustainable economic future for Wales requires not only a base of skilled individuals, but opportunities and demand for those higher-level skills in the Welsh economy.

We’ve done a good job in skills acquisition in Wales over the history of devolution. Though we have further to travel, more people than ever have higher level vocational and academic skills. The challenge is that too often young people particularly have taken those newly acquired skills to other parts of the UK to put them to use. It’s a point made in a powerful recent report by the Harvard Kennedy School which makes a persuasive case for growing a more regionally balanced economy across the UK by boosting capacity in areas outside of traditional strength, through greater investment in infrastructure. In particular it highlights the importance of greater geographic spread in the UK’s innovation potential through the development of new innovation hotspots across the whole country.

GCRE is a good example of the kind of the kind of new approach we need to get the UK economy growing sustainably again. A project that can complement the supply side changes we are making through more skills acquisition with a demand side change through supporting  new projects that can see those new skills utilised here in Wales.

It is only through a long-term and mission-led industrial strategy of this kind that we can develop new muscle in the economy that will not just drive Wales forward, but the rest of the UK too.