Town Hall in Wales: June 2018

I visited South Wales on 25-26 June in the latest of my Townhall Tours. This involved a day in Cardiff and a day in Ebbw Vale.

On paper, these provided quite contrasting pictures of the Welsh economy. Cardiff is one of the UK’s city success stories. Its media, arts, sports and retail sectors are thriving. So too are professional and financial services. The redevelopment of Cardiff Bay has been a remarkable success story. And like many successful cities, Cardiff is benefitting from inflows of people, businesses and capital which are adding to growth momentum.

Ebbw Vale in the Welsh Valleys has, historically, fared less well. At its peak in the 1960s, the local steelworks employed pretty much the whole town. The last of the steel industry companies closed in 2002. And regenerating the town after the loss of its anchor employer has been a slow process. Wages and house prices in the region remain among some of the lowest in Wales. So too are levels of educational attainment. Like many post-industrial cities, Ebbw Vale has struggled to attract people, business and capital.

Having spent the day speaking to local business people, counsellors, educators and charities in Ebbw Vale, I left with a sense of optimism. There are plans to grow advanced manufacturing businesses in the region, taking advantage of the training college which sits on the site of the old steelworks, a faster train line to the main cities and a support plan from the local council. That plan is to turn the region into “Tech Valley”. The economic potential in the region is not yet visible in the statistics, but was clearly audible in my conversations. This underscores the importance of on-the-ground intelligence.

Townhall Wales June 2018

While in Cardiff I also spent time with representatives from the not-for-profit sector, including at the National Museum of Wales. They are just completing a transformation project, with a complete revamp of their site and its exhibits. Every bit as important, however, was the transformation in their business model.

Traditionally, responsibility for the content and design of museum exhibits resting with curators – the experts. As a public institution, however, museums have a responsibility to make their content appealing to as many of the public as possible. To do so, the museum has brought together, in sets of community fora, people from across Wales to discuss and decide on what museum content might appeal to the widest possible range of people.

This “co-creation” model appears to have worked extremely effectively. By combining the insights from expert and non-expert parties, exhibits maintain their high quality while having wide appeal. This is a great example of a public institution – in this case, a museum – ensuring it remained relevant and connected to those it served – the public.

This is relevant to the Bank of England’s own engagement efforts. We too are a public institution. And we too are exploring means of harnessing the views of the general public, to improve understanding of the economy and policy and to build public understanding and trust. It is to that end that the Bank will begin convening a set of citizen panels later this year, covering the whole of the UK.

A third issue which arose, in particular from the company roundtables, concerned pay pressures. A striking feature of the jobs market over the past few years has been that, as the jobs market has tightened, wage inflation has picked up for people who have moved job but not for those that have remained in the same job. It was to be expected that, as unemployment fell and the jobs market tightened, the limited availability of staff to fill posts might, at some point, lead to a rise in pay among workers who were not moving job. For example, pay rises might be needed to help retain staff, given the possibility of higher-paying outside options.

The message from a number of companies across a number of sectors in Wales was that these pressures to pay-up were mounting. Indeed, these pressures had gone up a gear during the course of this year. This message is broadly consistent with official data showing a pick-up in wage growth and pay settlements comparing this year with last and with surveys of recruitment difficulties.

This evidence adds to my confidence that the economy is experiencing a gradual, on-going firming of pay pressures, with implications for underlying inflation pressures looking ahead.

I am grateful to Leanne Connor, Mark Langshaw, David Anderson, Lesley Kirkpatrick and to the Bank’s Agents in Wales Steve Hicks and Ian Derrick, for expertly organising the visit.

The next Townhall is in the North-East in July.