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Power Up: skills, technology and infrastructure may solve Wales’ productivity challenge

28 November 2018

Driving productivity through skills, technology and infrastructure holds the key for economic growth in Wales, according to Deloitte’s latest Power Up report. One of the critical challenges facing the Welsh economy is slow productivity growth. Whilst weak productivity is a global phenomenon, international comparisons suggest that it is particularly acute for the UK as a whole as well as Wales.

Deloitte reviewed nearly 20 years of Office for National Statistics (ONS) productivity data and 36 years of employment data dissecting it by nation, region and by sector and interviewed over 50 business leaders, educators, local government officials and influencers from Wales, Scotland, Northern Ireland and the eight English regions outside London to assess how the UK can unlock its potential for growth.

Although clear themes emerge from each region or country covered in the report, business leaders consulted from Wales cited skills, building on talents and expertise, investing in technology and scaling up operations as well as better transport links as key to improving productivity.

The report noted that in 2016 Wales achieved the fastest economic growth of the four UK nations. However, Wales remains bottom in the UK league table in terms of labour productivity. Optimism that the principality can address the productivity challenge and narrow the gap with the UK as a whole can be found in some industry sectors such as finance and insurance; information and communication as well as other service activities. Leading the way forward, these sectors are amongst five of the 13 analysed where productivity growth in Wales has outperformed national averages since 1997. One sector in particular, professional, scientific and technical services, has increased both productivity and employment at the same time, showing that they are not necessarily mutually exclusive.

In employment terms, Wales’ rate of 75% employment is just shy of UK rate of 75.5%. Wales has rapidly created jobs over the last eight years, with unemployment significantly falling from 9.4% in 2010 to 3.8% in the period July to September this year. For the sectors analysed for the report, Wales has performed well in job creation with a net 300,000 jobs created between 1982 and 2017. The strongest sectors in Wales for employment growth over the last 20 years have been in arts, entertainment and recreation; and administrative and support services. The sector in Wales that has seen employment fall the most since 1997 is manufacturing.

The research conducted for the report also revealed that Wales’ most productive sectors have fewer people employed in them than in the previous two decades, with 36% of the population in 2017 employed in the sectors with the highest output compared to 43% in 1997.

However, whilst the 2016 economic growth figure indicates that productivity and growth in Wales is heading in the right direction, it still lags behind the UK average. Business leaders interviewed argued more needs to be done, particularly on skills, collaboration and investing in infrastructure such as transport, if the country is to continue to grow and prosper.

Wayne Harvey, senior partner for Deloitte in Wales, said: “We’re created a unique insight as to how Wales has fared both pre and post financial crisis by analysing nearly 20 years of data, and the outlook is positive. Through talking with key figures from the public and private sector in Wales and finding out their views, we’ve identified key areas that have the potential to unlock productivity in the principality, primarily up-skilling, technology, improved transport infrastructure and greater collaboration. Whilst there is not a single definitive answer to the productivity puzzle, we certainly have gained a new perspective of Wales’ strengths and challenges and the business landscape.

“The Welsh economy has proven its resilience and ability to navigate change many times throughout history. By identifying the challenges facing Wales, it opens up the productivity debate as to what policymakers, business and educators can do to ensure that we remain competitive, boost our economic growth and thrive in the future.

“Job creation has been one of Wales’ greatest achievements in recent years and there is further opportunity to build on this. Deloitte is just one example of success in this area as we’ve now risen to over 1000 employees in Wales. As for our analysis, it shows if Wales replicated the success of its top five performing sectors in creating jobs, it could lead to almost 1.5 million more jobs in Wales over the next 20 years.”

Harvey added: “The changing shape of the workforce, whether falling or climbing in different sectors across Wales, does have an effect on productivity and growth, but not always a negative one. If we look at manufacturing in Wales, productivity has risen 84% since 1997 but its employment figure has fallen, which is to be expected through technological change and more efficient, less labour intensive processes.”

Pauline Biddle, managing partner for Deloitte’s UK regions said: “Analysing data by industry, we looked at the best performer in the UK’s regions and nations for each sector. If this performance was replicated across the UK as a whole, this would be worth an additional £263bn to the economy, or nearly £10,000 for every UK household.

The report suggests weak productivity is a particular problem for the UK, when compared with other developed economies. Biddle explains: “The slowdown in productivity growth has had a tangible effect. Our analysis shows that if productivity growth had continued at the same rate as in the decade before the financial crisis, UK workers today could work, on average, six fewer hours per week in order to produce the same output.

“However, our UK regions and nations have huge opportunity for growth and there is an overwhelming sense of pride and commitment that comes from the interviewees.”


Note to editors

About the Power Up report
The report consulted and interviewed more than 50 business leaders, educators, local government officials and other influential figures in Scotland, Wales, Northern Ireland and the eight English regions outside London. The report describes each UK region and nation’s economic performance. It investigates strengths and weaknesses and outlines a series of proposed actions, deriving from discussions with senior business leaders that can help to raise the contribution of many regions to a new level.

The regions and nations are:

  • East of England;
  • East Midlands;
  • North East;
  • North West;
  • Northern Ireland;
  • Scotland;
  • South East;
  • South West;
  • West Midlands;
  • Yorkshire and Humber; and
  • Wales.

About the Power Up data
The 15 sectors analysed:

  • Agriculture, mining, and utilities;
  • Manufacturing;
  • Construction;
  • Wholesale and retail trade;
  • Transport and storage;
  • Accommodation and food service;
  • Information and communication;
  • Financial and insurance activities;
  • Professional, scientific and technical activities;
  • Administrative and support services;
  • Public administration;
  • Education;
  • Human health and social work; 
  • Arts, entertainment and recreation; and 
  • Other service activities.

All data is sourced from the Office for National Statistics (ONS), some publicly available, others under license agreement.

The employment numbers are from 1982 to 2017.

The productivity (as measured by output per hour worked) numbers are from 1997 to 2015 across 15 industries and all regions. The change in productivity is analysed across three different time frames – pre-crisis (1997-2007), post-crisis (2007-2015) and overall (1997-2015). The annual UK productivity is the average of the productivity numbers for the four quarters. The UK productivity for each industry is the based on the average of all the regional numbers for each industry.

Interviews were conducted with:

  • Carolyn Fairbairn, CBI Director-General 
  • David Noon, Global Brexit Lead, Deloitte
  • Ian Stewart, Deloitte Chief UK Economist 
  • Sir Howard Bernstein Strategic Business Adviser to Deloitte
  • Angus Knowles-Cutler, UK Vice Chairman, Deloitte
  • Pauline Biddle, managing partner for UK regions, Deloitte
  • Business leaders in Wales

About Deloitte
In this press release references to Deloitte are references to Deloitte LLP, which is among the country's leading professional services firms.

Deloitte LLP is the United Kingdom member firm of Deloitte Touche Tohmatsu Limited (“DTTL”), a UK private company limited by guarantee, whose member firms are legally separate and independent entities. Please see for a detailed description of the legal structure of DTTL and its member firms.

The information contained in this press release is correct at the time of going to press.

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