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Wales’ Productivity Challenge: Exploring the issues

The Productivity Institute’s eight Regional Productivity Forums have written an extensive agenda-setting analysis for each of the five English regions and the devolved nations of Wales, Scotland and Northern Ireland. This includes historic regional context, key issues and future research priorities. Alongside this is an executive summary: a high-level overview highlighting the productivity picture in their area, including a scattergraph showing the disparities within on a NUTS3 level in comparison with the UK average, the primary drivers and bottlenecks, a SWOT analysis and a look to the future. Both can be downloaded on the right of this page. These were written with the support of the Wales Productivity Forum.


Wales has a population of 3.2 million accounting for 4.8 percent total UK population and 3.4% of UK GDP. Economic activity is largely concentrated in the south, including the cities of Cardiff,  Swansea and Newport. North-, mid- and southwest Wales are generally very rural areas with sparse population density. The Welsh economy has a sizeable productivity gap with the UK, and,  although the gap has not widened further over the past decade, the long-term slowdown of productivity over the longer term is a major factor of concern. Wales has experienced serious deindustrialisation over the past 50 years from a former legacy of coalmining and metals production, particularly in the south Wales valleys. But today, Wales still benefits from relatively good productivity performance in manufacturing, but weak productivity performance in other sectors, notably services. It still has the highest share of output in manufacturing at 17.2% of total value added compared to 10.1% for the whole of the UK in  2018.

This is supported by a number of anchor manufacturers in aerospace and automotive. Despite a relatively strong manufacturing sector, Wales has the lowest proportion of private sector employees in R&D activity of all the UK NUTS1 regions. The share of the working age population qualified with intermediate and high skills is relatively low at 57.9% compared to 60.3% for the whole of the UK in 2020. This is marginally better than corresponding shares in northern and midland English regions but well below London, southern and eastern England and Scotland. Earnings levels in rural Wales are amongst the lowest across the whole of the UK, standing alongside very high rates of self-employment, and contributing to extremely low levels of sub-regional productivity in counties such as Powys. Agricultural productivity in Wales suffers from a very high proportion of upland farmland classified as severely disadvantaged and consequent low levels of diversification. In particular during the 1980s and 1990s, Wales achieved success in attracting significant new foreign direct investment.

The ‘valleys’, however, have struggled to recover, being an area of dense population settlement, poor housing and population health and limited transport access. Since the establishment of Senedd Cymru (formerly the National Assembly for Wales) in 1999, Wales has experienced devolved powers regarding health, education, transport, economic development and business support, agriculture and environment, and some limited fiscal powers.

Author Andrew Henley


  • Productivity Studies




A. Henley (2021) Wales’ Productivity Challenge: Exploring the issues. Productivity Insights Paper No. 007, The Productivity Institute.