Economy of Wales facts for kids
Cardiff: Wales's capital city
|Currency||Pound sterling (GBP)|
|GDP||£55.8 billion (2015)|
GDP per capita
Population below poverty line
|1.428 million (September 2015)|
|Agriculture, Aerospace, Construction, Electronics, Emergency Services, Food & More food, Forestry, Manufacturing, Oil & Gas, Renewable Energy, Services, Textile, Tourism, Transport|
|Exports|| £12.2 billion
(2014: £13.4 billion)
|Aerospace Systems, Business & Financial Services, Cereals, Chemical Products, Dairy Products, Electricity, Electronics, Iron & Steel, Machinery, Oil & Gas, Pharmaceuticals, Plastics, Renewable Energy, Road Vehicles, Textiles, Timber, Water|
Main export partners
|Excluding the rest of the UK
All values, unless otherwise stated, are in US dollars.
The economy of Wales is closely linked with the rest of the United Kingdom and the wider European Economic Area. In 2012, according to ONS provisional data, headline gross value added (GVA) in Wales was £47.3 billion, making the Welsh economy the tenth largest of the UK's twelve regions (counting Wales, Scotland and Northern Ireland alongside the nine English Government Office Regions) ahead of only Northern Ireland and the North East of England. The modern Welsh economy is dominated by the service sector. In 2000, services contributed 66% to GVA, the manufacturing sector contributed 32%, while agriculture, forestry and fishing together contributed 1.5%.
As in the rest of the United Kingdom, the currency used in Wales is the pound sterling, represented by the symbol £. The Bank of England is the central bank, responsible for issuing currency, and retains responsibility for monetary policy and is the central bank of the UK. The Royal Mint, which issues the coinage circulated over the whole of the UK, has been based at a single site in Llantrisant, south Wales since 1980, having progressively transferred operations from their Tower Hill, London site from 1968.
Economic output per head has been lower in Wales than in most other parts of the UK (and most other parts of Western Europe) for a very long time – in 2002 it stood at 90% of the EU25 average and around 80% of the UK average. However, care is needed in interpreting these data, since regional GDP/GVA per head data in the UK does not take account of regional differences in the cost of living, which in Wales is estimated to be 93–94% of the UK average. Thus the gap in living standards between Wales and more prosperous parts of the UK is not as pronounced.
As the capital city of Wales, Cardiff is the main engine of growth in the Welsh economy and the significant service centre and economic driver for the wider south Wales economy. The city and the adjoining Vale of Glamorgan contribute a disproportionately high share of economic output in Wales. Cardiff is a centre for white-collar professions. The city relies principally on the retail, finance, media and tourism sectors and has been undergoing major regeneration since the late 20th century, particularly in Cardiff city centre and Cardiff Bay.
Until the mid 18th century, economic development in Wales was restricted by its peripheral location, predominantly upland topography, bad communications and sparse population. Commerce was most advanced in the small coastal ports that had regular commerce with Bristol or Liverpool; the other major sources of external trading contact were the drovers, who drove cattle from Mid Wales along Drovers roads for sale and slaughter in the English Midlands and London's Smithfield Market from the 14th century onwards. The drovers were instrumental in establishing the first banks in Wales, such as Banc Y Ddafad Ddu ("Black Sheep Bank") in Aberystwyth.
Industrial development from the mid 18th century was stimulated by the potential of Wales' rich mineral deposits, the arrival of English entrepreneurs and financiers and advances in technology. The development of iron smelting by coke made the South Wales Valleys a natural industrial location during the Industrial Revolution and, from the mid 18th century, increased demand for metals and coal was generated first by war and later by the advent of steamships and railways.
The northern rim of the South Wales Coalfield, focused on Merthyr, became Britain's foremost iron-producing district in the second half of the 18th century, while the south-western part of the coalfield, around Swansea, emerged as an important centre of non-ferrous metal smelting and tinplate production. Metallurgical industries required ever increasing quantities of coal, which was initially largely mined for this purpose. However, coal mining for sale developed in earnest from the mid 19th century and this was to become the signature industry of the region, transforming the economic and social landscape of the South Wales Valleys.
Although a much smaller industry than coal, the slate industry in Wales became the world's largest supplier in the 19th century and had an enduring impact on the landscape of North Wales. At its height in the 1890s, there were dozens of quarries employing around 15,000 men, although they suffered from the boom and bust nature of the construction industry. As most of the workforce were drawn from rural, Welsh-speaking communities, slate quarrying was described by one historian as "the most Welsh of Welsh industries".
Despite explosive growth in the early 1900s, by the 1920s it was apparent that Wales was facing economic difficulties, largely because of its reliance on older heavy industry rather the newer, growing light industry sectors that were becoming established in the more prosperous parts of England. Even during a boom period at the start of the 20th century, Wales had a narrow economic base dependent on the labour intensive exploitation of natural resources. The Welsh export economy collapsed during the inter-war recession, a victim of increasing protectionism and the rise of new competitors overseas. As global terms of trade changed, unemployment in the South Wales Valleys soared to unprecedented levels during the early 1930s (up to 59% in Merthyr and 76% in Pontypridd), despite the exodus of 400,000 people from the region between 1921 and 1939.
In the post-war era, the steel and tinplate industries consolidated on a smaller number of larger sites, such as the new works at Port Talbot and Llanwern. The National Coal Board, created in 1947, tried to modernise the Welsh coal industry but the number of pits in South Wales shrank from 115 in 1953, producing almost 21 million tons, to 34 in 1981, producing 7.7 million tons. Pembrokeshire and Swansea Bay became centres of the petrochemical industry and new light industry was attracted to locations throughout Wales. Wales attracted an above average share of the foreign direct investment (FDI) into the UK from the 1970s onwards but many of the new plants established by foreign firms were essentially "branch factory" operations offering low-wage, low-skill employment opportunities. In 1971 Sir Julian Hodge founded the Commercial Bank of Wales (later renamed Bank of Wales) but the company was later taken over by HBOS and the brand dropped in 2002.
In the post-war decades there was a shift towards service sector employment, which accounted for 60% of jobs by the 1980s, many of them held by women. The concentration of official agencies in Cardiff increased the amount of bureaucratic public sector employment: Government regional policy brought various national bodies to Wales: the Royal Mint moved to Llantrisant, Companies House to Cardiff and the Driver and Vehicle Licensing Centre to Swansea. From the 1970s on, the steel industry contracted, with works at Ebbw Vale, Shotton and East Moors in Cardiff closing and layoffs elsewhere. The early 1980s recession had a bigger impact in Wales than in other parts of the UK: between 1979 and 1982, Wales lost 130,000 jobs and the employment rate fell to 62%. Recovery started later in Wales, and structural changes left a legacy of high unemployment amongst older men, especially in the Valleys.
Today, Wales remains a lagging region within the wider United Kingdom economy. Over the long term, output and productivity growth in Wales has been broadly in line with the UK and the developed world as a whole, although there are some unexplained gaps in particular service industries. What has marked Wales out is a low activity rate compared to other parts of the UK.
|Year||£ million||£ per head||Index of £ per head (UK=100)|
Agriculture and forestry
- See also: Sheep farming in Wales
In 2003, agriculture contributed £418 million to Welsh GVA, or 1.1% (including subsidies). 1.6m hectares (around 77% of Wales' total land area) is used for agricultural production and an estimated 57,500 people are directly employed in the sector. Farming is dominated by beef, sheep and the dairy sector, with the arable sector accounting for 10% of agricultural output. Average farm size is 30–40 hectares, small by UK standards, and dominated by family-run enterprises.
Forest and woodland makes up 14% of the land area of Wales and there are 4,000 jobs and in forest-based industries.
The Welsh fishing industry is the smallest in the UK, with about 1,000 full-time and 400 part-time fishermen. The minor role that the Welsh industry holds is largely due to its geographical isolation, weak distribution networks and the demise of the Wales distant-water fleet from the 1960s onwards.
Wales has a diverse manufacturing sector. Heavy industry, once a mainstay of the Welsh economy, has largely been in decline over the past century but is still very apparent. Metal ore refining is a long established industry in Wales. As of 2007, Corus had manufacturing facilities at Port Talbot, Llanwern, Newport, Trostre, Shotton, Ammanford, Pontardulais, Tafarnaubach and Caerphilly, although only the Port Talbot Steelworks remains as a major integrated steelmaking plant. Nearly all the tinplate and much of the aluminium produced in the UK are made in Welsh plants.
During the 1980s and 1990s, a major growth sector in manufacturing was the electronics industry with over 130 North American and 35 Japanese companies establishing operations in Wales. However, this is a characteristic of a "branch factory" economy where routine production is located in one region while higher skill activities are located in another.
Major trading partners
Excluding intra UK trade, the European Union and the United States constitute the largest markets for Wales's exports. As part of the United Kingdom and the European Union, Wales fully participates in the single market and free trade area which exists across all EU member states and regions. Recently, with the high rates of growth in many emerging economies of southeast Asia and the Middle East such as China, UAE and Singapore, there has been a drive towards marketing Welsh products and manufactured goods in these countries, with China and Qatar entering the top ten destinations for Welsh exports in 2013.
|United States||£2.80 billion|
|Source: Welsh exports: Fourth quarter 2015|
The total value of international exports from Wales in 2015 was estimated at £12.2 billion (2014: £13.4 billion). The top five exporting industries in 2013 were power generating machinery £4.0 billion (2013: £4.2 billion), petroleum, petroleum products & related materials £2.6 billion (2013: £3.8 billion), Iron & Steel £1.288 billion (2013: £1.3 billion), electric machinery £0.69 billion (2013: £0.7 billion), and professional and scientific services £0.346 billion (2013: £0.353 billion).
In recent years, the service sector in Wales has seen above average growth; however in 2005 its share of GVA was small compared with most other regions of the UK. Wales does not have a favourable occupational structure, and a relatively high proportion of jobs are in public administration, health and education. Compared to more prosperous parts of the UK, Wales lacks high value added service sector employment in sectors such as finance, business services and research and development. This is partly due to a weaker agglomeration effect, due to the small size of towns and cities in Wales compared to some other UK regions and small countries.
- See also: Tourism in Wales
With its mountainous landscape and numerous sandy beaches, Wales attracts significant tourism. In 2002, nearly 13 million trips of one night or more were made in Wales, generating expenditure of £1.8 billion. Of these trips, 11.9 million were made by UK residents and 0.9 million by overseas visitors. Cardiff is the most popular destination for visitors to Wales, with 11.7 million visitors in 2006.
In 2014, over 10 million domestic trips of one night or more were made in Wales, generating expenditure of £1.7 billion.
|Attraction||No of Visitors|
|Wales Millennium Centre||1,197,566|
|St Fagans National History Museum||564,195|
|Folly Farm Adventure Park and Zoo||485,936|
|Cyfarthfa Castle Museum||481,907|
|National Museum Cardiff||442,972|
|Pembrey Country Park||440,000|
|Elan Valley Visitor Centre||400,000|
|Snowdon Summit Visitor Centre||393,432|
|Source: Visits to Tourist Attractions in Wales 2014|
In November 2008, the average price of a house in Wales was £126,181, a fall of 11.7% since the previous year. The average house price in England and Wales as a whole was £161,883. In August 2008, average house prices in Wales ranged from £109,000 in Blaenau Gwent to £238,000 in Monmouthshire.
Economy by region
According to Eurostat figures there are huge regional disparities in the UK with GDP per capita ranging from €15,000 in West Wales to €179,800 in Inner-London West. There are 26 areas in the UK where the GDP per person is under €20,000.
These areas are the following:
- 4.5 million (8.5% of English) live in these deprived English districts. 11 of these deprived regions in England: Durham, Northumberland, Greater Manchester North, Blackpool, Sefton, Wirral, Barnsley Doncaster Rotherham, South Nottinghamshire, Dudley, Outer London – East North East, Torbay
- 1.4 million (45% of Welsh) live in these deprived Welsh districts. 6 of these deprived regions in Wales: Isle of Anglesey, Conwy & Denbighshire, South West Wales, Central Valleys, Gwent Valley, Powys
- 1.1 million (20% of Scottish)live in these deprived Scottish districts. 5 of these deprived regions in Scotland: Clackmannshire & Fife, East & Mid Lothian, East & West Dumbartonshire, East & North Ayrshire, Caithness Sutherland & Ross,
- 1.1 million (60% of Northern Irish) live in these deprived Northern Irish districts.3 of these in Northern Ireland: Outer Belfast, North of Northern Ireland, West & South of Northern Ireland.
Comparison with France and Ireland
In Wales, GDP per capita varies from €15,000 in Isle of Anglesey to €30,400 in Cardiff.
When compared to France, GDP per capita ranges from €18,900 in French Overseas Territories to €92,300 in Hauts-de-Seine and France has only 4 regions where GDP per capita is under €20,000. This suggests the level of social equality is much greater in France than in the UK.
When compared to the Republic Of Ireland, GDP per capita ranges from €20,100 in the Irish Midlands to €57,200 in Dublin. There are no regions in Ireland where GDP per person is under €20,000.
In recent years, Cardiff, the northern and southern coastal belts and some rural parts of Wales have experienced the biggest increase in employment, while the South Wales Valleys and other industrial towns have suffered a decline. This pattern probably reflects a combination of
- the increasing importance of quality of life factors in location decisions;
- the greater role played by the largest conurbations as centres of service sector businesses and
- the effects of skill-biased technical change on the demand for labour, disadvantaging "skills poor" declining industrial districts.
Average earnings and employment vary considerably across Wales. They are both generally higher in east Wales, especially in urban areas, but lower in south west Wales and the Valleys, although earnings in Bridgend and Neath Port Talbot, which are still centres of skilled manufacturing employment, are relatively high. In north and north west Wales, earnings are low but the employment rates are above the Welsh average.
A significant part of the earnings (and value added per job) variations within Wales are due to structural factors such as economic mass and occupational mix rather than like-for-like lower pay or productivity. Cardiff, with 324,800 people, benefits from its capital status, a hinterland in south east Wales and good connections to London, the Greater Bristol area and the M4 corridor. Cardiff is the primary location for service sector activities in Wales, with 26% of Welsh service sector output and 22% of Welsh service sector employment, compared to 19% of all employment in Wales. North east Wales benefits from proximity to Cheshire, Greater Manchester and Merseyside and there is significant cross-border commuting. The Valleys and the western areas of Wales have less economic mass and are more distant from major economic centres. These are some of the poorest regions in Europe and qualify for Objective One funding.
Many parts of Wales suffered from a continuous decline in heavy industry over the 20th century, culminating in the virtual disappearance of coal-mining in the 1980s. The demise of 'smokestack' industries left a legacy of high unemployment, and although unemployment has declined in recent years, unemployment in West Wales and the Valleys still tends to be higher than the Welsh average and economic inactivity (a form of hidden unemployment) continues to be a major problem in these areas. Merthyr Tydfil and Neath Port Talbot have some of the largest proportions of people in the UK not working due to long-term illness or disability, though some believe that in reality many people classified as "unable to work" through sickness are low-skilled workers encouraged to exit the labour market by the benefits system as well as declining demand for their skills.
The figures below for 2013 come from Eurostat and are denoted in Euros.
|Regions (NUTS3)||GDP €||GDP per capita €|
|Isle of Anglesey||€1.1 bn||€15,000|
|Conwy & Denbighshire||€4.1 bn||€19,700|
|South West Wales||€7.0 bn||€18,100|
|Central Valleys||€5.6 bn||€18,900|
|Gwent Valleys||€6.0 bn||€17,600|
|Bridgend & Neath Port Talbot||€5.8 bn||€20,600|
|Monmouthshire & Newport||€6.3 bn||€26,500|
|Cardiff & Vale of Glamorgan||€14.6 bn||€30,400|
|Flintshire & Wrexham||€7.4 bn||€25,700|
|TOTAL||€ 68.8 bn||€22,300|
The GDP per head for Wales was €22,300, which was 84% of the EU average of €26,600, whereas for the UK as a whole this figure was 118%. The region of Wales with the highest GDP per head was Cardiff & Vale of Glamorgan with 114% of the EU average, and the region with the lowest GDP per head was Isle of Anglesey with 57% of the EU average.
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Economy of Wales Facts for Kids. Kiddle Encyclopedia.