The IOE&IT Daily Update is starting to explore the trading profiles of the UK’s regions. This week, we’re looking at Wales.
Our head of the UK nations and regions, Paul Brooks, offered expert analysis on a range of stories from the valleys and beyond.
Diversify exports
One notable trend is the recent push to diversify Welsh exports away from oil and towards more renewable energy sources.
According to export data from 2022, £4.6bn (22%) of Welsh exports were oil. The main source of this is the Valero refinery in Pembrokeshire, which refines crude imports to ship from Port Talbot.
Tata steel
The ongoing discussions around Port Talbot’s future and potential funding touch on the move towards renewable energy.
The Port Talbot steel plant, which employs approximately 8,000 people in the UK, is in talks to receive £500m in government funding.
The money will be supplemented by £700m investment from Indian parent company Tata Steel.
Funds would be earmarked to facilitate the decarbonisation of the plant. This has raised questions about the potential loss of up to 3,000 jobs.
Asked about the implications for the substantial workforce, Brooks said:
“It’s inevitable that efficiencies will mean fewer people are required to run these plants.
“However, it does free up skills for those that want to retrain to move into other areas and there’s a lot of support available from IOE&IT and other organisations to help.
“There’s lots of opportunities across the supply chain.”
Anglesey
Brooks identified Anglesey as a site full of potential for development, noting it’s often referred to as ‘energy island.’
“There’s an old nuclear power plan called Wylfa, that the government is considering as the UK’s next nuclear site.
“On Anglesey you’ve got offshore wind turbines, you’ve got another potential nuclear site on the island, plus a lot of solar energy as well. You’ve also got the biggest planning consent for tidal energy generation.”
This is in addition to the anticipated freeport, with the island confirmed as one of two new freeport sites in March. The government announced £26m of funding for construction in Anglesey and Port Talbot.
The freeports, from which goods are subject to reduced custom fees and bureaucracy, are anticipated to generate £5bn and 20,000 high-skilled jobs.
Lamb
The Welsh staple is still a prominent good shipped abroad. HMRC estimates that Welsh lamb exports were worth almost £365m in 2022.
However, with the majority of exports going to the EU, additional regulatory barriers post-Brexit are hitting traders hard.
Since 2021, after the UK formally left the EU’s single market, British exports have faced increased border checks, including customs and sanitary and phytosanitary (SPS) procedures.
The BBC reported that many exporters struggled with the additional time needed to navigate new rules and complete necessary paperwork.
“It's made things very difficult for small producers, although larger-scale producers have still managed to ship product across the border,” said Brooks.
He added there is no quick fix:
“You have to get the UK government and EU governments on board to smooth the passage of animal goods through borders. There's no magic wand we can wave.”
Services
Global horizons: Realising the services export potential of UK nations and regions the IOE&IT report on the UK’s regional service export performance, addressed underperformance by Wales.
Wales was split into two regions, West Wales and the Valleys, and East Wales, which placed 16th and 21st respectively out of a possible 41 regions.
Although limited data was available – with one of the report’s recommendations being to collect more data on services exports – one conclusion drawn was that West Wales and the Valleys outperformed the East (£4,509m versus £2,926m), despite the former’s lower export potential.
This has been attributed to services activity in-and-around Swansea, as well as services activity related to high-value manufacturing, such as steel.
Brooks echoed the report’s conclusion that more data from the region is required to ensure better insights and policy recommendations can be produced.
“There’s huge opportunities for services export across the entire nation. Moving forwards, it’s vital we have the full picture, to support both East and West Wales to reach their full potential.”