The economic double whammy of covid-19 and a hard Brexit could blight the North Wales economy for a generation - in a throwback to the dark days of steelworks and mine closures.
Dr Edward Jones, of Bangor University’s acclaimed Business School, warns the massive slump could cripple the region’s ability to bounce back from the current recession, but also believes its young workers and the nature of the Forth Industrial Revolution offer huge potential.
He says the latest unemployment figures paint a gloomy picture with the Welsh jobless number rising from 3.1 per cent in March to 4.6 per cent, an increase of over 20,000 people but there is likely to be worse to come as major employers like Airbus consider shedding jobs.
Dr Jones said: “Covid-19 has had a devastating impact on the North Wales economy, and Brexit could make these problems worse, especially with Joe Biden’s election victory serving up a rude reality check for Boris Johnson’s desire to quickly close a trade deal with the USA, a project that has until now depended heavily on the whims of President Donald Trump.
“There are now three priorities for the Government. The first and most obvious priority is to save lives. The second is to protect the economy and the third is to prepare for the recovery.
“But the jobs trend is worrying, on the high street and in manufacturing – we won’t suddenly lose thousands of jobs as we did with the closures of Shotton and Brymbo Steelworks and Anglesey Aluminium but there is a consistent week in, week out, drip-drip of job losses whether it’s at Debenhams, Pizza Express or Airbus.
“During the summer a lot of companies informed the Government that they’re starting the redundancy process and we can expect these to be announced over the coming months.
“Also, some European-owned companies have begun to restructure their business as we approach Brexit; getting rid of the younger workers while retaining those with experience to keep the business ticking over. This is very worrying because young workers are the future of any business.”
Dr Jones added that Wales had seen jobs start to leak away even during Chancellor Rishi Sunak’s furlough scheme, aimed at avoiding job losses, which saw a third of the Welsh workforce paid to stay at home.
In March, the Welsh unemployment rate was 3.1 per cent but by September, this had risen sharply to 4.6 per cent with the UK at a three-year high of 4.8 per cent. The Office for Budget Responsibility (OBR) expects unemployment to reach 7.5 per cent by the middle of next year.
Dr Jones thinks that unemployment in Wales could continue to increase, following a trend seen for the UK as a whole, and that some areas in Wales may experience even worse local labour market conditions.
“By the middle of this year, unemployment had risen to 3.8 per cent in North Wales, but had reached 5.3 per cent for Anglesey and 4.7 per cent in Conwy. Some areas in Wales including even Flintshire and Wrexham with their jobs in advanced manufacturing may experience unemployment levels last seen in the early 1990s.”
Dr Jones said: “These are worrying trends and could have long-term scarring impacts on families and communities. In Wales, we have experience of the devastating impact long-term unemployment has.
“In areas like Flintshire and Wrexham the closure of coal mines and steelworks like Shotton and Brymbo left people dealing with the emotional and physical wounds which were the legacy of rapid de‐industrialisation in the 1980s. It is important that we learn from our history.”
In his November Spending Review, the Chancellor acknowledged the UK economy was expected to shrink by over 11 per cent this year, the worst economic decline in 300 years.
Dr Jones said: “When the coronavirus crisis first hit, many optimistically predicted a rapid economic rebound in the second half of the year, a V-shaped recovery, but the outlook has since darkened, with rising fears of a slow and painful recovery.
“What started as a short and sharp external shock is slowly turning into the type of prolonged pain last experienced during the 2007 financial crisis.
“In July, Airbus announced it was planning to cut 15,000 jobs globally in total as it dealt with the effects of the coronavirus crisis.
“The 6,000 staff working at the wing assembly site in North Wales are vulnerable to reductions with many more people relying on the company for work through the supply chain.
“Oxford Economics estimated that Airbus supported 11,700 jobs throughout Wales in 2015, all of which would be impacted by job losses at the aeroplane manufacturer.”
UK car production suffered its slowest September since 1995 as the pandemic continued to batter demand. Flintshire has a major Toyota factory on its territory while Vauxhall’s plant at Ellesmere Port also employs staff from North Wales.
The UK Society of Motor Manufacturers and Traders have warned of further pain for the industry which could have an adverse impact on employment across the supply chain if no Brexit deal is agreed.
“And in December we heard the devastating news that Debenhams is likely to be liquidated and broken up in the new year, putting 12,000 jobs at risk across the UK.
“The news came just hours after Arcadia collapsed into administration, putting more than 13,000 jobs at risk. The loss of these stores will have a devastating impact on the high street across the whole of Wales.”
Dr Jones said: “Brexit probably hasn’t been at the top of anyone’s mind during this historic pandemic but the Brexit transitional period ends on December 31 and that could spell more bad news for Wales.
“Between 2007 and 2020, we received €4.6 billion in EU funding with most of this spent in North and West Wales and the Valleys.
“What will happen to the Welsh economy if this EU funding isn’t replaced? Studies have shown that structural funding has been successful in reducing unemployment and that its removal could cause unemployment to rise.
“South Yorkshire received structural funds up to 2006 but after it was withdrawn unemployment rose and the region failed to sustain the economic benefits gained.
“That tells us the Welsh labour market is likely to face considerable challenges in the near future given the ongoing impact of covid-19 and if EU structural funds are not replaced.
“But the performance of the economy continues to be highly correlated with the trajectory of covid-19 but with positive news about vaccines it is going to end in some way so we need to prepare for the economic recovery.
“This means securing the future of companies, particularly of the SMEs that employ 62 per cent of the Welsh labour force so they are ready to meet the demand that will someday return.
“The modern knowledge economy depends on a highly skilled and often specialised workforce and it is important those skills aren’t lost.
“The Fourth Industrial Revolution, emerging sectors such as 3D printing, blockchain, and Artificial Intelligence, has intensified this need for a skilled and knowledgeable workforce.
“The revolution is fundamentally changing the way we live, work, and relate to one another by blurring the boundaries between the physical, digital and biological worlds, and is driving disruptive technology innovations across many sectors.
“The boom in Fourth Industrial Revolution technology can help kick-start North Wales’ powerful manufacturing sector.
“North Wales has a long tradition of manufacturing, the legacy of which is that it still has vital resources and a workforce armed with the skills needed to grasp the opportunities of the Fourth Industrial Revolution.
“There is also an opportunity for us to redesign the high street, converting empty shops to provide for local producers and sellers, start-ups, and places for the community to gather.”