Communities Economy

Coronavirus: Economic recovery – businesses, infrastructure and a green recovery

As Wales emerges from lockdown, and an unprecedented quarterly fall in UK Gross Domestic Product, responding to existing and new challenges and opportunities over the coming years will be of critical importance to Welsh society and the economy.

Estimated reading time: 6 Minutes

15 September 2020

Darllenwch yr erthygl yma yn Gymraeg | View this post in Welsh

As Wales emerges from lockdown, and an unprecedented quarterly fall in UK Gross Domestic Product, responding to existing and new challenges and opportunities over the coming years will be of critical importance to Welsh society and the economy.

The Counsel General and Minister for European Transition is leading on the Welsh Government’s planning for recovery, and has said that the Welsh Government will build a recovery based on:

a commitment to social, economic and environmental justice – and will embed our obligations to those who follow us alongside those that are living through Covid19, under the Well-Being of Future Generations Act.

The Welsh Government has held a number of roundtable sessions with experts from Wales and beyond on how it should support recovery and reconstruction from coronavirus. The Wales Centre for Public Policy has produced a write up of the key messages from these.

The Senedd’s Economy, Infrastructure and Skills Committee will begin taking evidence into its inquiry on economic recovery on 16 September. We’re publishing two articles setting out some of the key themes that the Committee is likely to consider during its upcoming evidence sessions. This article focuses on what the Welsh Government and other stakeholders have said regarding economic recovery in relation to:

  • the support needed for businesses and for individual sectors;
  • the investment needed in infrastructure; and
  • the potential for a green recovery.

Our other article, which will be published tomorrow, concentrates on people, places and inequalities in the context of economic recovery.

Businesses

The Welsh Government has said that phase 3 of the Economic Resilience Fund, which will be focussed on supporting economic recovery, will help “businesses, particularly those in the low carbon economy, to safeguard and create good quality jobs, rooted in local communities”.

The Confederation of British Industry (CBI) Wales has called for the Welsh Government to boost competitiveness through extending business rates relief to mid-sized businesses to enable them to deliver innovation projects to support economic recovery.

The Federation of Small Businesses (FSB) Wales has raised the need to support businesses in areas affected by any future local lockdowns through a Rapid Reaction Business Fund, and for the Welsh Government to create a communications plan that provides clarity for businesses in affected areas on what is happening with new lockdown measures.

Professor Dylan Jones-Evans of the University of South Wales has called for incentives for investment, given that businesses not spending on Research and Development and training may have longer lasting effects on productivity and growth in the economy.

The Institute of Chartered Accountants in England and Wales suggests that targeted financial support should be provided to small businesses to enable investment in tackling climate change.

To fund support, participants in the Welsh Government round tables suggested that the Development Bank of Wales could have an increased role that supports firm-level and economic transition, with greater use of surveys to develop a “nuanced understanding of where there are strengths, opportunities, vulnerabilities, and bottlenecks in financing”.

Sectors

While there have been calls from trade unions, the Federation of Small Businesses Wales (FSB Wales) and Make UK for the UK Government to extend its Coronavirus Job Retention Scheme, organisations have also highlighted ways that the Welsh Government could support sectors most affected by the pandemic to recover.

The Welsh Government has recently announced sectoral support to assist the childcare and culture sectors.  

The tourism and hospitality sectors have been hit particularly hard by the pandemic. UK Hospitality has called for a system of ‘smart grants’ and, along with the Wales Tourism Alliance, for a further business rates holiday in 2021-22 to assist the tourism and hospitality industries through the upcoming period. FSB Wales has suggested that a Tourism Hibernation Scheme be created to enable businesses to survive until 2021, through providing loans at a low interest rate via the Development Bank of Wales.

The Wales Centre for Public Policy’s write-up of the Welsh Government roundtables highlights a number of different suggestions for supporting different categories of business and workers. These include:

  • Support for sectors who will need to gradually return to a ‘new normal’.
  • Retraining for workers in sectors that are unlikely to be able to resume for some time.
  • Enhanced support for workers in remote areas who might not have access to alternative jobs, such as many of those employed in tourism, such as a job guarantee scheme.
  • Targeted support for sectors like manufacturing where some workplaces are finding social distancing difficult and greater automation may be required to address this.

The Bevan Foundation’s work on foundational economy sectors concludes that  helping these sectors develop in a post-pandemic economy requires support targeted to micro-firms and suitable premises to be available for expansion of successful businesses. The Welsh Government roundtables also identified that some foundational sectors will require government support, and that this should be targeted to support businesses who will be viable if they receive short-term support. In addition, “vocational training and retraining programmes should focus on equipping people for work in these areas”.

Infrastructure

A number of organisations have called for investment in social and economic infrastructure to boost the economy. The Bevan Foundation suggests that:

A major investment in public infrastructure could not only support business activity but help to get it fit for the future.

CBI Wales has called for ‘shovel-ready’ construction projects to be accelerated to boost demand and competitiveness in the economy. Wales Trades Union Congress (TUC) has commissioned work which suggests that almost 60,000 jobs could be created if the Welsh Government invests in key projects, with investment in ‘shovel ready’ projects being a key lesson from the 2008 recession. It suggests that these be prioritised in areas such as housing; transport upgrades; energy and environment; manufacturing; and broadband.

The Welsh Local Government Association has published proposals for capital investment by local authorities.  These cover 10 sectors, including both economic and social infrastructure in areas such as business support; transport and active travel; social care and affordable housing.

Chwarae Teg advocates that investing in social infrastructure such as social care, childcare and health should be prioritised to stimulate and diversify the economy. It suggests that this would boost employment, earnings and gender equality.

The Bevan Foundation have stated that the infrastructure investment must be in addition to any support that Wales receives from the UK Shared Prosperity Fund, although delivery should be aligned. Other organisations such as Wales TUC and the Future Generations Commissioner have argued that there is a need for the Welsh Government to be given increased borrowing powers to ‘build back better’.

A green recovery

There have been a number of calls for the Welsh Government to support the green economy, with consensus emerging over potential approaches to support in some areas.

Natural Resources Wales is leading a taskforce established by the Welsh Government to develop ideas that link climate action with job creation and inclusive economic growth. The Welsh Government has recently announced that the Optimised Retrofit Programme will fund the fitting of energy efficiency measures in up to 1,000 existing homes owned by registered social landlords and councils, and has recently run the second round of the Circular Economy Fund, which aims to reduce waste by keeping materials in circulation for as long as possible.

Investing in green infrastructure has been advocated by a number of organisations.  Organisations such asCBI Wales, Wales TUC, the Civil Engineers Contracting Association Wales, the Federation of Master Builders Wales and the Future Generations Commissioner have called for investment in areas such as building affordable homes, retrofitting housing to improve energy efficiency, active travel, and increasing the number of electric charging points.

CBI Wales has called for support to enable Welsh businesses to deliver more resilient supply chains. The Bevan Foundation and the Industrial Communities Alliance (ICA) Wales have suggested that this may mean reshoring some production in areas such as manufacturing and essential goods and services.

Organisations have also suggested that investment could reduce industrial emissions, and support economically deprived areas. Wales TUC has suggested that an investment fund is needed to support industries, such as steel, to transition to lower carbon models and cleaner technology. It also calls for unemployment in  sectors and regions to be considered when making decisions on individual projects. ICA Wales asserts that a green industrial strategy should be “at the heart of the economic process”, and that it should support those areas facing economic challenges to boost productivity, competitiveness and access to the labour market.

The Future Generations Commissioner has suggested that, as well as making green economy investments, funding should be allocated to large-scale habitat and wildlife restoration. This would include support for reforestation, flood defences and restoring nature in towns and cities. The Wales Centre for Public Policy’s write-up of the Welsh Government roundtables also outlined a number of ways that the wider green economy could be supported, such as changing agricultural land use, committing to purchasing zero-carbon products, and greater investment in wind power.

Our second article will look at people, places and inequality in relation to recovery from the pandemic.


Article by Gareth Thomas, Senedd Research, Welsh Parliament  

We’ve published a range of material on the coronavirus pandemic, including a post setting out the help and guidance available for people in Wales and a timeline of Welsh and UK governments’ response.

You can see all our coronavirus-related publications by clicking here. All are updated regularly.

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