We Need a More Joined-Up Conversation on Productivity

Productivity in Wales is often presented as a single problem with a single solution. In reality, it is far more nuanced than that, and understanding those nuances matters if we are serious about making progress in the next Senedd term.

One place to start is by being honest about how central productivity has been to economic policy in Wales. At times it has featured prominently, but it has not been a consistent or sustained focus. That matters, because productivity is a long-term issue and the trends we see today are shaped by decades of economic structure and policy, not just recent decisions.

There is also a risk of assuming that this is something devolved institutions can simply fix on their own. When you look at productivity data over time, Wales tends to sit in broadly the same position relative to other UK regions. That pattern existed before devolution and has continued since. It suggests that while Welsh Government has important levers, it does not control all the factors that shape productivity outcomes.

The picture also looks different once you move beyond headline figures. Wales is often cited as having the lowest total GVA per head in the UK, but when you look at productivity per hour worked, the gap narrows. When you look at wages, the picture improves again. That tells us something important: workplaces and businesses in Wales are not necessarily unproductive. In many cases, people in work are producing a reasonable amount of value. The challenge lies elsewhere in the system.

Demographics play a role. Wales has an older population, with many people moving here to retire. We also have relatively high levels of economic inactivity among people of working age. That affects overall productivity figures, even if the people who are in work are productive. Sector mix matters too. Parts of the Welsh economy are dominated by sectors such as tourism and agriculture, which tend to have lower measured productivity than others.

Business structure is another part of the picture. Wales has a high proportion of micro and small businesses, but that in itself is not unusual when compared with many other parts of the UK. The real issue is how we create the conditions for those businesses to grow, invest and make the most of the opportunities available to them.

When you pull all of this together, it becomes clear that productivity policy cannot sit in one place. Some levers sit with Welsh Government, others with the UK Government, and many depend on how businesses, educators and communities respond. That makes a joined-up approach essential.

There are areas where policy choices could make a real difference. Supporting businesses to grow is one. So is attracting, retaining and retraining skilled people so they can take up opportunities when that growth happens. Skills policy, infrastructure and business support all interact with productivity, but they need to be aligned rather than treated in isolation.

One tension that needs to be addressed more openly is the relationship between jobs and productivity. Business support is often measured by the number of jobs created, because it is visible and easy to count. But for many businesses, productivity improvement does not always mean more jobs. Investment in new machinery or technology can mean fewer roles but higher value output. If our support systems are always incentivising job creation, we risk working against productivity objectives.

That does not mean abandoning employment goals, but it does mean being clearer about what we are trying to achieve and how we measure success. Business support organisations need the flexibility to back productivity-enhancing investments, even where the outcomes look different to traditional job metrics.

International examples show that productivity can be treated as a cross-cutting policy consideration rather than a standalone initiative. In Wales, the most important step may simply be to be more intentional. To sit down, decide what productivity means for Wales, identify the areas where change is possible, embed that thinking across government and then measure progress transparently.

As we approach the next Senedd term, productivity should not be reduced to a slogan or a single policy announcement. It requires a clear understanding of the drivers, an honest assessment of where responsibility lies, and a commitment to align skills, business growth, infrastructure and support around shared objectives.

If we can take that more nuanced, joined-up approach, we stand a better chance of shifting Wales’s productivity picture over the long term.

Joshua Miles talks about this and more in the Unlocking Wales' Productivity Potential podcast episode The Productivity Challenge for the Next Welsh Government. Listen to the podcast here.