The Welsh Economy is Showing Green Shoots

Whisper this, there are real roots of recovery coming in the Welsh economy.

In a world inundated with statistics, facts and figures, getting a true feel for the Welsh job market can be difficult. Do we look at labour market indicators? Vacancy and employment data demand? Sector trends? Pay? Skill gaps? Investment pipeline?

What tells me that the Welsh economy is recovering? Experience.

I have worked in the recruitment industry in Wales for 18 years and I have seen the economy recover from the 2008 global financial crisis, Brexit in 2016, the pandemic in 2020, the energy crisis in 2022, and the general geopolitical instability which has/is leading to war on several fronts across the world . Each has brought its own unique challenges to the Welsh economy and Welsh businesses.

The global financial crisis brought the deepest recession in the UK since the Second World War. There were bailouts, and redundancy levels soared to a record high, with 12.2 per 1,000 employees at its peak between February and April 2009. Unemployment climbed steadily and peaked at 8.5% in November 2011. The public sector in the UK was hit with historic spending cuts, with total managed expenditure (TME) cut by 2.7% in real terms between 2009 and 2015. Austerity became engrained in the vocabulary.

Just when there was some light shining on the UK economy, the UK voted to leave the European union. Exported goods dropped by between 6% and 30% (dependent on the method chosen to measure), business investment dropped between 12% and 18% and productivity dropped between 3% to 4%, with resources being pulled to administrative planning and compliance. The unemployment rate decreased from 4.9% in June 2016 to 3.7% in December 2019, with a drastic reduction of overseas workers due to the end of EU free movement cited as one of the reasons. Redundancy rates did not exceed 4.6 per 1,000 employees in the period June 2016 to December 2019.

The impact of the 2020 pandemic was profound. The UK economy was in a state of shock and fell by a record 19.4% as government-mandated lock downs were imposed. Financial support packages were put in place for businesses and individuals and furlough was introduced. Unemployment rates peaked at 5.3% and redundancies surpassed the previous record high of 12.2 per 1,000 employees in Feb/Apr 2009, with redundancies impacting 14.3 per 1,000 employees as companies reduced employee headcount to cope with drop in demand or inability to trade.

Post pandemic, consumer demand surged, leading to a significant demand in labour. Between 2001 and 2014, job vacancies averaged between 450,000 and 700,000 – the lowest number recorded was just after the global financial crisis in 2008. Brexit saw the numbers steadily increase to 800,000, but this number increased to a record high – just over 1.3 million – in March to May 2022. The byproduct of the increased consumer demand and high vacancy levels were higher wages, raised business costs (which, in some cases were passed to the consumer) and, ultimately, inflation.

Ironically, it’s widely accepted that inflation was driven by the very thing that made the GDP bounce back so quickly – higher consumer demand and an increase in job vacancies, leading to more competition in the market and higher salaries.

Where are the green shoots?

There are a multitude of reasons why I feel positive about the Welsh economy. All the indicators show that we are moving from a tight labour market into a more normalised market. Employment levels remain relatively high, unemployment levels are still moderate by historical levels and job vacancies have steadied to pre pandemic levels. The redundancy rate 25-year average is 5.4 redundancies per 1,000 employees. It is currently sitting at 4.2 (Jan to Mar 26), and these are all positive signs.

Crucially, Wales is finally attracting the inward investment that it deserves, with 65 foreign direct investment projects secured in 2024/2025. These investments brought in roughly £4.6 billion and represented a 23% increase year on year. Wales is beginning to carve a niche for itself in industries that represent not just the present, but the future, from being at the forefront of the semiconductor industry, with the world’s first cluster created, to the potential for Wales to be a world leader in clean energy production.

Naturally, there are challenges. Youth unemployment rates are concerningly high at 16.3% as organisations automate entry level roles. I strongly feel this is temporary however; entry roles provide future talent and are critical from a succession planning perspective. For this reason, companies will change tack at some point. New initiatives are needed from UK and Welsh Governments to address this – the Jobs Guarantee pilot scheme is a start, but more is needed.

Numerous conversations with C-Suite leaders over the last three months have told me that we are all ready for growth and are optimistic about how AI and technology can impact productivity – even though we are acutely aware of the pitfalls of over-automation. The shoots of recovery are there, and if you look deep enough, the long term future of the jobs market and economy in Wales is filled with positivity.