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Jon Waters

Interesting that there was some scepticism about the status of Cardiff as a 'national' centre. Despite all the hype, Cardiff (and Newport) are actually relatively weak - especially in comparison to the larger, adjacent "Greater Bristol" area. Plymouth Business School did some work on the Severnside economy in 2000 and noted that "Bristol has done much better than Cardiff in attraction of key industries such as business services and has much lower unemployment, higher earnings and higher GDP per head." In areas like finance, Cardiff and Newport have attracted call centre functions, while Bristol has secured the head offices and the quality jobs. In many ways the Severnside 'division of labour' in services mirrors the problems in manufacturing, where Wales has traditionally got the routine, low skilled branch plants. Don't kid yourself that the presence of the Assembly, the recent success of Cardiff as an 'events city' and exciting new developments are going to fundamentally alter this pattern. As I speak 'Regeneration' magazine is heralding SWRDA's start on England's largest science park at Emerson's Green in North Bristol, and 'Property Week' notes that as a result of the Lyons review of Civil Service location, the whole 6,000-job Defence Logistics Organisation will co-locate with the other MOD functions at Filton Abbey Wood.

Turning to the Valleys, I was very impressed by Elystan Glodrydd's analysis at the IWA's forum (http://www.iwa.org.uk/forum/read.php?f=2&i=2&t=1#reply_2) in which it is argued that if they are to develop at all, housing needs to be improved to provide the kind of facilities that would attract professionals and entrepreneurs. Middle class housing generates businesses and perhaps places like Merthyr should attempt to 'capture' Cardiff commuters and professionals working locally in health, education and public administration. I've seen this kind of argument used by Brian Morgan of Cardiff Business School and also by the RTPI (in the context of the regeneration of the Swansea waterfront).

Another area where people tend to think 'supply generates demand' - but in this case erroneously - is skills, a notable priority for the SE Wales workshop. It is true that Wales lacks human capital when compared to most regions of England, but the problem is one of cause and effect. Quite possibly knowledge businesses won't invest in a region with low skills, but those regions that have been successful in developing such businesses will also attract more skilled people. If you just increase the supply of skills without increasing the demand for them, you simply either generate out-migration (for example, Wales loses 20-30% of its graduates already) or end up with people having skills that aren't used (there's evidence for this in the latest Future Skills Wales survey). Most Welsh businesses and indeed 90% of UK businesses are operating in domestic markets where the income structure means that people often choose goods and services on the basis of price rather than quality (think Asda, Direct Line, EasyJet, and a whole host of local firms). Unfortunately this results in low cost, low skill business strategies - the dreaded 'Low Skils Equilibrium", called the LSQ for short. When it comes to education and skills, demand is as much of a problem as supply, but policymakers have always been reluctant to acknowledge this. If you want to read more on this issue have a look at the website of the Centre for Knowledge, Skills and Economic Performance, co-located at Warwick and Oxford universities.

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