Guest blog: Towards a better understanding of the Welsh economy (the Input-Output Tables for Wales)

Darllenwch y dudalen hon yn Cymraeg

Professor Calvin Jones is working with Welsh Government analysts to provide expert advice on a new project to better understand the Welsh economy. In this blog post, he explains what you can expect from this work.


Wales has lofty ambitions for the long term. The Well-being of Future Generations Act, the Environment Act and the Government’s Net Zero Commitments make clear that the aspiration is for a Wales that is fair, inclusive, healthy, biodiverse, and globally responsible – not least regarding climate safety. Clearly, none of this can be achieved without an economy that is all those things, and which at the same time provides material prosperity for our people – and especially those at the bottom of the income scale.

However, as the world becomes more complex, and inter-relationships across the economy, society, environment and climate become more obvious and important, we must continue to improve the range and quality of statistics available to support policy making and monitoring. There are currently some key data gaps, and where information does exist, it is often limited by quality or small survey sample sizes, is difficult to compare over time or between different areas, or is structured in ways that make sense for the UK, but less so when used to inform Welsh policy objectives. Without a complete and detailed picture of the economy, it is hard to trace the ways in which economic activity has implications for Wales’ socio-economic progress, environmental quality, or global ‘footprints’.

Welsh Government analysts are seeking to fill some of these intelligence gaps via a three-year project examining the feasibility of constructing a full regional economic account for Wales – known as an Input Output (IO) table – in a manner which enables an analysis, not only of how the economy ‘works’, but also how it fits within other systems – for example, UK and global economies, Wales’ natural environment, or the climate. IO Tables for the UK (Office for National Statistics (ONS)) and Scotland (Scottish Government: Supply, Use and Input-Output Tables) have long been used for policy analysis, and their use is growing, with, for example Northern Ireland and the West Midlands now having comparable table structures. The Understanding the Welsh Economy project builds on work previously carried out by the Welsh Economy Research Unit (WERU) at Cardiff Business School. These University IO Tables and related modelling approaches have been widely used; for example, in examining the importance of key regional anchor firms (BBC News), the economic and environmental consequences of major events (Research Gate), and the vulnerability of Welsh firms and sectors to Brexit (Figure 1).

Figure 1: Brexit Risk, Sector Size and Regional Location Quotients(circle size=LQ)

Aerospace and steel have a combination of high Welsh location quotient and risk from brexit.

Source: WERU (2017)

These accounting structures can enable a more sophisticated policy approach. Take for example the commitment to decarbonising transport in our transition to net zero. A better understanding of the uses and users of transport in Wales would improve the effectiveness of policy action, but travel data rarely report such detail. The WERU IO Tables have been used however, in conjunction with a Wales-bespoke tourism satellite account (World Tourism Organization), to establish the carbon footprint of tourism to (and in Wales), and also disaggregate this carbon burden by sector, type of visitor, and whether it occurs inside or outside Wales.

Understanding the Welsh economy: the objectives

Whilst the WERU Tables have been widely used, they suffer from a number of limitations that arise from their ‘non-official’ status – notably constraints on both resourcing and access to data, uncertainty around future plans, and a lack of ‘mainstreaming’ into policymaking. The Welsh Government IO project will establish the feasibility and potential costs and benefits of developing and mainstreaming a fully-fledged and regularly updated set of IO Tables for Wales. The project has a number of initial, interlinked statistical aims:

  • To create an experimental set of Supply and Use Tables (ONS) for Wales for base year 2019, mirroring progress in Scotland and Northern Ireland,
  • To develop a set of linked Analytical Accounts (ONS) that have potential uses for economic modelling, and to inform and link to other accounting structures (for example those covering the environment, skills & human capital, or households),
  • To use the above developments to undertake an audit of where economic statistics for Wales are lacking in policy-important areas,
  • To develop set of Supply and Use Tables for Wales with base year after the ending of Covid protections.

To further these objectives, we have already commissioned boosts to existing ONS survey data, including the Annual Business Survey (ONS), the Annual Purchases Survey (ONS), the Business Registration and Employment Survey (ONS) and the Living Costs and Food Survey (ONS) (and will continue to develop our own Trade Survey for Wales). However, statistics are only part of the story. As part of this project, we want to make sure that the statistics and analysis provided by Welsh Government – and indeed by other agencies in Wales are ‘fit for Welsh purpose’: asking questions not only about robustness, but also scope, timeliness and detail. From there we can assess whether our statistical infrastructure can provide the intelligence that we need to guide Welsh Government (and others) towards effective delivery of our national objectives; be that inclusive prosperity, circular production, net-zero living or global responsibility.

To do this our project must be properly contextualised, and responsive to a wide range of users and needs. An internal project board will work with experienced technical advisors from Wales, the UK and abroad to make sure our developments are robust, reasonable, and proportionate to policy need. We will look to solicit advice and guidance from public, our Welsh Economic Statistics user group, third sector and private agencies across the UK, and engage fully with academia. We are already in liaison with those undertaking parallel work in governments and universities across UK (and with the ONS supported ESCoE project). If the project is not inclusive and responsive, it will not fully succeed.

The next six months – and beyond

Constructing this governance structure will be one of the first project tasks, ensuring that we are on the right path. A ‘gap analysis’, examining where existing data are likely to fall short of the exacting requirements to compile Input-Output Tables is already underway. These processes will then set us fair for the remaining 18 months of the project.

It will not, however all be ‘waiting and audit’. The partnership between Welsh Government and Cardiff Business School means we can begin by further developing the 2019 Cardiff University IO Tables in useful ways, understanding the costs and benefits of Table expansion and added value for policy – for example, these tables are already informing the upcoming Joint Nature Conservation Committee (JNCC) Wales’ Global Footprint analysis, and sectoral economic analyses on behalf of Government. And we are already talking to colleagues across Welsh Government to establish how we can use the University IO Tables in their work, for example in estimating waste intensities and footprints. These preparatory works mean that as the government tables are developed, refined, and linked to other statistical systems, government colleagues – and hopefully those further afield – will be ready and willing to use the new structures to build better evidenced – and hence better – policies.

Post by, Professor Calvin Jones, Academic Advisor, Knowledge and Analytical Services, Welsh Government

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