How can we crisis-proof the future of the Welsh economy?

Crisis-proofing the future of the Welsh economy will require a radical reconstitution of our system, says Luke Fletcher MS, Plaid Cymru Spokesperson on the economy.

As with households, small, independent businesses have experienced the distress associated with the cost-of-living emergency over the past year. The Federation of Small Businesses Wales told the Economy, Trade and Rural Affairs Committee in December 2022 that one in seven small businesses are considering shutting down or selling up to stay afloat because of unmanageable inflationary pressures.

Inflation continues to be a destructive force – the cost-of-living crisis is for many a cost-of-doing business crisis. Energy intensive industries as well as small, independent businesses are suffering. It isn’t only those industries that immediately come to mind – take steel, for example – that are feeling the pinch, it’s also those less often spoken about too, such as breweries, for example.

Bang on Brewery, a local brewery within my region in Bridgend, has seen a staggering 549.8% increase in their new utility contract alongside other rising costs, such as a 68% increase in their new premises lease and a 165% increase in the cost of brewer’s grain since the beginning of 2021. They’ve found that just to remain where they are, they will need to find an extra £198,500 after tax to survive, meaning the potential trade price for a bottle of beer could increase to £12.53.

These increases are just some of the many ways in which this crisis is impacting Welsh business and debilitating an already hamstrung industry still recovering from the sharp vagaries of Covid-19.

The Welsh economy should be a reflection of the kind of society that we want to create. The cost-of-living emergency, and the crisis of redistribution that is coming to define the period we’re currently living through, means that ensuring equity and humanity in the transition to net-zero is more urgent than ever.

There are some initiatives in Wales which offer some much needed respite. For example, the Welsh Government is providing retail, tourism and hospitality businesses with 75% business rate relief in 2023-24. The Development Bank of Wales (DBW) has also recently launched the £10 million Green Business Loan Scheme to support businesses to decarbonise and lower energy costs.

Moreover, as part of the Co-operation Agreement between Plaid Cymru and the Welsh Government, commitments have been made to charting potential pathways to net zero by 2035. Alongside this, we hope to work towards the creation of Ynni Cymru, a publicly-owned energy company for Wales, to expand the community-owned renewable energy sector.

Just transition considerations should form the foundations of decarbonisation policy in Wales at every level to crisis-proof the future of the Welsh economy. It is also important that we situate this within a wider transformation of the Welsh economy. From a planetary perspective, we need a substantial reconstitution of our economic system. To respond to the climate emergency with the degree of seriousness and urgency it deserves, wholesale changes must be made.

Change cannot fall solely within the purview of markets – markets do not have long term vision or morality. Where our current model has overwhelmingly succeeded is in centralising wealth within fewer and fewer hands. On measures of equality and environmentally conscious economic development, our approach in Wales has largely failed to deliver.

The challenges that come with large-scale transition to net-zero, the cost-of-living crisis and the climate emergency necessitate a system-wide transformation – new and serious approaches to workforce and industrial planning is what this situation demands of us. Workers, communities, and industries in Wales must be supported through this to create an agile and diverse economy that Wales needs to flourish and to ensure that future generations also thrive.