Thursday, 6 September 2012

Wales : An Economic Profile II - Manufacturing & Technology

Manufacturing is far from dead in Wales. In fact, manufacturing makes up a greater share of the Welsh economy compared to the other Home Nations – 15.2% in 2009 compared to 10.3% for the UK as a whole – the equivalent of around £6.8billion every year.

"Production" jobs in Wales from 2001-2010
(Click to enlarge)
In 2010, there were just over 147,000 people employed in, what Stats Wales describes as "production" (mining, manufacturing, energy and construction). The vast bulk of these are in straight-up manufacturing, but the numbers employed have fallen from 210,000 in 2001, and saw a very sharp fall during the first dip of the current double-dip recession.

The most annoying thing is that between 2007-2008, the numbers employed in production in Wales - especially manufacturing and construction - rose.

Gee, thanks "masters of the universe."

Heavy Industries

Port Talbot steelworks is not only a major landmark, but likely to
be Wales' single largest company by itself.
(Pic : BBC Wales)
The decline in Welsh heavy industry is often linked to the overall decline of the Welsh economy. Although coal mining in Wales is critically endangered - albeit still ongoing in different forms - Wales continues to be a major player in the heavy industries. The smokestacks are still here, perhaps most famously exemplified by TATA's Port Talbot and Llanwern steelworks.

In 2010, Wales produced 52% of the UK's iron (3.79m tonnes) and 51% of the UK's steel (4.92m tonnes).
Metal exports from Wales were worth £1.71billion in 2011 (12.7% of Wales' total exports in goods), recovering well from the recession dip, but sharply down on the pre-recession total of £2.42billion.

Although not listed in the 2011 Top 300, in previous years, TATA's (and before them, Corus) operations in Wales were worth a considerable amount by themselves – estimated turnover was around £2.5billion in 2008. If that trend continued down the years, then it's likely that they would be the largest company based in Wales. However, figures for Corus/TATA stopped in subsequent editions, so it's hard to quantify.

Earlier in 2012, TATA announced an £800million investment in their Port Talbot works, with a commitment of at least £240million – including the re-commissioning of number 4 blast furnace (but ignition has been delayed) and a new medical/administration/training centre. The previous Welsh Government invested £100million to complete the Port Talbot distributor road near the steelworks, which is due for completion sometime in 2013.

Although TATA may be the pre-eminent metals company, there are smaller metal producers like Llanelli-based Dyfed Steel and Celsa UK in Cardiff. Llanelli is still home to a major tin-plating works, while Swansea-based Timet provides titanium for the aerospace industry.

Despite this, the numbers employed in the Welsh iron and steel industries have fallen sharply - from 63,000 in 1996 to just over 8,000 in 2010 – a fall of 87% in just 14 years.

Exports from heavy industries, engineering and building (2005-2011)
(Click to enlarge)

There have also been other blows to the Welsh metals industry. Pre-eminently, the mothballing of Llanwern blast furnaces, closure of Ebbw Vale steelworks, and the mothballing of Anglesey Aluminium in 2009 due to the termination of an energy contract (aluminium smelting is an incredibly energy-intensive process) – one of Anglesey's largest employers. Anglesey Aluminium may recommence smelting by 2016 once a biomass plant is constructed (more on that in Part I).

Chemicals are another "big Welsh product", with exports valued at around £1.07billion in 2011.

Most of that is likely to be from Dow Corning's plant in Barry, which specialises in silicones (used in gums, lubricants, sealants and medical applications). Solutia UK, in Cefn Mawr near Wrexham, produces rubber industry chemicals, but the plant is due to close completely by 2015.

Dow Corning's plant at Barry. Chemical exports from
Wales were worth over £1billion in 2011.
(Pic : Penarth Times)

There'll also be significant petrochemical and related goods, such as liquefied gas, exported/imported from/to Wales - via the likes of Milford Haven, the UK's fourth largest port in terms of tonnage handled.

Rockwool, based near Bridgend since the late 1970s, are a major insulation manufacturer, while Pontypridd-based Harp International are a major producer of aerosols, propellants and refrigerants.

The Royal Mint, based in Llantrisant, has a highly-skilled metallurgical-oriented workforce, with a turnover of £215million in 2011. It's a private company owned by HM Treasury, and has an exclusive contract to produce coinage for the UK, as well as produce coins for other nations, commemorative coins/medallions and - more recently - Olympic medals.

Construction & Property Development

Flintshire based housebuilder, Redrow, are
Wales' largest construction company.
(Pic :
In 2009, 93,200 people were employed in the construction sector in Wales, contributing 7.7% of total GVA the same year (approximately £3.39billion). Construction output in Wales fell sharply at the start of 2012, falling to 88.7 (2009 = 100) in the first quarter.

The single largest Welsh construction company is house builder Redrow, based in Flintshire, and listed on the FTSE 250. Redrow had a turnover of just over £450million in 2011, and was the ninth largest company by turnover in Wales the same year, making pre-tax profits of around £25million. Redrow is currently subject to a management buy-out by chairman, Steve Morgan.

Between roughly 5,000 and 6,000 new homes constructed every year in Wales. There are major urban regeneration schemes taking place on brownfield sites, such as Coed Darcy near Swansea, Glan Llyn near Newport and new urban villages being created at Parc Derwen in Bridgend and Llanilid, Rhonnda Cynon Taf. Redrow isn't the only prominent Welsh house builder, there's also Bangor-based Watkin Jones, and Llantrisant-based Llanmoor Homes.

In terms of general construction and civil engineering, most Welsh companies are in the mid to small range but still pack a punch. Award-winning Cardiff-based JR Smart are currently developing a mixed-use "Capital Quarter" near Cardiff City centre, while PMG estates constructed the Cardiff City Stadium and retail park.

Other prominent Welsh civil engineering/construction companies include : Ruthin-based Jones Brothers (who constructed the Porthmadog bypass), Newport-based structural steel experts Rowecord Engineering, in addition to Bridgend-based Jehu Project Services (a group of four companies covering contracting, energy and property development) and Cardiff-based Macob Holdings. These four companies have a combined turnover of approximately £230million.

Wales is also base to of one of the UK's leading architectural companies – Holder Mathias, based in Cardiff – who have designed schemes across the UK and Europe, including retail, healthcare, masterplanning, residential/regeneration schemes and mixed-use developments.

Cardiff University is also one of the UK's leading centres for architecture and has a genuinely "world-class" school for city/regional planning.

The Welsh Government has focused on "up-skilling" the construction sector, developing a new construction academy at Bridgend College as well as creating pathways for building/construction apprenticeships. Local and national government are also a significant commissioner of major infrastructure projects – more on that in Part IV.

General Manufacturing & Engineering

Manufacturing remains an important part of the Welsh economy, and can punch
above its weight on the European and world stage in certain sectors.
(Pic : BBC Wales)

There are two general manufacturing/engineering sectors Wales performs notably well in.

Firstly, aerospace. There's a significant global aerospace manufacturing facility at Broughton, Flintshire, which manufactures wings for Airbus aircraft. Broughton has been a base for aerospace manufacturing for some considerable time, and is not only home to Airbus, but many other supporting companies – for example, defence aviation specialist Raytheon. It's unclear how much the Airbus factory contributes to the Welsh economy, but it's likely to be a significant figure - I'd guess easily in the hundreds of millions of pounds, if not more.

General Electric Aircraft Services - based in Nantgarw, Caerphilly - is one of Wales' few £1billion companies, with a turnover of £1.2billion in 2011, and employing more than 1,000, in what is a highly-skilled, high value-added business in the maintenance of aircraft engines. Considering it's several miles from an airport, this is quite the achievement, and proves that nowhere should be written off for this kind of industry.

Below this, you have several moderate-sized players in aircraft engineering : Cwmbran-based Contour Premier Seating (their expertise is obvious), Bridgend-based aircraft technical management company TES Aviation (who recently attracted investment from Japan), TB Davies and Aircraft Maintenance Support Services (also near Bridgend), who manufacture aircraft support equipment.

St Athan was, until recently, part of the Defence Aviation Repair Agency (DARA), maintaining the Royal Air Forces' fast jets. The UK Government moved maintenance of Tornado aircraft "in house" in 2007, while plans for a £14billion defence academy at the site never materialised. The WDA invested £113million in a "super-hanger" at the site (Project Red Dragon) before the UK Government took those decisions.

Wales' Top 20 manufacturing and engineering companies
(Click to enlarge)

St Athan was recently been designated an aerospace enterprise zone by the Welsh Government, making good use of the former DARA base there, and has already attracted interest. Iron Maiden singer, Bruce Dickinson, recently launched an aircraft maintenance company at the site – Cardiff Aviation – which is aimed at maintaining Airbus and Boeing aircraft, hoping to create up to 1,000 jobs.

British Airways have a significant maintenance facility at Cardiff Airport, which is capable of servicing large passenger aircraft such as the Boeing 747 – and are considering expansion. Nearby Cardiff and Vale College, as well as most Welsh universities, offer specialist courses in aerospace engineering.

Next, there's the automotive sector. Although there've been significant job-losses and plant closures here in recent years (TSW in Resolven, Visteon in Swansea), automotive exports were worth £566million in 2011 - which is almost double biotechnology and pharmaceutical exports. However, exports in this sector have declined significantly since 2005.

Wales has attracted significant foreign direct investment
in the automotive sector down the years.
(Pic : Bridgend Council)

Like TATA and Airbus, it's unclear how much Bridgend's Ford engine plant and Deeside's Toyota plant contribute to the Welsh economy. Again it's likely to be very significant, and again likely to be in the hundreds of millions of pounds range.

Those plants aside, Wales' largest automotive company is Calsonic Kansei Europe, based in Llanelli, who manufacture various components. After this, the second (verifiable) automotive "giant" is Yuasa Battery Europe, based in Ebbw Vale. The combined turnover of both companies is around £720million, both employing a combined workforce of more than 2,000.

The exotic names shouldn't surprise you. The automotive sector benefited heavily from foreign inward investment through the 1970s and 1980s, leaving Wales with a strong automotive supply chain. The total value of the automotive sector - and its supply chain - to the Welsh economy has been estimated to be £3billion.

Ebbw Vale has been selected to be an automotive enterprise zone by the Welsh Government, and has also been put forward as site for a £250million motorsports circuit and business park. The automotive sector clearly has something of a future in Wales, but what will they be doing? Will there be a move to hydrogen vehicles? Electric vehicles?

General manufacturing exports 2005-2011
(Click to enlarge)

We shouldn't ignore "low-tech" manufacturers that form the backbone of Welsh industry. For example: packaging companies, general machinery, bulky goods, vehicle repair, household goods, other components.

Most of the Welsh secondary sector will be this – "big box" manufacturers on large industrial estates on the outskirts of major settlements. They might not feature heavily in the list I've given, but they have strength in numbers and form a backbone of companies in the Top 300 list, and probably a bulk of those outside it too.

The top four "general manufacturing" companies in the Top 300 list (Kronospan, Kingspan, International Greetings, Artenius PET Packaging) had a combined turnover of £882million, and employed more than 4,400 people. General "engineering" exports were also worth £3.82billion in 2011.

Food & Drink

There are three sides to the food and drink sector in my opinion:
  • Primary – Including crop and meat processing.
  • Processing – Turning primary products into other foods (i.e. Baking).
  • Service - Hospitality, fast food/food sales/restaurants and food marketing.

The primary part was touched on in Part I. For this section, I'm looking a the "processing" role. I'll look at the service side of things in Part III.

Although only two food and drink "manufacturers" made my list of the top 20 Welsh industrial companies (Finsbury Food Group of Cardiff and First Milk Co-op of Wrexham), there are also prominent Welsh companies below this.

SA Brain are primarily involved in hospitality, but still has the iconic brewery in the centre of Cardiff, more on them in Part III. They've launches several new draught and bottled beers in recent years - including Brains Black (stout) and Brains 45 (a premium lager that's been discontinued) as well as continuing their traditional ales.

There's a fairly active Welsh independent brewery scene – (the famous) Otley Brewery in Pontypridd, Swansea-based Tomos Watkin (who make ales and ciders like "Taffy Apples"). Wrexham Lager has a long and noble history, and has been resurrected (of sorts) despite the original company closing in 2000. Penderyn produce a Welsh whiskey, though the Welsh whisky industry has a long way to go to be on a par with Scotland and Ireland. I'm was surprised by the number of commercial vineyards in Wales – despite the fact vines have been grown in Wales, especially the Monmouthshire, Powys and Vale of Glamorgan areas, since Roman times.

Where are the next Welsh "brands" going to
come from?
(Pic : Via Amazon)
Finsbury Foods – based in Cardiff - oversee several subsidiaries, such as Memory Lane Cakes, United Central Bakeries, Livwell and Nicholas and Harris. They're also listed on the FTSE 250.

Wales also has large and medium size companies such as Global Foods and Euro Foods (both Cardiff) and Peter's Food Services, based in Caerphilly (perhaps most famous for its pies). Brace's bakery are a major employer in the Newport area, and an important Welsh commercial "brand", employing some 330 people and a turnover of £30.4million in 2011.

Real Crisps, based in Newport, are owned by the Northern Irish crisp manufacturer Tayto. Bon Bon Buddies, based in Blackwood, are a major supplier of branded confectionery, and  experienced significant growth in Europe in recent years. In recent times, Anglesey-based crisp manufacturer Jones o Gymru (who source all their ingredients locally), sealed a deal to supply crisps to Tesco's 40 Welsh stores.

Harking back to Part I, Wales has a pretty active meat export market and meat processing industry. But alongside this, as exemplified above, Wales does relatively well above its weight in the the more "industrial"/"convenience food" sector of the market. Ultimately though, with a few exceptions, these are still mostly branch factories.

Could Wales produce a new generation of popular, marketable food brands? The manufacturing base is certainly there. What's becoming clear though, is that despite having all the things necessary to upscale and turn raw materials/processed goods into high-value products and services, there might be a "ceiling" as to how far Welsh businesses can go along this road.

Breach it, and I'm think it could help the Welsh economy will start to grow. If we can make crisps, cakes and other foods, then we should be able to put Welsh "brands" on supermarket shelves, attract the high-paid jobs in marketing these brands - and all the corporate stuff that underpins it - that are currently based elsewhere.

Electronics & IT

Wales had an enviable track record in attracting electronics inward investment – in particular branch factories from global brands like Sony, Panasonic etc. This is on the wane. Exports in machinery and household goods are in a steady decline, while as noted earlier, general engineering exports have experienced big increases in value in recent years to make up for this.

The days of big Japanese electronics companies
plonking a factory anywhere are over.
(Pic : BBC Wales)

One sector that has seen a noticeable, possibly terminal, decline in exports is telecomms. Despite this sector producing one of Wales' greatest business minds (Terry Matthews), exports have fallen in value from £259million in 2005 to just £53million in 2011. But these figures could be misleading.

Cassidian, based in Newport, are a major defence and security telecommunications company. One of Terry Matthew's companies, Mittal Networks, also based in Newport, had a turnover of just under £100million in 2011. Big companies don't necessarily mean big exports, especially if most of their business is done within the UK, or if there isn't anything tangibly "exported" – like data.

Although IT has been selected as a special sector in the Economic Renewal Plan, IT plays a much more significant role further down the "food chain" that at the top. IT companies are a perennial mainstay of the Fast Growth 50 list, rather than the Top 300. This is a good sign, as it means Wales is beginning to develop a solid, indigenous base in IT.

I'll give you some examples. Swansea-based IT sales specialist, Flashpoint Technologies, saw turnover rise from £7.8m to £54.8m between 2008 & 2010. Cardiff-based data applications specialist Excelerate increased their turnover by more than 200%. Education IT specialist, Gaia Technologies, based in Bangor, almost doubled their turnover to more than £10million.

Bangor-based educational IT company, Gaia Technologies, are
just oneof a number of rapidly-growing Welsh IT companies.
(Pic : Gaia Technologies)

Like Terry Matthews, our other great business mind, Michael Moritz, made a significant fortune in internet/IT investments – including the likes of Google, PayPal and Youtube.

Alongside Cassidian mentioned earlier, Reading-HQd Logica are a significant employer in Bridgend, providing services in outsourcing, management consultancy and general IT consultancy. They were recently taken over by Canadian IT services company, CGI, in a deal worth £1.7billion.

I've mentioned before that there are some weaknesses here - in particular the games industry - but steps have been taken to develop things like mobile applications, via the establishment of specialist centres like those at Glamorgan University. Price comparison websites would probably come under this too, but more on them in Part III.


Wales has a "blind-spot" when it comes to cutting-edge science and technology. Most of our science industry is dominated by the medical devices and pharmaceuticals industry - usually subsidiaries of larger multi-nationals. For example: Ortho-clinical Diagnostics, near Pencoed, Biomet in Bridgend, Ipsen Biopharm near Wrexham, Siemens in Caernarfon and Convatec in Flintshire.

Before we consider the future of life sciences in particular (picked as a growth sector in the Economic Renewal Plan), we need to accept the fact that there are very few indiginous life science/science companies coming through. Very few make the Fast Growth 50 list, for example. A point I've raised before.

Wales' top 10 "high tech" companies
(Click to enlarge)

There are exceptions to this. Biotec Services International, based in Bridgend, specialises in clinical and pharmaceutical supplies and are an example of an indigenous science company experiencing rapid growth. British Biocell International, based in Cardiff but with centres all around the world, manufacture assay & immunoassay equipment for diagnostic and labelling purposes.

Williams Medical Supplies are the only "Welsh" company to make my list of the Top 10 high-tech companies. They're a successful, highly-skilled, pharmaceuticals supply company based in Rhymney of all places, and are a leading supplier to the primary care sector in particular. Once again – you shouldn't completely write off certain areas because of their economic history.

Our weakness, as far as I see it, is Wales' inability (so far) to come up with a large number of patent-protected, innovative technologies. This is starting to change though. Wales is developing niches in areas such as:
  • Optronics (lighting/scanning/processing/laser technology) – There are a cluster of companies based in and around north east Wales, plus Photonstar (formerly Enfis, based in Swansea, listed on the AIM).
  • Silicon Wafers – Cardiff-based, AIM-listed, IQE are the most obvious example. They are now one of the world's leading suppliers of silicon wafers (used in solar panels, semiconductors) and expended to include manufacturing facilities in mainland Europe, the US and Asia. Swansea-based Pure Wafer are a leading recycler of silicon wafers.
  • Diagnostic/medical equipment – Wales already manufactures them, but is starting to develop new ones too. EKF Diagnostics – founded in Germany originally, but now based in Penarth – have developed new diabetes diagnostic equipment, as well as special "biomarker" based testing equipment. It made a loss recently, but only because it was rapidly expanding and taking over subsidiaries. Swansea's Energist provide laser-based technology to the medical and cosmetics industry. There are numerous others - particularly university spin-outs - but too many to mention here.

In recent times, Business Minister, Edwina Hart (Lab, Gower) and Welsh biotechnology entrepreneur, Christopher Evans, launched Ser Cymru – a university-based science initiative – as well as a biotechnology fund worth £100million, with the hope of attracting a further £200million. The aim is to generate up to £1billion for the Welsh economy over the next decade.

I'll be looking in more detail at the economic role of Welsh universities in relation to the national economy in Part IV next week.

See, it isn't all bad news. Wales can still make things with the best of them.

Part III, focusing on the service sector (finance, retail, hospitality/tourism) and the creative industries/media , will be posted in a few days time.


  1. One positive note under manufacturing :-

  2. I don't know about the others but I can't imagine that Airbus or Cassidian, both part of the same company, contribute much to the economy.

    Cassidian in particular not only gets virtually all of its contracts from the public sector, but apparently hasn't won an order in years. Airbus, described by the company as 'just outside Liverpool' is barely in Wales, in fact there's a joke in the industry that the main gate and the finance office where they process the grants are the only part of the site this side of the border.

    For both companies, recruitment is almost entirely in England, and there are hardly any Welsh employees, the canteen staff and cleaners excepted, they drive into Wales every morning and drive home every night.

    These are English companies who's only interest in Wales is to extract Welsh taxpayers money. In fact they are probably both a net drain on the economy, and I bet they aren't alone

  3. Thanks for the comments.

    Cibwr - It's certainly good news. I just hope the likes of Leighton Andrews can intergrate the Pi into the IT curriculum in schools. It makes sense now if we're going to make them.

    Anon - You're probably right re. Cassidian contracts. I'm pretty sure anyone can apply to work these companies. Deeside College run Airbus' apprenticeship scheme, the Broughton site is a good 2km inside the Welsh border and to an American, for example, Airbus probably is "just outside Liverpool".

    It isn't logical for a company employing exclusively English people to locate in Wales. I'd really like to know what you think the point of that would be?

    It doesn't compute that they would locate somewhere and have grants dished out when they could very easily just stay in and around London and not require any government assistance.

    EADS (the company that own Cassidian and Airbus) are Dutch. Cassidian are German. Airbus are French. There's nothing English about them.

  4. Fantastic job Owen, with the three of them.

  5. Thanks. There's still three parts due over the next week, Llan. ;)

  6. The engineering departments, especially those employed in medical device manufacturing, should be compensated well. These are the individuals responsible for the production of medical machines.

  7. thanks very much for this....fid you read the plaid report " offa's gap roots and remedies of the welsh growth collapse...!

  8. Yes Alun I did. You can find my assessment of it via this link.