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A few numbers have grabbed headlines in the last month.  One of those was the UK’s net immigration figure.  The UK’s net annual immigration to June 2022 was 500,000, an increase of over 300,000 on 2021 figures, and one of the largest figures on record.  The problem for businesses struggling to hire and an economy facing a hiring squeeze is that these record figures have done little to increase the availability of labour.  Most of the increase was driven by those who are economically inactive.  The largest increase was in the number of foreign students.  The UK higher education sector is highly dependent on the fees paid by foreign students to remain solvent.  After the financial pressures of Covid, the government has subtly encouraged foreign students into the country to support university finances.  While good for the education sector, and benefitting long-term skills, this has no immediate impact on hiring.  The next biggest increase was from Ukraine.

Given working-age men were not allowed to leave Ukraine, the majority of these are likely to be mothers and young children.  Combined with the fact many are staying with host families and have not been driven here by economic factors, these numbers have likely contributed little to the availability of labour in the UK.  The third largest segment was an increase in British Overseas Residents moving to the UK.  This is mainly immigration from Hong Kong.  While this segment will probably contribute significantly to the economy, it is likely that they are wealthier families and the highly educated, not young people entering the job market.  Overall, these figures have therefore done little to replace the post-pandemic workforce losses.

The numbers which have most interested me recently is the drip feed release of 2021 census data over the past few months.  In Wales, this data shows a tale of two cities, alongside a bigger picture of changes to the Welsh population.  While the UK population overall has grown 20% in the last 40 years, the population of Wales has grown 13%.  Most of this population growth has been concentrated in Cardiff and along the English borders.  Outside of this area, many regions of Wales have seen a static population and, in some areas, population decline.  The Census data also shows that many areas in Wales are ageing much faster than the UK average.  The population of Pembrokeshire has grown significantly in the last 40 years but is now flatlining and has one of the most rapidly ageing populations in the UK.  These census demographics play an extremely important role in both explaining past economic performance and determining future economic success.

The Census figures for Wales back up the anecdotal evidence we can all see.  That is: a significant growth in the number of retirees in many villages and rural areas; a reduction in birth rates and in the number of young families and children in many communities; a reduction in average household occupancy contributing to the pressures on housing; and a pattern of young people leaving the old industrial heartlands in search of work and careers.  These issues create significant economic and political challenges for Wales and those of us living in Wales.

There are bright spots though.  The population of Cardiff has grown 32% in the last 40 years, and it now has a population significantly younger than the UK average.  The regeneration of Cardiff has been successful in attracting the young and economically active and bodes well for future economic activity and growth.  The hope is that the current regeneration of Swansea will now have a similar impact.  Swansea has a large student population.  The challenge in the past has been encouraging those people to stay on and live and work in Swansea.  Unlike Cardiff and most UK cities, the population of Swansea has been static over the past 10 years.  The main political and economic challenge of the next few years for Wales is addressing the chicken and egg situation of jobs, skills, housing and demographics.  You need the young to create a workforce, you need the workforce to attract the economic growth, you need the jobs to attract the workforce, and tied up in this is ensuring that the young have the right skills and access to good housing.  Both the Welsh Government and businesses seem to recognise this, and I am confident that if we work together, we can address these challenges.

It does feel like we are living through Dicken’s opening lines.  It is the best of times; it is the worst of times.  I see huge opportunity for the Welsh economy in the coming years with deglobalisation driving a reindustrialisation of the Welsh economy, boosted by Wales establishing a leading position in renewable energy.   Many Welsh owned businesses are succeeding.  However, in the short term, there are tough times ahead and a number of obvious economic challenges that need addressing.  At the heart of this is the circular challenge of demographics, skills and housing.  These issues are currently creating a bottleneck for economic growth.  With the right will and policies they can be overcome.  An adult conversation about immigration and what we want (and need) a sustainable future population in Wales to look like would also help.