Economic Growth Wales

Summary

Measuring economic growth in Wales provides insight into the performance and health of the Welsh economy. Although Wales is part of the UK’s overall economy, several statistics are produced specifically for the Welsh economy, describing regional trends, long term growth, and differences with other parts of the UK. A number of important economic policies are devolved to the Welsh Government.

The Office for National Statistics (ONS) published annual estimates for regional Gross Domestic Product (GDP) and Gross Value Added (GVA) including Wales, although there is a delay in the publication of the data. The most recent data is for 2023. Wales does not have monthly GDP statistics like the UK overall.

Things to consider

Gross Domestic Product (GDP) is a measure of economic output based on the total monetary value of goods and services produced by a country or region in a specified period (usually a year or a quarter). The Welsh Government does not produce its own GDP data, and is therefore reliant on the analysis of data published by the Office for National Statistics (ONS).

GDP per head is a measure of a country’s GDP divided by its population. In the annual ONS regional GDP data, GDP per head figures are calculated using ONS mid-year population estimates (for the “per head” component) for UK release. It is used to measure the economic prosperity of a country. GDP per head at the Welsh level as can be affected by cross border commuting and demographic structure. For this reason, ONS recommends that economic performance should be assessed by reference to productivity (GVA per head or per hour worked). To calculate GDP, ONS first estimates Gross Value Added (GVA). GDP is equal to GVA but adjusted for taxes levied on products (such as VAT).

GVA is a measure of economic contribution calculated by taking the value of goods and services produced and subtracting the costs of inputs and materials. GVA is used as the primary measure for economic growth in Wales because:

It reflects the value of goods and services produced in Wales after accounting for intermediate consumption
It aligns closely with regional productivity analysis
It provides a clearer picture of regional economic structure

The ONS publishes quarterly regional GDP data, which is currently suspended whilst ONS update the methodology due to issues with data volatility and large scale revisions. This is particularly important when discussing Welsh estimates of GDP and GVA because the Welsh economy is smaller than that of the UK, so quarterly figures in particular can be more volatile.

Another key economic indicator for Wales is Regional Gross Disposable Household Income per head. This is often regarded as one of the best measures of material living standards and represents the amount of money that individuals can spend or save, after income re-distribution through the tax and benefits system. For Wales, Gross Disposable Household Income is only published in nominal, not real terms. To enable comparisons of living standards, ONS also publishes Gross Disposable Household Income as an index, with UK = 100.

The Welsh Government also publishes short-term output indicator statistics, which show the quarterly movements in gross output of the production, construction and market services sectors in Wales. These are the earliest official indicators of the performance of the Welsh production and construction industries.

What to look out for

Comparisons of GDP and GVA data must use either real or nominal data. Real GDP/GVA removes the effect of inflation whereas nominal figures include price changes. Real measures are generally preferred for judging economic performance over time, as using nominal values without removing inflationary effects can be misleading. Note that, as sub-national price indices are not available, real GDP and GVA reflect changes only in the overall UK price level.

International comparisons should be like-for-like as far as possible and should take into consideration the limitations to the comparability of data between countries. Where possible, statements should use a consistent choice of countries to compare against, such as the G7, the largest economies in Europe etc.

Wider support

We have published a rapid review of Revisions of estimates of UK Gross Domestic Product (GDP), providing guidance on improving the communication of uncertainty and revisions of economic growth statistics.

ONS has also published several blogs to aid understanding of economic growth and its statistics:

More information on the methodology of GDP can be found on the ONS’s Gross Domestic Product (GDP) Quality and Methodology Information (QMI) Article.

The Institute for Fiscal Studies (IFS) is an independent economics research institute. The IFS publishes its own analysis and forecasts on a range of economic and fiscal topics.

The National Institute of Economic and Social Research (NIESR) is an independent research institute that carries out research into the economic and social forces that affect people’s lives.