Matthew Lynn

If the single market is so great for Wales, why is it so poor?

If the single market is so great for Wales, why is it so poor?
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Industry will shrivel. Exports will dry up. The few remaining steel works will be closed down. And rugby will be banned. Okay, I made that last one up. But in a report today, the leaders of Welsh Labour and Plaid Cymru have laid out the case for keeping the principality in the single market - and warned that the economy will be virtually destroyed if they come out. 'Severing ties with the single market to control our borders would be an act of catastrophic self-harm,' according to the Welsh First Minister, Carwyn Jones.

Like a kind of mini-me Nicola Sturgeon, it is possible to see what Jones, or certainly the Plaid leadership, might be playing it. They see membership of the single market as a way of driving a wedge between Cardiff and London, and winning more power for themselves. But there is one question they conveniently skip over. If the single market has been so great for Wales, how come it is so poor?

One of the things the EU helpfully does with the billions we give it every year is publish detailed statistics on regional GDP. Even better, it adjusts all the figures for what money is actually worth in each country, known as purchasing power parity in the jargon of economists.

So, given that Wales has been a full member of the single market since it was launched in 1992, how is it getting along? Not very well, as it turns out. According to Eurostat statistics, it is shockingly poor. It is on 77 percent of the EU average GDP per capita, adjusted for purchasing power parity. West Wales and the Valleys is on just 69 percent.

That is poorer than Portugal, for example, one of the least developed parts of western Europe. Or Cyprus – and both of those countries had to be bailed out. In fact, when you look at the regional break-down, it is poorer than whole swathes of eastern Europe, which only a quarter of a century ago were under Communist rule. Prague, for example, is up to 173 percent of the EU average. The Budapest region is on 107 percent. Two Polish regions are wealthier than Wales; pretty soon scaffolders may well be heading from Swansea to Warsaw. Heck it is poorer than parts of Romania. Bucharest is on 80 percent of the EU average.

It is relatively easy to see why London is so keen on the EU. It has done brilliantly well in the last couple of decades. It is the richest part of Europe by a wide margin; for statistics buffs, Inner London West (that’s the bit where the Russians live), is the wealthiest part of the continent, on 539 percent of the average. That may or may not be because of the EU. But it has become a lot richer while inside. It is not completely barmy to want to keep things as they are when you are doing really well.

But it is harder to see why the Welsh, even more than the Scots, want to stay in a single market that has done do little for them. Of course, it probably isn’t the fault of the EU that Wales is so poor. But it is hard to argue that a change – any change – would be so terrible. The Welsh could see that, and they voted to Leave. But Labour and Plaid still don’t get it.