Wales has the lowest ranking in a new assessment of economic competitiveness that also covers the regions of England with many of its local authorities languishing at the foot of the league table.
The challenges facing the Welsh economy, with many of its communities described as being “innovation deserts”, are highlighted in a report from Professor Robert Huggins of the School of Geography and Planning at Cardiff University and Professor Piers Thompson of Nottingham Business School at Nottingham Trent University, which builds on their long-standing and respected Ƶ economic competitiveness index research.
Their latest work, Economic Possibilities Across England and Wales: the NICE index of localities and regions, determines ranking on the combined measures of networks - that includes estimated ties between businesses within and outside a region and their research and development intensity - innovation, creativity and entrepreneurship (NICE).
Wales is below all the regions of England assessed, which sees London ranked top followed by the south east of England.
The 330 local authority areas in England and Wales were also scored on the NICE measure with Merthyr Tydfil ranked bottom, Blaenau Gwent 328th and Anglesey 325th. The highest ranked Welsh local authority is Cardiff, ranked 62nd (with a positive NICE score of 0.28) followed by Monmouthshire ranked 100th (00.7). Flintshire is the next highest at 125th. but with a NICE negative score of 0.02).
Newport is ranked 239th and Swansea 176th.
The authors of the report said the prominence of Welsh communities among the struggling areas, reflects “systemic challenges in developing foundational economic capacities.”
They also warn that the Ƶ Government’s new industrial strategy risks reinforcing existing disparities by ignoring the specific challenges facing Welsh localities.
The report says that schools and lifelong learning institutions must integrate creative and entrepreneurial curricula alongside teacher development programmes to nurture the “psychological resources necessary for network participation, imaginative risk-taking, innovative thinking, and venture creation across all age groups.”
Prof Huggins said: ‘Unfortunately, Wales remains economically cut off from many parts of the rest of the Ƶ, indicating that despite some positive policy developments there is still much to do.
“Our findings reveal that Welsh communities are not just struggling with physical infrastructure deficits in terms of transport and housing, they’re suffering from profound behavioural barriers that prevent them from creating the networks, innovation, and entrepreneurial cultures essential for modern economic success.’
The study identifies particularly severe deficits for Wales across networks where it is ranked 10th and lowest alongside the English regions, innovation (10th), and entrepreneurship (ranking 9th). Only in creativity does Wales show marginally better performance with a ranking of 7th.
The report describes large parts of Wales as being “innovation deserts” - with severely limited entrepreneurial ecosystems, weak business networks, and constrained access to creative infrastructure. The report adds that these deserts create barriers to economic renewal, cutting Welsh communities off from the knowledge flows and collaboration opportunities that drive modern prosperity.
It adds that post-industrial Welsh towns have become trapped in cycles where historical narratives of decline become self-fulfilling prophecies, limiting residents’ ability to envision and create new economic possibilities.
Prof Huggins said: “Wales possesses significant creative and cultural assets that should be driving innovation and entrepreneurship, but communities like Merthyr Tydfil and Blaenau Gwent have developed what we term self-limiting mindsets, rooted in narratives of decline, that prevent residents from building the networks and entrepreneurial cultures that could transform their economic prospects. In essence, they have become disconnected from economic opportunity.”
He added: “We’re not dealing with a simple infrastructure problem that can be solved by building roads or broadband networks, Welsh communities need behavioural interventions that help people rebuild confidence, create networks, and develop entrepreneurial cultures. The Ƶ Government has recently launched a new industrial strategy, and while this may produce some benefits for parts of Wales it will not address these more fundamental behavioural challenges.”
The study said there is a strong correlation between the NICE index scores and the key economic measure of gross value added per capital - highlighting that networks, innovation, creativity, and entrepreneurship serve as foundational conditions for wealth generation. The report says that this provides evidence that Wales’s economic under performance stems directly from its failure to develop these.
Prof Huggins said: “Wales needs a long-term plan to harness its future economic possibilities through sustained investment in building the human networks and entrepreneurial cultures that can break cycles of decline.
“This means community-level interventions that help people develop business connections, innovation programmes that build on Wales’s creative strengths, and entrepreneurship support that tackles the behavioural barriers preventing people from starting businesses. Clearly, there are pockets of success particularly in part of Cardiff and our other cities, but these need to become far more widespread.”
The study recommends that the recently established Council of the Nations and Regions should help coordinate targeted investment specifically addressing behavioural change rather than just traditional infrastructure. This includes redesigning choice architecture to encourage entrepreneurship, building forward-looking narratives that highlight local successes rather than historical failures, and creating dense networks of collaboration.
Prof Huggins said: “Without urgent action to address these foundational deficits, Wales risks becoming permanently economically isolated from Ƶ prosperity, with further devastating consequences for Welsh communities and national economic performance.”
Scotland and Northern Ireland are not included due to a lack of comparative data.
Comment: Business Editor Sion Barry
It will come as little surprise, but Wales has taken the unwanted badge of propping up a new competitiveness index.
Professor Robert Huggins of Cardiff University, alongside his long-term research partner on Ƶ economic competitiveness, Professor Piers Thompson of the University of Nottingham, has assessed the performance of Wales and its 22 local authorities against the regions and council areas of England.
The weighted index uses data ranging from entrepreneurial activity and research and development investment to creativity and business networks.
In what we know is an imbalanced Ƶ economy, London and the South East of England sit at top of the index. Of the 330 local authorities assessed, Merthyr Tydfil is ranked bottom — with many other Welsh councils not far behind. Cardiff is the highest ranked Welsh local authority but is hardly a standout performer, coming in at 62nd.
There weren’t comparable figures available for Northern Ireland and Scotland, which might have helped improve Wales’s relative position.
The post-industrial blight of multiple generations growing up in households without a working adult continues to hold back many of Wales’s most deprived communities. However, the adoption of city regions — most notably the Cardiff Capital Region — has led to public transport investment that is expanding travel-to-work catchments and fostering a sense of agglomeration.
Wales does have competitive advantages over some English regions, including its relative proximity to a global financial centre in London and its potential to catch the wave of global growth in the compound semiconductor sector. That said, it will face global competition, including from the Republic of Ireland with its recently announced ‘Silicon Ireland’ national semiconductor strategy.
The Ƶ Government’s new industrial strategy — while unable to cover every sector — is well grounded, with its focus on eight growth areas, including clean energy, digital and tech, advanced manufacturing, and the creative industries.
These are all sectors where Wales already has strong businesses and clear potential for further expansion, as well as room to attract new entrants.
But what will the industrial strategy mean for some of the most underprivileged people in Wales — many of whom live in the communities ranked at the very bottom of the index?
On a positive note, it only takes one adult to enter the workplace to break the cycle of generational workless households. As the report points out, what’s needed is a cross-sector approach and a society that doesn’t just pay lip service, but genuinely encourages entrepreneurship, lateral thinking, and creativity to flourish — including among those diagnosed as neurodiverse.
