With ASKAR SHEIBANI
CEO, Comtek Network Systems and chair, DBF
The economic outlook for North Wales and the Mersey Dee area looked relatively positive up to November 2021.
The arrival of the new variant of the Covid-19 virus, Omicron, rapidly disrupted all the economic forecasts.
The market is extremely volatile and subject to rapid changes. China is the world’s biggest supplier of components and goods and has adopted the strictest Covid rules.
China’s zero-Covid policy has become a serious burden within the supply chains according to the International Monetary Fund (IMF).
Although the demand for manufacturing goods is pretty healthy, unfortunately, the supply chain’s bottleneck is hampering the output. For example, if you wish to buy a new car you have to wait up to nine months for it to be delivered.
We are also facing major skilled labour shortages within our region. For a long time, the UK relied on European workers to close the labour shortages gap but many have now disappeared due to Brexit.
Energy costs are set to go up by approximately 50% in April, creating significant economic and social crises amongst the poorest in the society and also for small businesses.
The prospect of war between Russia and Ukraine could easily block the gas supply chain from Russia to Europe, hence escalating a further sharp rise in energy prices.
All the above has drastically increased inflation which is expected to reach 7% in April. The prospect of higher inflation has persuaded the Bank of England to decide to increase the interest rate, hence increasing homeowners’ mortgages and putting small businesses under more pressure.
Inflation, especially in necessities such as food and energy, is already having a devastating impact on the poorest in our communities.
The UK’s relationship with its biggest neighbouring market, the European Union, is at best very frosty. The UK’s strong relationship with China has progressively worsened in recent years. The government is struggling to reach free trade deals with the rest of the world, in particular with its closest ally the USA.
Some of these unfortunate economic conditions are global and beyond the control of the UK government. Some, however, are a direct result of the UK government’s poor policies.
We are facing an uncertain economic outlook and both the UK and Welsh governments must act urgently to mitigate the financial pressures facing small businesses and the poorest in our society.
There are no justifications for the UK government to increase National Insurance contributions right now. There are no justifications for any tax rises while the world is going through uncertain economic conditions.
The Bank of England must holt all its forecasted interest rate rises. The present high inflation is a global phenomenon which the Bank of England will have very little influence to reverse. It must also continue with further Quantitative Easing so bank lending to small businesses is accessible and free from major unacceptable barriers.
The UK and Welsh governments must remove all the unnecessary bureaucratic barriers and accelerate the planned upgrading of North Wales and Mersey Dee regions’ ailing infrastructures such as rail and digital, which will stimulate regional economic growth.
North Wales has a fantastic opportunity to be a global leader in renewable energy production and technology. The UK and Welsh governments must take this unique opportunity and speed up the process of planned investment before it is too late.
North Wales has the right conditions to develop tidal energy infrastructure and hydrogen production technology.
Unfortunately, the UK government is embroiled in infighting and disunity which is a major concern for businesses.
Hopefully, all these unhelpful government internal crises will soon be over and common sense and maturity will prevail.
We are going through a volatile economic period and a unified fully focused government, working together with Welsh Government as a partner, is desperately needed right now to mitigate any possible economic challenges.