This essay originally appeared in Metro & Me, a collection of essays exploring the potential of the South Wales Metro as a catalyst for change.
The South Wales Metro is a long-term investment project – probably 20 to 30 years or more – that could play a key role in improving Welsh economic performance. It will create an integrated transport system that will provide significant economic benefits to employers, commuters and other transport users. And, if the right conditions are put in place, this could lead to increased productivity in the regional economy as well as better access to markets.
Initially the people who commute every day to Cardiff and Newport (currently around 100,000 people, most of whom commute by car) will see a reduction in the cost of travelling, through shorter journey times for commuters and for those travelling on business. In general, the greater the time and cost of commuting, the lower is labour productivity. The Metro would significantly reduce commuting costs, increase commuting capacity, give rise to a larger and more effective labour market and thereby lead to an increase in productivity. These business benefits and reduced journey times would be enjoyed by firms and organisations across the Cardiff Capital Region (CCR) which would unlock further employment opportunities.
Wider community benefits would follow for local residents through better access to local public services, like care homes, hospitals and schools, and also better access to leisure facilities. There would also be environmental benefits by incentivising modal shift from road to more sustainable forms of transport. With about a quarter of CO2 emissions in Cardiff coming from cars and trucks the potential modal shift away from road transport offers significant environmental benefits. This modal shift would also reduce the levels of congestion on existing roads and offer further benefits in the form of improvements in the flow of traffic.
The significant economic benefits will be linked directly to the total amount of capital investment that the Metro will generate. The initial £800m of infrastructure investment will provide a direct boost to local employment during the construction phase. The impact multiplier effect for construction investment in Wales is significant and is higher than most other forms of investment. However, the proportion of activities utilising Welsh firms within construction supply chains will need to rise significantly in order to maximise the local economic impact. Procurement rules for the construction phase of the Metro will need to be used judiciously in order to create the potential for many more jobs in the area.
But the construction phase is only the start of the process and the potential impact of the Metro on the Welsh economy will be much greater. Increased rail capacity and improved connectivity can raise productivity and improve the working of the regional labour market but it will also bring wider potential benefits by facilitating the growth of business clusters in the Cardiff Capital Region and facilitating ‘agglomeration economies’.
These benefits arise as improved connectivity enables more economic activity to take place in urban centres where high-density agglomerations of activity can lead to greater creativity and higher productivity. This virtuous circle is achieved by increasing the potential market for firms; by increasing the use of local intermediate inputs and allowing firms to specialise in different stages of the supply chain; by creating a wider pool of labour that allows better matching between supply and demand; and by providing greater opportunities to share knowledge of innovative activity. These agglomeration effects typically add between 10% and 40% to the conventionally measured direct economic benefits.
Because of the size and duration of the Metro investment and its ability to harness agglomeration economies it is useful to distinguish between the medium term economic impacts of the investment in new and improved infrastructure and the wider, longer term ‘catalytic impacts’.
The medium term impacts (both direct and indirect) would include those benefits generated by the electrification of existing lines and the investment in new lines as well as the investment in rolling stock, new stations and the ongoing operation of the Metro once it is built.
The medium term impacts will be generated by the high quality rapid transit corridors created by the Metro, which have the potential to generate economic activity both around key terminal destinations and along the new transport corridors. However, the potential medium term impact of the Metro project would depend on the amount of local sourcing embodied in every element of the development.
The wider, longer-term catalytic benefits that are generated by the Metro would be those positive impacts on productivity, agglomeration and the labour market that are likely to occur as the Metro becomes embedded into the regional economy and attracts further investment.
These catalytic impacts will arise from the effect that better connectivity will have on the Cardiff Capital Region in terms of enhancing business competitiveness. For example, an expanded commercial hinterland connected to quality labour will enhance the productivity of local firms by providing better access to suppliers and customers. The increased availability of valuable land around the new and expanded stations will favour the development of local business parks and improvement in inter-modal transport facilities across the region. This will act as a further magnet for inward investment and business growth in the CCR.
However, these medium term impacts and longer- term catalytic effects will depend on a number of factors – like productivity improvements and inward investment – that cannot be guaranteed. They would require a concerted effort to maximise the potential impact of the Metro and the intermodal connectivity that it offers – including the links to the electrified main line, the expanded capacity at Cardiff airport and the links to other regional developments such as the new Convention Centres and the Valleys Regional Park.
From the outset it is important that a programme team – the Metro Growth Team – is set up and charged with maximising the economic benefits and ensuring that every growth opportunity is harnessed. This would include identifying business development prospects adjacent to Metro stations and interchanges; identifying skills needs and apprenticeship opportunities during the roll out and maintenance of the track; working with the supply chain to maximise local content; looking at regeneration possibilities along the main commuting corridors; and developing synergies with the Valleys Regional Park and the airport.
In effect, the Growth Team will need to help put in place a coordinated investment plan to enhance the longer-term catalytic impacts of the Metro in both the construction phase, the roll out of services and the longer term utilisation and future development phases.
The Metro project is hugely important for Wales but, now that the tender has been won, we need to set down some challenging targets in order to maximise the regional economic impact.
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