M4 Corridor around Newport Revised Wider Economic Impact Assessment Welsh Government M4 Corridor around Newport Revised Wider Economic Impact Assessment M4CaN-DJV-GEN-ZG-GEN-RP-TR-0004 P04 | December 2016 CVJV/AAR 3rd Floor Longcross Court, 47 Newport Road, Cardiff CF24 0AD Welsh Government M4 Corridor around Newport Revised Wider Economic Impact Assessment Contents Page Executive Summary 1 1 The Project 6 2 Scope of this Report 12 3 Transport and Economic Performance 17 4 Economic Context 31 5 The Problem 67 6 Traffic Impacts of M4CaN 81 7 Impacts during Construction 87 8 Impacts during Operation 94 9 Overall Conclusions 118 M4CaN-DJV-GEN-ZG-GEN-RP-TR-0004 | P04 | December 2016 Page 2 Welsh Government M4 Corridor around Newport Revised Wider Economic Impact Assessment Executive Summary The economy of South Wales is highly reliant on the M4 as the primary east-west road link. The M4 is the main route in and out of the country for over 70% of the country’s population and economy1. In economic terms, the M4 Corridor around Newport (M4CaN) plays multiple roles. The M4 facilitates the movements of goods and people between Wales and the rest of the UK, enabling firms in South Wales to access domestic and international markets. The M4 is the most heavily used transport link between the main urban centres in South Wales and the Severn Estuary of Swansea, Bridgend, Cardiff, Newport and Bristol. The M4 Corridor around Newport also plays a key role in facilitating the movement of commuters through South Wales. For many users, there is no feasible alternative to the M4. Traffic congestion on the M4 Corridor around Newport results in longer journey times for users. Traffic incidents can exacerbate delays and cause disruption to businesses and other users, resulting in poor journey time reliability. Given the reliance on the M4, any disruption to the smooth operation of the motorway in South Wales imposes costs on individuals and businesses and has a negative impact on the economy. Furthermore, as the primary route in and out of South and South West Wales, the current state of the M4 has negative impacts on the perceptions of Wales as a place visit and do business. The Brynglas Tunnels, for example, have been described by the former Prime Minister as a ‘foot on the windpipe of the Welsh economy’2. Concerns over the functioning of the M4 corridor have been expressed by the business community in South Wales. These concerns are highlighted in a recent open letter from members of the business community in relation to the M4CaN proposals. They state: ‘The constant disruption and delay along the main motorway route across South and West Wales caused by the Brynglas tunnel bottleneck around Newport significantly damages the Welsh economy and negatively impacts upon Wales’ standing as a globally competitive business location.’3 Research commissioned by the Welsh Government has established the link between transport, accessibility and the economic performance of South Wales4. South Wales exhibits lower levels of GDP per head than neighbouring areas in the South West of England or indeed the UK average. Notably, GDP per head in Cardiff and the Vale of Glamorgan is less than that of its counterpart in the South West, Bristol. In large part, Wales’ poor relative economic performance is explained by a longstanding ‘productivity gap’ between Wales and the UK average. This research has indicated that spatial factors – the lack of economic mass or density and the relative peripherality of Wales – play a role in 1 Based on the population and economies (as measured by Gross Value Added) of Local Authorities in South West and South East Wales. 2 Former Prime Minister David Cameron (The Senedd, 1st November 2013) 3 Open letter from CBI Wales and leading Welsh businesses to Welsh politicians: ‘Delivery of M4 Black Route is vital for the Welsh economy’ (February 2013) 4 Extending the research on understanding the productivity variations between Wales and the UK (2009). Professor John Hudson, Department of Economics & International Development, University of Bath. And, Productivity in Wales: the impacts of peripherality on spatial patterns of productivity. University of the West of England (2010). M4CaN-DJV-GEN-ZG-GEN-RP-TR-0004 | P04 | December 2016 Page 1 Welsh Government M4 Corridor around Newport Revised Wider Economic Impact Assessment determining Wales’ relative performance. This hypothesis is supported by UK and international evidence on the link between transport and economic performance. The demands placed on the transport network are set to increase. The population of South Wales is projected to increase by 7.5% between 2014 and 20395. Within the study area defined for this assessment, car travel accounts for 73% of commuter movements, a proportion which actually increased between 1991 and 2011. Inadequate transport infrastructure will make it more difficult to accommodate such growth. Increased highway congestion, resulting from higher demand, notwithstanding public transport improvements, will increase the costs of doing business in South Wales, making it more difficult for local firms to compete in external markets. Increased congestion will also affect the functioning of the labour market by increasing the costs of commuting, acting to effectively reduce the area over which people can access employment and firms can recruit workers. In the absence of intervention, growing traffic demand will increase the severity of traffic problems on the M4 around Newport leading to longer journey times and more frequent delays. Logically, this would also reinforce the negative perceptions of the quality of the transport network in and out of South and South West Wales amongst people and businesses. The M4CaN proposals seek to improve the functioning of the road network by providing a faster and more reliable route for strategic journeys, whilst also strengthening the resilience of the road network in South Wales. The Revised Economic Appraisal Report (EAR) demonstrates that the economic benefits to users of the improvements, consisting of the reduction in time and costs of journeys under typical operating conditions brought about by the scheme, outweigh its costs such that the scheme offers value for money. However, it is also important to consider how changes in transport conditions – by influencing the decisions of firms and individuals – can impact on economic performance and competitiveness at a local and regional level. The EAR sets out that the M4CaN scheme will result in lower journey times and reduce transport costs for businesses in the study area defined for this assessment. Even before the effects of traffic incidents and abnormal delays are considered, cost savings for businesses in the study area are estimated to be £30m (2016 prices) each year by the design year of 2037. In practice, however, the scheme will also improve journey time reliability and will reduce the delays associated with traffic incidents which will result in further cost savings and efficiency benefits for businesses. In addition to the direct cost savings set out in the EAR, the scheme is also expected to contribute to higher levels of productivity in the study area by enabling improved interaction between businesses and widening the effective pool of labour and skills available to firms. Such effects are termed agglomeration effects. Agglomeration effects resulting from the scheme are expected to contribute a further £26m (2016 prices) each year by 2037 to the GVA of the study area. As noted, research suggests that economic performance in Wales is also influenced by Wales’ relative peripherality. By improving access between South Wales and the rest of the UK, further productivity benefits might be expected. 5 2014-based Local Authority Population Projections for Wales M4CaN-DJV-GEN-ZG-GEN-RP-TR-0004 | P04 | December 2016 Page 2 Welsh Government M4 Corridor around Newport Revised Wider Economic Impact Assessment Whilst it is difficult to be precise about the magnitude of such benefits, applying evidence from academic research commissioned by the Welsh Government6 would suggest that further productivity benefits in the region of £25m (2016 prices) per annum could be expected in South Wales by 2037 as a result of lower travel times between South Wales and the rest of the UK. Combining these impacts together, the scheme is expected to deliver higher GVA (Gross Value Added7) of £81m (2016 prices) per annum in the study area in 2037 or £1.6bn (Present Value 2010) over a 60 year appraisal period. In South Wales specifically, the impact on GVA would be £66m per annum by 2037 or £1.3bn (PV 2010) over 60 years. It should be noted that the GVA estimates above underestimate the total impact of the scheme given that they are based on changes in average journey times under typical operational conditions on the highway network in terms of average flows and speeds on a normal day of operation. Disruption and delays arising from traffic incidents will impose further costs on the economy. Therefore, the additional capacity and resilience afforded by the scheme will further reduce the costs to businesses of unreliable journeys and incident related delays with resultant higher productivity gains than those quantified above. It is also important to consider how transport conditions affect the location of economic activity and employment. The vast majority (88%) of firms describe the quality and reliability of transport infrastructure as a significant influence on business investment decisions8. The importance of access to the motorway network is demonstrated in the clustering of employment around existing junctions of the M4 in South Wales. The M4CaN scheme, by creating two new junctions to the south of Newport (Docks Way Junction and Glan Llyn Junction), will provide improved access to a number of currently allocated employment sites in Newport and Monmouthshire. It has been estimated that these sites have the capacity to cater for in the region of 15,000 jobs.