Cabinet meeting: 1 June 2026

• Rhun ap Iorwerth MS (Chair)
• Sioned Williams MS
• Mabon ap Gwynfor MS
• Anna Brychan MS
• Heledd Fychan MS
• Llŷr Gruffydd MS
• Siân Gwenllian MS
• Rt. Hon. Elin Jones MS
• Adam Price MS
• Dafydd Trystan Davies MS
• Rt Hon. Elfyn Llwyd

Officials

• Andrew Goodall, Permanent Secretary
• Rachel Garside-Jones, Director Office of the First Minister
• Toby Mason, Director Strategic Communications
• Carwyn Wycherley, Deputy Head of Cabinet Office
• Aled ap Dafydd, Senior Special Adviser
• Emily Edwards, Senior Special Adviser
• Elin Roberts, Senior Special Adviser
• Cai Elis, Special Adviser
• Francess Ifan, Senior Special Adviser
• Luke Fletcher, Special Adviser
• Jonathan Evershed, Special Adviser
• Lewis Owen, Special Adviser
• Damian Roche, Cabinet Secretariat (minutes)
• Katie Mason, Cabinet Secretariat
• Tom Nicholls, Chief Economist (Item 3)
• Liz Lalley, Director, Economic Policy and Strategy (Item 4)
• Claire McDonald, Deputy Director, Economic Policy (Item 4)

1.1 The Prif Weinidog welcomed Cabinet and noted the positive reception and atmosphere at the Urdd Eisteddfod in Ynys Môn the previous week, along with the useful Cabinet discussion at the Llandudno Junction office on the First 100 Days Plan.

1.2 The Prif Weinidog thanked Cabinet for their timely returns for Cabinet and Plenary business.

1.3 It was noted how these next few months would be vital to make progress on the objectives of the First 100 Day Plan.

2.1 The Trefnydd set out business for the following day, as per the plenary grid circulated with the Cabinet papers.

2.2 The first ministerial priority statements would be made the following day.

2.3 It was noted that oral questions and a full afternoon of opposition business would begin the following Wednesday, and oral questions and motions for opposition debates would be published Wednesday evening that week.

2.4 It was flagged there had been a significant increase in volume of Written Questions tabled, so the request was made of ministers for every effort to be made to clear answers within the 8-working day target.

3.1 The Prif Weinidog welcomed Tom Nicholls, Chief Economist to the meeting and invited him to present his analysis of the state of the Welsh economy.

3.2 The situation overall was for a Wales which broadly tracked the major UK economic conditions; however, there were some challenging issues facing Wales in terms of persistently lower productivity and relatively weaker living standards.

3.3 Whilst labour market performance remained strong by historic standards, it was currently weakening, with inactivity remaining relatively high.

3.4 It is likely there would be continuing constraint on public finances without a sustained improvement in UK productivity or participation.

3.5 There were a number of structural pressures, including those caused by the demographics of an ageing population, alongside the ongoing impacts of climate change, which were likely to intensify over the coming decade.

3.6 Although there was limited scope for WG to materially change the path of growth in Wales over the short term, there were policy choices that could be made, which could shape medium‑term outcomes through raising participation and skills, supporting investment and productivity diffusion, and prioritising within a constrained fiscal envelope.

3.7 It was noted how deeply integrated Wales was into the wider UK and world economies, with business-to-business sales and purchases in the UK and internationally making up a significant part of annual trade.

3.8 Productivity in Wales had been persistently lower than the UK average, with GVA per hour worked in Wales comparable to that of Northern Ireland and the North East, which also had underperformed in comparison to the rest of the UK.

3.9 The evidence revealed that both economic output and growth in living standards had slowed significantly since the financial crisis in 2008, with outturn tracking well below what it would have been had the crash not happened, and then lower still since Covid-19.

3.10 The GDP per head between 1998 and 2023 revealed that Wales had performed similarly to other UK countries and English regions over that period. However, there was a different sectoral composition to the UK in Wales, with relatively higher economic output shares in certain sectors such as manufacturing, public administration and defence, and human health and social work activities producing more compared to other high value sectors such as financial and insurance services, IT and communications and professional, scientific and technical services.

3.11 The employment rate was likely to be around its highest rate currently, with some signs of gradual softening, but there was uncertainty in the data at present, and whilst unemployment was relatively low at present, there were issues with inactivity levels remaining relatively high.

3.12 In terms of the next 12 month outlook and key risks for Wales, these were concentrated around: weak productivity and investment; labour supply constraints, particularly health-related inactivity, both mental and physical; further risk of external shocks and global risks, such as the wars in the Middle East and Ukraine; pressures and demands on households; and UK fiscal policy and the tightening funding environment over the remainder of this Senedd term.

3.13 There were a number of key structural pressures on the economic outlook for Wales, including the demographics of an ageing population and a decline in the working-age share from the mid-2030s onwards, which would lead to pressures on labour supply and changing demands on public services. In addition, the fiscal context was for prolonged UK fiscal constraint, which meant limited financial resource growth and potentially the need for reprioritisation and reform. Finally, climate change posed significant challenges and risks to global economies and there would be transition costs regardless of any mitigating actions taken.

3.14 In summary, there were 3 key areas where there were opportunities and scope for response, including: improving productivity and participation; industrial transition including in the energy sector; and public service reform.

3.15 The Prif Weinidog thanked the Chief Economist for his presentation.

4.1 The Cabinet Minister for Enterprise, Connectivity and Energy introduced the paper, which set out the challenge faced by Wales from a persistent and deeply rooted productivity gap relative to the UK average. Wales produced less output per hour worked than the UK average, and that gap had been persistent over a very long period. The latest data put Wales at around 85% of UK productivity, meaning a gap of roughly 15%.

4.2 There was evidence of other nations and regions narrowing the productivity gap significantly within a decade, such as in Northern Ireland, with the Northern powerhouse region of Manchester also performing strongly on this metric in a relatively short period of time.

4.3 This issue was paramount for Wales, as productivity was the foundation of living standards, driving wages, determining the competitiveness of businesses, and underpinning the resources available for public services. Without sustained improvement in productivity, increases in employment or economic activity would not translate into better outcomes for people across Wales.

4.4 The causes of this gap were structural and cumulative, rather than short-term, with lower levels in Wales of business investment and research and development than the UK average. The business base was dominated by small firms, with too few able to scale and grow, and the adoption of innovation and new technologies was unevenly spread, all set against a backdrop of longstanding constraints in areas such as planning, infrastructure, connectivity, energy and access to finance.

4.5 Alongside this, the economic geography of Wales presented additional challenges, with connectivity weaker in some parts of Wales, particularly in rural and post-industrial areas, which limited access to labour markets, supply chains and customers. Overall, this reduced the ability of firms and workers to benefit from scale and agglomeration. Importantly, much of the gap reflected differences in firm-level performance, in terms of how effectively businesses used their capital, skills, and innovation, rather than simply the specialisms of those sectors.

4.6 The implication was that improving productivity would not be about any one single intervention. It would require a more consistent and deliberate focus on the core drivers of economic performance, such as investment, innovation, skills and the functioning of places. That would mean supporting firms to invest and grow, improving the diffusion of new technologies, aligning skills with higher-value activity, and strengthening connectivity and the conditions that would allow businesses to operate effectively.

4.7 All of this work was inherently a cross-government issue, with decisions taken across portfolios, whether those were in skills, transport, planning, housing, health or regional policy. All of those decisions shaped how well people were able to participate in the labour market, how firms performed, and how places functioned economically. Taken together, these decisions determined overall productivity outcomes.

4.8 The proposal was for the government to commit to adopting both a national productivity mission and a goal to halve Wales’ productivity gap with the UK, measured by GVA per hour worked. In addition, the proposal was for the government to become much more explicit and consistent in how productivity was taken into account in decision-making. That would mean being clearer about the outcomes that were trying to be achieved, focusing on impact rather than activity, and ensuring that policy and spending decisions were aligned with improving economic performance over the long term.

4.9 It was also important to be clear about the nature of the challenge, which was long-term and structural. Progress would be gradual, and outcomes that could be influenced by factors beyond devolved control, which underlined the importance of taking a disciplined and consistent approach over time, and of strengthening how progress was monitored, including through better use of intermediate indicators such as investment, firm growth, and skills utilisation.

4.10 It was noted an oral statement would be made on the following day, confirming the government’s intention to take forward this mission and goal.

4.11 The ultimate goal was to raise the underlying performance of the Welsh economy, and improving productivity was the answer to that. It would lead to the delivery of higher wages, stronger businesses and more sustainable public finances over time.

4.12 Cabinet agreed and noted the recommendations in the paper.

* An updated version of the background note originally circulated to Cabinet was issued following the meeting.

5.1 The Cabinet Minister for Health and Care introduced the item by setting out the government’s top priority, which was to eliminate all 2-year waits in NHS Wales.

5.2 Currently, there were around 2,600 people waiting over 2 years, which was not acceptable.

5.3 Cabinet welcomed the update.

6.1 The Dirprwy Brif Weinidog provided an update on the implications of the Supreme Court ruling about Sex and Gender in the Equality Act 2010 and the Equality and Human Rights Commission’s Code of Practice for Services, Functions and Associations, which would have implications across all policy areas.

6.2 Although the matters considered by the Supreme Court under the Equality Act were not devolved, there would be significant implications for how services were delivered in Wales.

6.3 It would be important to respect the Supreme Court’s judgment and recognise that it clarified the current legal position.

6.4 The government must comply with the law, whilst in parallel considering how to apply this in Wales, guided by the values of fairness, dignity and inclusion.

6.5 It would be important to treat all those affected with dignity, respect and kindness, recognising that gender reassignment was a protected characteristic under the Equality Act 2010. This would mean, in complying with the law, consideration should also be given to the cumulative impact of decisions made in response to the judgment across all policy areas.  

6.6 In terms of early actions to signal the government’s position and support for the trans community, these would be set out in the Dirprwy Brif Weinidog’s statement on priorities to the Senedd the following week.

6.7 In addition, meetings with affected stakeholders on all sides of the debate would be arranged.

6.8 It would be vital to comply with the law, whilst remaining compassionate, respectful and inclusive to all.

6.9 Cabinet welcomed the update.

7.1 The Prif Weinidog invited Toby Mason, Director of Strategic Communications to provide an update on the current state of Wales.

7.2 The Prif Weinidog thanked Toby Mason for the presentation.

Cabinet Secretariat
June 2026