Wales Launches Complementary Currency to Boost COVID-Affected Economy

Wales, with a population 3.15 million, along with England 56.3 million, Scotland 5.46 million and Northern Ireland 1.89 million make up UK’s total population of 66.8 million. Although all countries in the Union are governed by the UK government based in Westminster in London, Wales along with Scotland and Northern Ireland each has a devolved Parliament with limited powers.

In December, Wales launched a complementary currency, the Celyn, in a bid to provide a boost to the economy. It was created by the Circular Economy Wales, whose aim is to form a mutual credit system in Wales and is backed by the Welsh government’s Foundation Economy Scheme.

The Celyn is designed to give users access to an instant zero-interest credit facility to then spend at other businesses which are part of this network and will hopefully be able to stave off economic collapse for a number of them. Members will have 12 months to settle this debt, through payment-in-kind, by offering goods of the same value to other members.

Effectively this is a barter system designed to deal with business’s cash shortages that in the pandemic are likely to be seen across the country. Although the Celyn is only in operation in Wales, it follows the same system as that of Sardex in Sardinia and could be introduced in other countries where the COVID-19 pandemic has damaged the economy and created cash shortages.

According to its creators, Wales’ SMEs will be strengthened by more than £250 million and they will save nearly £200 million due to the cashless transaction system. Members will only need to pay a small fee to enrol, which will cover the costs of creating and running the system.

This is not the first local currency scheme in the UK. A decade ago, towns and cities across the UK launched local currencies to save local businesses, but in these cases physical currency was produced bearing the name of the town or city, the primary intention being to support local businesses and shops in their high streets. These local currency schemes sprang up in Bristol, Brixton and Kingston (both suburbs of London), Lewes, Liverpool, Exeter, Totnes and also in a geographical area of natural beauty, the Lake District.

However, in 2020 a large percentage have quit or are in the process of doing so. Two aspects are cited by those running the Bristol Pound, the most successful scheme and still operating, as being the cause of their failure.

First the schemes have come across as very middle class, and most recently people are shopping using contactless payments, a strong trend even before the pandemic. In addition, lockdowns related to the pandemic have caused a switch to online shopping which won’t have helped.

Other issues are the difficulty of small high street shops and cafes to compete with the prices of a national supermarket, and if your suppliers don’t accept them.

However, although the Welsh Celyn scheme is similar in principle to local Pound schemes, it has unique differences which may allow it to succeed where pound schemes have failed.

First it is country wide rather than being local, it is supported and financed by the Welsh government, it is for businesses, requires membership, provides loans and allows barter to repay them.

It is also designed to solve an economic crisis caused by an unexpected enemy, a virulent virus, and in this respect there is no shame in needing financial support. It stands a good chance of being successful in this crisis, whether it will continue once things return to normal is another matter. However, the important thing is that it helps struggling businesses now.