Chamber Budget 2026 Submission

On behalf of the North East Chamber of Commerce and our 1,800 members, who together employ more than a third of the region's workforce, I am pleased to set out our priorities for the autumn Budget.

The North East is a region of ingenuity, creativity and resilience. We are home to world-class advanced manufacturers, internationally successful exporters, pioneering clean energy industries, leading universities and colleges, innovative businesses and ambitious entrepreneurs. Our major cultural venues and organisations, our public sector employers and our rich and vibrant voluntary and community sector together make up the region’s economic infrastructure: generating jobs and driving growth.

Our businesses want to invest, innovate, trade and create good jobs. They are ready to work with your government deliver the good growth you have rightly placed at the heart of your agenda. The message from business is clear: growth will not come from ambition alone. It requires the right conditions for firms to invest, recruit, innovate and expand.

The latest evidence from the British Chambers of Commerce (BCC) shows just 17% of firms currently plan to increase investment - the lowest level since the pandemic - while high labour, energy and other costs continue to constrain investment and hiring. The BCC has called for the Budget to enable firms to invest, innovate and trade. We agree: this submission lays out a series of practical interventions your government can make now to achieve your ambition for good growth everywhere, starting with the North East.

Policy calls to unlock growth

Our Unlocking the North East Economy Policy Plan 2025-2027 sets out practical recommendations developed with employers across our region. These form the basis of this submission.

1. Investment, innovation and productivity

The Budget should send a clear signal that business investment is both a national priority and a powerful means to accelerate regional growth. We therefore urge the government to avoid further tax increases on business and to recognise the cumulative impact of taxation, regulation, employment costs, energy costs and other policy-driven costs on investment decisions over the last five years.

In particular, the Budget should deliver the root-and-branch reform of business rates promised by the government. The current system is complex, outdated and increasingly acting as a barrier to investment. BCC evidence shows concern about business rates remains high across sectors and that firms want a fairer system which gives them confidence to invest, grow and create jobs.

Alongside these actions we would ask the government to:

• Broaden research and development tax credits so innovative SMEs, particularly manufacturers and creative and cultural institutions can benefit from support for a wider range of production and process innovation
• Expand the Made Smarter approach beyond manufacturing to other high-growth sectors
• Improve access to finance for SMEs and scale-ups seeking to invest, innovate and adopt new technologies
• Continue to support the North East AI Growth Zone as a national exemplar of how AI can drive productivity, good jobs and regional growth.

Your recent announcement of the new Northern 500 initiative, bringing the North’s most ambitious mid-sized businesses into a single growth community led by a mayoral partnership is a significant boost to this growth agenda. Chambers from across the North, including this one, have already engaged directly with Tom Riordan and his team on the creation of the Northern 500 and I look forward to continuing that dialogue as part of the wider Northern Growth Strategy.

2. Deliver the skills system employers need

Skills continue to be a major policy priority for our members and the North East needs a skills system that is simpler, more flexible and genuinely employer led. Our partnership with Tees Valley Combined Authority to deliver the area’s Local Skills Improvement Plan (LSIP) is a strong example of how the public and private sectors can work together to deliver meaningful improvements, based on employer need locally. Since 2022 we have brought together more than 5,000 employers to share their views on the areas industrial needs and shape the skills system accordingly. Commitment to long-term funding for employer-led Local Skills Improvement Plans across England, ensuring they continue to shape local skills provision would reinforce your commitment to those employer needs.

At the same time reform of the Growth and Skills Levy, allowing businesses to use funds more flexibly for shorter, accredited and modular training, as well as retraining and upskilling, would meet needs directly identified by our LSIP work. Greater opportunities for employers to pool resources locally would significantly maximise the local and regional benefits of the Levy, actively supporting place-based investment without any additional funding requirements.

Alongside this, we are looking forward to the recommendations of Alan Milburn's review of economic inactivity among young people and will play an active role implementing these activities at a regional level. Chamber members consistently tell us that while SMEs are keen to offer work experience and industry placements, many lack the capacity to manage the administration and coordination involved. We therefore call for investment in employer brokerage services that can support SMEs to deliver high-quality workplace experiences and strengthen links between education and employment.

3. Unlock the North East's energy security and low carbon opportunity

The North East has a major opportunity to become a national leader in clean energy, via advanced manufacturing and offshore wind, hydrogen, carbon capture, utilisation and storage, electric vehicles and batteries.

It is positive to see your government putting the energy transition at the heart of its plans for growth. High energy costs are currently a major constraint on business competitiveness and investment. The BCC is calling for action to reduce energy costs for businesses while addressing long-term grid connection delays.

In the North East we want to see:

• Accelerated reform of grid connections and network capacity, particularly for nationally significant industrial and energy projects
• Reducing the cost of industrial electricity to improve the international competitiveness of energy-intensive businesses
• Provision of a stable framework for private investment in clean energy and industrial decarbonisation.

4. Invest in infrastructure and connectivity to unlock growth

Physical and digital connectivity is foundation for good growth, within and between regions. The Leamside Line initiative, improving connections across Tyne, Wear and County Durham, received early backing in the first half of this administration and we would urge your department to maintain that momentum. This should sit alongside investment in the North East's wider strategic transport network, including improved rail connections between Tees Valley, County Durham, Sunderland, Newcastle and Northumberland and further local work on bus network reform.

The government’s ten-year infrastructure strategy set out the long-term policy framework in this area which will benefit our ports, airports and support the region’s ambitions for digital infrastructure, including full fibre and 5G, particularly in rural areas. The government should therefore ensure major infrastructure projects deliver a stronger local economic dividend, with more North East SMEs able to access procurement and supply-chain opportunities, supporting BCC’s Great British supply chain initiative.

5. Back exporting businesses and international growth

The North East is an internationally trading region. Imports and exports of goods and services generate nearly £29bn for the regional economy, yet there remains significant untapped potential among SMEs.

We are supporting BCC’s calls for a national Export Growth Programme, which would build on the practical support we already deliver to over 600 SMEs locally each year, including:

• Market-entry support and advice
• Customs and export advice and support
• Trade missions and access to international networks
• Digital trade training
• Help navigating customs and regulatory requirements.

The North East has the businesses, assets, and expertise to compete globally. We need to make it easier for more businesses to do so.

6. Make good growth work for everyone

Growth must translate into opportunity - and businesses have a critical role to play.

In the post-Covid environment, the conditions for people and businesses have been tough: rising costs within a challenging labour market have disfranchised young people while SMEs have often struggled to create the conditions for growth. There is an important conversation that needs to take place about the role of welfare reform in this context and the best way to carefully rebalance resources across different areas of need. A review of the pension triple lock should be an important feature of such a process. We are supportive of a conversation with regional business and other stakeholders about how any changes in this area could be used to unlock wider opportunity and growth. Long-term devolved and integrated funding for our Combined Authorities, to allow them to better address employment, health and skills in the round should be a central component of this rebalancing, ensuring the specific needs of places like the North East are accounted for.

The Budget should also include measure to learn from positive devolved health and work pilots underway in the region, such as Connect to Work and the Youth Guarantee scheme, supporting new opportunities for public and private partnerships to deliver good growth for everyone.

The North East contribution to national growth

The North East has the assets, businesses, people and ambition to make a strong contribution to the UK's economic success.

Businesses need the confidence to invest. They need the skills to recruit and grow. They need affordable energy and reliable infrastructure. They need access to finance and international markets. And they need a stable and competitive environment in which to do business.

Our six priorities are practical and deliverable within the remainder of this Parliament.

The test for Budget 2026 should be whether it gives businesses and employers greater confidence and capacity to invest, innovate, recruit and trade.

The North East stands ready to work with your government to deliver that good growth - creating good jobs, raising productivity and ensuring that the benefits of economic growth are felt across our communities and across the UK. I would be happy to discuss any aspect of this submission with you and your team.

Yours sincerely,

John McCabe DL

Chief executive

North East Chamber of Commerce