We need support to help exporters

Written by

Jonathan Walker, Policy director, North East England Chamber of Commerce latest column for The Journal

Cast your mind back a year and a bit ago. We were all firmly in lockdown, allowed out once a day and strictly confined to our bubbles (well, at least most of us were).

But you might also remember that the most profound change to the country’s economic status in a generation had just occurred. After more than four years of negotiations, late-night votes and elections, Brexit finally got done and the transition period ended.

With everything else that’s been going on, it’s easy to forget just how big a change Brexit has been.

Free movement ended, customs declarations came in and the entirety of social media became experts on cross-border issues in Northern Ireland.

For a region which, at the time, sent more of its goods to the EU than any other single market, these changes meant a huge amount of adjustment and disruption to our businesses.

At the Chamber we heard and saw this first hand. As the region’s biggest provider of international trade services, we helped businesses both to prepare beforehand and understand the new rules once they came in.

So where are we one year on?

The truth is that our regional trade numbers aren’t where we’d like them to be.

Our own surveys show that export performance has been largely flat, even while domestic activity has rebounded strongly following the onset of the pandemic.

Of course, Brexit alone is not responsible for all of this. There are severe global supply shortages, inflation and the continued impact of Covid.

But only the most blinkered could fail to see that leaving the EU has, at least in the short term, caused some major headaches for traders.

A recent British Chambers of Commerce survey showed that 45% of firms reported difficulties adapting to changes in rules brought about by the UK-EU agreement.

Exporting can be an enormous boost for businesses, but unless these issues are ironed out many may be deterred from selling overseas.

The practical support available to exporters to tackle trade barriers must be increased, while new border changes introduced in January mean it must also be expanded to importers grappling with new processes.

This is probably the last Chamber column I write before heading off before pastures new and is probably my 1,374th on Brexit. Here’s hoping that Government listens, if only so my successor can write about something different.

Be realistic – for better or worse

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Arlen Pettitt, Knowledge Development Manager, latest column for The Journal.

I’ve occasionally been accused of not being positive enough about the North East.

This is, of course, ridiculous.

If I wasn’t positive about the North East I wouldn’t start this column by mentioning the brilliant news that Britishvolt have secured £1.7bn in investment for an electric vehicle battery plant in Blyth.

I also wouldn’t mention the fantastic recent announcement that 9,000 HMRC jobs are moving into Newcastle City Centre.

And I definitely wouldn’t mention the success story of small business ART Health Solutions, who’ve raised £800,000 of investment to create jobs and develop an app aimed at workplace wellbeing.

There’s been recent positive news relating to jobs generally too.

Growth in the number of employees on PAYE in the North East was 5% higher in December 2021 than December 2020, and there’s been an upward trend in those numbers since May last year.

That’s good news for longer term, stable employment and shows businesses getting back into the swing of bringing in payrolled employees after the understandable slowdown of the months following the first lockdown.

So, we’re creating jobs and getting people into work but not as fast as we need to be.

Official numbers show the employment rate falling, unemployment rising and crucially, economic inactivity is increasing too – particularly showing an increase in long term ill-health and into retirement.

That increase in economic inactivity is happening across the country, but in the North East it counts for one in every four working age people, whereas nationally it’s one in every five.

Being out of sync with the national picture is a problem.

Prime Minister’s Questions last week was mostly about what constitutes a work party (a quagmire I won’t wade into), but there was also time for Blaydon MP Liz Twist to ask about unemployment, to which the Prime Minister replied that unemployment was falling to near record lows.

This is one of those things that’s both true and not.

Nationally, sure, the unemployment rate is 4.1% and falling, but in the North East it’s 5.7% and rising.

That’s the reality, and dismissing it – or failing to notice it – does nothing to change the situation.

If our situation is different, shouldn’t the action taken here be different?

Each and every person lost out of the workforce carries with them skills and experience no longer available to businesses.

That’s a challenge and an opportunity that it’s worth being realistic about.

Taking a look at the ‘Left Behind Communities’ report

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Rachel Anderson’s latest column for The Journal

How’s the January health kick going?  I know, you can’t face looking at the discounted mince pies in the supermarket and the sight of another bean sprout leaves you looking wistfully at the calendar and kicking the scales under the bathroom cabinet. 

It’s easy to make light of the post-Christmas health kick (or lack of it). But the impact of the health on happiness, wealth, education productivity and quality of life and the stark differences between communities was highlighted last week in a report by the All-Party Parliamentary Group on Left Behind Communities. The report highlights the disparities in health between effectively the poorest areas and the wealthiest.  “Left Behind Communities” is a horrid phrase which was probably the product of a focus group somewhere in Westminster.  It’s debateable what it means and whether the people living in them feel as miserable, patronised and left behind as the name suggests’ but it is current Government parlance, so we’ll go with it as it does throw a light on health as one of the factors holding back many communities. 

The findings of the report suggests that Men in LBNs live 3.7 years less than their more affluent counterparts and for women it is 3 years less.  When drilling down further the real impact of health on all those other aspects of life becomes apparent and why failing to tackle such inequalities is such a crime.  It’s not just about death rates it is about healthy years, on average women can expect 57 against 65 nationally and men can expect 55 against 64 nationally.  Why? Because serious diseases are 15% more likely which debilitate faster and people in those communities are mostly in low paid physical jobs which exacerbate their conditions. 

Of course, there are lifestyle choices involved.  However, poor health impacts on so much more than just the individuals themselves, it impacts on earnings, education, caring responsibilities, family life, pensions, quality of life and overall poverty.  Breaking a cycle in good health is hard enough, poor health makes it almost impossible, and the cycle perpetuates.

If we want to level up our communities, reduce poverty and improve life chances then we must recognise it is about more than simple job creation or throwing money at the problem.  We have to see the underlying problems and not dismiss them as a “social” issue to be solved in isolation and employers, the community and public authorities must think differently and see it as an advantage to everyone if we want to improve.

North East needs for 2022

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Marianne O’Sullivan’s latest column for the Journal

As we get 2022 well underway Covid is once again having a large impact on the economy with work from home guidance in place along with increased numbers of staff needing to self isolate disrupting supply chains and businesses. Government has announced some grants available to hospitality and leisure businesses. Councils in the North East will be opening applications soon with all money distributed by the 31 March.

This support is welcome, however Government must be ready to go further if Covid measures are tightened or prolonged and give support to other sectors who are also being negatively impacted.

Another issue for the economy in 2022 will be inflation, rising energy prices and the cost of living. In a survey of our members in quarter 3 of 2021 inflation was the top concern of businesses followed by staff shortages, energy prices and staff costs. These concerns are set to continue into 2022 and its important Government helps tackle these areas.

Unlike future energy bills, the levelling up white paper is eagerly anticipated and due to be published in the coming months. It has the potential to be key for the region’s economy. It urgently needs to set out exactly what the government means by the term levelling up as this will set out which actions will achieve a more fair UK and also measure the success of Government’s strategies.

We need to see Government set out targets including increasing educational attainment, reducing child poverty, improving business growth rates and increasing transport capacity. Policy measures to support this include the decentralisation of national institutions, increasing the visibility of the North East to private investors, fair funding for schools and more devolution around infrastructure decisions.

There have been reports that the levelling up white paper will focus on devolution but the Treasury has said there is no extra money available. It would be meaningless to have more Mayors without devolving powers and access to funds, leaving areas reliant on bidding to central government. We need to ensure that levelling up involves local decision making.

There needs to be a move away from short term competitive bidding processes for funding towards a more collaborative form of Government with longer term consistent funding to tackle some of these issues. The UK Shared Prosperity Fund is due to be in place in April replacing EU funding. This fund will be essential for the North East and creating a fairer economic recovery from Covid in 2022.

Brexit Rumbles on…

Written by

Jack Simpson, International Services Executive, latest column for The Journal

It may be stating the obvious, it may make you put this paper down, but Brexit is not over and the impact is being felt. This may come across as doom and gloom, but to me it presents a rewarding challenge to a government or community.

In 2020, regional trade was erratic. We had a strong start to the year, before the pandemic resulted in a drop of almost 50%. But resilient as we are, regional trade recovered to over £7bn by the end of 2020.

However, the recovery surge has been curtailed in 2021 by EU Exit. The recent Q2 Regional Trade Figures show a continued reduction in international trade, down to £6bn in the first months of the year, and £5.9bn in the months after.

This is a huge reduction and looking at the country markets there has been a £700m reduction of European trade in 2021, worth over half the loss of regional trade this year.

Unlike COVID, Brexit resulted in structural changes, raising new trading barriers between the UK and EU which must be navigated, such as customs or regulations, while also implementing tariffs, import taxes, for some goods. This makes trade less appealing for both UK suppliers and EU customers alike.

What’s worrying, is although some say, and maybe wish, that Brexit is done and dusted, it is not. New border changes are coming from 1st January which will make importing further complicated, health checks on food & agriculture goods and recent spats with France & Ireland have undermined confidence in EU traders.

It was interesting in the UK budget that there was no mention of Brexit, or new proposals of how to support global traders either maintain trade with Europe or find new partners further afield.

International Trade is a proven benefit for businesses, with research showing global businesses are more profitable, innovative and pay better salaries than domestic counterparts, with many commenting it is easier to crack overseas markets than the UK.

How do we overcome this structural change? Research shows “perception of risk” is the biggest hold back for new traders, “I don’t want to trade because something will go wrong”, so increasing customs knowledge and market entry funding is key.

We need to remain globally competitive, utilising educational and cultural elements as well as economic, to get businesses trading or investing in the North East, as seen with the BritishVolt and Envision Gigafactory wins.

Playing to our world leading strengths, and expanding our global reach, is a sure route to prosperity and should be a priority locally and nationally in “levelling up” the North East.

We need to see Government invest in green skills

Written by

Marianne O Sullivan, Chamber policy adviser, latest column for The Journal.

The Budget had some welcome announcements for North East although we’re still waiting for the Government to publish its plans on key areas like levelling up.

Part of the good news for the region was the investment confirmed to improve local rail links in Teesside including redevelopment schemes for Darlington and Middlesbrough stations.

There was also a reduction in business rates for those in the hospitality, arts and culture sectors who have been negatively impacted by Covid restrictions.

We welcome the investment in skills including the newly announced Multiply scheme, which will equip adults with basic numeracy skills. The £560 million investment in the Multiply scheme will benefit our region in particular due to the region’s lower-than-average numeracy levels.  

However, the wait goes on for the Levelling up White Paper and the Government’s integrated rail plan to set out a longer-term strategy for region. Investment in major projects such as Northern Powerhouse Rail and a clear definition and metrics for the Government’s levelling up agenda will be crucial to success.

Despite COP26 being held in Glasgow the Budget didn’t have many major announcements around climate change. Some funding was announced to grow the heat pump market along with business rates relief for businesses to decarbonise non-domestic buildings and an increase in public research and development investment.

We need to see Government invest in green skills to ensure people in the region are able to take advantage of opportunities in jobs in key sectors such as retrofitting, renewable energy and battery technology. We also need to ensure that opportunities are accessible to a large proportion of those at risk of unemployment. This is particularly important for the North East, due to a significant proportion of our workforce holding lower level qualifications.

COP26 presents an opportunity for firms to re-examine their sustainability strategies and their wider supply chains. This could the North East to lead the way in a green recovery making businesses more competitive and attractive to customers with climate change an increasing priority for consumers and the Government. 

The Chamber will be sharing best practise with members as well as campaigning for investment to build on the North East’s green infrastructure to meet our net zero targets, as well as creating new jobs and allowing the region to contribute to the UK’s economic recovery.  

The Budget is a chance for the Government to recognise the significant regional imbalances in our country

Written by

Jonathan Walker, Policy Director, latest column in The Journal.

Tomorrow the Chancellor will set out the Government’s spending plans for the next three years. This is a huge political and economic moment.

The word ‘unprecedented’ was thrown around a lot during the pandemic, but the size and nature of the Government’s intervention to support jobs and keep the economy going was genuinely unlike anything we’ve seen before.

As a result, Rishi Sunak will be under enormous pressure to get a grip on public finances and bring down spending.

But he needs to show that Government has learned the lessons of the financial crash and subsequent austerity by not taking decisions that harm the ability of regions such as ours to recover.

As I’ve written plenty of times here in recent months, the North East has been particularly exposed to the consequences of Covid.

The Budget is a chance for the Government to recognise the significant regional imbalances in our country and take steps to address them.

Our firms are ready for the challenge. Our own surveys show that confidence and performance has risen dramatically since the middle of last year, with companies recruiting and investing across the board.

However, there are major headwinds that threaten to slow down that recovery or even send it into reverse.

Inflation, staff shortages and supply chain issues are all massively growing concerns for North East businesses. While we hope they will be relatively short-lived, they still pose a major challenge to our economy.

This must be at the forefront of the Chancellor’s thinking as he decides his tax and spending priorities. We’re not saying that the public finances don’t matter; rather that decisions need to be made extremely carefully and that there are many areas in which investment now will pay dividends in the future.

Long-term investments in our infrastructure, further support for the transition to a low-carbon economy and stable, devolved funding for regeneration will all help to make our region more resilient in the long run.

The idea of ‘levelling up’ has been changed and stretched far beyond what was suggested in the 2019 Manifesto. We are very clear, its aim must be to close the economic performance gaps that exist between regions. This will require difficult decisions about where to invest, with some places inevitably losing out. If this is done on the basis of solid economic evidence and with the intention of correcting historic underfunding and deprivation, then we will support it.

The Government need to find a solution for the shortage of gas

Written by

Rachel Anderson, Assistant Director of Policy, latest column for the Journal

You’d be forgiven for uttering an exasperated “what fresh hell is this” and pulling the duvet back over your head this morning.  Just as it seems we might be emerging from the pandemic and there is a smile on travel agent’s faces, the next crisis comes galloping over the horizon and we’re suddenly short of gas.  Before we chop up the furniture, let’s be clear, we’re probably not going to run out, but our gas is costing us on average two and a half times more than it’s costing our European counterparts, as gas is still a major part of our electricity generating capacity it’s less the sunlit uplands and more the unlit ones.

But this matters, it really matters.  Businesses have faced unprecedented pressures over the last 18 months and to be hit by such large rises in energy prices as they are trying to pull themselves back into profitability feels like a an almost impossible task.  Following every recession, it is often the recovery period which proves the most difficult for many companies as cashflow is king and finding the resources to meet the upturn in demand can be difficult with credit lines stretched.  A restaurant re-opened following two lockdowns facing increased wages due to staff shortages, difficulties in the supply chain, not least due to a CO2 shortage caused by the increased gas price, they will perhaps also be beginning to pay back Government loans taken through the pandemic might be forgiven for just closing the doors and walking away. 

But also to be considered is when those energy price hikes hit the general population, what happens to spending amongst the population?  Less disposable income means less spend and a significant slowdown in the economy in just those sectors hit hard.  Energy prices affect most companies, only the ones who have invested in green technologies escaping the fluctuations and reduced profit margins knock on into wage rates and can affect investment plans.  Longer term, the need for a coherent energy strategy is writ large but this is an emergency in the shorter term which will require a robust response.    

Knitwear manufacturers and candle salesmen may well see an upturn in business; but joking aside there are some bumpy times ahead and once again we look to the Government to find solutions not only to the UK’s supply problems but also to support our storm battered businesses once again. 

Staff Shortages…

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Our UK economy has been hit by a wave of staff shortages, unseen since the 1970s. Research shows that businesses across the country are struggling to recruit the staff needed to operate at full capacity, with labour shortages present in a variety of sectors and role types, from entry-level hospitality positions, to veterinary practitioner roles which are needed to validate animal produce traded with the EU.

The Road Haulage Association estimates that there is currently a shortage of around 100,000 HGV drivers, meaning supply chains are overstretched. Customers are already seeing the impacts of this, with supermarket shelves increasingly bare. As the run-up to Christmas edges closer, there are concerns from sector experts that supply problems will cause widespread stock shortages.

The shortage of HGV drivers is having a particularly deep impact on the North East’s ability to trade. As a result of their inability to transport the goods, a small manufacturing member of Chamber has had to cancel six orders, while other companies have had to inform international clients that they cannot guarantee deliveries on time. Businesses are concerned that this could hamper their chances of winning supplier contracts.

So, what has caused such extensive labour shortages?

The pandemic has caused widespread labour shortages across Europe, with many foreign workers returning home to wait out the crisis. The US, Germany and France are also struggling with a shortage of HGV drivers for example; however, the UK has been hit hardest due to the new immigration system, which put a stop to freedom of movement with the EU. There are now strict entry requirements for skilled talent, whilst the entrance of so-called ‘unskilled’ workers, including care workers, hospitality staff and HGV drivers, has been blocked.

The shortages caused by the pandemic and the EU’s exit will likely be a longer-term problem; businesses expect to see shortages remaining for two years at least. Employers are working hard to create a strong domestic talent pipelines, but this is a long-term project, and the Government needs to allow employers more flexibility to hire the staff they need from outside the UK while this is established.

We recently wrote to the Government pushing for urgent changes to the system to be made to ensure that businesses in the North East can recruit the staff they need. The changes we proposed included creating a temporary route for unskilled roles critically needed to meet economic or social priorities. We will continue to push Government on this critical issue.

The North East can become a leading region in the development of a green economy

Written by

Jack Simpson, North East England Chamber of Commerce, Training and Global Network Adviser latest column in the Journal

Looking out of my window to another typical British wet and windy day, some might joke “how about this global warming?” But from Germany to Australia climate disasters are more common, dangerous reminders of a changing world.

UK hosts COP26 in November, a UN conference at which global leaders are expected to commit to further action on climate change. The UK already plans to be carbon neutral by 2050 and ban diesel car sales by 2030. While this may cause concerns, I see it as big opportunity.

The North East is can become a leading region in the development of a green economy, particularly with the news of two new renewable battery factories planned. ‘BritishVolt’ the UK’s largest Gigafactory (lithium-ion battery factory) and with a £1bn investment  ‘Envision’ will be developed alongside Sunderland’s Nissan factory.

This opens up huge potential. One report estimates 70% of vehicles sold by 2040 will be electric, yet Europe has a major battery production shortage, with over half of global Gigagfactories based in China.

If we follow in the footsteps of Nissan and establish the most productive battery plants in Europe, then we could be looking at a new era of global prosperity and identity for the region.

But all this needs power, right? Luckily the North East already has the renowned Blyth Energy Centre, pioneering offshore wind technologies and production. While on Teesside, Dogger Bank plans to become the world’s largest wind farm- already announcing the arrival of GE who will develop 107m long turbine blades, 20m longer than Big Ben!

The move from coal to renewable energy will be a long process, but a worthwhile one. There have also been private initiatives such as Newcastle Airport’s new solar farm to offset their carbon footprint. All this helps in our regional fight against climate change.

I would make two asks on this. One, not to rest on our laurels. As exciting as all this is, we should try and think why these investments came to the region, take those lessons, and explore how we can attract more and different green technologies.

Second, remember this is a transition. Looking at our history, we must help workers re-skill, find and access new jobs when they arrive, retain university students and support college graduates. These developments must be something that happens with us, not to us.

There is a long way to go in the battle for a sustainable planet, but our region is well-placed to take advantage of the opportunities it presents.