Economy: North-East England

Lord Bates Excerpts

Thursday 31st January 2013 Lords Chamber

Asked by

[Lord Bates]

To ask Her Majesty’s Government what assessment they have made of industry and recent economic developments in the north-east of England.

[Lord Bates]

My Lords, the north-east of England may be the smallest of the English regions but for those of us who have the privilege to be associated with it, it is very much a hidden gem, or even a jewel in the crown. It is home to Northumberland, voted the most tranquil county in England, and also to Newcastle, the party capital of Europe. However, five years ago the tranquillity and partying were brought to an abrupt end. First, Northern Rock sustained the first run on a bank in 150 years, putting 3,000 jobs at risk and shattering investor confidence. Then, Nissan announced 1,200 redundancies and the viability of the entire plant was under threat as it went on to short-term working. Then, Teesside Cast Products announced the closure of its blast furnace and the lights literally went out on that part of Teesside with the loss of 2,000 jobs. Finally, the promised multibillion-pound government investment in new agility trains was shelved.

The region was on its knees but five years on it is a very different picture. Virgin Money has acquired Northern Rock and safeguarded 2,000 jobs in the region, and over the past year it has added 1.2 million new accounts. Nissan's car production plant in Washington near Sunderland will soon become the first factory in the UK ever to produce 500,000 cars per year. The new £4.3 billion investment will take employment at the plant to 6,000—a record level. The Government have announced the go-ahead for a £4.5 billion investment by Hitachi in Newton Aycliffe for a new generation of agility trains, which will create 730 skilled jobs with a further 200 workers needed to build the test track and the plant itself. In mentioning Newton Aycliffe, I should say that the noble Baroness, Lady Grey-Thompson, a great champion of the north-east, wanted to take part in this debate but was actually required to be in Newton Aycliffe today to open a new 30,000-square foot factory for MediTek, which is the best of all possible excuses.

Finally, in April 2012 the Teesside blast furnace was the subject of a £1.6 billion investment by Thai company SSI and the furnace was relit, providing 1,700 jobs, and 100% of its output is now destined for the fast-growing economies of Asia.

Exports from the north-east of England are a major success story and reached record levels in the year to June 2012, amounting to £14 billion, an increase of 7.8% on the previous year—itself a record. The north-east is now the only region in the UK that exports more than it imports. According to the latest regional trade statistics, the north-east has a positive balance of trade of £1.175 billion in the third quarter of 2012, compared to a negative balance of £328 million in Yorkshire and the Humber, a negative balance of £886 million in the north-west and a negative balance of £10.265 billion in the south-east.

The growth in exports is also fuelling growth in jobs. According to the January 2013 labour market statistics, there are now more people employed in the north-east than at any time since October 2008. Unemployment has fallen by 23.1% in the past year. According to KPMG’s December 2012 jobs report, permanent job placements in the north-east of England are at a 29-month high. The number of apprenticeships in the north-east has more than doubled, from 18,510 in 2009-10 to 37,760 in 2011-12.

Just as important for the long term, the economy is rebalancing away from an overdependence on public sector employment. According to a Written Answer I received a couple of days ago, between March 2010 and September 2012 there have been 43,000 job losses in the public sector. We can all appreciate the pain and hardship suffered by those affected but over the same period the private sector has created 68,000 jobs—a net gain of 25,000 jobs.

The housing and construction sectors are critical to the regional economy, with companies such as Barratt, Bellway, Persimmon and Yuill all having their roots firmly in the region. Here, too, we are seeing some encouraging progress, with the latest figures from the NHBC indicating that new home starts in the north-east were at 3,996 for 2012, compared to 3,227 for 2011 and 2,845 for 2008—an increase of 24% and 40% respectively.

North-east towns are seeing record numbers of new business start-ups. Darlington saw a record number of start-ups in quarter 1 of 2012. Sunderland saw its highest ever level of company formations in quarter 2. In Newcastle and Middlesbrough, quarters 1 and 2 saw a return to pre-2007 levels of company formation. The number of net new businesses starting up in the north-east region last year was 2,406. As someone who has experience of setting up two businesses in the region, I know how challenging those first couple of years can be. It is essential that these new businesses are nurtured and allowed to grow. They are the future of the region—the new Greggs, Vertu, Onyx, Utilitywise, Nifco or Kilfrost—employing potentially tens of thousands of people and securing the viability of the region.

The north-east is blessed with the largest chamber of commerce in the United Kingdom, and it also has the Entrepreneurs’ Forum—I declare an interest as an honorary ambassador—which is a private sector network of entrepreneurs from the north-east who are seeking to put back into the region training and mentoring of a new generation of entrepreneurs.

We have an outstanding network of universities in the north-east of England: Newcastle, University of the Year 2000; Durham, University of the Year 2005; Northumbria; Sunderland; and Teesside, University of the Year 2009. Our academics and students are undertaking ground-breaking research and innovation and acting as a catalyst for local enterprise. Their work is complemented by two government-funded national centres of excellence—the Centre for Process Innovation, home to the national centres for printable electronics and industrial biotechnology; and the national New and Renewable Energy Centre in Northumberland —giving the north-east international leadership in the development of advanced manufacturing processes and materials. According to UCAS data released this week applications for north-east universities have increased by 3.4% over the period last year and against a national increase of 2.4%, and the greatest growth in applications has come in the areas of computer science and engineering, which are exactly where the need is greatest.

One of our greatest weaknesses in the north-east, as a peripheral region, is connectivity. Here too we have seen some welcome progress with the announcement in the Chancellor’s Autumn Statement last year that the A1 is to receive a £378 million investment, bringing it up to motorway status. The north-east remains the only region not to be connected to a neighbouring region by a motorway. I know what a barrier this is to foreign direct investment and to domestic investment, particularly in a region noted for manufacturing.

The Government deserve one cheer for announcing the investment in HS2, which will dramatically cut journey times to London for all northern cities, but they would get a second cheer if they started construction in the north rather than in the south. We have been waiting for over 50 years for connection to the motorway network and we are therefore slightly suspicious of major infrastructure networks whose funding seems to run out somewhere south of Leeds.

Our IT infrastructure is even more important for the north-east. It deletes at a stroke of a key our single greatest economic disadvantage, namely geography. The north-east is a major international centre for graphic design, computer games manufacture and creative media of all kinds. Companies like Sage and Eutechnyx are world leaders in their sectors, based in the north-east. IT can create an information superhighway not just to London but to the entire world, and not by 2033 but within a few years, and at a fraction of the cost. The Government announced a £6 million investment to bring speeds of 80 to 100 megabytes per second in Newcastle as part of a network of superconnected cities, but Gateshead, Sunderland, Durham, Berwick, Hartlepool, Middlesbrough, Stockton and Darlington should and could be added for the price of a few yards of high-speed rail line.

The people of the north-east have always been optimistic by instinct—which, to follow any of our football teams, seems to be a mandatory requirement. They are also resilient, able to adapt, innovate and advance in new economic landscapes, as we have seen repeatedly through our history, emerging to compete as winners on the world stage. I hope I have shown that in responding to the severe challenges presented to it over the past five years, the north-east of England is not a problem to be solved but an example to be followed.