With German and Spanish family members, the ongoing debate surrounding the UK’s future relationship with the EU is certainly a hot topic in our household. And being based in Newcastle, the potential impact that future changes could have on the North East economy – and inward investment – is of particular concern.
As explored within our latest TRIP report
, foreign investment such as the investment by Nissan in Sunderland - which has strong links to the EU market - generate huge benefits for our region as a whole. For instance, an analysis of the commuting patterns within the area surrounding Nissan indicates that c.60% of the 6,700 workers based at the Washington site live outside of the host authority of Sunderland, across the wider region. A further 11,000 North East jobs are also supported in the main supply chain, generating further employment, wage and expenditure benefits for the wider region as demonstrated in Table 1 below.
Table 1: Total direct and supply chain employment impacts
Source: NLP analysis / Made in Sunderland
However, whilst the region’s FDI performance increased in 2015, in recent years, the relative performance has declined and the share of job creation captured across the North East remains below the pre-recession average. A smaller number of larger projects (in job creation terms) have also been secured over the past decade, leaving the region more vulnerable to closures such as SSI in Redcar, than would be the case with a wider, more balanced FDI portfolio.
In the context of the above and the wider uncertainties surrounding Brexit, it is even more important that our region’s partners work together to secure a higher level of FDI activity going forward. A number of recent publications have highlighted the need for more central leadership to drive such growth and to provide a consistent and strong message to all potential investors. However, as demonstrated within our TRIP report, a total of 14 organisations are currently engaged in FDI, with a high level of cross-over in sectors being targeted at the local level.
Greater levels of collaboration and co-ordination within and across LEP boundaries would help to strengthen the region’s attractiveness as a location for FDI and generate a clearer picture of the strengths of different locations within the region. Whilst it is recognised that this approach could present a number challenges politically, the ultimate aim should be to ensure that the region is best placed to compete for FDI and to capture and retain FDI economic benefits within the North East.
It is recognised that this challenge is not a North East issue alone, with Foreign Direct Investment (FDI) playing a key role in the economy of all regions of the UK. Indeed, as identified by Gordon Brown during the recent EU referendum campaign, a total of 10,000 European-owned businesses employ workers within the UK and a further 200,000 individual UK companies trade with Europe.
In addition, Ernst & Young’s most recent attractiveness survey highlighted that despite an improvement in overall UK FDI performance during 2015, the future outlook is less certain than at any time in recent memory.
Whatever the impact of invoking Article 50, it is clear that action is needed to boost FDI activity across all regions of the UK in response to the findings of the attractiveness survey. In the context of the Nissan example, there is real scope for FDI partners across the region – including DIT, LEPS and local authorities – to work together more closely to secure FDI. The prize – a strengthening of the region’s performance as a whole – can only bring benefits to the region, and, in turn, the national economy.
Ernst & Young, (2016), Attractiveness survey UK 2016: Positive rebalancing?