Category: Economy

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No deal, no good

Keith Burge

Get Brexit Done. The three-word slogan that won a General Election, turning red seats to blue in parts of the North East that had never seen the like in decades, if ever. And yet, here we are just over 12 months on, and that victory is not so much ringing hollow as sounding a death knell for crucial elements of the region’s economy.
According to ONS there are around 3,500 exporting businesses in the North East. The North East is unusual among the regions of England in having a trade surplus in goods. Exports account for a higher proportion of regional output than in any other English region (26 per cent).
More specifically, the North East relies disproportionately on the European Union as its largest export market. In 2019, around 60 per cent of the value of all North East exports went to the EU, significantly higher than the UK average of just over 48 per cent and indeed the highest of all English regions.
But as from 1 January 2021, everything changes. The Government is imploring business to ‘Check. Change. Go.’ Which is all well and good, apart from the minor details of being unable to tell them what to check, what to change and where to go. Of course, this will hurt businesses across the UK, but given the disproportionate reliance of North East exporters on EU markets, the region looks set to suffer more pain, in relative terms, than any other part of the country.
The North East Chamber of Commerce – which has been lobbying on behalf of and providing practical support to exporters for decades – recently hosted a ‘Brexit Support Week’, a series of 13 sessions on different Brexit-related topics that will impact businesses including new customs responsibilities, data regulation etc. These events attracted around 850 attendees, representing many hundreds of businesses, all of which want to prepare, have not had the information to be able to do so and see the cliff edge looming. It seems likely that many of them will each already have spent thousands of person hours making preparations for different scenarios, at a significant cost to their businesses. For the smallest exporters, lacking capacity and unable to make that sort of investment, it seems to be more a case of shutting their eyes and hoping they survive the impact. Ordinarily, many would rely on the expertise of freight forwarders, logistics providers and customs specialists, but their capacity is limited and a massive increase in demand has seen their prices increase markedly.
And of course, some of those attending these events will have been importers, trying to work out how they can continue to work with suppliers across the EU. It has been reported anecdotally that some are so fearful of disruptions to supply chains and higher costs brought about by a combination of a deteriorating exchange rate, the application of tariffs and an abundance of bureaucracy, that they have been trying to find alternative suppliers within the UK. Import substitution: that has to be a winner, no? Well, maybe, but then if it was such a good idea, why haven’t buyers done this already? The usual answer is quality and/or cost.
As an alternative, some manufacturing businesses whose operations rely on a continual supply of goods entering the UK from Europe, have been stockpiling goods. The cost of this additional warehouse space is another unwelcome burden.
And whilst businesses employing staff from EU countries face no immediate pressures in theory, in practice there are reports of some EU nationals opting to return to their countries of origin amidst the uncertainty (and, in some instances, to escape the toxicity of Brexit). Replacing lost staff or trying to hire additional staff from outside the UK using the new points-based immigration system may well be a daunting prospect for many employers.
Still, it isn’t as if businesses have had anything else with which to contend over the past 9 months.
So how might things look under a No Deal Brexit (or even a last gasp hard as nails deal)? Firstly, there is the bureaucracy. But that’s OK, say the champions of Brexit: businesses already export around the globe and are used to this. Except, many businesses who export to (and import from) the EU have no dealings outside the EU and so have never been exposed to the bureaucracy of non-EU international trade. According to the head of HMRC, the cost of all of this new paperwork will amount to £7.5 billion a year. A year! How much this will cost North East businesses is difficult to estimate, but will certainly run into hundreds of millions of pounds. A very high cost from which they will derive no benefit whatsoever.
Secondly, there are tariffs. Farmers will see the cost of their exports rise to unaffordable levels and demand collapse. Manufacturing and processing businesses face the double whammy of having to pay tariffs on imported components and raw materials and then seeing their final product having a tariff imposed upon it, thereby eroding their competitive position. For example, under WTO rules there are tariffs of 4.5% on car parts and 10% on cars. In its evidence to the House of Commons International Trade Committee, Nissan said that tariffs will add £500m a year to costs. It then has to try to absorb those costs, rather than pass them on in the form of higher prices, given that cars exported to the EU (its key market) become 10 per cent more expensive anyway.
And that’s not all of it. Which brings us to problem number three. The Nissan plant relies wholly on operating on a Just-in-Time basis. At any one time it holds a maximum of half a day’s stock and if it runs out of parts that is very serious. Honda reckons that an hour’s lost production costs it several millions of pounds. So why not stockpile? Build some warehouses? Toyota has said that if it built such a warehouse it would be the third biggest building on the planet.
Many businesses and their representative organisations have raised concerns about the digital infrastructure required post-Brexit. The fact that these are either set to be finished or upgraded in the next few weeks means that businesses will have very little time to get to grips with them. This increases the risk of mistakes being made and the associated problems that would then arise e.g. border delays and additional costs to businesses. Of course, anything that risks border delays presents a serious risk for Just-in-Time supply chains.
Fourthly, EU Rules of Origin require producers of final goods to include a minimum proportion of that item by value to be sourced within the EU. With the UK outside of the EU that means UK manufactured components no longer count. Anecdotal evidence suggests that UK suppliers are already being excluded from supply chains in favour of EU27 suppliers who enable producers to continue to comply with EU Rules of Origin. A trade deal may or may not have been able to address this; a No Deal Brexit certainly will not.
So, all in all, pretty terrible. Oh and I nearly forgot: all of this uncertainty has meant that new investment – especially from international investors deciding whether to invest further in their North East-based plants or place investments elsewhere – has stalled. Of all English regions, the North East has the highest percentage per head of jobs created by Foreign Direct Investment, with overseas-owned firms employing tens of thousands of people across the region. If there are two things international investors hate they are uncertainty and instability.
And if you’re looking for flowers – as a mark of sympathy or to cheer yourself up – that too might be problematic. Of all flowers sold in the UK, 70 per cent come from the Netherlands and are delivered fresh every day. In the first three years after the EU Referendum 1900 florists closed, seemingly due to the 20% devaluation in Sterling caused by Brexit which made importing unaffordable. After 1 January, the deliveries won’t even get through.
Photo – Tyne and Wear Archives and Museums wikimedia

Part 6 Teesside Airport: where the buck never stops

A S Hunter

Unless evidence emerges to the contrary, we shall have to assume that it is in TOP TEAM that strategic decisions are made, but it is not at all clear to whom this group is answerable. It is also not at all clear why this group isn’t the board of TIAL itself. This is the case at Cardiff, why not at Teesside?

MPs fight back for Northern culture

Jane Neville

The North’s cultural industry has been hit hard and faces an historic challenge as the global pandemic continues to affect our everyday lives. The Northern Culture APPG will promote and champion the huge economic contribution made by the North’s cultural sector, build consensus and fight for what the government needs to do to level-up and build back the North’s cultural potential now and in the longer term.

BREAKING

Sunderland residents protest over No Deal Brexit

Louise Brown

Nissan’s Chief Operating Officer, Ashwani Gupta, has repeatedly said that the plant in Sunderland would be unsustainable with a no deal Brexit. He also stated they need a Brexit deal with a sustainable business case for their UK commerce to be viable. Mr Gupta said that the EU was Sunderland factory’s biggest customer and warned that Nissan’s commitment could not be maintained if there was not tariff-free EU access.

Christmas with the Hobs

Kim Sanderson

“We know that freelance performers, technicians and artists have really struggled while venues have been closed, and many people have been unable to access government financial support – so it’s vital that we do our bit to help. Christmas with the Hobs gave us an opportunity to bring together North East arts professionals to create a magical Christmas gift from Northumberland. We hope you enjoy it!”

All party parliamentary group and March for Change launch interim report on the coronavirus pandemic

Kate Bredin

Dr Whitford spoke about the more effective use of local public health teams by all the devolved nations. She expressed disappointment that after a lot of progress in Scotland over the summer with no deaths for six weeks of people who had tested positive for the virus, too much of a relaxation being signalled from Westminster had effectively undone the work. She expressed concern about the planned relaxation this Christmas potentially coming at a very high cost.

Boris Johnson’s blame game

Giuseppe Bignardi

Fishing is a sticking point in the Brexit negotiations. The UK has rejected an offer to reduce the EU states fishing quota by 15-18%. Fishing is of relatively little importance to the UK (0.1% of our GDP) but it has become a symbolic issue. Our government wants an exclusive right to set fishing policies as a demonstration of UK sovereignty.

Homelessness is blighting the north of England – a radical housing programme could alleviate it

Stephen Lambert

Although the number of rough sleepers in Newcastle is much lower than Manchester and other core cities, with up to 20 individuals sleeping out in the city centre on any given night, many thousands more make up the ‘hidden homeless’. Some sofa-surf in friends’ flats. Others sleep in cars or stay in charity-run hostels, grotty B&B hotels and other costly forms of temporary accommodation. According to the housing campaign group Shelter, a staggering 320,000 people are homeless in modern Britain.

W(h)ither women’s work

Sally Young

Although it’s been illegal in the UK to pay women less than men for fifty years, a 15.5% gender pay gap still exists. This year the Equal Pay Day in the UK was 20 November, the day women effectively start to work for free because, on average, they are paid less than men. Sadly there will be many redundancies after furlough and the perilous state of childcare means a disproportionate number of these are likely to fall on women.

International day for disabled people: the need for an inclusive approach

Julie Ward

In 1984 I found myself running an arts and disability agency for the north of England, and encountered the tail-end of the mass segregation programme that had resulted in millions of people with mild to severe physical and mental disabilities being locked away in large institutions, forced to do menial work for pocket money and with little say about any aspect of their lives. The arts activities that my organisation ran often opened up deep emotional scars from years of abandonment, disregard and abuse. Paintings, poems and performances were littered with powerful symbols of imprisonment and freedom.

Covid-19: a catastrophe for women

Ann Schofield

Women on low pay, are not just having to choose between the basics of eating and heating, as many families living in poverty prior to Covid-19 had to do. They must now choose between food, warmth and all the required expensive sanitizers and masks needed to keep their families safe. In ensuring their family’s survival, many women are going without essentials. This includes safe, hygienic sanitary products which they can no longer afford and aren’t freely available because of the closure of centres and schools that distribute them.

Part 5 Teesside airport: does Houchen have any mates at Stobart’s?

A S Hunter

Throughout the report the joint venture partner is referred to as ‘the preferred operator’, and in one table TVCA Chief Executive Julie Gilhespie is charged with identifying one by March 2019. However, on page fifty-one of the document there is an apparent lapse in their editing, and in a table Stobart is named where presumably ‘preferred operator’ should be.

3p in my bank account: the story of Tony and Boris – both ‘just about managing’

Peter Benson

Tony is so proud he hates asking for help and always says there are so many others who are worse off than him. He volunteers at a charity in London; manning the library, sorting new books received, and handing them out. He loves it as he is on a rota and has a few buddies. There he is valued. He would never reveal just how badly-off he actually is as he doesn’t want people to know.

Poetry Corner

Longview

Harry Gallagher

The North, chipped and scavenged in these standing stone days, does not fall asunder nor domino down in sight of barber surgeons with their slingshots, chippings. Long abraded by high seas, we stack lean as limestone, holding our breath like we have held our noses, impassive in the face of this flitting ephemera. We Danelaw […]

BREAKING

The government needs to do more to save the High Street: a response to the Arcadia group administration news

Yvonne Wancke

Jessie Joe Jacobs, candidate for Tees Valley Mayor said: “Our High Streets are the heart and soul of our communities, my family’s business Jacobs’ carpets began on Stockton High Street and I am committed to seeing new life breathed back into it. Today’s news about the Arcadia group is desperately sad but we won’t go down without a fight.”

A way out: international day for the elimination of violence against women

Jessie Joe Jacobs

It is for this reason that we need more women in political positions, more women leading our councils and combined authorities and more women leading our economies. We need a balanced plan for people and places to thrive, ensuring women are given the priority they deserve. We need to champion women’s empowerment and women’s well being and to lift our voices to challenge violence against women in all its forms. I am standing for Tees Valley Mayor next year and this is what I hope to achieve.

Every ten seconds…

Peter Benson

But who is really looking out for the hungry in the UK? It seems to be down to all of us and businesses around the UK and an army of volunteers who so generously give their time energy and often money to volunteer in a charity food bank.

A day in the life of a foodbank volunteer

Jackie Taylor

Now we feed the families. One lady is scared for her kids over the virus. Another is worried about internet access as she has a meeting but cannot afford the internet costs that week, someone manages to gift her some data.

Part 3 Teesside Airport: Airline competition?

A S Hunter

Industry insiders have said that the Aberdeen and Belfast routes are the ones that are most commercially viable. But it is far from certain that there is sufficient demand for two airlines to compete for the business. Given the promotion that Loganair is getting, it looks as if Eastern is on its way out of Teesside. But are they being forced out, or are they trying to find an excuse to leave?

Soap and streaming by Jarrow entrepreneur: supporting the LGBTQ+ community in the North East

Jane Neville

“We have become more driven towards raising money for the LGBTQ+ community and trying to increase their presence in the North East gaming and streaming environment. In going forward, we are hoping to set up SFST as a charity aimed at helping members and organisations of the LGBTQ+ family, with an interest in streaming and gaming, by offering them support and technical help. We also are looking to assist with micro grants to help get people set up and ultimately build a Northern Gaming LGBTQ+ Network”.

A renaissance of affordable homes is needed in the North East

Stephen Lambert

One striking exception to this was the ‘Byker Wall’ development in 1968 to 1982 – a block of 620 maisonettes with colourful architecture and sensitive landscaping. Five years ago the estate was transferred to the Byker Community Trust and has £20m investment since 2012. It won an award in 2017 – ‘Best Post War Neighbourhood’ at the Academy of Urbanisation.

‘Good Trouble’ for the international day of the child

Julie Ward

Children growing up in post-pandemic, recession-hit Brexit Britain will have many challenges as they face a shrinking job market, mounting debts and a future cut off from their European peers, denied the right to travel, work, live and fall in love across a union of what was 28 different countries.

Left in the dark, left in the cold: why charities and social enterprises are worried about the replacement for EU funding.

Michal Chantkowski

The mainstream government funded support schemes, such as the ‘Work and Health’ and former ‘Work’ programmes are widely criticised for multiple reasons. They appear to be focusing on low hanging fruit, on clients who need little support in order to progress, while putting minimum effort into supporting those with complex needs or facing multiple issues, and at the same time channelling money into multi-nationals and corporations and Tory donors instead of supporting charities and social enterprises.