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CONTENTS 05 Foreword 07 North Evolution 12

The Northern Powerhouse: is it still relevant?

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Global North: A new vision for the North

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Global North: The Great Free Trading Opportunity

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Global North: Connectivity

26 Global North: Do we have the skills we will need? 30 Recommendations


ABOUT POLICY NORTH POLICY NORTH IS AN INDEPENDENT, CROSS PARTY THINK TANK WITH THE MISSION TO MAKE THE NORTH OF ENGLAND THE BEST PLACE IN THE WORLD TO LIVE AND DO BUSINESS BY SEIZING THE OPPORTUNITIES OF A NEW GLOBAL BRITAIN. Policy North is made up of entrepreneurs and business leaders who are passionate about ensuring the North, and the wider UK, have a growing economy, a strong private sector, and are able to make the most of the opportunities that a new global Britain will have to offer. If we can deliver on growth and skills in the North, the whole of the UK will benefit. The heart of the Industrial Revolution, the North has a long history of driving national growth. It is home to over 15 million people and over 1 million private sector businesses. If the North were a country, it would have the same size economy as the whole of Belgium, accounting for 19% of total UK output. The region produces 19% of UK goods exports, and is connected to the rest of the world through 7 international airports and 12 major ports. There are over 20 universities in the North, of which 4 are ranked in the top 100 universities globally. However, even with these incredibly positive factors, there is much untapped potential.

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ABOUT THE AUTHOR

DAVID HARRISON PRESIDENT OF POLICY NORTH With over 40 years’ unparalleled business experience, David has worked in financial services for much of his career. In 2007, he became managing partner of Newcastle -based financial services group True Potential. His goal is to democratise finance and he is a crusader for technological advances in financial services. His vision is to foster a nation of committed, interested savers turn on their mobile device to get real-time information on the value of their portfolio. He believes in the value of ‘impulse saving’ and the ability to access your savings and investments in a way that suits your lifestyle. David is a true entrepreneur. He believes in having skin in the game and giving a hand up to others. Those values have helped True Potential reach two million clients and £52bn assets under its administration.

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In 2016 the firm turned over £69m and made a profit of £15m. In May 2017, True Potential was named European Business of the Year at the international EBA Awards in Croatia. David, an MBA graduate, is a generous supporter of financial inclusion and education. In 2013 he donated £1.4m to establish a Centre of Excellence at the Open University, providing free personal finance courses to the public. He is a founding member and Director of Policy North, taking up the role of President in 2017. David supports the power of free markets to do enormous social good and believes that Brexit can lead to extensive international trading opportunities, creating more new businesses. These changes can have a huge impact on employment, leading to a bigger change in how people feel about themselves with a greater sense of shared values and personal responsibilities.


FOREWORD Incredibly, a year has passed since the UK voted to leave the European Union. Despite all the discussion and debate since 23rd June 2016, we are barely any further forward in understanding what exactly Brexit will mean for the UK and the North. This year’s general election result has added a new dimension to the debate surrounding Brexit, as politicians and commentators try to interpret the instructions handed down by voters. Policy North maintains one very clear position. Whatever relationship the UK enjoys with the EU, once the drawn out negotiations are concluded, we must be able to enter into free trade agreements with anyone we choose. That means leaving the Customs Union. Failure to do so, will prevent us from taking advantage of the global opportunities that will exist and that are crucial for the North. Successive governments have attempted economic rebalancing and regional development. The effects have been piecemeal and costly. Brexit can be different but the North needs a fresh approach.

The Government’s strategy for the North centres on closer collaboration between great north cities. Policy North will always support that approach where it makes sense, but it cannot be the central vision for the North post Brexit. Our political representatives need to think much bigger – they need to think globally. As we set out in this report, there is a strong historical case for an outward-looking, internationally trading North. We propose a set of recommendations aimed at securing international investment, jobs and growth. What opportunities exist for Newcastle in Singapore as well as Sheffield; for Manchester in Louisiana as well as Leeds and vice versa? How can the North develop networks and forge business connections with growing economies such as the gulf states and in new industries including FinTech and Biotech? These are the questions that we are in a global race to answer. But we cannot do that with a domestic-focused agenda that lacks substance. That is why we believe the Northern Powerhouse is no longer good enough to service the future needs of a truly Global North.

Stephen Purvis Chairman and Founder of Policy North

“Policy North maintains one very clear position. Whatever relationship the UK enjoys with the EU, once the drawn out negotiations are concluded, we must be able to enter into free trade agreements with anyone we choose. That means leaving the Customs Union.”

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TODAY THE NORTH OF ENGLAND IS HOME TO 15 MILLION PEOPLE AND HAS OVER ONE MILLION PRIVATE SECTOR BUSINESSES.

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NORTH EVOLUTION The North of England is home to 15 million people1 and over one million private sector businesses. 2 If the North was a country, it would be one of the largest economies in Europe - similar in size to Belgium3. The United Kingdom’s departure from the European Union provides a unique opportunity for the North to find a powerful role in a truly global Britain with increased international influence. Entrepreneurs and business leaders are passionate about ensuring the North has a growing economy. A strong private sector and a highly skilled population is essential to be able to make the most of the global opportunities that a new global Britain has to offer. If we can deliver on growth and skills in the North, the whole of the UK will benefit – as was the case in the past. As the engine of the industrial revolution, the North has a long history of driving national growth. Today the North has over one million private sector businesses; its economy was worth £304 billion in 2014, accounting for 19% of total UK output.4 The North produces almost 20% of UK goods exports5 and is connected to the rest of the world through seven international airports and 12 major ports. There are over 20 universities in the North, of which four are ranked in the top 100 universities globally6. Even with these incredibly positive factors, there is much untapped potential. The North is not, and never should be, short-hand for Greater Manchester. The North is the individual cities, towns and villages that make up the unique landscapes of Cumbria, Yorkshire and the Humber, the North West and the North East of England. There are many lessons to be drawn from the result of the EU Referendum. One of the most important to note was the divergence of the wider North from the major Northern cities.

Many of the areas that voted Remain were clustered around metropolitan university towns and cities. These included Liverpool, Manchester, Leeds and Newcastle. A key example of this is Manchester that voted to Remain by a significant 60% vote share. Yet right across the North West, North East and Yorkshire and Humber, just 11 areas voted Remain - out of 1257. This highlights the divide that has emerged over time between the North’s urban cities and the Greater North, which has faced slower job growth and stagnating wages – simultaneously – with Britain becoming a member of the European Economic Community in 1973. The decline of the North East’s once industrial strength illustrates this pattern. Coal mining in County Durham peaked as early as the 1920s, when more than 170,000 men were employed as miners8 . In the two decades from 1950-1970 the decline accelerated with around one hundred North East coal mines closing and industry finally all but dying out by the late 1980s.

ITS ECONOMY WAS WORTH £304 BILLION IN 2014 ACCOUNTING FOR 19% OF TOTAL UK OUTPUT A similar trend was followed by shipyard closures. An early decline toward the end of the late 1920s saw the closure of Richardson Dock in Stockton in 1925 and Palmers of Jarrow and Hebburn, along with Priestman’s of Sunderland in 1933. The industry’s existential decline came some decades later as six shipyards closed in the 1960s, followed by five in the 1970s. By the late 1980s only one shipyard remained in the North East.

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THE NORTH PRODUCES ALMOST 20% OF UK GOODS EXPORTS AND IS CONNECTED TO THE REST OF THE WORLD THROUGH SEVEN INTERNATIONAL AIRPORTS AND 12 MAJOR PORTS

For too long we have continued to educate people in the same way, in the same trades and traditions, preparing future generations for roles in which demand was already collapsing. This has had the unfortunate consequence of creating a legacy of unemployment and skills deficits across the region. This pessimistic legacy may help to explain why the majority of the North East voted to leave the EU by a margin of almost 1 million votes. The voters of Hartlepool, Doncaster, Carlisle, Blackpool and Rochdale were not just voting to leave, but voting for change – long overdue change. In fitting with this very demand, with the UK leaving the European Union, there is an opportunity for the Government to bring about positive change for the North.

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A UBS regional policy report highlighted deepseated imbalances, heralding from the Victorian era, with policy initiatives in the intervening period “barely acting to offset the natural drift of business activity towards the south” 9. Outside of the North’s major cities, the period corresponding to the UK’s membership of the EU has left the Greater North far behind London and the South East in terms of wages, skills and growth. This is shown by the gap in Gross Value Added between the North and the rest of the UK which continues to remain stubbornly wide and growing.


On a base of UK GVA per head of 100, the figure for the North East is 74, for Yorkshire and the Humber 80.7, the North West 85.4, while the figure for the South East is 109.8, and London 172.110. For too long the North has been left behind. For too long the UK has not been a country that works for everyone. The once in a lifetime decision to leave the EU and to unshackle ourselves from its regulation, means we can forge new trade agreements and explore new markets. Trade is the key to a northern renaissance and rebalancing the economy. Exporting public sector jobs to the North is neither sustainable nor imaginative and in reality acts as a restraint on regional enterprise and innovation. The aforementioned untapped potential is now itself in jeopardy. The outcome of the 2017 general election has cast fresh doubt on the type of Brexit we are heading towards. In the rush to explain what the election result means, some commentators are arguing that the election result was in effect a vote against a hard Brexit. Indeed, the First Minister of Scotland, Nicola Sturgeon, has already claimed that a hard Brexit is “dead in the water.” On the contrary, others point out that 580 Conservative and Labour MPs were elected on manifestos promising to leave the EU and with it, the Single Market – a ‘hard Brexit’. To people outside of the Westminster bubble, the terms ‘hard Brexit’ and ‘soft Brexit’ are largely meaningless. These are terms that have been hijacked by politicians to steer the debate towards the outcomes of their own political interests - not necessarily the outcome that a majority of the UK population voted for. There is a real danger of a ‘scrambled Brexit’ as a result of a Prime Minister with a weakened mandate, being short of a Commons majority, reliant on 10 MPs from a smaller political party for confidence and supply. Nevertheless, what matters much more than labels is substance. It is crucial that, once negotiations are concluded in March 2019, the UK and in particular the North, can negotiate free trade agreements with the rest of the world. That is the litmus test by which the public should judge whether Brexit has been delivered.

THERE ARE OVER 20 UNIVERSITIES IN THE NORTH, OF WHICH FOUR ARE RANKED IN THE TOP 100 UNIVERSITIES GLOBALLY A Great North Free Trade Zone in the North will turn future free trade agreements into jobs and economic growth, rebalancing the British economy. That is the positive vision and message that the Government needs to listen to, act on and communicate. The recent general election was a clear reminder of what happens when the public vote is taken for granted. Should this lesson be ignored, far more political careers will be brought to an abrupt end. Our ability to strike up free trade agreements with any country we choose is the standard by which we will judge whether Brexit did indeed mean Brexit. It will also come to define how serious the Conservative Party is about rediscovering its voice and influence in the North. Britain is a great trading nation and the North truly has the potential to become a global powerhouse. Having wasted one golden opportunity, the Conservative Party now stands on a precipice. Its vote share in the North of England reached a two-decade high at the election and there is now a fork in the road. The choice is not between hard or soft, but between winning in the North and electoral oblivion.

If hypothetically, once a deal is agreed, the UK remains in the Single Market, with free movement as a condition, and of far greater importance, we are bound by Customs Union rules, the British public will rightly ask, in what way have we left the EU?

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BRITISH TRADE: THE FACTS

£147.6BN £81.3BN

44% 56%

In 2014, the UK exported £147.6 billion worth of goods to the EU (49% of all UK goods exports) and exported £81.3 billion worth of services to the EU (37% of all UK services exports).

Overall, 44% of UK goods and services exports went to the EU (£228.9bn), while the remaining 56% of UK goods and services exports went to the rest of the world (£286.3bn).

£228.9BN 70.6% £290.6BN 25% Today, the UK has an extremely large trade deficit with the EU (i.e. we buy far more from them than we sell to them). In 2014 we sold £228.9bn worth of goods and services to the EU, but bought £290.6bn.

70.6% of the UK economy is domestic business, not international trade. Exports of goods and services to the EU represented 13.1% of GDP in 2014. Exports of goods and services outside the EU represented 16.3% of GDP and were 25% more valuable than exports to the EU.

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Source: http://www.voteleavetakecontrol.org/briefing_trade.html


THE UK IS A FAR MORE OPEN ECONOMY THAN OTHER EU COUNTRIES. ACCORDING TO EUROSTAT, IN 2014, THE SHARE OF UK GOODS EXPORTS GOING TO COUNTRIES OUTSIDE THE EU IS HIGHER THAN EVERY OTHER EU MEMBER STATE BAR MALTA.

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THE NORTHERN POWERHOUSE: NO LONGER RELEVANT? Both the Coalition and Conservative Governments’ policies for northern investment and rebalancing the economy have built around the concept of a Northern Powerhouse. This was a concept first mentioned in 2014 and has been made Government policy since. The aims of the Northern Powerhouse centre on closer collaboration between northern cities and towns.

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According to the Northern Powerhouse Partnership, the aim is to “help develop consensus among businesses, civic leaders and others about how the north of England can be more successful. The focus will be on encouraging cities and counties to work together to create a northern powerhouse.” A number of policy commitments since 2014 have fallen under the heading of the Northern Powerhouse but there seems to be little clarity surrounding specific aims and objectives. A survey of public opinion by Ipsos MORI found that half of respondents in the North of England had at least heard of the Northern Powerhouse. 22 However, only 26% of respondents believed it would happen soon enough to have an impact on their life. ComRes carried out a poll in November 2015 for the BBC. It reported that more than two in five adults in the North of England say they have never heard of the ‘Northern Powerhouse’ (44%). A further one in five (20%) say they have heard of it, but know nothing about it. When asked about their confidence in whether the Government’s Northern Powerhouse policy will boost the economy in the North, adults in the North of England are split; half say they are confident (50%); while two in five (40%) disagree. There is strong support for devolution to the North; four in five Northern adults (82%) agree that local politicians in the North, rather than MPs in Westminster, should have control over services like transport and health to improve the region. 23 The policy commitments that fall under the Northern Powerhouse agenda further underline its domestic economic redevelopment agenda, covering infrastructure/capital spending: transport, science institutions, and cultural venues. Greater devolution of power to sub-regional areas completes the fourth policy commitment area. However, a key problem is that the Northern Powerhouse resembles a brand without a product and a concept without content. Hence any Government announcements linked to the North fall under the Northern Powerhouse banner, whatever that announcement may be.

That does not diminish the requirement for improvements to infrastructure, transport, housing and skills, all of which are of strategic importance to northern economic development. We support those aims and to that extent we support the Northern Powerhouse. Where we differ is that the Northern Powerhouse is predominantly about greater collaboration between northern towns and cities. But is an east-west trade partnership the right approach and how do we take advantage of post-Brexit Britain? The UK’s departure from the European Union will open up new, more lucrative frontiers internationally that require us to the rethink both the priorities and relevance of the Northern Powerhouse – with a powerful role in a truly global, free trading Britain. The world is changing faster than we have ever known. More data have been produced in the past two years than in the whole of previous human existence. Mobiles, wi-fi, on-line shopping, viable electric cars, apps, digital photography, on-demand TV, Facebook, YouTube, Wikipedia, Uber, AirBnB: all of these are less than 15 years old. Therefore, we need a fresh, agile, consistently evolving global vision. Where are our own Northern Facebooks, Apples and Amazons? We have a long way to go to address this and nowhere is this felt more acutely than in the North East. The number of businesses for every 10,000 people in the North East is only 600. By means of comparison, no other UK region has fewer than 800. Energising and revitalising great northern towns and cities must continue. But, Policy North believes that the role of the Northern Powerhouse must adapt to post-Brexit Britain in two key ways: 1.

It must focus on city-region growth and establish trade links. This means that close collaboration between nearby city regions may make economic sense, but that should not mean simply shoehorning parts of the North into monolithic blueprint.

2.

It must provide the domestic agenda to support a global strategy that seeks to open up and exploit international trade opportunities for the North.

Policy North has openly challenged the Northern Powerhouse and questioned whether it fulfils the strategic vision we believe the North needs, especially consider the potential opportunities the North can achieve post-Brexit.

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GLOBAL NORTH: A NEW VISION FOR THE NORTH Since the 12th century, Newcastle has enjoyed national and international trading links. From London to the south and the low countries to the east, Newcastle established itself as a busy port exporting wool around the country and beyond. Around the same time, Newcastle also famously began exporting coal, with much of it heading south to London.

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They may relate to the cloud and computing capability; extreme environment technology; agri-tech; gaming; or advanced manufacturing.

Manchester, meanwhile, was the home of a booming textile industry in the 16th century and through the 17th century had strong trade connections throughout Lancashire and with London.

Whatever our strengths, they need to fit within a broader ‘Global North’ strategy built on a trading vision if we are to realise Brexit’s true potential. In other words, we need to think bigger.

The North was the birthplace of the industrial revolution. Newcastle in particular, harnessed innovation and invention to become the powerhouse of the industrial revolution. It was the Qatar of the 19th century with a GDP to rival any other in the world.

In the year to December 2016, the value of UK trade in goods exports increased by 5.6 per cent and imports increased by 7.6 per cent.

Until now, the strategic vision for the North bas been about closer collaboration between north towns and cities. Brexit means it is time to think globally and seize the many economic opportunities that come with it to restore the North to its former glory and beyond.

Until recently, the North East was the only English region with a positive balance of trade, exporting more than it imports. However, 2016 saw that trend reverse. In fact, last year there was an increase in annual export value for all English regions except the North East and Yorkshire & the Humber.

The clearer we are on our unique strengths, the greater the interest of our potential international partners’ will be in working with us. The focus should be on where our truly globally relevant innovation and economic strengths are.

UK IMPORTS AND EXPORTS BY REGION, YEAR TO MARCH 2017

90

Year to March 2017 - Imports Year to March 2017 - Exports

80

Value (pounds billion)

70 60 50 40 30 20 10 0 Unallocated Unknown

Unallocated Known

Northern Ireland

Scotland

Wales

South West

South East

London

East

West Midlands

East Midlands

Yorkshire & Humber

North West

North East

Note: 2016 and 2017 data are provisional Source: Regional Trade Statistics, HM Revenue & Customs

Region

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In contrast with the Northern Powerhouse project, we call on the Government to adopt a new strategy with clear objectives designed to take advantage of the global opportunities for north businesses. Global North should have the following core strategic goals: 1. Support businesses seeking to scale up and access global markets; 2. Promote the North as a destination for international businesses to locate their manufacturing operations. As well as attracting international investment and opening up export markets, Global North should also be about securing existing assets. This should make up the third core strategic goal. In the North East, which voted heavily for Brexit, the one project stands out for our revitalisation post coal, steel and shipbuilding. It is the Nissan factory, which directly employs 7,000 people and a further 30,000 in the supply chain. Nissan is the largest car manufacturer in the UK, exporting 80% of its product. The long-term strategy under discussion is the future location of electric car development and production, something that began in Sunderland and a product that many feel will dominate the market in 10 years’ time. Global North must seek to retain assets such as the Nissan factory, attract more of them and ensure that the skills and infrastructure are available locally for the future. It will do this by having a very clear focus and a small number of priorities.

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Success in business comes by achieving focus and Global North should be no different. That means knowing what the first thing to do is and only doing that. We should employ this approach to the North’s global future – focus on one priority and only one, and therefore avoid distraction and dilution. Enterprise Zones have been set up in parts of the region in an attempt to kick start investment but Policy North would like Westminster to go much further and commit to a free trade zone across the North. This would be transformational towards rebalancing the economy and is something that could be achieved posy-Brexit. It should be Global North’s central aim. A Global North strategy should also be about securing faster links to the rest of the world. This will set us free and enable us to truly compete and realise our undoubted potential. We shouldn’t limit the word transport to simply the physical – very fast broadband links (Japanese speeds) to the region would help tremendously. And not just in terms of IT companies, but indeed all of the many service industries we now host across the North would benefit.

SO GLOBAL NORTH SHOULD BE ABOUT TRADE, CONNECTIVITY (BOTH TRANSPORT AND SUPERFAST BROADBAND) AND SKILLS BROUGHT ABOUT UNDER A FREE PORT STRUCTURE - A SINGLE PRIORITY PROJECT THAT WILL TRANSFORM THE NORTH.


GLOBAL NORTH

ACCESS TO INTERNATIONAL MARKETS ATTRACT BUSINESS SECURE ASSETS

FREEPORT

CONNECTIVITY

SKILLS

INFRASTRUCTURE

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GLOBAL NORTH: THE GREAT FREE TRADING OPPORTUNITY The long-term aim of Global North will be the creation of a Great North Free Port, creating 612,000 jobs and £12bn of investment across northern England.

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Free Ports, often called Free Trade Zones (FTZ), are areas within a country’s territorial border but are considered to be outside of the customs border. That means businesses can import, process and export goods within the Free Port without incurring customs tariffs. Policy North has analysed the performance and impact of 3,000 FTZs globally to assess opportunities for northern economic development post-Brexit. Free Trade Zones vary in size, from the largest including Jebel Ali in Dubai at over 5,000 hectares down to the Muuga FTZ in Estonia covering 75 hectares. Each FTZ has created 22,600 jobs, on average, with a combined total of $500bn in direct trade related value added.* Sectors currently benefitting from FTZs include automotive, electronics, chemicals, pharmaceuticals and machinery.

RESEARCH FOR POLICY NORTH SHOWS THAT ESTABLISHING A GREAT NORTH FREE PORT, COVERING NINE MAJOR NORTHERN FREIGHT PORTS, COULD CREATE 612,000 JOBS, IF THEY MATCH THE SUCCESS OF THOSE EXISTING FREE TRADE ZONES The average gross value added (GVA) of each northern employee is £20,000**, meaning the economic impact on the North could be £12bn annually. There are over 3,000 FTZs globally but none exists on mainland Britain as EU regulations including state aid effectively block them. Post-Brexit, the UK will be able to create Free Ports, which could be key to retaining large manufacturing businesses and attracting new ones. Free Trade Zones are proven drivers of investment and jobs, from China and Singapore to the UAE and United States. With its industrial and maritime heritage as well as existing port infrastructure, Britain is ideally placed to take advantage of Free Ports, something that has been impossible while we have been members of the EU. The establishment of a Great North Free Port will focus investment and job creation where it is needed most within northern industrial communities where unemployment and social deprivation remain at high rates. In doing so, this initiative will help to rebalance the British economy. Being part of a Free Port gives control over the tariffs that anyone pays when importing the raw materials with which to manufacture vehicles. These tariffs can be considerably higher than those charged on a finished product.

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*http://mitl.mcmaster.ca/reports/MITL_FTZ_Report.pdf **https://www.ons.gov.uk/economy/grossvalueaddedgva/bulletins/ regionalgrossvalueaddedincomeapproach/december2016


THE GREAT NORTH FREE PORT CONCEPT IS BUILT AROUND NINE EXISTING MAJOR FREIGHT PORTS AND INFRASTRUCTURE:

1 Tyne 2 Sunderland 3 Tees and Hartlepool 4 Hull 5 Goole 6 Grimsby & Immingham 7 Liverpool 8 Manchester 9 Heysham

Policy North recommends this idea is piloted and refined in the North East. Later, this could be expanded to cover other parts of the North– effectively turning the area into one free trade zone. 21


GLOBAL NORTH: CONNECTIVITY The North already suffers from the national and international perception that it is remote and difficult to get to. This means our great innovations here have higher barriers to overcome than those elsewhere if they are to lure the investment and opportunities of London up the A1 and M6.

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In 2015 the North East saw by far the biggest decline of any region in the number of businesses based within its boundaries. A 10 percent drop in this region against a five and eight percent rise in the North West and Yorkshire respectively is concerning. Air travel remains a key issue. Increased services to more destinations from both a national and international perspective have been hard fought in order to deliver true global connectivity. They will become ever more important as we look for trading opportunities further afield. Northern regional airports are located in Blackpool, Carlisle Lake District, DoncasterSheffield, Durham Tees Valley, Humberside, Liverpool, Leeds- Bradford, Manchester and Newcastle. 85 Policy North supports Transport for the North’s (TfN) and the Government’s shared vision for air connectivity, which includes:

More destinations served by Liverpool, Manchester, LeedsBradford, Newcastle, Durham-Tees Valley, Doncaster, Sheffield and Humberside, carrying over 30 million passengers a year; Direct links for businesses and the public to a range of destinations; High quality surface access to airports to ensure the North is a competitive location for multinational businesses; Better rail connectivity to Manchester Airport; Support to Newcastle Airport to allow it to thrive.

This would be achieved by developing plans to better connect Manchester Airport to neighbouring cities by rail; improving connectivity more generally; and reviewing how regional airports would be affected by devolution of Air Passenger Duty to Scotland. 86 But there are some unique obstacles, not least from north of the border. The North faces a connectivity challenge arising from the Scottish National Party’s plans to half APD (Air Passenger Duty) as a first step toward potentially abolishing it all together. Effectively this duty is currently levied on all passengers across the UK (currently including all Scottish airports) and raises approximately £3.8 billion for the Exchequer. In its attempts to prove to the Scottish people that as a governing party they are capable of delivering a sustainable thriving economy for the country, the Scottish National Party (SNP) has decided using the powers granted to them following the Devo Max agreement (which the previous Coalition Government agreed to prior to the Scottish referendum) that they will slash this Air Passenger Duty by 50%. This bold move will immediately make their regional airports a lot more attractive to fly into/out of than any of those located over the border in England who at this time are still tied to the entire cost of APD. The impact on Newcastle Airport (approx. 98 miles only from Edinburgh) could prove catastrophic longer term as more and more passengers are tempted to choose a Scottish airport as their alternative to Newcastle. The financial impact on travellers and therefore individual airports is clear. When travelling as a group of four, the savings on APD could equate to anywhere between £13£26 up to £94 - £194 per passenger travelling (depending on final destination) and in some instances even more. Those hard earned international routes that took decades to attract as we rebuilt industry throughout the North East would be threatened, (think of Nissan, Komatsu and more recently Hitachi all responsible for thousands of direct and indirect jobs in the region and all wholly owned Japanese firms that require easy connectivity to reach their investment within the region).

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The risk to the North is that more companies will decide to invest in Scotland instead of the North because of their cheaper air travel and greater international connectivity. This is not a trivial matter and resolving it therefore sits as one of Global North’s key connectivity objectives. London Heathrow Airport has openly recognised this huge threat to the BA route that flies five times daily between London and Newcastle carrying over 500,000 passengers and connecting a huge 50% onto other global destinations. Then of course there is the further important issue of a third runway at LHR. In terms of direct benefit to the North East if a third runway were to go ahead then it is estimated that this project would generate a staggering £4 billion in terms of economic benefits and up to 5,100 new skilled jobs as a direct result from the construction phase of the project alone. Improved connectivity, therefore, is a key objective for Global North and we recognise the announcements that have been made towards improving transport. The Government has said that it is “spending £13bn on transport for the Northern Powerhouse over this Parliament, including dramatic improvements to our roads and railways in the North”. 32 • £3bn is for rail schemes – mainly to upgrades in and around Manchester – with the outstanding £1.65bn for rail working out at £330m a year until 2020, for all of the North-East, Yorkshire & Humber and the North-West; • £5bn is for major road schemes, including the improvements to the A1; and •

The remaining £5bn is made up of the standard allocations to local councils through the Integrated Transport Block Capital Grant for projects such as bus lanes, cycle lanes, and traffic-calming and local highways maintenance, including filling in potholes. 33

Meanwhile, UK ports are largely privately owned; they generally fund their own investment and development plans and make decisions as to whether to provide ‘port services’ on a commercial basis. 88 Nevertheless, Government and local authorities are active in improving port surface access and connectivity and encouraging economic development in the areas around ports. For instance, the Government is making road and rail improvements at the Port of Liverpool, while Liverpool City Region is developing a freight and logistics hub in the port through its Growth Fund. 89

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Among the options being considered by TfN for the expansion of ports are: • Development of a rail and water-connected distribution network; • Investment in the port and hinterland connections and infrastructure; • The utilisation of capacity released on the rail network by HS2 and HS3 for freight services; and • A package of infrastructure solutions that would facilitate new Strategic Rail Freight Interchanges in the North and would allow larger and longer freight trains to access these interchanges, including gauge clearance where necessary. In September 2016 the North of England’s four main ports (Liverpool (run by Peel Ports), Hull (ABP), Tees Valley (PD) and Tyne (Port of Tyne)) agreed a new partnership to create jobs, boost exports and prosperity across the North of England.90 A new Northern Ports Association is aimed at uniting northern ports and make importing and exporting easier.91 It is also no coincidence that UK businesses trade up to 20 times more with countries that have direct daily UK connections and it’s why improving our connectivity across the World is of monumental importance to the future prosperity of northern regions. We have always been an island trading nation and proudly still boast some world class firms in all types of industries and sectors producing world class products and services that most countries across the globe want to be able to access and benefit from. Through improved connectivity, Global North should seek to encourage direct investment and tourism to Britain whilst at the same time opening up many new and exciting overseas markets for British exporters to explore and sell to.


IN TERMS OF DIRECT BENEFIT TO THE NORTH EAST, IF A THIRD RUNWAY WERE TO GO AHEAD THEN IT IS ESTIMATED THAT THIS WOULD GENERATE A STAGGERING £4BN.

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GLOBAL NORTH: DO WE HAVE THE SKILLS WE WILL NEED? Young people in London and the South East are 57% more likely to get into universities ranked among the top third than young people from the North14, according to a report by the Children’s Commissioner for England. That divide is a symptom, rather than a cause, of the educational divide in the UK. The North East of England for example has some of the best primary schools in the country15, yet coupled with the lowest level of adult employment16.

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That attainment gap is laid bare in Redcar and Cleveland on Teesside. Ninety-five per cent of primary schools there are deemed “good” or “outstanding” by Ofsted. However, it is a fact that Redcar and Cleveland is in the bottom 20 of the 149 areas in England when it comes to the progress a pupil makes from the end of primary school to the end of secondary school.17

The Industrial Strategy includes a commitment to introducing a “proper system of technical education”. 20 This is a welcome step. The further announcements in the Budget for a new ‘T-Level’ system21, overhauling how technical education is taught and valued, is a step in the right direction if we are to improve the North’s levels of productivity, which currently lags behind the rest of the UK 22.

The former Head of Ofsted, Sir Michael Wilshaw noted in his most recent report: “Last year, I highlighted the disproportionate number of secondary schools that are less than good in the North and Midlands, compared with the South and East of England. This year, the gap has widened slightly. More than a quarter of secondaries in the North and Midlands are still not good enough. This year, there are 13 local authority areas where every secondary school inspected is either good or outstanding, and all are in London or the South East. However, there are 10 local authorities with 40% or more of pupils who are in secondary schools that are less than good, and where attainment and progress is below the national level on the key accountability measures18 .”

Putting technical courses on an equal footing with academic work, increasing the number of hours students train by 50% and replacing the current 13,000 qualifications with 15, will help make a complicated system easier for pupils and parents to navigate.

Six out of ten of those failing areas highlighted by Sir Michael Wilshaw are in the North; Blackpool, Bradford, Doncaster, Knowsley, Liverpool and Northumberland. Five years ago the North West was identified as one of the stronger areas, but improvement has stalled. According to Ofsted the proportion of secondary schools that are good or outstanding has increased by just 3 percentage points in the North West since 2011. Over the same period the increase nationally was 13 percentage points. To further illustrate the point, Ofsted notes 5 in 10 secondary schools in Liverpool are less than good, compared to just 1 in 10 in inner London19. The skills gap in the North goes beyond schools standards and into both long term outcomes and technical skills.

IN POLICY NORTH’S RESPONSE TO THE GOVERNMENT’S INDUSTRIAL STRATEGY GREEN PAPER, WE PUT FORWARD A SERIES OF RECOMMENDATIONS AIMED AT IMPROVING EDUCATION STANDARDS ACROSS THE NORTH TO ENSURE THAT WE HAVE THE SKILLS TO MEET THE NEEDS OF GLOBAL NORTH.

The further announcement that each student studying for a technical qualification will do a three-month work placement as part of their course23 is one we support, although there is room here for further ambition. We would like to see no student, studying for either academic or technical qualifications, leaving school without the opportunity of three- month’s real, high quality work experience. The current system of two weeks, often random ‘work experience’ fails our young people. To be truly valued, as well as being extended, work experience must also be given an empiric basis – a standard to be worked towards, rather than a box to be ticked. To that end we recommend the introduction of a new place based “Skills Standard” so that every young person is genuinely ready for the world of work around them. A skilled workforce is crucial both to attracting international businesses to the North but also to ensuring that the North can take advantage of global export markets. Policy North has put forward proposals for three levels of the new “Skills Standard” that would be regularly agreed with employers and LEPs. When successfully completed could lead to a Bronze, Silver or Gold “Skills Standard” for every young person participating. Activities for each level of the Skills Standard would be designed to fit around academic study and social activities, but could well take place beyond the normal school hours, possibly as part of the National Citizenship Service. The programme would not only finally give confidence to employers that work place skills were being addressed, but even more importantly it would instill in young people a culture of life long skills development in what will become an everchanging work place environment over their lifetime.

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The Skills Standard would be a key opportunity to leverage the skills of large companies’ employees bases. Currently, young people in schools and beyond do not interact enough with the world of business, with research suggesting just 15% of 19-24 year olds saying they’ve engaged with employers on three or more occasions (Mann and Percy, 2013)25.

The JCB Academy in Staffordshire, sponsored by JCB and, alongside other businesses including Bentley Motors, Network Rail and Rolls-Royce have worked together to develop their unique curriculum. The academy provides a world-class education and is a real model for other businesses to engage directly with innovative educational institutions and models.

The Industrial Strategy’s commitment to “explore and further encourage the uptake of STEM subjects” is also welcome, but we would like to see further specific measures. We would be keen to see Local Enterprise Partnerships develop place based bursary schemes for STEM (Science, Technology, Engineering and Maths) subjects, with shifting emphasis placed on the opportunity in each locality.

Policy North supports and actively endorses the Government’s introduction of the Apprenticeship Levy, to help fulfill the ambition to get three million new apprenticeships created by 202036. More importantly, Policy North welcomes the Government’s long-term commitment to apprenticeships, which the evidence shows deliver long-term positive results for learners.

For example, the North East has the highest level of youth unemployment in the country - over 20% of those between the ages of 19 and 2426. Yet at the same time the North East has major skills shortages – for example, there are more than 2,000 vacancies in the technology sector in the region27. For example, a devolved place based bursary scheme could be developed for North East students in the first year of a post-16 technology or Maths. We note that in many institutions where vocational education is of high calibre there is often a large employer sponsoring behind it. The JCB Academy is a superb example of businesses helping provide top quality education in a vocational environment.

The work of the newly announced independent Institute for Apprenticeships, [an executive nondepartmental public body, sponsored by the Department for Education, and responsible for ensuring high-quality apprenticeship standards], will play a vital role in vetting new apprenticeship programmes ensuring they are relevant to the workplace and meet core standards. It is important the Institute for Apprenticeships’ work is informed by the Industrial Strategy to deliver tangible, long term success with an increase in apprenticeships focused on the IT and digital sectors – so apprentices develop necessary skills to succeed. Education and skills however, must go beyond school years. For the North to truly embrace the international opportunities of a new global Britain, its workforce must be able to gain relevant skills quickly in a rapidly changing economy. As highlighted at our ‘Policy North Business Roundtable’ event in Newcastle upon Tyne, people’s ability to access training courses to upskill is out of step with the speed of change in the work place38 . Policy North would encourage the Government to consider a one-stop online market place of courses and training providers, an “Online Skills Bank” accessible to all. Importantly this should include training providers benchmarked against one another, encouraging “switching” and private sector comparison sites to develop in the market. Such a system should also map clear pathways for people to be able to keep pace with industry needs on a local level, allowing them to become armed with relevant skills for their region or sector. We would also encourage devolved bodies to offer a “Career MOT” to help signpost those in need of retraining or further education later in their careers. The “Career MOT” could ensure that volunteering, work experience, upgrading basic skills and

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mentoring are easier to access for those seeking retraining, so that we do not risk entrenching unemployment or underutilising existing human capital in the workforce. Further, we would urge the Government and devolved bodies to consider the use of personal budgets to encourage people to up-skill and train. We discussed the ‘Skills Future Credit’ system currently being rolled out40 in Singapore with Sim Ann, the Singapore Trade Minister on her recent visit to the UK. From next year people will be given personal budgets to spend on education and training courses provided by Institutes of Higher Learning and accredited education and training providers. We note the OECD’s estimate that 9 million working-age adults in England have low literacy and/or numeracy skills41, an acute problem in the North of England especially. According to the ‘Future of Jobs’ report from the World Economic Forum: “by 2020, more than onethird of workers will need skills they don’t now have.”42 The North of England knows better than most what it means to be at the centre of an industrial revolution. More than 200 years ago the North of England powered the world’s first industrial revolution, pioneering engineers such as George Stephenson, developing new engines driven by coal, making new goods and transporting them right across the globe. However, the challenge and opportunities of the “Fourth Industrial Revolution” of modern times will be very different. If we are to secure the skills revolution we so desperately need to meet the challenges of the Fourth Industrial revolution, and the global opportunities of a new global Britain then the work between business and education institutions must go beyond work experience and careers advice. Global North will be about close collaboration with business to help build more strategic links between education, training, and skills with business and enterprise. By working collaboratively to assess need and outcomes, investment and innovations in education by businesses and entrepreneurs can have a greater impact, be better coordinated, and best practice can be shared as quickly as possible.

spread best practice across the UK and beyond. By strategically joining up business and skills, Global North has incredible potential to ensure the North’s workforce of tomorrow has the skills and expertise to play a leading role in the technology of tomorrow; from artificial intelligence, the internet of things, advanced robotics, drones, driverless cars, 3D printing to nanotechnology.

POLICY NORTH HAS PUT FORWARD THE FOLLOWING RECOMMENDATIONS IN RESPONSE TO THE INDUSTRIAL STRATEGY GREEN PAPER. THEY ALSO FORM THE SKILLS AGENDA FOR GLOBAL NORTH. 1. A revolution in Work Experience for every pupil; 2. A new place based modern “Skills Standard” for every pupil; 3. A new generation of business-led Career Advice; 4. A bursary scheme directed at future core skills such as STEM; 5. More free schools and greater c hoice of educational models such as Maths Schools; 6. Expanding high quality apprenticeships and technical courses; 7. An “Online Skills Bank” to create a comparison market place of courses and training providers; 8. A Career MOT to actively encourage lifelong learning; 9. Establishing an institute to drive orward the link between business and skills.

It is an objective that Global North should actively support the creation of an independent, businessled institute to connect enterprise and the skills sector. It should have a clear focus on assisting the private sector in its innovative activities in the education and skills sector, alongside helping to

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GLOBAL NORTH

GLOBAL NORTH: RECOMMENDATIONS

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FOCUS ON CITY-REGION GROWTH AND ESTABLISHED TRADE LINKS STOP TRYING TO SHOEHORN PARTS OF THE NORTH INTO A MONOLITHIC BLUEPRINT; REPLACE THE NORTHERN POWERHOUSE WITH GLOBAL NORTH - AN INTERNATIONAL STRATEGY THAT SEEKS TO OPEN UP AND EXPLOIT WORLD-WIDE TRADE OPPORTUNITIES; ESTABLISH A GREAT NORTH FREE PORT - A SINGLE PRIORITY PROJECT THAT WILL TRANSFORM THE NORTH; CONTINUE WITH THE TRANSPORT PRIORITIES SET OUT BY TFN; ADDRESS URGENTLY THE APD ISSUE AFFECTING NORTHERN AIRPORTS, ESPECIALLY NEWCASTLE; ADOPT THE SKILLS RECOMMENDATIONS SET OUT IN POLICY NORTH’S RESPONSE TO THE INDUSTRIAL STRATEGY.

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REFERENCES 1

ONS, Population Estimates for UK, England and Wales, Scotland and Northern Ireland: mid-2015, June 2016, https://www.ons.gov.uk/ peoplepopulationandcommunity/populationandmigration/populationestimates/bull etins/annualmidyearpopulationestimates/latest

2

BEIS, Business Population Estimates 2016, Department for Business, October 2016, https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/559219/bpe_2016_statistica l_release.pdf

3

HM GOV Northern Powerhouse, http://northernpowerhouse.gov.uk

4 ONS, Regional gross value added (income approach), UK: 1997 to 2015, December 2015, https://www.ons.gov.uk/economy/grossvalueaddedgva/bulletins/regionalgrossvalueaddedincomeapproach/p reviousReleases 5 HMRC, Regional Trade Statistics, September 2016, https://www.uktradeinfo.com/Statistics/RTS/RTS%20Releases/RTS_Q2_2016.pdf 6

QS World University Ranking 2016-17, https://www.topuniversities.com/university-rankings/world- university-rankings/2016

7

Electoral Commission, EU Referendum Results 2016, June 2016, http://www.electoralcommission.org.uk/find-information-by-subject/ elections-and-referendums/past- elections-and-referendums/eu-referendum/electorate-and-count-information

8 Durham County Record Office, http://www.durhamrecordoffice.org.uk/article/10560/Coal-Mining-and- Durham-Collieries 9 Financial Times, North of England’s economy undermined by entrenched weaknesses, March 2016, https://www.ft.com/content/d4bcaaba-dbbe-11e5-98fd-06d75973fe09 10 ONS, Regional gross value added (income approach), UK: 1997 to 2015, December 2015, https://www.ons.gov.uk/economy/grossvalueaddedgva/bulletins/regionalgrossvalueaddedincomeapproach/p reviousReleases 14 Children’s Commissioner, Growing Up North, Time to leave the North-South divide behind, December 2016, http://www.childrenscommissioner.gov.uk/publications/GUN 15 Ofsted, SCHOOLS NorthEast Summit 2015, October 2015, https://www.gov.uk/government/speeches/schools-northeast-summit-2015 16 ONS, Regional labour market: March 2016, https://www.ons.gov.uk/releases/regionallabourmarketstatisticsmarch2016 17 Ofsted, Annual Report 2015/16: Education, Early years & Skills, December 2016, https://www.gov.uk/government/collections/ofsted-annual-report-201516 18 Ofsted, Annual Report 2015/16, December 2016, https://www.gov.uk/government/collections/ofsted- annual-report-201516 19 Ofsted, Annual Report 2015/16, December 2016, https://www.gov.uk/government/collections/ofsted- annual-report-201516 20 BEIS, Building our Industrial Strategy: Green Paper, January 2017, https://www.gov.uk/government/consultations/building-our-industrial-strategy 21 HM Treasury, Spring Budget, March 2017, https://www.gov.uk/government/publications/spring-budget- 2017-documents 22 ONS, Regional and sub-regional productivity in the UK: Jan 2017, https://www.ons.gov.uk/employmentandlabourmarket/ peopleinwork/labourproductivity/articles/regionaland subregionalproductivityintheuk/jan2017 23 HM Treasury, Spring Budget, March 2017, https://www.gov.uk/government/publications/spring-budget- 2017-documents 24 Work Experience, Tyne & Wear, https://work-experience-tw.co.uk 25 Anthony Mann & Christian Percy, Employer engagement in British secondary education: wage earning outcomes experienced by young adults, February 2013, http://www.tandfonline.com/doi/abs/10.1080/13639080.2013.769671 26 ONS, Regional labour market, March 2016, https://www.ons.gov.uk/releases/regionallabourmarketstatisticsmarch2016 27 Chamber statement on employment statistics, NEEC, April 2017, https://www.neechamber.co.uk/news/chamber/chamber-statement-on-employment-statistics 28 HM Treasury, Spring Budget, March 2017, https://www.gov.uk/government/publications/spring-budget- 2017-documents 29 DfE, Free schools drive social justice: Nicky Morgan, May 2015, https://www.gov.uk/government/news/free- schools-drive-social-justice-nicky-morgan

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30 Dixons Trinity Academy, Ofsted Report, January 2014, https://reports.ofsted.gov.uk/provider/files/2354585/urn/138251.pdf 31 DfE, More than 130 new free schools to create more good places, April 2017, https://www.gov.uk/government/news/more-than-130new-free-schools-to-create-more-good-places 32 Carnevale, Smith & Strohl, Recovery 2020: Job Growth and Education Requirements through 2020; Georgetown University, June 2013, https://cew.georgetown.edu/cew-reports/recovery-job-growth-and- education-requirements-through-2020/ 33

Exeter Mathematics School, Results 2016, August 2016, https://www.exetermathematicsschool.ac.uk/results/ • 30 Ibid., p23 • 31  “A tunnel through the Peak District: can you dig it?”, New Statesman Spotlight, October 2016 • 32  TfN, The Northern Transport Strategy: Spring 2016 Report, March 2016, p5

34 University Technical College Students – 2016 Destinations, www.utcolleges.org/uploads/uploads/.../utcdestinations_a4flyer_nov16_webready.pdf 35 Eurostat Unemployment Statistics, February 2017, http://ec.europa.eu/eurostat/statistics- explained/index.php/Unemployment_statistics 36 BIS, Apprenticeships (in England): vision for 2020, December 2015, https://www.gov.uk/government/publications/apprenticeships-in-england-vision-for-2020 37 BEIS, Building our Industrial Strategy: Green Paper, January 2017, https://www.gov.uk/government/consultations/building-our-industrial-strategy 38 Newcastle Chronicle, February 2017, http://www.chroniclelive.co.uk/news/north-east-news/north-east- business-leaders-politicians-12617044 39 BEIS, Building our Industrial Strategy: Green Paper, January 2017, https://www.gov.uk/government/consultations/building-our-industrial-strategy 40 HM Treasury, Singapore Government Budget, March 2015, http://www.singaporebudget.gov.sg/budget_2015/home.aspx 41 Kuczera, M. OECD Skills studies building skills for all: a review of England, February 2016, https://www.oecd.org/unitedkingdom/building-skills-for-all-review-of-england.pdf 42 World Economic Forum, The Future of Jobs Employment, Skills and Workforce Strategy for the Fourth Industrial Revolution, January 2016, http://reports.weforum.org/future-of-jobs-2016/ 43

CBI & The Royal Society, Making education your business: A practical guide to supporting STEM teaching in schools and colleges, May 2016, https://royalsociety.org/topics-policy/publications/2016/making- education-your-business/ • 85 For further information on regional airports see Regional Airports (SN00323), 26 April 2016 • 86  Op cit., The Northern Powerhouse: One Agenda, One Economy, One North, p20

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www.policynorth.com

Global North  

David Harrison