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Lord Bates is a Home Office Minister and a former MP for Langbaurgh.

Over two years ago on this site, I wrote an article pointing out that government policies aimed at rebalancing the economy in the North East away from public sector dependency were ‘hurting but working’. I now wanted to return to the theme in a short series of articles exploring progress to date.

In 2010, the scale of the challenges facing the North East were enormous. The region had been hit harder than most as a result of the economic meltdown in 2008-2010. In 2007 at Northern Rock, we saw the first run on a bank in 150 years; it was nationalised in 2008 and there were 1300 redundancies. In 2009 Nissan announced that they were cutting 1200 jobs from their workforce of 5000. In February 2010, the lights literally went out on Teesside when the blast furnace was mothballed under the watch of Lord Mandelson, the then Business Secretary. 1600 skilled workers were made redundant.

The one hope being pushed to revive the regional economy at the time was a multi-billion pound order
from Hitachi for new agility trains in Newton Aycliffe. The deal would have created 750 skilled jobs, but
the bankrupt Labour government had to cancel the contract.

Compare and contrast this with he situation now:

In 2011, Sahaviriya Steel Industries (SSI) purchased the Teesside blast furnace. By 2012 the furnace was re-lit and 1800 skilled workers were again employed and exporting 100 per cent of their output through Teesport.

In 2012 Northern Rock was put back into private ownership via Virgin Money and 2000 jobs in the region were safeguarded.

Also in that year, the Government announced the go-ahead for the £4.5 billion Hitachi order at a new plant in Newton Aycliffe. Construction of the £82 million factory will be completed in mid-2015.

Later that year, Nissan announced a new £250 million pound investment in their plant, and growing exports meant they were able to re-employ 1600 workers. They went on to hire a further thousand, reaching a record level of 6000 employees. The plant now produces more cars than the whole of Italy.

And last summer, Virgin announced that they were going to be creating a further 200 jobs.

But the story of this economic turnaround doesn’t stop there:

North East export statistics show that in 2014, the region was the only one in the UK to export more than it imported. Moreover, the total value of exports in the last year has risen by two per cent, the
highest of all English regions. It is not just cars and steel either, pharmaceuticals are the second largest component in exports and the regional economy. Indeed the North East accounts for 58 per cent of the UK’s petrochemical output and 35 per cent of pharmaceutical business output.

There are now 27,000 more businesses across the North East than there were in 2010. Last year, the British Chamber of Commerce found that the North East was second only to London for number of hi-tech start-ups.

Meanwhile, the 2014 Knowledge Economy Index found that the North East was the fastest growing knowledge economy in the UK, having grown 38 per cent in the past five years. Collaborations with the region’s two top-twenty ‘research excellence’ universities, Newcastle and Durham, were key drivers of this strong performance. One hi-tech start-up out of Newcastle University, Sage now employs more than twice as many people as Nissan. The same university is today the world leader in stem cell research.

Challenges remain; public sector employment has fallen by 59,000 since 2010 but, as we get the national finances back on a stable footing, this reduction has been more than offset by the growth in the private sector. Total employment in the North East now stands 51,000 higher than in 2010.

Salaries are increasing too as private sector growth and demand for skills increases. Adzuna, the recruitment agency, reported last year that advertised salaries were increasing faster in the North East than in another region of England and at over twice the rate (6.1%) of the South East (2.4%).

The economic evidence has even been seized upon by the national press, a media hitherto inclined to lazy stereotypes of the North East. Headlines like ‘North East England maintains lead in business growth’ in the Financial Times last year would have been unthinkable five years ago, as would ‘If you want to see good news, travel North East’ in the Daily Telegraph.

Before 2010, the Labour Government and local authorities placed their trust in the £300 million a year regional development agency – ONE North East to develop grand plans and pick ‘winners’. We were told that, were it abolished, economic development in the region would disintegrate. In reality the exact opposite has occurred.

But there is a greater lesson for the North East as it continues its phoenix-like rise from the ashes of
the last Labour government. Historically, our greatest weakness has been to place far too much confidence in government and demonstrate too little confidence in ourselves.

This is after all the region of Lord Armstrong who developed hydroelectric and hydraulic power; Charles
Parsons investor of the steam turbine that revolutionised maritime transportation; George Stephenson father of railways; Joseph Swan inventor of the electric light bulb. The region has inventiveness and enterprise in its economic DNA.

This historic entrepreneurial instinct was suppressed during the long decline of the nationalised heavy
industries. The region has listened too long to the warm patronising words of a political and collectivist
elite who sought to lock the regional economy in a sentimental cage of government dependency believing it incapable of standing on its own two feet. The evidence of the past five years is clear: The North East can not only survive, but thrive, when its entrepreneurial spirit is set free.

 

6 comments for: Lord Bates: The revival of the North-East

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