Electronics company LG Philips announced recently that it is to close its manufacturing plant at Durham with the loss of some 761 jobs. The closure of the plant results from the development of flat-screen display technology, which is not manufactured by the Dutch-Korean group at the Durham plant. On the same day, Abbey announced that it will be closing its call centre in Gateshead with the loss of a further 235 jobs, following its acquisition by Banco Santander, Spain’s largest bank.
These two examples summarise the challenges that the North East economy has had to face during the past decade. LG Philips represents the foreign-owned sector that received various financial incentives to encourage it to remain as a major manufacturer and employer in the region. Abbey represents the more recent trend towards creating jobs through large-scale call centres in the region and these jobs then being ‘offshored’.
Despite this, the region has seen significant growth in its economy in recent years. In particular, the region has benefited from the continuing success of its leisure and tourism industry and the numbers of people visiting the area from both the UK and abroad, for business and pleasure, has soared. Newcastle was voted the ‘New Capital of Britain’ by both The Times and The Observer, which carried the quote: “Forget London’s reputation as the cool capital – the new centre is Newcastle.”
Last year saw a notable increase in the number of companies in the area going to investors for funding and an increase in the number of local companies turning to acquisition as a way to grow their businesses.
One of the region’s most successful stories is its growth in science-based businesses. In order to succeed in a global economy, the UK needs to build on its ‘scientific genius’ and the North East is definitely at the forefront of research and innovation.
The vehicles for this ambitious plan have been the Science and Industry Council, the region’s five Centres of Excellence, (covering biosciences, digital media, nanotechnology, renewable energies and process industries) and the venture capital fund NStar.
The five Centres of Excellence have been highly successful in encouraging new technology, new business and entrepreneurship throughout the North East.
Similarly, in less than a decade, the Centre For Life in Newcastle has become a recognised world leader in genetics and stem cell research. The historic announcement on 19 May that scientists at the Centre For Life had successfully cloned a human embryo, just months after being licensed, underlines the fact that the region is at the cutting edge of scientific development.
The North East’s five universities – Durham, Newcastle, Northumbria, Sunderland and Teesside – also have an important role to play. The research that they produce is central to regional development agency One NorthEast’s strategy to increase the level of collaboration between business and academia to establish new technology-based businesses spun out from the universities and to increase the level of entrepreneurial activity in the region.
Recognition of the progress that has been made in the region came recently when the Chancellor announced in his pre-budget report a long-term plan of investment in science education and the high-tech industry. He selected Newcastle as one of three “science cities” that will share a fund of £100m to accelerate further growth. Paul Walker, chief executive of Sage Group, has been appointed chairman of the group that will oversee this project.
As we enter the second quarter of 2005, official statistics suggest that the UK economy is facing a downturn. The North East unemployment figures rose for the first time this year. Despite this, there remains an air of confidence in the area.
A number of venture capitalists, including Northern Enterprise, Northern Venture Managers, Bridge Community Ventures and NStar, are actively investing in the North East. This desire to invest in the area has been fuelled further by the optimism of the local business marketplace.
One NorthEast will continue to play a huge role in developing the area. The Northern Way Growth Strategy aims to establish the North of England as an area of exceptional opportunity, with a world-class economy and superb quality of life. It aims to tackle the £29bn output gap between the area and the rest of the UK by transforming the North’s economy. In addition, One NorthEast recently launched the Regional Image Strategy, which aims to increase awareness of the region and to attract more investment, business and people.
The region is further supported by a wide range of organisations committed to the development of business in the area. National bodies with regional offices, including the Confederation of British Industry, the North East Chamber of Commerce (the largest branch in the UK) and the Institute of Directors are joined by a number of local groups such as the Entrepreneurs Forum and the Bridge Club.
The Entrepreneurs Forum has been set up by entrepreneurs and aims to “shorten the distance travelled from business start-up to success”. Here members draw on the personal and professional experiences of each other and the forum’s board, which includes some of the region’s most successful businessmen and women, such as Sir Peter Vardy, Lorna Moran of Northern Recruitment Group, David Charlton of the Officer’s Club and Paul Walker of Sage Group.
The Bridge Club is a privately owned company that aims to help businesses in the area make the right connections, whether it be with like-minded business professionals, suppliers or mentors.
Aspire is a business-led regional campaign which sees the private and public sectors working together to inspire and motivate young people in the region to do better in work and life. It is working to ensure we have the talent tomorrow to continue the economic successes in the region today.
Going forward, both Komatsu and Siemens have announced expansion plans for their sites in the region. UK statistics forecast a downturn in economic activity but the North East has great strength in innovation and technology. The commitment of both the public and private sectors to work together to promote enterprise, raise skills levels and encourage investment will undoubtedly help us improve our competitive situation in the challenging times ahead.
Jamie Martin is managing partner of Ward Hadaway and regional chariman of the Confederation of British Industry
