The State of Britain

NE

The gap between the NE’s tax take and public spending increases, the unemployment rate still a UK outlier, and trains dominate economic developments

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In the ONS’s estimate of regional public spending and regional tax revenues in 2019, the NE had a deficit of £10.7bn, a larger shortfall than the £10.2bn recorded in 2018. The North West, at £20.1bn, had the largest deficit in the UK which compared with London, which had the highest surplus of £38.9bn.

On a per person basis, the NE’s deficit was £4,027, larger than the £3,852 recorded in 2018. London had the highest surplus of £4,369 per person whereas Northern Ireland had the biggest shortfall per person at £4,978.

The only areas of the UK to run surpluses were London, the SE of England and the East of England. The West Midlands and the North East were the two regions in the UK to increase their net fiscal deficits over the year; the other seven regions reduced their shortfalls.

At a national level, the UK had a deficit of £623 per person which splits into deficits of £68, £2,713, £4,289 and £4,978 for England, Scotland, Wales and Northern Ireland respectively.

Public spending in the NE was £36bn or £13,560 per head, an increase on the 2018 figure of £34.8bn. London had the biggest spend of £123.9bn or £13,826 per head whereas Northern Ireland had the lowest at £27.9bn or £14,821 per head. Total government spending was £853bn or £12,835 per head.

The NE collected £25.2bn in taxes in 2019. London contributed the most to the Exchequer at £161.9bn, compared with the lowest contribution of £18.5bn which was from Northern Ireland. Overall the state raised £811.3bn or £12,213 per head in taxes an uplift of £34.1bn or £461 per head compared with 2018.

More data from the ONS showed unemployment in the NE increased by 5,000 to 80,000 between September and November 2019; the jump of 0.4% took the overall rate to 6.2%. Northern Ireland had the lowest rate at 2.3% with the UK rate at 3.8%. The NE rate of 6.2% is a UK outlier with the next nearest at 4.3% in London, the West Midlands and Yorkshire and the Humber.

The South West had the highest employment rate at 79.8% which compared with 71.4% in the NE. UK employment was estimated at 76.3%.

NE average property prices recovered after a big fall last month. Prices increased by 0.7% during November 2019 to £130,712, which took annual growth to 1.4%. In comparison, UK prices increased by 0.4% to £235,298 an annual growth rate of 2.2%.

On transport, the Office of Rail and Road (ORR) is investigating Network Rail over its poor service on routes used by commuter favourites Northern and TransPennine Express. Network Rail owns and operates rail infrastructure in England, Wales and Scotland.

The ORR said the proportion of scheduled train stops made on time in the last 12 months up to 4 January by Northern was 55% and 41% by TransPennine Express. This compares to the national average of 65%.

Early in January, Transport Secretary, Grant Shapps, announced he was evaluating a proposal from Northern Rail for options for continuing its franchise after the minister said the firm had the finances to continue only for a number of months. Then he surprisingly followed through and nationalised the firm, which consequently threw the Transpennine franchise into sharper focus.

On HS2, the Department for Transport and HS2 Ltd did not allow for all uncertainties when estimating initial costs the National Audit Office (NAO) has said. In 2015, HS2 was due to cost £56bn but a leaked government report suggested the total could reach £106bn. At this cost the decision whether to proceed or not will likely be taken at Prime Ministerial level next month.

Still on trains, Darlington council wants to highlight the town’s rail heritage ahead of Stockton and Darlington Railway’s bicentennial celebrations in 2025. The railway was the world’s first passenger line to use steam locomotives when it opened in 1825. Funding of £20m from the Tees Valley Combined Authority to create a world-class visitor attraction has been secured.

Further north along the line in Newton Aycliffe less positive train news, up to 250 jobs could be lost at the Hitachi plant which makes intercity trains for Avanti West Coast. Opened in 2015, the facility employs c900 people and was awarded a £350m contract to assemble 23 trains last month but earlier lost out on a contract for the Tyne and Wear Metro.

Administrators Deloitte have said 53 jobs will be lost in Crook, County Durham, after they could not find a buyer for iron and steel castings producer the Bondshold Group. The firm was established in County Durham in 1868 and only two years ago was one of the UK’s fastest-growing for international sales.

The closure of a Nolato Jaycare factory in Portsmouth with the loss of 115 jobs is likely to benefit the firm’s other plant in Newcastle. The medical packaging firm said the relocation would cost c£2.8m.

Tesco Bank is to create 20 jobs in Newcastle as part of an investment in online banking. This adds to 20 roles created when the bank announced Newcastle as the home for a technology hub in November. The company is recruiting test, software and systems engineers, systems architects, solution designers, project managers, and IT and business analysts.

NE economic growth in 2018 better than 2017, the Sunderland economy the fastest growing in the region, the Tees Valley LEP unable to move the growth dial and NE unemployment a cause for concern

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Following its first publication of quarterly GDP estimates for the regions in September, the ONS has now published its 2018 full year estimate of economic activity by UK country, region and local area using gross domestic product.

The figures showed the NE economy grew by 0.9% in 2018, up from the 2017 growth rate of 0.5%. This placed the NE eighth (2017 ranking 12th) out of the twelve UK ‘regions.’

The UK and England growth rate in 2018 was 1.4%. Growth in Wales was 1.3%, Scotland grew by 0.9% and the Northern Ireland economy shrank by 0.5%.

London topped the 2018 table with growth of 2.0% whilst Northern Ireland was at the bottom.

Within the region, the Sunderland economy grew the fastest at 4.9%, followed by South Tyneside at 3.3% and Tyneside at 2.3%. Across the UK, the highest annual growth of sub national areas was in Falkirk at 10.5%.

Four areas of the region saw their GDP decline in 2018. The worst performer was Darlington at -6.3% followed by Hartlepool and Stockton at -4.0% and Northumberland at -2.5%. In UK terms, the lowest annual growth of sub national areas was in Mid and East Antrim at -10.1%.

GDP per head growth of 4.9% to £29,635 was seen in Sunderland which was the highest in the NE. GDP per head fell by 6.4% in Darlington to £28,866 but the lowest in the region was Northumberland at £18,978.

In terms of UK extremes, GDP per head was £395,309 in Camden and the City of London and £15,034 in Ards and North Down. These figures are a guide and are influenced by commuter flows.

In 2018, key drivers of the North East economy were arts and entertainment at 7%, wholesale and retail 5% and information and communication at 3%. Those areas that did not perform well were accommodation and food services down by 3%, education declined 2% as did water supply and services. Overall the services sector grew by 1.3% and production by 0.2% with construction declining by 2.1%.

The 2018 performance of the region’s two enterprise partnerships was also highlighted by the ONS. Of the UK’s 45 development bodies, the North East LEP was ranked 14th (2017 ranking 38th) with growth of 2.0%, but the Tees Valley LEP slipped from 42nd in 2017 to bottom in 2018 as the economy declined by 2.1%.

More data from the ONS showed unemployment in the NE increased by 15,000 to 78,000 between August and October 2019; the jump of 1.1% took the overall rate to 6.1%. Northern Ireland had the lowest rate at 2.3% with the UK rate at 3.8%. The NE rate of 6.1% is a UK outlier with London the next nearest at 4.5%

The South West had the highest employment rate at 80.8% which compared with 70.9% in the NE. UK employment was estimated at 76.2%.

NE average property prices fell by a substantial 2.3% during October 2019 to £129,360, the biggest drop in the UK, which took the annual fall to 1.1%. Only London recorded a bigger annual drop of 1.6%. In comparison, UK prices fell by 0.7% to £232,944, an annual growth rate of 0.7%.

The NE economy treads water, regional unemployment becomes a UK outlier, and mixed news in Sunderland

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Nine hundred year old Auckland Castle, in Bishop Auckland, once the private palace of the Prince Bishops of Durham, has reopened after a three year multimillion-pound renovation; the Castle hopes to attract 130,000 visitors a year. The project was funded by a £12.4m heritage lottery grant and £7m from the Auckland Castle Trust.

In Gateshead, £90m could be spent bulldozing a 20-acre site adjacent to the High Street. New housing and green spaces would be created; up to 30 businesses will be asked to relocate. Gateshead Council said it would be working with partners to realise the plan.

In Sunderland, Legal & General has announced it will invest in a plan which includes the development of the old Vaux Brewery. One of the three buildings planned for the project is the new Sunderland City Hall.

Vaux Brewery closed in 1999 after 162 years and the 26-acre site has been vacant since then. In July, online supermarket Ocado announced plans to set up a new centre at Vaux, creating 300 jobs. Overall, spend on the entire project could top £100m.

Also in Sunderland, Hays Travel has announced plans to hire an extra 1,500 staff. The travel agent has already taken on 2,330 former Thomas Cook employees but now plans to hire more staff, of which 200 people will be at its head office in the city.

Not such good news for the area was energy firm Npower’s decision to cut up to 4,500 jobs as part of a restructuring plan. Three call centres are under threat of closure, one of which is at Houghton le Spring, where 2,500 are employed.

Chinese firm Jingye says will invest £1.2bn in British Steel after it provisionally agreed to rescue the steelmaker. Hundreds of workers are employed by British Steel in the North East, at sites near Redcar; at Skinningrove, east Cleveland; and at Blaydon. The new owners did not put a number on how many jobs would be saved.

The Stats

Following its first publication of quarterly GDP estimates for the regions in September, the ONS has now published its next estimates for the North East, the other eight English regions, and Wales, for the year to March 2019. GDP figures have been available for the UK since the 1940s, for Scotland since 2002 and Northern Ireland since 2013.

The latest available figures showed the NE economy grew by 1.5%, up from 0.9% the previous quarter. This placed the NE seventh (previous ranking eighth) out of the twelve UK ‘regions.’

London topped the table with growth of 4.2% whilst at the bottom the Yorkshire and Humberside economy declined by 0.3%. Propelled by a drive to meet the original March 31st Brexit date, UK growth over the same period was 2.2%.

The ONS figures also highlighted that the quarter to March 2019 was better for the region than the previous quarter. The North East economy grew by 0.4% in January to March 2019, following growth of 0.2% in October to December 2018.

In this period, the health and construction industries grew by 6.9% and 3.2% and made the largest positive contributions to growth, whereas the education and energy industries recorded negative growth of 4.3% and 7.9%.

The services sector contributed the most to GDP whereas the production sector was a drag on the regional economy.

Estimates published by ESCoE last month for the year ended September 2019, a more recent period than the ONS figures, ranked the NE eighth (previous ranking was ninth) with growth of 1.2%, which suggests the region has had a slightly better summer relative to other parts of the UK.

Using this metric, UK growth was 1.45%. Growth in London (ranked first) was 2.32%, which compared with the South West of England (bottom) at 0.41%

More data from the ONS showed unemployment in the NE increased by 7,000 to 75,000 between July and September; the increase of 0.5% took the overall rate to 5.9%, the highest rate in the UK. The next highest rate was London at 4.5%. Northern Ireland had the lowest rate at 2.5% with the UK rate at 3.8%.

The South West had the highest employment rate at 81.0% which compared with 71.2% in the NE. UK employment was estimated at 76.0%.

In September, average earnings in the North East were up by £14 to £551 per week. London had the highest average earnings of £830. The lowest average earnings of £527 were recorded in Wales. In the UK overall, average earnings grew by 3.6% or by 1.8% after inflation.

NE average property prices were flat over the month at £132,769, which took annual growth to 2.0%. In comparison, UK prices fell by 0.2% to £234,370 during September, an annual growth rate of 1.3%.

NE house prices grow the fastest in the UK, regional rail worries, and Geordies and Teessiders see their happiness improve

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Unemployment in the NE increased by 3,000 to 74,000 between June and August, which took the overall rate to 5.8% which was the highest in the country.

The South West continued to record the lowest rate at 2.4% with the UK rate at 3.9%. The South West also had the highest employment rate at 81.0% which compared with 71.2% in the NE. UK employment was 75.9%.

Two months ago, North East average property prices increased by 1.7%, the most in the UK. This was all reversed last month with prices dropping by 2.1%, but the latest figures show prices went up again, this time by 3.1%, to £134,736.

The monthly uplift was the highest in the UK and took the annual increase to 3.3%. In comparison, UK prices grew by 0.8% to £234,853 during August, an annual growth rate of 1.3%.

The ONS’s Personal Well-being (or Happiness) Index has ranked the NE second out of the 12 UK ‘regions’ in terms of improved life satisfaction, only Londoners’ happiness improved  more. Average anxiety also improved in the NE over the last six years, with only folk from the East and North West of England less anxious.

Overall though, the Northern Irish were still the happiest in the UK with Londoners still the most miserable.

Development

In Middlesbrough, an £8m technology centre is to be built at a research facility on a former ironworks. The Welding Institute extension is part of the £55m Teesside Advanced Manufacturing Park. Half the funding has come from the EU’s regional development fund.

Also in Middlesbrough, a £250m project could see the town becoming a leading digital city. An initial £45m phase will see three 20-storey office and residential towers built, which will be the highest buildings within a 30 mile radius.

Also planned is a 750-seat indoor amphitheatre beneath a glass atrium and a 400-seat outdoor arena to host events such as lectures and concerts. The scheme will be funded jointly by the Tees Valley Combined Authority and Middlesbrough Council.

Jobs

Hays Travel staff have been moving to their new three-storey head office  in Keel Square, Sunderland, from four separate sites across the city centre over the last few months. 

Overall, headcount was about 1,000 in the city before the firm bought all 555 Thomas Cook stores in the UK for £6m, saving up to 2,500 jobs. Over 100 new jobs will be based in the Sunderland headquarters as a result of the deal.

About 3,000 of Nissan’s 7,000 workers are being moved from night shifts to day-time working which will be sufficient to maintain the existing 440,000 cars a year output. Some of this production will be the new Juke model which started being built this month.

The plant also makes the Qashqai and electric Leaf models. Earlier this year, the firm announced it was ending the production of two of its Infiniti cars with the loss of 250 jobs.

The government will open talks with other bidders for British Steel after failing to agree terms with Ataer Holding during the exclusivity period which started in August. Hundreds of workers are employed by British Steel in the North East, at sites near Redcar; at Skinningrove, east Cleveland; and at Blaydon.

Chemicals firm Ineos has launched a consultation on the potential closure of the Seal Sands Acrylonitrile plant on Teesside. Other activities at the site may safeguard some jobs but 220 posts are at risk.

Transport

The Northern Powerhouse Partnership’s Independent review into HS2 called ‘HS2 North’ was introduced in Parliament this month by the Northern Powerhouse All Party Parliamentary Group.

The key recommendation of the report is the establishment of HS2 North, a private sector special purpose vehicle modelled on the Olympic Delivery Authority which would integrate HS2 and Northern Powerhouse Rail.

HS2 North would be arms-length from government, contracting with private sector delivery partners and Network Rail, and overseen by Transport for the North.

Whilst no one doubts that HS2 will bring significant benefits to the Northern economy, this report, and a second Northern Powerhouse Partnership report, ‘HS2 and the Economy of the North’, identifies that further detailed work needs to be undertaken to pin down the economic benefits that the new line would bring.

Separately, CBI East Midlands, West Midlands, Yorkshire and Humber, London, the North East and North West regional directors also urged the government to build the HS2 rail project in full.

However, a paper by the Adam Smith Institute, also released this month, claims that HS2 will deliver limited benefits and that some Northern cities could lose direct trains to London.

The paper instead recommends upgrading existing routes with new signalling, doubling the number of tracks, reopening mothballed lines, building new sections of railway and targeting bottlenecks at key junctions.

Also on the trains, the government is considering whether the management of Northern Rail should be taken into public hands. The Department for Transport confirmed it was developing contingency plans with either a new short-term management contract with Northern or the Operator of Last Resort (‘OLR’) (effectively the Government).

The OLR is currently in charge of London North East Railway, the East Coast Mainline intercity franchise. Northern is a large, more complex commuter network, so the government is likely to take-on a more supervisory role, with Northern still able to run day-to-day services and take the blame.

In a bad month for Northern, politicians demanded that passengers still having to use the 1980s-built rail-buses called Pacer trains should be offered reduced fares. Northern had planned to withdraw them all by the end of this year but some will be retained into 2020 as a result of delays in the construction and delivery of new trains from manufacturer CAF.

The Pacers, a joint venture between British Rail and British Leyland, were originally constructed from the body of a bus and were intended to have a maximum lifespan of 20 years. In fairness though the Pacer is a survivor, other British Leyland vehicles from the 1980s like the Austin Maxi and Morris Marina have long gone

Middlesbrough again the most deprived authority in England and the North East retains the highest unemployment rate in the UK despite a significant improvement

Reading Time: 4 minutesThe Ministry of Housing, Communities and Local Government has published its deprivation index which looks at an area’s levels of income, employment, education, health and crime as well as housing services and living environment. Jaywick in Essex, near Clacton-on-Sea, was previously found to be the most deprived in the last two reports in 2010 and 2015 and it has won this unwelcome accolade again. The Ministry divides England up into 32,844 neighbourhoods averaging about 1,500 residents or 650 households each. The Thorntree area of Middlesbrough was the first area in the NE to be featured and was ranked 46th.

In terms of local authorities, 49% of Middlesbrough was ranked as deprived, the worst in England, and Hartlepool was ranked tenth with 36%, both authorities had the same rankings in 2015. Gateshead and Northumberland were both in the top ten more deprived areas relative to 2015 and Newcastle, Redcar /Cleveland and South Tyneside all moved up the deprivation rankings.

Middlesbrough, Hartlepool and Redcar are some of the NE towns invited to apply for regeneration funding as part of the £3.6bn Towns Fund which is targeted at 100 English towns. Towns must submit economic growth plans with a focus on improved transport, broadband connectivity, skills and culture.

The Ministry found concentrations of deprivation in a number of coastal towns, many of which are in the North East, but there was no new money for the region in the latest tranche from the Coastal Communities Fund. The North East and Yorkshire were, however, awarded £17.2m as part of a £95m pot to revive historic high streets, with Hexham, North Shields and Middlesbrough benefiting.

Delegates who attended the Convention of the North at the ‘Magnum Centre’ in Rotherham were first treated to Latin ice cream jokes before the PM outlined plans to give Northern Mayors and combined authorities more control over setting local train fares, timetables and budgets. He cited his experience as Mayor of London as evidence of how transport in London improved when devolved from central government. At county level, he also floated the idea that councils or community partnerships could take control of branch lines and their stations.

Transport
It is difficult to see how rail reforms could make services much worse, after a report by Transport for the North found Northern and TransPennine Express (TPE) services worse than they were a year ago when they were disrupted by timetabling chaos. More services were either late or cancelled in July and August than the previous year the report found, with the rail firms pointing to weather events such as flooding and extreme heat as mitigating factors. The percentage of TPE trains running on time dropped to 70.9% between 21 July and 17 August from 75.7% in the same period last year, an average of 42 trains were cancelled daily, representing 12.9% of services. At Northern, punctuality fell to 79.4% from 82.2% and an average of 139 trains were cancelled each day, representing 5.3% of services. The latest National Rail Passenger Survey of the 25 UK rail companies ranked Northern 23rd and TPE 18th. Last month, popular Virgin Trains, which was ranked second with a 91% satisfaction rating by passengers, lost its franchise to TPE’s parent.

Development
Also on the trains, Newton Aycliffe based Japanese train builder Hitachi, has failed to win an order to supply 42 new trains for the Tyne and Wear metro. Hitachi was in competition with Spanish firm CAF and Swiss train manufacturer Stadler for the £500m contract, the winner will be announced in January. Hitachi’s County Durham plant employs 700 people and built the East Coast Mainline’s new Azuma trains. Recently it won a £400m order for new Midland main line carriages but failed to secure a £1.5bn London Underground contract. CAF has a factory in Newport and Stadler has one in Liverpool.

The Stats
For the first time, the ONS has published quarterly GDP estimates for the North East and the other eight English regions and Wales. GDP figures have been available for the UK since the 1940s, for Scotland since 2002 and Northern Ireland since 2013. The latest available figures, which are for the year ended 2018, showed the North East economy grew by 0.9%. This ranked the North East eighth out of the twelve UK regions. The East Midlands topped the table with growth of 3.4% whilst at the bottom the South West economy contracted by 1.1%. UK growth over the same period was 1.5%.

The quarter to Dec 2018 showed the information/communication and construction industries grew by 6.8% and 3.2% respectively and made the largest positive contributions to North East growth. The transportation and storage industry experienced negative growth of 5.8% and was the largest drag on the region’s economy. Within the North East, the services sector contributed positively to GDP growth but output in the production sector contracted. More recent estimates (six months later) for the year ended June 2019, published by ESCoE last month, ranked the North East ninth with growth of 1.3%.

More data from the ONS showed unemployment in the North East fell by 9,000 to 63,000 between May and July, a significant drop of 0.7% to 5.0%. This, however, was still the highest unemployment rate in the country. The South West had the lowest rate at 2.4% with the UK rate at 3.8%. The South West also had the highest employment rate at 80.8% which compared with 71.1% in the North East. UK employment was estimated at 76.1%.

Last month, North East average property prices increased the most in the UK by 1.7%, this was all reversed this month, with prices dropping by 2.1% to £127,466. Annually prices have dropped by 2.9%. In comparison, UK prices grew by 0.5% to £232,710 during July, an annual growth rate of 0.7%.

North East average property prices increase the most in the UK and Tees Valley & Durham defined as a less developed region by the EU

Reading Time: 3 minutesGrowth in the North East was 1.3% in the year to June 2019 according to estimates from ESCoE; similar to the previous quarter’s growth of 1.4%. This ranked the North East ninth out of the twelve UK ‘regions’. At 2.3% London had the best performance with Northern Ireland at 1% the worst. The North West was the most improved region with growth accelerating from 1.0% to 1.6%. The national growth rate for the same period was 1.5%. With the UK economy contracting by 0.2% in the quarter, most regional economies have shrunk with the North East too close to call.

Unemployment in the North East fell by 1,000 to 68,000 between April and June, a drop of 0.1% to 5.3%. This was highest unemployment rate in the country. The South West had the lowest rate at 2.7% with the UK rate at 3.9%. The South West also had the highest employment rate at 80.5% which compared with 70.8% in the North East. UK employment was estimated at 76.1%, the joint highest since comparative records began in 1971.

In June, average earnings in the North East fell from £560 to £537 per week, the lowest in the UK. London had the highest average earnings of £831. In the UK average earnings grew by 3.7% or by 1.8% after inflation.

North East average property prices increased the most in the UK during the month, a 1.7% uplift to £130,342 took the annual growth rate to 1.8%. In comparison UK prices grew by 0.7% to £230,292 during June, which left the annual growth rate unchanged at 0.9%.

On employment, the 800 British Steel jobs on Teesside could be safeguarded after Atear Holdings, which owns nearly 50% of Erdemir, Turkey’s biggest steel producer, said it was in advanced talks with the Official Receiver. British Steel was put into compulsory liquidation in May. Atear Holdings is the investment vehicle of the Turkish military pension fund.

It was a month of mixed messages from the Government on regional transport. In July, Boris Johnson used his first major policy speech in Manchester to promise a high speed rail link between the city and Leeds. High speed rail is expected to arrive in Leeds and the rest of northern England by 2033. This tied in with Northern Powerhouse Rail’s plan to link Leeds to Newcastle via an HS2 junction and upgrades to the East Coast Main Line. But now the government has launched a review of the high-speed rail link (HS2) with a decision promised by the end of the year. With £7.4bn already spent, Transport Secretary, Grant Shapps, has refused to rule out scrapping it entirely. Phase 1 of the development between London and Birmingham is due to open at the end of 2026. In July, the current chairman of the project warned that the total cost could rise by £30bn to £86bn, putting the projects value for money into question.

A report by an All-Party Parliamentary Group (‘APPG’) of MPs which looks at Post-Brexit Funding for the nations and regions has found that the UK would receive additional EU funding in the 2021-27 spending round. Three additional sub-regions are likely to slip below the threshold of 75% EU average GDP per head that would qualify them for ‘less developed region’ status. Existing less developed regions like Cornwall and West Wales & the Valleys, will be joined by the Tees Valley & Durham, as well as Lincolnshire and South Yorkshire. These areas would likely have received at least €500 per head in EU regional development funding over 2021-27 which adds up to an extra £950m.

Additionally, the EU has proposed that ‘transition region’ status should be extended to cover all regions with a GDP per head between 75-100 per cent of the EU average, compared to 75-90 per cent at present. Seven additional sub-regions are likely to slip below the threshold of 100% EU average GDP per head qualifying them for ‘transition region’ status. They are East Anglia, East Wales, Greater Manchester, Leicestershire, Rutland & Northamptonshire, Outer London South, North Yorkshire and South Western Scotland. It is not clear how much extra funding these areas would have received from the EU, or but €50 per head over the next EU spending round would equate to £560m.

The UK government has promised to replace EU funding to the regions with a new UK Shared Prosperity Fund. If the new sub regions are added, the APPG calculates this amounts to c£1.8bn pa, on top of the c£2.2bn pa already committed as part of Local Growth Fund. Integrating the Local Growth Fund into the UK Shared Prosperity Fund could be problematic. The Local Growth Fund allocates funding to LEPs via competitive bidding whereas the allocation of EU funds uses a fixed formula. How the Shared Prosperity Fund will be allocated to the devolved nations and mesh with other pots like the City Deals is yet to be determined.

The value of North East Enterprise Zones queried, more money for the Borderlands Growth Deal and depopulation concerns in North East coastal towns

Reading Time: 3 minutesUnemployment in the North East was unchanged at 71,000 between February and April but at 5.6% it was still the highest in the UK. At 2.6% the SW of England had the lowest rate in the country. The UK unemployment rate stands at 3.8%.

After North East average property prices surged by 5.0% in April, this month prices reversed by 1% to £127,885, which meant annually prices dropped by 0.7%. In comparison, UK prices increased by 0.1% to £229,431 during May, which reduced the annual growth rate to 1.2%.

In its review this month of the 38 Local Enterprise Partnerships (LEPs) – the private sector-led partnerships between businesses and local public sector bodies that support local economic growth – the Public Accounts Committee of the House of Commons found that from 2015-16 to date; £9.1bn of taxpayers’ money has been awarded to LEPs through three tranches of Growth Deals. The north of England, with 11 LEPs, has received most of the funding at £3.4bn (38%), the East of England, with three LEPs, has received the least with £703m, and London, with one LEP, has received £435m.

The Ministry of Housing, Communities and Local Government considers the population of an area as well as the strength of the LEP’s strategic economic plans and projects when deciding Growth Deal allocations. There are no overlapping LEPs in the North East which means the regions LEPs will be able to bid for funds from the Government’s proposed Shared Prosperity Fund, which will replace EU structural funding after Brexit. The North Eastern LEP has received £380m, the 6th most in England, whereas Tees Valley has secured £126m, the 28th in England. The Ministry does not to evaluate the Local Growth Fund which means it has no understanding of what impact spending through LEPs has on local economic growth. The latest growth figures for the North East from ESCoE showed the second lowest growth in the UK at 0.8%.

The 24 Enterprise Zones designated in England in 2011 to improve economic growth had created 17,307 jobs by 2017 instead of the forecast 54,000 jobs by 2015. BBC-commissioned research conducted by think tank charity Centre for Cities also found that in two areas the number of jobs had fallen. Enterprise zones offered cheaper business rates, superfast broadband and lower levels of planning control. According to the research only 63 jobs were created in the North Eastern Enterprise Zone, the lowest job creation in England, with 777 in the Tees Valley Enterprise Zone. The cost of the scheme is disputed, with The Ministry of Housing, Communities and Local Government claiming £101m, £215m less than the BBC’s estimate of £316m+. The Ministry also disputes the methodology used in the research.

Northumberland and the other four cross-border councils and the Scottish and UK governments have signed the heads of terms for the Borderlands Growth Deal. The two governments have confirmed funding of up to £350m and agreed to uplift the deal with an extra £45m. Projects under consideration include a feasibility study into extending the Borders Railway beyond Tweedbank to Carlisle., Carlisle Station Gateway, Chapelcross Energy Park near Annan, Berwick Theatre and Conference Centre and the Mountain Bike Innovation Centre in the Borders. Second phase projects might include a play village at Alnwick Garden, the Star of Caledonia landmark sculpture at Gretna and a dairy innovation centre in Dumfries and Galloway. The funds will be deployed over 10 years by the Scottish government and over 15 years by the UK government.

BBC analysis of ONS projections has found thirty seaside towns could see a fall in the number of residents under the age of 30 by the year 2039, with the biggest decline in the north of England. Northumberland could see a fall of 11%, the third largest decline in England, with Hartepool and Redcar seventh and eighth. Coastal authorities in the south such as Bristol could see a 15% rise in the number of children and young people. The Coastal Communities Fund has invested £218m in 354 projects across the UK since 2012 with the latest figures showing 27% or c£25m deployed in the South West and 12% or £15m in the North East. In the spring, the House of Lords Select Committee on regenerating seaside towns found that Brighton and Bournemouth have shown that coastal areas can successfully regenerate and that the Government should secure town deals for other deprived seaside areas.

Nissan’s Sunderland Plant the Blueprint for Sustainable Inward Investment and has the Northern Powerhouse 5 years on ‘Powered up the North’

Reading Time: 4 minutesUnemployment in the North East increased by 7,000 or 0.6% to 72,000 between February and April, at 5.7% it was the highest in the UK. At 2.7% the SW of England had the lowest rate in the country. The UK unemployment rate stands at 3.8%.

North East average property prices surged by 5.0% to £130,388 during the month which meant annually prices increased by 2.0%; the monthly increase was more than double anywhere else in the UK. In comparison, UK prices increased by 0.7% to £228,903 during April, which held the annual growth rate at 1.4%.

Research by the think-tank, the Institute for Public Policy Research North, showed the North East has seen the biggest percentage cut to public sector jobs (24%) of all of England’s regions, with 72,000 fewer public-sector workers in the region than a decade ago. The North West lost most jobs overall with 133,000 less employees. With northern regions of the UK more dependent on the public sector than other parts of the UK, the Government’s austerity programme has had more of an impact. Figures from the ONS last month showed that, with the exception of London and the East and South East of England, most regions of the UK have a fiscal deficit, with the North East having the highest in England. The think tank also compared the Northern Powerhouse’s performance over its first five years with the UK average, citing successes in economic growth (10.7 % v 10.6%), productivity (11% less productive v 12%) and employment (6.9% v 6.2%.)

Echoing the North-South divide, during the month, 33 newspapers across the north of England, including the Newcastle Chronicle, Northern Echo and Teesside Gazette, jointly demanded the government accelerates devolution to help deliver economic growth. The campaign, labelled Power up the North, also targeted more funding for the Northern Powerhouse Rail.

Nissan’s Sunderland factory has now produced 10m cars since 1986. Despite her mixed reputation in the North East, securing Nissan was arguably the most successful sustainable inward investment project achieved by Mrs Thatcher, who visited then Nissan chairman, Katsuji Kawamata, to personally put the case for Sunderland. Since 1986, Nissan has received an estimated £347m in EU and UK public funds, in return the firm has invested c£4bn in Sunderland and made it its European base.

No surprise that banknote and passport printer De La Rue is to cut 170 jobs at its Gateshead factory. Last year the government awarded a contract to Franco-Dutch firm Gemalto to make UK passports following Brexit.

On transport, Spanish firm CAF, Swiss manufacturer Stadler and Japanese firm Hitachi, have been shortlisted to build a fleet of new trains for Tyne and Wear’s Metro system. Hitachi built the East Coast Mainline’s new Azuma trains at its Newton Aycliffe site. The winner of the £500m contract is due to be announced by operator Nexus in January 2020 with the 42 new trains expected to replace the existing carriages between 2021 and 2024

North East councils have also agreed a £377m bid to the government’s Transforming Cities Fund to overhaul the region’s transport. Part of the bid will include £108m for twin tracking of the Metro between Pelaw and Tyne Dock.

The Tyne and Wear Passenger Transport Executive (also known as Nexus) could take control of bus services according to Northern Powerhouse minister, Jake Berry. In the UK, only in Northern Ireland are bus services state-owned but in London services are more regulated than in the North East. Jake Berry’s brief was expanded to include the Department for Business, Energy and Industrial Strategy this month. This added to his role at the Ministry of Housing, Communities and Local Government – all may change again when Theresa May exits Downing Street.

Plans to impose a toll on motorists in Newcastle City Centre would cause economic damage according to businesses. Newcastle, Gateshead and North Tyneside have been consulting on imposing either a Clean Air Zone in which the highest-polluting vehicles would be charged a daily fee of £12.50 or a £1.70 toll on the three central bridges across the Tyne. Analysis by Newcastle City Council has suggested the tolls could damage the region’s economy by £140m. A decision is expected in the autumn.

On development, revised plans have been submitted for the ‘Whey Aye Wheel’ on the site of the former Spillers Flour Mill. The £100m leisure development on Newcastle’s Quayside will include a 460ft observation wheel taller than the London Eye. The project will include a family entertainment centre, a virtual golf club and a 12m tall sculpture called The Geordie Giant.

Also, plans for a £60m skyscraper on the Gateshead Quayside are to be replaced by designs for an even bigger high-rise hotel to serve a new arena and leisure complex – Gateshead Quays. Under the new plans the building would be 21 storeys tall at its highest point. The Gateshead Quay’s development will cost £260m and include a 12,000-seat music venue, a conference centre, hotels, and restaurants and will replace the Utilita Arena in Newcastle. If it opens in 2023, it could boost the regional economy by c£30m pa, attract an extra c300,000 visitors to the North East, and create 1,140 new jobs.

On interventions, a £4.9m SME fund has been launched in County Durham. The three-year County Durham Growth Programme has been launched by Business Durham, the economic development arm of Durham County Council, using funding from the European Regional Development Fund.

The costs of repairing Stockton’s Grade II-listed art deco Globe Theatre are now more than £26.5m. Stockton Council’s 2011 business plans envisaged the £4m project would create 23 permanent new jobs and 72 construction jobs, attract about 82,500 visitors a year and boost the local economy by £2.5m.

The North East posts the highest unemployment and lowest growth rates in the UK despite benefitting from the highest per person public spending in England and Redcar flagged as an example of regional unfairness in the business rates system

Reading Time: 4 minutesGrowth in the North East fell by a fifth to 0.8% in the year to March 2019; the second lowest growth rate in the UK according to estimates from ESCoE. At 2.7% and 0.7% London and Northern Ireland had the highest and lowest growth rates in the country respectively. The East of England was the most improved region of the UK with growth accelerating from 0.9% to 1.9%. The UK growth rate for the same period was 1.5%.

Unemployment in the North East was unchanged at 69,000 between January and March, at 5.4% it was the highest in the UK. At 2.4% the SW of England had the lowest rate in the country. The UK unemployment rate stands at 3.8%.

In March, average earnings in the North East increased to £560 per week. London had the highest average earnings of £762 whereas the Northern Ireland had the lowest of £513. In the UK average earnings grew by 3.3% or by 1.5% after inflation.

North East average property prices fell by 1.1% to £123,046 during the month which meant annually prices dropped by 0.8%. In comparison, UK prices dropped by 0.2% to £226,798 during March which cut the annual growth rate to 1.4%, although transactions were up by 1.4%.

In its estimate of regional public spending and regional tax revenues in 2018, the ONS has concluded the North East had a deficit of £9.7bn. This compares with London which had the highest surplus of £34.3bn. On a per person basis the NE’s deficit was £3,667, the third highest in the UK and the largest in England whereas London had the highest surplus of £3,905 per person and Northern Ireland had the biggest deficit per person at £4,939. The only areas of the UK to run surpluses were London, the south-east of England and the east of England. At a national level, the UK had a deficit of £636 per person which splits into deficits of £106, £2,452, £4,395 and £4,939 for England, Scotland, Wales and Northern Ireland respectively.

British Steel has been placed into liquidation, putting 5,000 direct jobs and 20,000 indirect jobs in the supply chain at risk. Of these there are c800 direct jobs in the NE largely on sites at Lackenby and Skinningrove. The company was transferred to the Official Receiver because the company did not have funds to pay for an administration. The Official Receiver says that good progress is being made towards finding a buyer for the company.

There was also disappointing news in Gateshead when passport and banknote maker De La Rue launched a strategic review of its business following the loss of its passport contract to Franco-Dutch firm Gemalto. Gemalto bid c£260m which compared to the £400m contract awarded in 2009 to De La Rue. The company employs around 600 people at the Gateshead factory. Whilst one of arm of the state, the Passport Office, cannot be blamed for seeking value for money for the tax payer and no doubt adhering to EU procurement rules, the stats above, which evidence the NE’s poor performance in terms of growth, unemployment and fiscal deficit, suggest good reasons why other arms of the state should consider interventions to ensure projects like this come to those parts of the UK which clearly need them. Without knowing the details of the contract negotiations it is impossible to know, of course, whether some form of state aid was available to De La Rue and if it had been offered, whether this would have made any difference.

Better news in Billingham, where food firm KP Snacks has invested £6m in its factory as it celebrates 50 years of production on the site. The plant, which makes Pom Bears and McCoys, has opened a new pellet production facility creating about 25 new jobs and taking total headcount at the factory to c750.

On regional transport, LNER has unveiled the first of 65 new Azuma trains which will run on the East Coast Main Line, initially serving Wakefield, Doncaster, Peterborough and London. The trains, which are modelled on the Japanese bullet train, are being assembled at Hitachi’s plant in Newton Aycliffe, County Durham.

Work on a new railway station on the Durham Coast Line has started. The £10m station, at Horden, near Peterlee, should serve c70,000 passengers a year for through services to Newcastle, Sunderland, Hexham, York, Carlisle and London. The project is being funded by Durham County Council, the North East Local Enterprise Partnership and a £4.4m government grant. Upgrading of the Metro line in the Gateshead area has been completed with the installation of 2,300 new railway sleepers and 8,000 tonnes of new track ballast as part of the £350m Metro all-change modernisation programme.

In the air, passengers using Newcastle and Durham Tees Valley airports had an average delay of 14 minutes last year, the joint 11th worst in the UK according to the Press Association. The worst UK airport was London Stansted and the best was Belfast City (George Best) with an eight-minute average delay.

Regional development projects this month included the opening of a new £3m creative centre in the Grade II-listed former post office building in Hartlepool. The centre contains 28 units, with a mix of studios, workshops and office space and is a joint project between Hartlepool Borough Council, the Tees Valley Combined Authority and The Northern School of Art. Newcastle’s St Nicholas’ Cathedral has been awarded £4.2m lottery funding towards a £6m renewal project which will include staff, volunteer and visitor facilities being created beneath the cathedral hall. It is hoped the project will attract 100,000 visitors to the cathedral annually.

Stockton council has agreed to buy Wellington Square shopping centre for a reported £7m in a growing trend of council interventions on the high street. The deal includes 50 units which will be managed on the council’s behalf by Knight Frank. The council is borrowing £30m in an effort to regenerate sites in borough town centres. In Wearside, the council is now solely in charge of the regeneration company tasked with transforming local communities. Siglion, which was set up almost five years ago, was charged with projects on a number of key sites in Sunderland, including the former Vaux site, Seaburn’s seafront and a series of housing developments.

The CBI has cited Redcar as an example of how the current business rates system is entrenching regional unfairness. The closure of the steelworks four years ago saw a rise in unemployment alongside a significant drop in property prices which means firms in the area now pay business rates up to 20% above their rateable value.

The UK’s first special economic area moves forward in Teeside, the North East records the highest unemployment rate in the UK and fears that the ‘Whey Aye Wheel’ will dazzle pilots

Reading Time: 4 minutesUnemployment in the North East rose slightly by 1,000 to 71,000 between December and February; an uplift of 0.1% to 5.6% – the highest in the UK. The SW of England had the lowest unemployment rate in the country at 2.6%. The national unemployment rate stands at 3.9% and UK average earnings grew by 3.5% or by 1.6% after inflation.

North East average property prices fell by 0.4% to £125,397 during the month which meant annually prices fell by 0.8%. In comparison, UK prices dropped by 0.8% to £226,234 during April which cut the annual growth rate to 0.6%.

Middleton Hall, near Darlington, possibly the largest retirement village in the UK, has been sold to an employee trust owned by its 190 staff. The first in its sector to be owned by its employees, Middleton Hall becomes one of c300 UK firms owned by its staff. On regional retail, Beales department store in Hexham is to close with the loss of 71 jobs. Citing increased costs such as business rates the firm said it was no longer viable to operate in the town. Also the Stockton branch of Debenhams was named as one of 22 shops to close as part of the restructuring by its new owners.

An £80m infrastructure project, likely to have significant economic benefits, is the removal of the toll barriers on the Tyne Tunnel. The toll booths on the north side of the river will be replaced with number plate recognition cameras which will reduce peak time queues. The cameras, when combined with roadwork improvement, will introduce welcome economic efficiencies on both sides of the Tyne; c40,000 cars use the tunnels every day. The North East Joint Transport Committee has agreed to start formal talks with tunnel operator TT2. Also on the A19, the £75m three year project to create a triple decker junction on the coast road next to the Silverlink estate has finished on time; c35,000 vehicles are expected to use the new road.

North East rail services were severely disrupted this month when ten trains were damaged by faulty electric cables. Travellers experienced delays on a long stretch of the line from the north-east to London. More positively an extra train an hour will run between Newcastle and Carlisle as part of Northern’s new timetable. Investment will also go into train refurbishment and station improvements.

On regional development, Newcastle’s attempt to ‘outwheel’ the London Eye and build Europe’s largest observation wheel is continuing. The 140m’Whey Aye Wheel’ is part of a planned £100m development on Newcastle’s Quayside but the developer is being asked to consider alternative sizes because of fears the wheel could dazzle pilots or create a collision hazard for light aircraft. In Northumberland, the County Council has given its own developer, Advance Northumberland, a £3m grant and a £4.7m loan to move forward its Portland Park project- aimed at regenerating Ashington town centre – after it was deemed not viable for the commercial sector. The development costs c£8.7m will be worth c£5.5m when completed. More council interventions, this time in Middleborough, where the council will pay £840,000 for land intended for a snow centre. The council plans to sell the land to developers Cool Runnings NE who will build the Subzero centre. Also in Hartlepool, a collaborative project between Hartlepool Borough Council and The Northern School of Art to build a 30,000sq ft production studio at a former bus depot has been approved. The Northern Studios will feature a soundstage and could be used for large film and TV productions. The studios would also be used by students at The Northern School of Art.

The former Redcar steelworks is likely to become the UK’s first Special Economic Area (‘SEA’) when its status is approved by Parliament later this year. This will mean the South Tees Development Corporation (STDC) will collect business rates and rent in the area which will be reinvested in cleaning up the site. Aimed at international investors, SEAs are more common in India and China and typically go further than the model proposed at Redcar, with more liberal taxation, trading, quotas, customs and labour laws. A report by Redcar and Cleveland Council has estimated the area will bring in £340m of rates over 25 years. This revenue would be shared equally between the council and the STDC – with 50% of the rates reinvested in the 4,500-acre site.

The difficultly in balancing the need to attract international investors to Redcar with moving the project forward is highlighted by the compulsory purchase proceedings which have begun to bring the Teesside steelworks back into public ownership from international investors – three Thai banks. The banks have had control of the 870-acre plant since it went into liquidation in 2015. Negotiations with the STDC have ’broken down’ in a dispute over the land’s value. Tata Steel Europe sold the steelworks site to Sahaviriya Steel Industries (SSI) in 2011, retaining the adjacent 1,420 acres; ownership of that land was transferred to STDC in February.

A mayor of the new North of Tyne Combined Authority (NTCA) has been elected. The authority covers three councils north of the River Tyne, Northumberland, Newcastle and North Tyneside. The NTCA is the ninth to be created under the Local Democracy, Economic Development and Construction Act 2009 but unlike some other combined authorities it does not have control over transport or housing; it will focus on skills and adult education, employment, investment and business support. This devolution deal is supported by a Government fund of £20m a year over 30 years. Although this money is the second-highest offered to a combined authority, it is feared the NCTA will have insufficient scale when competing with larger combined authorities for government resources.