The Economic Intelligence Bulletin for North West England: Summer 2007-Summer 2008.

 

Welcome to this 2007/8 edition of the Economic Intelligence Bulletin. A great deal has happened since the previous report which partly accounts for the length of the current Bulletin. As on earlier occasions I would emphasise that the contents reflect my own perceptions of what has been happening in the Region’s economy. Also, given the extent and range of activities within North West England, the developments and issues which I have highlighted represent no more than a cross-section. Nevertheless, I have sought to use some sort of a bench-mark in the second section of the Bulletin, paragraphs 28-84, where trend statistics more frequently appear. The Region has the considerable benefit of ONS staff based in the North West and this has, I know, proved very helpful to both individuals and organisations in the public and private sector alike. As we seek to make sense of rapidly changing times, both globally and within the Region, we are continually seeking out data. Given the need to respond positively and make critical decisions, robust data becomes even more essential. For that reason I have posed the question in the opening section “so what are the facts?”  The Bulletin contains a number of individual stories about businesses within the Region. Many reflect high achieving companies operating in challenging economic conditions but, sadly, there is also mention of others less successful. The Bulletin does not attempt to side-step references to the economic challenges but, at the same time, provides a positive response to the “gloom and doom” merchants. If one were to select a characteristic running through the report then it would be the resilience and flexibility of the North West’s successful enterprises. The achievements of the Region’s Production Sector are deserving of an accolade. We are the UK’s leading Manufacturing Region and the reason for success is that we have moved forward. North West Manufacturing 2008 is even different from the 2000 model and certainly better focused, and more technologically leading-edge than anything before. Another characteristic that this Bulletin brings out is the strong inter-relationship between sectors and industries. This Region, the first in the world to experience an Industrial Revolution, is a leading area within a leading Nation in key fields such as the Knowledge economy, and crucial R+D, the very basis of success. Finally, what, hopefully, this Bulletin does achieve is to highlight the fact that the progress of any area is dependent on the drive, and enthusiasm of its people. Statistics can go someway to describing what is happening but the individual stories of perseverance, fortitude, passionate commitment, and achievement paint the real picture.

 

Brian Eaton.

 

BriNess Enterprises.

 

e-mail eaton.brian@btinternet.com.

 

Mobile 07850 216451.

 

6th August 2008.

 

INDEX.                                                                                                         PARAS.          

 

  So What are the Facts?                                                                              1-27.

 

What is Really Happening out there in the Big Wide World, and         28-84.                                         How is North West England Performing?

 

Agriculture, Forestry, Fishing, Food & Drink.                                        85-183.

 

Engineering Sector.                                                                                   184-232.

 

Automotive.                                                                                               233-266.

 

Aerospace.                                                                                                 267-284.

 

Shipbuilding, Shiprepairing, Marine Engineering.                              285-294.

 

Chemicals, Chemical Products,Energy, Environmental Products.    295-351.

 

Textiles, Textile Products, and Advanced Flexible Materials.             352-419.

 

Other Key Manufacturing Sectors.                                                        420-438.

 

Construction and Building Sectors.                                                        439-454.

 

Communications including Haulage, Roads, Rail, Ports, Airports.     455-470.

 

Further Strategic Sectors in the Advancing Economy.                         471-540.            

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

So what are the Facts?

 

 

 

1.      The standard approach adopted in many reviews, be they economic-based or otherwise, is to identify what are considered to be key parameters and assess performance over the period. Indeed few, if any, experienced analysts would not endorse this methodology. Difficulties can arise, however, because of the varying degrees of robustness of the information. It is, therefore, fortunate that North West England, together with other regions, is now benefiting from the expert presence locally of Office for National Statistics (ONS) officials. Nevertheless the actual availability of reliable statistical and other data is dependent on a variety of factors. Recent years have seen increasing demands for facts and figures covering a range of activities. A perception has been that this demand has come from people as individuals as well as from wider groups and organisations. “Give us the facts!” they cry.

 

2.      In terms of the UK business economy there was almost a plethora of hard data available in the three and a half decades after the Second World War. Nowadays the computer with its internet facilities has resulted in a considerable amount of information becoming more easily accessible. However, a keen sense of judgement is required to sort out “the wheat from the chaff”. This is not to deny that there is valuable material about. Nevertheless, despite modern technology, a recurring issue has been the time-lag between data collection/analysis and its public availability. This has implications for assessing with precision what is happening at the current moment. Albeit quite a few years ago, Harold Macmillan, British Prime Minister between 1957 and 1963, suggested that some data was about as useful as looking through an out of date edition of Bradshaw’s Railway Timetables in order to plan a journey!

 

3.       Because of the various difficulties involved in undertaking fully comprehensive data collection the emphasis has tended towards the sample survey approach. This applies, for instance, to the official ONS Household Surveys which, to their credit, seek to cover a fairly impressive range of activities and, directed by professional statisticians, ensure a rigorous approach to stratified sampling.  Surveys in general have, in recent years, enjoyed almost a halcyon period but this expansion has come from a wide variety of sources both public and private. The limited coverage of the sample and response rate, in a number of instances, precludes other than a very general response to a key question thereby failing to distinguish between different types of respondents. For example some industrial surveys ask individual companies whether there has been an increase or decline in their order book performance. The “yes”, “no”, or “same” responses camouflage a vast range of situations with, for instance, a company achieving an increase of £10,000 receiving the same weighting in the survey as one securing a £2 million improvement!

 

4.       Interestingly the availability of statistical and other data was helped in the years following the end of World War Two by the emphasis in Government on a more “hands-on” approach to economic development. A by-product was a relative wealth of information relating to business, employment, and related issues. There was considerable focus on reviving the post-war economy with regionalism a key consideration. Measures took the form of both the “stick” and “carrot” approach. The chief example of the former was when businesses had to apply for industrial development certificates for projects over a certain size. The threat of Government refusal influenced companies in the “over-heated” parts of the Country, then largely London and the South East, and Eastern England, as well as the West Midlands, to consider alternative locations in those parts of the economy where unemployment was higher and new industry was required.

 

5.       These “Development Areas” were widely spread, and later expanded further so that eventually there was a three-tier system of designation. Apart from the availability of labour, incentives to locate projects in these areas included, by historical standards, quite generous state-aid such as building and plant and machinery grants. Another Government incentive in particular areas of need was the building of advance factories. This was to facilitate the setting-up of new plants as quickly as possible, with allowance on the site for further expansion. These programmes were often introduced following the announcement of major redundancies including in industries such as coal-mining.

 

6.      This very brief and piecemeal account of Government regional industrial policy provides at least a partial explanation of why this extended post-War period, at least in terms of the business economy, was relatively data-friendly. The more direct involvement by the Government in economic/industrial development resulted in a considerable amount of collected data as well as softer but valuable qualitative information. Under the circumstances the necessary inter-relationship between Government and Industry aided key follow-up assessment. This resulted in valuable analysis, with policy implications, emanating from both within and without the Government service. These included reports/reviews such as “The Movement of Manufacturing Industry in the UK, 1945-65” by R S (Bob) Howard, Board of Trade, in 1968; “Regional Economic Policy and the Movement of Manufacturing Firms to Development Areas” by Barry Moore, and John Rhodes, Cambridge University, in 1976; and “The Effect of Regional Policy on Manufacturing Investment and Capital Stock within the UK between 1959 and 1978” by RD (David) Rees and RHC Miall, published in “Regional Studies” in December 1981.

 

7.      Subsequently there were also a growing number of national Industry schemes covering sectors as varied as Textiles and Red Meat Slaughter House activities. As an example read “The Clothing Industry Scheme: an assessment of the effects of selective assistance under the Industry Act (1972)” by J T Lambert, DTI, GES Working Paper number 61, 1983.In addition to their core function aimed at benefiting the economy these schemes also enabled a closer dialogue between business and Government to develop.

 

8.       The present political and economic climate is different from this earlier period and Governments of whatever party persuasion are, now, less amenable to this type of legislation. In addition the UK is a member of the European Union (EU) and wider consideration must be given to measures to ensure that they are not anti-competitive. There is, also, a considerable resistance on the part of Industry and Commerce, particularly amongst SMEs, against form-filling and data provision unless there appears to be fairly immediate beneficial results. These sentiments should be respected especially as local companies need to concentrate their energies on competing in highly challenging global conditions. However, hopefully, there is also a middle way which seeks to minimise business time and involvement yet extract key data for industry’s ultimate benefit.

 

9.      According to official sources the impact on UK business of ONS statistics was estimated at just under £40 million in 2005. This was only 0.3% of the “total burden of Government regulation”. ONS has signed up to a 2010 target to reduce those impacts over which it has some discretion by 25% or £7.5 million. In the first couple of years since the targets were set ONS has reduced the annual burden of its business surveys by £6 million. There are, however, quite reasonable new demands from the European Union (EU) for member states to improve the quality of regional and service sector statistics. Meeting these new demands, and simultaneously minimising costs to businesses, can be facilitated by ONS using some of the administrative data already held by Government.

 

10.   The positive news is that under the Statistics and Registration Services Act 2007 information-sharing agreements can take place between the newly created Statistics Board and other public authorities, subject to Parliamentary approval. From 1st April 2008 ONS became an executive statistical office operating under the supervision of the Statistics Board, headed by Sir Michael Scholar and answering directly to Parliament rather than to Government ministers. In late 2007 ONS had announced an additional £40 million investment. This was to enhance statistical outputs partly funded through efficiencies. Recently independent reviewers from other European Statistical Institutes have rated ONS highly for its implementation of the European Statistics Code of Practice. The ONS are to be applauded for their emphasis on consultation with users of data including those in the regions. The North West Regional team ran a launch event with the NWDA Regional Intelligence Unit (RIU) at the Reebok Stadium in September 2007. Over 140 people attended and feedback suggested that over 90% of delegates would welcome similar meetings in the future.

 

11.  Despite these useful advances it is, hopefully, more than sheer nostalgia that harks back to an earlier period when a number of particularly good data sources were available. What happened to the extremely informative Employment Records One and Two produced by the then Ministry of Labour and its successor, the Department of Employment and Productivity? These included listings, in each local office area, of the leading employers together with their business activities and employment. Especially valuable was an overview of the area, (eg Birkenhead, Burnley, Carlisle, Oldham etc), incorporating both statistical and qualitative data. Those records going back to the War years even highlighted the extent and impact of bombing raids on the local community! In much more recent times one can remember the valuable input of Department of Employment’s Regional Manpower Intelligence Units both through their interpretation of data and valuable local background knowledge.

 

12.  One notable more recent development, a few years ago, was the decision to establish Home Office research staff in the regional Government Offices. This helped to strengthen the inputs of teams drawn from the police, probationary, and drugs agencies to enable a broader approach to local economic development to be undertaken. Similarly there were key contributions from other bodies including Health. Sadly, this had come after the effective demise of the regional research teams of the then Department of Trade and Industry (DTI), and Department of Environment (DOE). These had included professionals drawn primarily from economics and geography backgrounds supported by executive and clerical staff.

 

13.  The short-lived Department of Economic Affairs (DEA) of the second half of the 1960’s was another example of the utilisation of regional research personnel. These regional research teams benefited from access to a considerable amount of original data which, for instance, in the case of DTI resulted in papers on topics ranging from the impact of mobile industry on the regional economy to an assessment of branch-plant development in manufacturing industry; from a detailed floor space per worker analysis by industrial sector to an impact study on overseas investment; from individual Industry background papers to the incidence and impact of plant closures and redundancies on the local economy etc.

 

14.  As well as being part of a national Departmental research body with fairly regular inter-regional meetings including at London HQ, the research teams were also integrated into the Regional Office. The latter situation enabled a valuable cross-fertilisation of ideas with administrative staff responsible for operating policy as well as involvement in ministerial briefing. Particularly valuable was the priceless situation of being able to touch base with industry and appreciate the challenges and opportunities at the “coal face”. This helped to put more qualitative “flesh” on the statistical “bones” by, through a micro-economic approach, focusing on developments at unit plant level.

 

15.  At the organisational level regionalism underwent significant changes in 1994 with the introduction of Government Offices in each English Region. These were the brain-child of then Deputy Prime Minister Michael Heseltine and were integrated regional offices concentrating separate Government Departments as well as a number of other activities within the same organisation. Economic Intelligence work continued, albeit in a changing format, and benefited from a closer integration of Departments. It should be noted, however, that even in the pre-Government Offices era there had, in most regions, been close liaison and collaboration between the then separate regional offices covering Industry, Employment, Housing, Local Government, Transport, Environment etc.

 

16.   Under the Government Office regime fairly regular inter-regional meetings began to be held with all the regional intelligence teams attending and with an important input from ONS. This particular approach, however, was, again, subject to change. There has, however, been an important impetus from the Regional Development Agencies with that of the North West playing a particularly positive role with its Regional Intelligence Unit (RIU). The latter is one of nine Regional Observatories which have been developed in the English regions to support regional policy making. This is through the provision of focused information and analysis. One of its many admirable roles is to help disseminate and widen access to intelligence. The Northwest Regional Development Agency (NWDA) website, www.nwda.co.uk, is an automatic “must see” source of information. It is highly practical in that it includes reference to the major funding streams and initiatives that it is involved with which range from economic regeneration to crime, from tourism to rural issues, from business finance to the New Single Regional Strategy. Details about the latter embracing all key aspects of Regional life is especially relevant. 

 

17.  Both North West England and the UK are competing in a global economy. Hence an integral part of performance is to be able to make comparisons with as wide a field as possible. In this respect there has been a positive contribution in the more recent period by such super-national organisations as Eurostat and the Organisation for Economic Co-operation & Development (OECD). Any set of statistics or data, however, is only as good as its contributors. As well as difficulties in agreeing and ensuring comparability of data there is, inevitably, varying levels of response, compliance etc between different nation states. Total economy figures, on a broadly comparable basis, are easier to secure than those relating to individual sectors. Hence, for instance, much is made in the media about the UK’s relative position amongst trade rivals in terms of overall productivity. This camouflages a range of performances, including those which would probably show the UK in better light. These, it should be mentioned, include a number of Manufacturing sectors or sub-sectors whose vital contribution to both the North West England and National economy should not be under-estimated. 

 

18.  A vital contribution to understanding and interpreting what is happening in the regional economy and elsewhere is through detailed original research. This can often fill the vacuum where no regular series of reliable indicators are available. It is in this field that the North West is well placed through the existence of higher educational excellence and cutting-edge economic research. This is available in key establishments in locations ranging from Liverpool to Manchester, and from Lancaster to Preston in Central Lancashire, and including the North West’s newest University in Cumbria. A prime example of excellence is Manchester Business School (MBS) which in its original form, was founded in 1965 at the same time as the London Business School. The present MBS was developed in 2004 taking in additional facilities and benefiting from the expanded new University of Manchester which included the former UMIST and its School of Management. Both Manchester and Lancaster are highly placed in the UK in the very latest Financial Times ranking of the world’s leading business schools.

 

19.  A very good example of knowledge in action is “Manchester: Knowledge Capital” which was established in 2002 and is a partnership of all ten Greater Manchester authorities; the four universities of Bolton, Salford, Manchester, and Manchester Metropolitan; the strategic health authority; as well as other key public agencies and leading businesses. This body seeks to make a difference through stimulating and supporting increased business innovation from research, science, and knowledge; engaging with the people in Manchester in securing this future through dialogue, debate, education, and employment; supporting the growth of a city-region environment which helps business success, provides a high quality of life, and is open to all; and through championing and trying new ideas as well as new ways of living and working. The progress and success of this partnership relies on a number of features not least of which is the provision of key data and analysis.

 

20.  The North West is well served by its local authorities. This is certainly the case in the field of key data relating to the local economy. For instance, a visit to the Lancashire County website, www.lancashire.gov.uk, is well worth the time particularly when the Economic Intelligence Team is located. This contains expert analysis on a range of crucial topics from area profiles to GVA, from unemployment to longevity of local companies, from industry assessments to the Index of Multiple Deprivation. Combined together are a range of need to know statistics with an in-depth and extremely interesting overview that meets the needs of policy-makers and general observers alike.

 

21.  The Merseyside Economic Review for 2007, as with previous editions, contains a wealth of detailed analysis ranging from GVA per capita to People and Skills; from Inward Investment to Environment Quality Indicators; from Life Expectancy to Household Income. This appears under the heading of The Mersey Partnership, website www.merseyside.org.uk, which is recognised as one of the foremost examples of private and public sector working. As elsewhere in the North West there is a sharp practical edge to its activities. With a membership of almost five-hundred the Mersey Partnership is firmly committed to forward progress in the key areas of economic development; Investment; and Tourism.

 

22.  Although Greater Manchester ceased to operate as a Metropolitan County in 1986 there was, subsequently, a fairly lengthy period when the Oldham-based Greater Manchester Research performed the vital role as the strategic research and information bureau of the Association of Greater Manchester Authorities (AGMA). A highly impressive stock of information was assembled ranging from regional competitiveness indicators to labour market and retail statistics; from deprivation indices to property values and transactions; from land use change statistics to education and training; from major employment trends to earnings. In later years Greater Manchester Research initiated a Sub –Regional Economic Intelligence Network which brought together a useful cross-section of experience including representation, for instance, from activities such as the business development side of Marketing Manchester; Salford University’s Market Intelligence arm; Business Link; Government Office North West; and MIDAS, now Greater Manchester’s Investment Agency.

 

23.   Although Greater Manchester Research is no longer in operation an extremely valuable role is performed by the Policy and Research Team of Manchester Enterprises. The latter was established in its original form in 1999 and is the economic development agency for Greater Manchester with a strategic remit to deliver economic growth and improve the prosperity of local people. The body also has a key responsibility for economic analysis and prides itself that its approach is interpretive as well as, crucially, focusing on actionable results. The type of work undertaken includes a vast range but includes such areas as benchmarking and strategy development studies; labour market intelligence; employer/business surveys including sector analyses; frameworks for key performance indicators and measurement; customer/staff satisfaction surveys; social audit; brand/product research, see website www.manchester-enterprises.com/research.htm for further details.

 

24.  Amongst a number of important contributions made by Manchester Enterprises Policy and Research Team is through the high profile Manchester Independent Economic Review. Early this year a full economic baseline study had been completed, with additional research from Greater Manchester Chamber of Commerce, providing an overview of recent key economic trends at national, regional, and sub-regional level. The very distinguished Manchester Independent Economic Review Team consists of Chairman Sir Tom McKilop of the Royal Bank of Scotland Group, and formerly chief executive of Pharmaceutical giant AstraZeneca; Jim O’Neil, head of global economic research at Goldman Sachs; Edward Glaeser, Economics Professor at Harvard University; Dr Diane Coyle, managing director of Enlightenment Economics, a consultancy set-up in 2001 to assess the impacts of globalisation and new technology; and Jonathan Kestenbaum, chief executive of The National Endowment for Science, Technology, and the Arts (NESTA).

 

25.  The £1.35 million Manchester Independent Economic Review was officially launched at Old Trafford on 2nd June 2008 by the Chancellor of the Exchequer Alistair Darling. It is due to be completed by the end of this year and aims to assist the forward progress of the City Region by building up a new evidence base to inform future policy. Research is covering a wide range of crucial indicators such as contributions of inward and indigenous investment; industry sectors and clusters; the innovation system; economic connectivity; trade etc. The study, and the depth in which it is being undertaken with respect to city-regions, is unique amongst similar areas in the UK. Readers may wish to explore the website www.manchester-review.org.uk for current and future developments. 

 

26.  An important contributor in the information process is the Media in all its various forms. In 1988 Bob Waterhouse edited the short-lived “North West Times” newspaper. Undaunted by the demise of this earlier publication he also edited the “North West Enquirer” which ran on a weekly basis in 2006 between 27th April and 21st September. The approach was highly laudable seeking to provide a quality, investigative, and analytical North West Regional paper. Sadly target figures were difficult to attain and problems with a potential funding package led to the newspaper going into administration. Despite this the North West contains a number of local newspapers where the reporting of local developments provides a fund of useful information not readily available elsewhere. The quality and balance of the reporting often compares favourably with some of the more nationally-based Media. Indeed amongst the latter, criticism can be made that more emphasis is given to “entertainment value” and a “dramatic story” rather than a thorough in-depth analysis.  

 

27.  Even in a world of robust statistical and other data there would still be the challenge of how the information should be weighted, and, crucially, what to include and exclude. As with previous editions, this current “Economic Intelligence Report” seeks to balance its approach providing, hopefully, appropriate statistical data together with a fairly lengthy account of what is happening at the “coal-face” of Industry and Commerce. Statistics, caveats and all, can go part of the way towards providing broad information on the current situation. However, it is the individual business experiences, with their stories of commitment and passion, yet also incorporating both the achievements and the struggles, which really explain and colour in the picture. As in earlier years, especially given the diversity and complexity of the economy, the Bulletin does not claim to be any more than an idiosyncratic reporting and analysis of events. What is, however, beyond dispute is that North West England is a major UK Region with a valuable role to play. Hopefully, the following text will illustrate that assertion.  

 

 

 

 

 

 What is Really Happening out There in the Big Wide World and How is North West England Performing?

 

 

28.  The great economist John Maynard Keynes (1883-1946) made reference to the influence of the “herd instinct” on a number of key situations. Already before the end of 2007 there were warnings echoed in many parts of the Media and elsewhere that there would be a slowing down in the global economy, some observers even went further suggesting a deeper recession. Given our important trade links with the USA it would have been extremely naive and unrealistic to ignore the various warning signs which were already indicating a slowing-down in the world’s major economy. However, an unfortunate trait in some quarters, both regionally and nationally, has been to talk down not only our achievements but our capabilities and resilience to the extent that we are, almost automatically, anticipating a “doom and gloom” scenario.

 

29.  One of the fascinations of Economics is its unpredictability. In Chemistry, provided that the correct constituents are used and procedures followed, then results are capable of being correctly predicted. Hence when Water is added to Sulphur Dioxide then Sulphuric Acid should result. The world economy, however, does not exist in a vacuum but inter-acts with a multiplicity of other situations ranging from political to environmental, from climatic to health-related, from geographically-spread to more localised but critical issues. Even those activities identified fairly closely with economic development, ranging from innovation and technological advance to changing consumer preferences, are not always capable of being predicted with any degree of exactitude. Last year’s Economic Intelligence Bulletin highlighted just some of the world’s trade agreements, as well as disparities in key areas such as customs and excise procedures, the very existence of which make it more difficult to predict future trade figures, certainly not with any degree of precision.

 

30.   Professor George Shackle (1903-1992) was an eminent, indeed pioneering, Post-Keynesian who was amongst the very first economists to insist on the importance of uncertainty and time in Economics. An admirer of the work of Keynes he also took a great interest in the contributions of Karl Gunnar Myrdal (1888-1987), whose analyses covered such crucial issues as the interdependence of Economics, social, and institutional phenomena. Myrdal’s experience, during his long life, included that of a Social Democrat Member of the Swedish Parliament as well as a fourteen year period as Professor at the famous Stockholm School of Economics. George Shackle empathised with Myrdal’s approach and challenged the conventional role of probability in Economics contending that it failed to allow for “surprising events”.

 

31.  During the Second World War George Shackle served as a member of Winston Churchill’s inner team of economists in Statistical Branch. Subsequently he became the Brunner Professor of Economic Science at the University of Liverpool between 1951 and 1969. In a number of discussions and interviews he was quick to emphasise that Economics was not a Science. Indeed, in the course of his lectures, he likened it to the sport of cricket. One may know about the laws of the game, its history, and have some knowledge of tactics and strategy relating to captaincy as well as how to execute the various techniques in batting, bowling, and fielding. However, even if one possessed this information it would have decided limitations in predicting how many runs Lancashire County Cricket Club would score at Old Trafford on a specific day, or any day for that matter, during the season.

 

32.  With partial hindsight as we reach the beginning of August 2008 we can at least note that, whilst there have been some cut-backs amongst North West businesses, there have also been a number of very determined success stories. Despite justifiable concerns about market demand it is no exaggeration to suggest that the North West is now in a much better position than even ten years ago and certainly twenty years ago to withstand these pressures. Outside of the London and South Eastern complex we are the largest UK Region in a number of key parameters and in some actually in the lead. What is important to stress is that, over recent years, more of our businesses have heeded the warning to look at cost structures and levels of efficiency in order to ensure a longer-term future.

 

33.  At the beginning of August 2008 the Trafford Park-based Manufacturing Institute announced that since the Manufacturing Advisory Service (MAS) had been launched in the North West in April 2002 it had helped to achieve over £491 million of financial savings including increased productivity and efficiency. From April 2005, with further funding from the NWDA and the European Regional Development Fund (ERDF), backed by the Manufacturing Institute’s own charitable resources, companies have benefited from an extended range of support under the Agenda for Change programme. This has provided an additional £218 million of financial savings for North West Manufacturers, providing some £709 million of support over six years as well as creating or safe-guarding over 5,700 jobs.

 

34.  A necessary, indeed vital, component to inject into any assessment of world trends is the growing importance of the emerging economies. For instance, an earlier report by the World Bank covering “Global Economic Prospects” expected USA growth to slow to around 1% in the first half of 2008 but to have experienced recovery by 2009. Industrialised countries were expected to record higher percentage increases whilst China was expected to grow by in excess of 10% over the next couple of years. India’s performance was expected to be “not far behind”. China’s exports of goods in 2007, according to the General Administration of Customs, broke the $ 1 trillion barrier, representing an advance of around 26% on the previous year, with imports rising by about 21%. The annual trade surplus was estimated as in excess of $260 billion a rise of around 48% on 2006. As long ago as January 2005 industry expert Jim Pinto in his article on “The China Manufacturing Syndrome” in “Automation World” suggested that China was already producing 50% of the world’s cameras; 30% of air conditioners and televisions; 25% of washing machines; and 20% of refrigerators. It was suggested then that “one private Chinese company manufactures 40% of all microwave ovens sold in Europe”. The explosive growth in China’s Textiles and Apparel industries was detailed in the previous Economic Intelligence Bulletin for North West England.

 

35.  The world economy has undergone tremendous changes in a relatively few years. This has obvious implications on immediate and future trade patterns. Although, for a number of years, the USA was the world’s leading exporter of merchandised goods this position was lost in 2003 to Germany who was still top in 2007 with an equivalent figure of $1.6 trillion exports according to the Federal Statistics Office. By end 2008 there is a strong possibility that China, already exporting the equivalent of $1.4 trillion of goods in 2007, will have leaped ahead which will put the USA into third position. Latest detailed WTO figures for 2006 then had Germany ahead on $1.1 trillion, the USA on $ 1.0 trillion, and China on $968.9 billion. The UK was in 7th position with $448.3 billion of exports of merchandised goods. However, the latter’s share of world exports of goods had declined from around 9% in 1953 to about 4% in 2006.

 

36.  Trade patterns are, however, extremely complex. For instance, if one includes all types of exports including Commercial Services, then the USA is still, very much in the lead accounting for around 10% of the world total. The USA’s Commercial Services exports totalled around $388.8 billion in 2006, some 10.7% of the world total. The UK, however, also recorded an impressive figure in this field, second only to the USA, of $227.5 billion or 8.3% of the global figure. In fact, despite considerable challenges, the UK has continued to compete in a wide variety of markets. This has been not only through the production of an impressive array of manufactured goods but, also, in other profitable lines.

 

37.  This was well illustrated in a paper entitled “Trading in Ideas and Knowledge” published in June 2007 and produced by Ian Brinkley. The latter is the director of the knowledge economy programme undertaken by The Work Foundation, a not-for-profit organisation that aims to “provide answers to practical problems for UK PLC and the Public Sector”. On the basis of official trade figures, from the Government’s “Pink Book”, the paper suggested that in 1995 the UK exported £28 billion of “knowledge services” which by 2005 had reached a total of £75 billion, a 170% increase, accounting for some 6.3% of GDP and about a Quarter of all UK exports. This proportion was stated to be “significantly more than any other major economy”. Ian Brinkley contends that Britain trades on ideas, knowledge, and technology-related industries much more than is the case in other large nations. These cover areas such as R+D; Engineering and Technical Services; creative and cultural industries; computer, information and communication services; financial services; consulting, advertising services; income form royalties, intellectual property etc.

 

38.  The UK can claim to be Europe’s top R+D location. Furthermore the Government has set itself a target of increasing R+D spend from 1.9% of GDP to 2.5% by 2014. This encompasses both the public sector and the commercial world with the aim of strengthening the position of the UK as a global R+D hub. Accountancy firm KPMG has recently undertaken a study of thirty-five cities within some ten countries analysing tax costs. The conclusion is that Manchester is in fourth position, but first in Europe, in terms of the most attractive location for R+D. Worldwide, amongst the areas investigated, only the Canadian cities of Montreal, Vancouver, and Toronto were rated ahead of Manchester.

 

39.  Colin Sinclair, from MIDAS, indicated that Manchester is particularly attractive for R+D because of its graduate talent pool, its highly skilled workforce, good transport links, and connectivity. Chris Fry, head of Tax at KPMG in Manchester, suggested that Manchester and the UK generally benefits from a positive Government attitude towards R+D. Ironically, there are still companies not claiming R+D tax relief that could actually benefit especially with further changes beneficial to SMEs now coming into force.   

 

40.   Interestingly this “knowledge service” expansion has been facilitated and developed by the sophistication of the Manufacturing Sector from which many of them derive. As well as high quality design and innovation, there are technical and trade related services, not forgetting royalties and licence fees emanating from the UK’s Manufacturing capabilities. North West England is a leading region in this sphere with more than one R+D facility that is a global player. The much publicised Saudi Arabian Al Yamamah contract awarded to what is now BAE Systems in 1985 was one of the largest export orders ever received in this Country. Within twenty years it was estimated that in excess of £22 billion had been secured from the contract. However, the programme not only consisted of a large provision of “hard” equipment for the Royal Saudi Air Force and Navy but, also, with on-going maintenance and logistics support, and technical training etc.

 

41.   Difficulties arise in seeking to allocate the UK’s export figures for all activities between its regions. However, UKtradeinfo is able to provide some useful information on exported goods. This data confirms the important position of North West England in the export field. For instance, in the calendar year 2007 the North West accounted for some £21.0 billion of goods exported or 11.1% of the total for all UK regions. UKtradeinfo was able to allocate £188.8 billion of UK exported goods to individual regions but was unable to allocate a further £30.9 billion. Amongst other regions only South East England, with some £33.5 billion exported goods, and London, £22.5 billion, exceeded the North West total.

 

42.  A feature of the North West, supported later in this Bulletin with detailed anecdotal evidence, is the diversity of its product range and overseas market involvement. For instance, in terms of exports of goods to other parts of the EU, the North West, with £11.3 billion, although still in third place regionally, was actually ahead of London on £8.6 billion. It should, also, be noted that the contribution of the North West’s Production Industries to the Nation’s exporting performance is understated. There are a large number of companies in businesses ranging from automotive components to textile weaving; from composites to metal pressings, that act as sub-contractors to UK-based enterprises who, in turn, are key exporters.

 

43.   Most recent available figures provided by UKtradeinfo on exported goods indicate that the North West, together with all other regions actually recorded an improved performance in the 1st Quarter 2008 compared with the same period last year. The North West increased its export of goods to both the EU and the rest of the world. The total Q1 2008 figure of £5.5 billion represented a 9.6% increase on Q1 2007 compared with an overall UK regional increase of 9.4%. On the basis of these Q1 2008 figures it was suggested that the North West had over 1,600 exporters accounting for £3.1 billion of exported goods to the EU25, and over 4,100 exporters accounting for £2.4 billion to the rest of the world. There will, however, be a number of these exporters that trade with countries in both areas.    

 

44.  A tremendous strength of the North West economy is its range of activities and, together with emphasis on quality and profit-orientated innovation, this has helped to provide an intro into a growing number of overseas markets from continental Europe to the Far East. A read through the individual sections of this Bulletin will reveal success stories covering a rich diversity of products and activities. These vary from synthetic horse-racing tracks to flooring products; from fighter and commercial aircraft to electric blanket components; from antibiotics to defence and security apparel; from sealing products to gas turbines.

 

45.   There has been much comment in the American press on falling house prices in the States and crippled credit markets together with job losses and contraction in the business sector. Private Sector Services account for nearly 70% of the USA’s economic output and has, in many respects, been the engine of growth during the present Century. Indeed recent years have seen an increased movement of manufacturing activity to foreign locations. Business has had to be especially combative in the States during 2007/8 and in January 2008 the Federal Reserve, the USA Central Bank, reduced interest rates from 4.25% to 3.5%, the largest decrease in twenty-five years. By April the rate had dropped to 2.0% its current level. By July 2008 unemployment in the States had risen to 5.7%.  Jobs had been shed in areas such as Government Service, and Construction, with some Manufacturing, and Retail employment also going. However, there had been growth in sectors such as Education and Health, Professional and Business Services, and Leisure and Hospitality.

 

46.  It might surprise some observers to note that just under 10% of all USA employment is within the Manufacturing Sector compared with around 11% in the UK, and between 12% and 13% in North West England. The USA Bureau of Labor Statistics suggests that seasonally-adjusted Manufacturing employment peaked at 19.5 million in June 1979 but by September 2007 had fallen to just under 14 million. Keith Hall, Commissioner at the Bureau, indicated in March 2008 that Manufacturing in the States had shed almost 300,000 jobs over the past 12 months. It was estimated in October 2007 that of the USA’s expected trade deficit of $725 billion some $ 540 billion, approaching 75%, was in Manufactured Goods. Despite impressive productivity performance in USA Manufacturing industries over the years industry and technology guru Dick Morley has expressed concern that negative attitudes and actions such as alleged “high taxes, strict zoning regulations, and excruciating bureaucracy” was driving production offshore.

 

47.  The JP Morgan Global Manufacturing PMI survey suggests that global manufacturing is currently at a five year low as weaker demand and higher cost inflation impacts adversely on orders and production levels. In essence, it was felt that a combination of weakening demand, falling orders, and rising costs was creating conditions of stagflation. The Eurozone recently announced the highest levels of inflation since recording began in 1996. This prompted the decision in July 2008 to increase interest rates from 4.0% to 4.25% despite concerns about falling demand. Recent months have seen differing levels of performance within the Eurozone with, for instance, France and Italy experience useful small increases in growth during the spring whilst Germany suffered a slight fall. In the UK, in the last 12 months, there has been a steady reduction in interest rates by the Bank of England. On 5th July 2007 the Committee had agreed a rate of 5.75% which by 6th December 2007 had been lowered to 5.50%. By April 2008 the rate had been lowered further to 5.0% where it is currently lodged following the last meeting on 10th July.

48.  As this Economic Intelligence Bulletin nears completion there are just about a couple of days before Mervyn King, the Governor of the Bank of England, and the Monetary Policy Committee meet again in August to review the rate. Although many experts predict that the rate will remain unchanged at 5.0% other observers have pointed out that inflation is currently running at 3.8%, almost double its 2% target, and likely to increase further in coming months. This in itself has prevented a lowering of rates recently with pressures more inclined to at least a slight rise to counter inflation. The latest Regional Trends survey published by the CBI and Experian suggests that business confidence has fallen influenced at least partly by cost of raw materials and energy. However, the volume of new orders picked-up and investment intentions have been less downbeat here in the North West than for the Country as a whole. Both nationally, and Regionally, the Manufacturing Sector is benefiting by the relative weakness of the £ against the Euro which is helping exports.

49.   The Chairman of EEF, Martin Edwards, has pointed to recent experience of British manufacturers. He indicated that this Nation’s top performing sectors were enjoying stronger growth rates than firms in France and Germany. This was being facilitated by the introduction of innovative production methods, and producing an increasingly high value Industry that was competing successfully across the globe. Martin added that what was especially notable was “the diversity of activities that are thriving”. Alongside the well-known success stories of Aerospace and Pharmaceuticals are “sectors producing scientific instruments, mechanical appliances and basic metals” as well as many others.   

 

50.    Currency exchange rates are, of course, an absolutely key issue. In this context general concern remains over the continuing weakness of the USA $. For instance on 1st August 2006 the $ exchanged against the £ at 1.8520, by 1st August 2007 it had weakened further to 2.03120. More recently there has been a slight strengthening and on 1st August 2008 the figure was 1.98180. Within the two year band between 1st August 2006 and 1st August 2008 the $/£ exchange rate ranged from 1.85160 to 2.11610. The USA $ has weakened considerably against the Euro from 1.27620 on 1st August 2006 to 1.37050 on 1st August 2007 to 1.560 on 1st August 2008. This is on the basis of historical exchange rate data from www.aonda.com. Despite this a number of businesses in North West England, especially those in niche markets, have managed to achieve useful orders in the States. There are also some companies based in this Region that operate facilities, including subsidiaries, in the USA.

 

51.  North West companies have continued to develop market contacts globally including in continental Europe where the Euro has actually strengthened against the £. At 1st August 2006 the Euro exchanged against the £ at 1.46180, weakening to 1.48220 by 1st August 2007. However, by 1st August 2008 the Euro had strengthened considerably to 1.27040. Fifteen of the twenty seven member states of the EU are now in the Eurozone including Cyprus and Malta who joined on 1st January 2008.  Amongst the other nations in the Eurozone are the large economies of Germany, France, and Italy.

 

52.  Although unemployment is only one indicator amongst many both the UK and North West England have, consistently, recorded lower rates of unemployment than the Eurozone. At around May 2008 the latter, according to EUROSTAT comparable data had an unemployment rate of 7.2% whilst, amongst individual countries, both France and Germany recorded a figure of 7.4%. The average unemployment rate for the EU27 was 6.8% ranging from 10.5% in the Slovak Republic to 2.7% in Denmark and 2.9% in the Netherlands.  The approximate UK comparison was 5.2% whilst the North West with some 206,000 unemployed had a rate of 6.1%.

 

53.    Productivity remains a perennial topic of discussion. Official statistics suggests that the UK has seen a relative improvement in its performance in recent years especially in relation to major trading rivals. For instance, assuming UK=100, then on the basis of ONS current purchasing power parity data, the UK has considerably reduced disparities with a number of competitors in terms of Gross Domestic Product (GDP) per worker. If one compares with the G7 Countries minus the UK then the ratio between 1991 and 2006 was reduced from 127 to 112. The USA reduction was from 139 to 128, whilst comparison with Italy was more dramatic from 133 to 104, and also impressive compared with France from 129 to 110. The contrast with Germany was from 118 to parity at 100, whilst there was a marked improvement against Japan from 109 to 90. Interestingly, at 1991, in terms of GDP per hour worked the USA, French, and German ratios, compared with UK=100, each stood at 135. By 2006 the USA disparity had been reduced to 117 and both France and Germany to 117. Italy had reduced from 124 to 97, whilst Japan, already less than the UK at 97 in 1991 had fallen still further, in relative terms, to 84 in 2006. The G7 ratio had reduced from 121 to 108. Russia is the most recent addition to what is now the G8, the other members being Canada, France, Germany, Italy, Japan, UK, and USA.

54.  ONS also provides GDP per worker analyses on the basis of constant purchasing power parity. This data is especially revealing in that in terms of both GDP per worker and GDP per hour worked the UK achieved greater relative improvement than key trade rivals. Assuming all countries to =100 at 1991, GDP per worker had risen in the UK to 138, ahead of the USA on 132, G7 minus the UK on 127, Germany 124, France 120, Japan 119, and Italy 116. The UK also dominated in GDP per hour worked, a figure of 146 in 2006 contrasting with 134 which was recorded by G7excluding the UK, USA, and Germany, with Japan increasing by almost a similar amount to 133.  The figures for France and Italy were, respectively, 130 and 122. It should be emphasised that these figures relate to relative improvement and, impressive as they are, should not be a reason for complacency especially in an intensely competitive world environment.

55.  ONS provides comparative UK regional data on productivity on the basis of Gross Value Added (GVA) per filled job; GVA per hour worked; and GVA per head. In 2006, on the benchmark of UK=100, North West England stood at 90.5 in terms of per filled job; 90.8 per hour worked; and 86.5 per head. It has been mentioned in past Bulletins that this Region is the largest in the UK in terms of population and employment outside of the major London and South East complex. It is unrealistic, however, under a number of headings, to directly compare performance levels with this latter mega “extended conurbation” which houses major institutions and extensive development associated with a capital city/entrepot and its environs. Examples of this weighting is demonstrated by reference to the London index for GVA per filled job of 129.3; per hour worked at 123.1; per head at 154.7. The equivalent South East England figures were also high at, respectively, 107.1; 108.3; and 109.8.

56.  Mention was made earlier of the impressive improvements made on the productivity front through the MAS programme administered by the Manufacturing Institute.  Even in the period between 1996 and 2004 inclusive, the latest official figures available, the North West experienced an increase in GVA per Manufacturing workforce job of over 27% to a figure of £41,900. The actual figure is worth noting because it indicates the high value of the Production industries. By contrast, for instance, the figure for All Industries and Services in this Region, at 2004, was £30,100. There is, however, a strong inter-dependency between sectors especially in a highly sophisticated economy such as the North West.

57.  In February 2008 EUROSTAT published Regional GDP figures as at 2005 for the EU27. On a purchasing power parity basis North West England had a GDP per inhabitant figure equivalent to 23,335 Euros compared with the EU 27 average of 22,400. On the comparator EU27=100 this suggested an index for the North West of 104.2. Within the Region both Cheshire, with an index of 132.8, and Greater Manchester, 110.0, were both above the EU27 average. In addition Lancashire, on 97.2, was fairly close to the average whilst Cumbria recoded an index of 90.2, and Merseyside 84.8. Of the 35 sub-regions (NUTS Level 2) Areas for which data was available in the UK Cheshire, with 29,744 Euros, recorded the fifth largest figure only behind Inner London, 67,798 Euros; Berkshire, Buckinghamshire & Oxfordshire, 168.0 Euros; Bedfordshire & Hertfordshire, 136.1 Euros; and Gloucestershire, Wiltshire, & Bristol/Bath area, 133.9 Euros. Greater Manchester was in thirteenth position.

58.   Amongst a number of positive features relating to North West England are its size and its diversity. Both are decided assets although, ironically, its size renders it difficult, on the statistical front, to rapidly “improve” on performance. In essence it requires substantial absolute increases in employment, output, investment etc, to bring about a significant percentage change. The Region itself covers an impressive range of geographical landscape and activities from the bustling market town areas near the Scottish border to the revitalised Automotive Industry in Crewe.

59.  The latest official ONS Regional Accounts, which became available on 14th December 2007, illustrate the complexity of our Region. Headline GVA at current basic prices in 2006 was provisionally quoted as £111.3 billion for the North West. This represented 9.9% of the UK figure, third only to London on £196.8 billion, and South East England on £177.2 billion. The only other region to reach the £100 billion mark was East of England with £109.9.The North West’s GVA per head figure at £16,234 compared with the UK average of £18,631. On a comparator of UK =100 this results in a North West index of 87. In the last five years for which figures are available, 2002-2006 inclusive, this Region’s index has been either 87 or 88. Nevertheless between 2002 and 2006 North West GVA has increased by £2.6 billion or 18.8% at the same time as London has seen a £5.6 billion increase or 25.7%.

60.  Within the North West there are thirteen NUTS Level 3 areas whose Headline GVA per head index, compared with UK=100, ranges from 115 at both Greater Manchester South, and Halton and Warrington, to 57 on the Wirral. There are even contrasts between locations in close proximity. For instance, whilst Greater Manchester South, on 115, has the relatively prosperous Cheshire County Council area to the South with an index of 106, to its North is Greater Manchester North on 68. Even within the NUTS 3 areas there are considerable variations. As an example Greater Manchester South, whilst containing many very positive, high growth activities also contains a number of hard core areas of deprivation.

61.  If a company is to succeed in a challenging market-place then a policy of focused investment is a priority if a leading edge position is to be maintained. An important aspect of this is an attention to profit-orientated innovation. ONS provides useful data on a regular basis highlighting expenditure on R+D performed in UK businesses. In the last six years for which statistics are available, between 2001 and 2006 inclusive, the North West has, consistently, been in third place behind the South East, and East of England. In 2006 the North West was responsible for £1.6 billion R+D expenditure or 11.4% of the UK total, whilst for the 2001-2006 period combined this Region undertook some £10 billion worth of R+D or 12.9% of the UK figure. ONS has recently also provided more detailed data on R+D performed in UK Manufacturing Businesses. Again, only the South East and East of England were ahead of the North West which in 2006 recorded a figure of £1.5 billion or 14.2% of the UK total.

62.  As with most set of statistics care needs to taken in interpreting the actual figures. In this context, on the wider aspects of innovation including R+D the reader will find it useful to refer to a discussion paper, produced in May 2006, entitled “The Use and Limitations of Indicators in the Context of City-Regions Development Strategy” which was prepared for “Manchester: Knowledge Capital” by the Manchester Business School. The appropriate reference is on page 44 of that document under the heading “Review of innovation indicators and their usefulness at the regional level”. Amongst a range of issues is the fact that “hard-nosed market-winning” innovation is more than just R+D. This is well brought out when visiting a number of companies in the North West. There is often evidence of businesses incorporating a seemingly low key improvement such as readapting various machinery and equipment and securing notable improvements in quality and/or productivity.

63.  An anticipated event during the year is the Government’s Budget Statement which has implications for all parts of the community and particularly the Business Sector. Since New Labour came to power in 1997 at least some of the mystique and uncertainty has been removed by the introduction of the pre-Budget Report some months in advance. Most Budgets in recent years have tended towards a “steady as she goes/stability” approach. Whilst this tends to attract a level of cautious approval there are also voices demanding a more vigorous support of Industry and Commerce. Both these type of sentiments were displayed following the 2008 Budget which was delivered to the House of Commons on 12th March by the Chancellor of the Exchequer Alistair Darling.

64.  Andrew Semple, the North West spokesman for the Manufacturers organisation the EEF, welcomed the package of “innovative” measures contained in the Enterprise White Paper but wished that there had been some announcement on the future direction of business tax strategy.  Amongst a number of mixed responses was that of Christine Hewson, tax partner at KPMG in Manchester. She acknowledged that the Chancellor had mentioned initiatives such as an increase in the Small Firms Loan Guarantee Scheme which has been extended to all SMEs. However, Ms Hewson was concerned that SMEs were “going to be hit by a tax hike next year when the rate of Corporation Tax is increased by three per cent”. Other views from around the Region varied. For instance, there was muted approval relating to national plans to invest £12.5 million to boost the number of female entrepreneurs.  On the negative side there were concerns over road pricing and fuel duties. There was, however, better news in July 2008 when the Chancellor announced that the 2p rise in fuel duty, due to take effect in October, had been postponed. It was hoped that this decision would help “motorists and businesses get through what is a difficult time for everyone”.

65.  The Chancellor expected the economy to grow by between 2.25% and 2.75% in 2009 compared with the 2.5% to 3% anticipated six months previously This adjustment was made as the effects of the credit crunch that began in the USA last year continue. Inflation was expected to rise before returning to its 2% target in 2009. The overall sentiment expressed in the Budget speech, however, was one of optimism for the long-term future of UK business. The North West has a significant presence of large enterprises within its boundaries but it also has an immense number of both small and medium-sized operations that are making important contributions to the competitive economy. In this respect it is good to record the commitment to improving the ability of small firms to access Government contracts. A target figure of 30% of total is welcome. Launched in 2006 www.supply2.gov.uk aims to open up the public procurement market to all types of business, especially SMEs. This is by giving them the facility to search, be alerted to and view open low-value contract opportunities, including R+D, across the Public Sector. In order to assist SMEs in accessing contracts the Government were to introduce a free three month trial period for new firms registering on supply2gov. The Government also intended to do more to encourage Public Sector buyers to register and post opportunities on the site.

66.   The Government is providing the National Council for Graduate Entrepreneurship (NCGE) with additional funding to establish university enterprise networks. The NWDA is very supportive of the development of a network of entrepreneurial universities and will be working in the Region to drive forward this initiative. It is felt that this initiative will not only provide support for businesses across the North West but has the potential to extend its influence to include schools, Further Education colleges, and the wider community. The continuous development of digital technologies is transforming most sectors. Regional Development Agencies have recognised their importance and sought to strengthen local capacity through the development of centres of excellence notably Media City at Salford Quays. This combines access to North West leading academic institutions and a cluster of creative firms around the projected new BBC complex.

67.   The central platform of the North West’s business advance is its people from the most senior chief executive to the most recent junior member of staff. The enhancement of the Region’s skills base has always been crucial to the prosperity of the area and, in the context of fierce global competition, this is a priority. The considerable variety of activities undertaken by North West businesses necessitates an impressive range of expertise and capabilities. Almost whole new sectors or sub-sectors have emerged in recent years from specialty including Ethnic foods to innovative responses from suppliers to the Transportation industries.

68.