North East in a Global Context Philip McCann University of Groningen

North East in a Global Context IPPR North 2012 Northern Prosperity is National Prosperity OECD, 2012, Promoting Growth in All Regions OECD, 2006, 2008 reviews of regional innovation in North East and the territorial review of Newcastle city region Regeneris, 2011, North West ERDF Operational Programme : Mid-Term Evaluation, March BIS papers DFID papers EU, OECD, World Bank documents

North East in a Global Context UK context – devolved administrations Within England – institutional reform related to regional development and enterprise promotion Space neutral or place-based? Rebalancing – sectoral or regional or both? Two-region model: GSE-v-The Rest? Regional focus is shifting – cities – versus hinterlands/rural It is an ongoing and emerging process

North East in a Global Context North East – issues relating to skills, entrepreneurship, innovation, diversity Challenges of geography General North-South debate Location within the North – issues of connectivity to the rest of the northern regions Land use planning and infrastructure provision Critical for inward investment FDI – and also for LEP strategic thinking

North East in a Global Context Infrastructure gap - Eddington (2006) and skills gap – Leitch (2006) Regional dimensions? Governance and coordination challenges Alignment of development funding aims - RGF – and LEP powers – and also EU development funding (ERDF, ESF etc)

North East in a Global Context The global economy is less connected than in 2007 and also less connected than most people imagine – major productivity gains from re- invigorating trade (Ghemawat and Altman 2012) 80% of global trade is in goods – 70% is manufactured goods Service type activities make up to half of manufacturing jobs, and their share is correlated with the overall skills levels. The distinction between manufacturing and services has blurred (McKinsey Global Institute 2012)

North East in a Global Context EU Single Market – accounts for 6% higher income per capita in UK – equivalent to £3,300 per household per annum (BIS and DFID 2012) Completion of the Single Market – removing all obstacles would increase UK incomes by another 7% - total effect would be 14% income per capita (BIS and DFID 2012) UK – 40% exports are services Trade in high value and medium-high manufacturing (and associated services) is central to NE trade with EU and the rest of the world North East – 50% of trade in goods is EU-related – including a large trade surplus

North East in a Global Context For advanced OECD economies, the importance of manufacturing and engineering is that it is a catalyst for driving R&D, innovation, productivity gains and widely dispersed knowledge-spillovers within and between different sectors, activities and regions (Harris and Moffat 2012) Manufacturing and engineering are central to re- invigorating the global economy and enhancing productivity growth via their impacts on R&D, innovation, trade and global connectivity.

North East in a Global Context High value manufacturing still provides a major comparative advantage for EU – in particular relating to energy and environmental goods and services, healthcare products and services, advanced materials, electronics etc Goods and services related to global and societal challenges and also taking advantage of the long-run growth opportunities associated with trade with the emerging BRICs markets LCEGS market estimated to be £3 trillion in 2007/08 (BIS 2009)

North East in a Global Context NESTA – ‘vital 6%’ Amongst SMEs, those that export are more oriented towards R&D, innovation or hold intellectual property. Exporting firms have weathered the economic crisis better than those which do not. Barriers to exporting are high for innovative firms (BIS 2011) – rising after two years and falling after ten years

North East in a Global Context EU Cohesion Policy ERDF funding - Smart Specialisation Policy prioritisation based on existing and emerging and promising areas of technology, activities or sectors on which the region already has potential scale and strength to diversity Matching and coordination of policy actions to promote diversification around a core Monitoring, experimentation, results-oriented and evaluation

North East in a Global Context EU Cohesion Policy contains many actions which are highly relevant for the development of high value manufacturing and engineering Actions on SME finance; actions promoting cross-border collaboration; actions linking R&D to innovation; actions linking universities and research centres to business; actions focused on energy and environmental goods; and actions focused on the upgrading of value- chains