The Chamber released an initial statement shortly after Rishi Sunak delivered his first budget as Chancellor, in which we broadly welcomed many of the decisions taken, while being careful to add that for some pledges, the devil will be in the details. International Policy adviser Tom Kennedy takes a look at the last week in this blog post.
Set against the backdrop of the growing pandemic threat, the first Budget of the new Johnson government received much press attention for large increases in levels of investment and public spending, including £12bn worth of support to mitigate the economic shocks of COVID-19.
But what does this Budget specifically mean for our ambitions to make a more Global North East?
On the topic of international trade, the Chamber asked the Chancellor to commit extra finances and support for our region’s exporters, to make the most of global opportunities for trade after the EU exit transition phase comes to an end. In something of a win for the Chamber, these requests were met in the Budget with commitments made for an additional £2bn UK Exporting Finance (UKEF) and additional International Trade Advisers (ITAs) being based outside of London. UKEF is the UK’s export credit agency which provides loans and insurance from the government to support exporting enterprises; this money, if utilised efficiently, could be of great use to North East exporters.
The presence of more International Trade Advisers close to the North East can only be good for prospective exporters, or those currently exporting who want to break into new markets. More ITAs in the North East will hopefully allow for more identification of market barriers and support for businesses to overcome these barriers, or provide information on new markets for prospective exporters.
There were additional announcements for brand new developments for North East exporters, such as a ‘Trade Envoy for the North’, a Digital Trade Network in the Asia and Pacific region and the establishment of ‘local champions’ in key overseas ports to support exporters from UK regions including the Northern Powerhouse.
The establishment of connections in the Asia and Pacific region could be beneficial to enhance the already growing level of exports from the North East to non-EU nations, especially as the North East’s digital and tech sectors have been growing rapidly in recent years. On the other two proposals, it will be useful to see more detail on how they will work for North East businesses. It is unclear how these ‘local champions’ will operate in their areas, or how much influence they will actually be able to have in order to help trading relationships to foster and grow. In the same vein, there has been very little information on the trade envoy for the North and how it would operate. Hopefully this information will be made available in the coming months.
Considering how the B word has dominated politics for the past 3 and a half years, there was surprisingly little mention of Brexit in the Budget at all. The Chamber made clear in our letter to the Chancellor that the government should work tirelessly to secure a Brexit outcome that protects the free and frictionless trade with the EU that so many North East businesses rely on. As the negotiations are currently ongoing, it is perhaps not surprising that there was little mention of them in the Budget, but this absence of the issue in the Budget does provide other, perhaps concerning, questions for the region.
The figures, provided by the Office for Budget Responsibility (OBR) that guided the Budget and give the government a forecast for future British economic performance, did not include any calculations for the possible economic impacts of Brexit, or for Coronavirus, which is already having huge impacts on the global economy and on British businesses.
This not only casts the figures into doubt but could also have extra significance for the North East, considering that the government’s previous economic assessments of Britain’s departure from the EU have suggested that the North East will be the worst affected area, with an approximate 6% reduction in output, even under model Free Trade Agreement conditions.
This information, you would think, would be useful in preparing a Budget, so as to ensure that each region can be allocated resources that it may need before the transition comes to an end, yet this has not happened.
Another cause concern for the North East, was the lack of information on the UK Shared Prosperity Fund. There was no mention of the fund, other than that more information should be expected in the Autumn Comprehensive Spending Review.
The UK Shared Prosperity Fund is set to replace the European Structural Investment Fund that Britain currently receives from the EU following the end of the EU exit transition phase. Between 2014-2020, the North East Local Enterprise Partnership area was allocated £437 million from the fund, while the Tees Valley received £197m in the same period, so information on the replacement of this funding is needed as soon as possible.
With the transition period scheduled to end on 31 December, the questions over Brexit cannot continue to be pushed further down the road. Not mentioning or accounting for our departure from the EU and its ramifications in the Budget do not make these issues go away, and the lack of information on the Shared Prosperity Fund now means that the Comprehensive Spending Review in the Autumn will be the only opportunity to shed light on what will happen.
This will mean that the myriad users who currently access European Structural Investment Funding, including businesses, charities, local and combined authorities will only have a few months at most to adapt to the new system. This is not an ideal scenario.
There are undoubtedly some good things in this Budget. Increased support for North East businesses to export across the globe is very welcome and we look forward to seeing how the other new proposals will support our region.
As we aspire to create a truly Global North East we want to see support given to businesses to trade further afield than Europe, but simply down to the sheer scale of trade that the North East does with EU member states these welcome changes will seem insignificant by comparison and will therefore simply be overshadowed by such uncertainty.
The rest of the policy team will be updating members on their respective policy areas, so the Chamber blog will be full of information on the impact of this Budget on our Influential, Connected, Competitive and Working North East campaigns going forward.
The Chamber will also be collating any and all information for businesses about Coronavirus, such as available assistance for businesses, as the situation develops. Please contact anyone in the Chamber policy team regarding support around this.