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The North East Economy Update – January 2016

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27 Jan 2016
We’re fortunate enough that our NECC membership enables us to develop our market knowledge and gain industry insights in the regions in which we recruit. The Newcastle team recently attended the North East economy update presented by NECC’s director of policy, Ross Smith. The update touched upon issues including cash flow, investment and employment within the region.

Although 2015 saw significant growth and as we move into economic stability after the Recession, concerns still remain within cash flow and fluctuating prices, especially in the manufacturing industry. Inevitably, the plummeting oil prices will have a huge effect on the North East economy and whilst we may benefit from lower travel costs, uncertainty and volatility in the market leaves many questions unanswered.The overall picture is that the North East continues to deliver growth, however the speed of this growth has now slowed compared the previous quarter. There is good news though as we are the second strongest performing region in the UK, holding the title from 2009-2013 and have recently been taken over by the North West.

Overall growth is slowing in our area, this is partly due to UK sales decreasing sharply in the last two to three quarters. The biggest reason for this lies in the changes within manufacturing, with manufacturing firms listing “exchange rates, energy prices, business rates and staff costs” as causes of a decline in profitability. Despite this, new figures show the North East has the best exports to China and India. The news highlights the North East’s manufacturing businesses’ seizing upon developments with trading and suggests the workforce is growing at a solid level.

However, the  manufacturing industry in particular have expressed concerns over lack of training with training investment in the North East manufacturing  significantly lower than the rest of the UK. This is a feeling expressed by some of my clients including Calsonic Kansei (who supply to Nissan), who  expressed their real concern in their growth plans being affected greatly by the lack of qualified and experienced engineers -a feeling strong amongst other high-profile clients.

Employment has seen steady growth in the last four years (reflective of general employment not the finance market) but there appears to be hints at a dip in employment re-emerging –a stark contrast to the rest of the UK. Unemployment in Teeside saw a huge rise recently with the demise of Sahaviriya Steel Industries UK Limited. Additionally, it has become even more difficult to find staff for reasons other than pay, hinting to the highly publicised skills shortage. Even in sectors where there are skilled candidates this becomes even more competitive, with employers seeking the best of the best.

As we look to the future for 2016 should we expect more bad news? The last survey in which these results were generated was completed two weeks after the SSI announcements, the effects of which are still feeding through the wider local economy and it is felt that we could see a difference emerge between performance figures in the northern part of the region against the southern part of the region (ie Teeside vs Tyne Valley). The inflation forecast is being affected by the oil price which has fallen further and the Bank of England has accepted that to achieve interest rates of 2% may now take longer than predicted 6 months ago.

It is far too easy to allow the last recession to be forgotten as stable economic growth has been restored, but these recent figures remind us that we have little control over global trends such as the exchange rate position, turbulence in many overseas markets, and a challenged oil and gas sector. What impact these will have on our region is hard to predict.

*Please note these figures are reflective of NECC member’s opinions so the sample size is smaller and not 100% reflective of the region.

If you would like to discuss developments within the North East region in further, contact me on 0191 261 8585 or email hayley.coulthard@sellickpartnership. Alternatively, sign up for our quarterly newsletter for the latest industry developments straight to your inbox. Receive Newsletter

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