Regional Economy
What's the story….
Mike Thomas, Director
© 2015 Grant Thornton UK LLP. All rights reserved.
Contents
• Size matters
• Challenges and Opportunities
– A small business story
– Medium size businesses
– Public sector
• Devolution/Northern Powerhouse – Can it be the answer?
© 2015 Grant Thornton UK LLP. All rights reserved.
Size matters – the economy…
Generally a very positive story….
• Three Northern Regions worth £289 billion – twice the size of
Scotland and 10th largest economy in EU;
• Economies of 5 largest Northern cities grew by 38.8 per cent 20032013;
• Population grew by over half a million – more than live in the City
of Manchester;
• Northern ports and airports exported goods worth £55.2 billion in
2014 and imported goods worth £54.2 billion;
• Rate of job creation in some parts of the North more than double
the national rate of 1.9 % (which is the Northern rate also).
• 29 Universities plus significant cultural and natural assets
• Rate of new business start-ups is impressive
• Medium Size Business sector is strong and growing
© 2015 Grant Thornton UK LLP. All rights reserved.
Size matters – the challenges…
• But…. the North continues to underperform relative to the world's
most successful economic regions!!
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Centralised system is hampering growth
Productivity is lower – against EU and nationally!
Historical Infrastructure under- investment
Poor transport connectivity
Qualification levels and skills are lagging behind
Health and Life Expectancy challenges
Ageing Population
Significant fiscal deficits in each LEP region area….
Reducing public sector resources vs Increasing demand
© 2015 Grant Thornton UK LLP. All rights reserved.
Growth – a positive story
© 2015 Grant Thornton UK LLP. All rights reserved.
Jobs Growth – Right type and value?
© 2015 Grant Thornton UK LLP. All rights reserved.
Jobs Growth – right value
© 2015 Grant Thornton UK LLP. All rights reserved.
Skills – Need to improve
© 2015 Grant Thornton UK LLP. All rights reserved.
Investment in Infrastructure - crucial to future
© 2015 Grant Thornton UK LLP. All rights reserved.
Decline in Public Sector spending
© 2015 Grant Thornton UK LLP. All rights reserved.
Health and Social Care – Inequalities remain
© 2015 Grant Thornton UK LLP. All rights reserved.
A significant and growing small business sector
• c.1 million private sector businesses in the North
of England
– Employing 5 million people
– Turning over £556 billion
• 99% are small (<49 employees)
– 2.5 million employees (49% of all employment)
– Turnover of 198 billion (36% of all turnover)
• Only 0.7% are medium (50-249 employees)
• 74% of all private sector businesses have no
employees
Source: BIS (2014) Business Population Estimates
© 2015 Grant Thornton UK LLP. All rights reserved.
The challenge of growth
• Not a start up problem: 60,000 new registered employer
businesses in 2014
• Nor a survival problem: 54% of businesses starting in
2011 were still operating in 2014
• But a growth problem:
– 5.9% of businesses starting in 2011 had reached £1
million turnover by 2014
– 6.1% of businesses turning over £1 million in 2011
had grown to £3 million by 2014
Source: BGS and ERC (2015) Growth Dashboard; ONS Business Structure Database
© 2015 Grant Thornton UK LLP. All rights reserved.
Medium Sized Business sector
• Agents of Growth Report (Grant Thornton 2014)
- Outperform the market
- Overlooked by policy makers
- Pivotal role in employment and innovation
- Resilient and most productive
- Outpace others on Rand D and capital spending
• Times Top Track 250 11.10.15 – North has largest
number (62) in table, sales of £17.2bn, profits of £820m
employing 93,000 people.
• Access to suitable funding, shortage of skills and
expertise and excessive red tape still challenges.
© 2015 Grant Thornton UK LLP. All rights reserved.
Barriers to growth
Source: GrowthAccelerator 2012-2015
© 2015 Grant Thornton UK LLP. All rights reserved.
Is Devolution the answer?
• Can it help with responding to the challenge?
• Economic Growth is being constrained
• Public Service Reform needs to
accelerate….
• Improved engagement with electors and AND
citizens – a different conversation …
© 2015 Grant Thornton UK LLP. All rights reserved.
Benefits of devolution – Why Devolve?
The UK is a
centralised
state
A real
opportunity to
innovate –
focus on
outcomes &
place
© 2015 Grant Thornton UK LLP. All rights reserved.
Devolution
offers a way of
reinvigorating
local
democracy
Local service
delivery record
compares
favourably with
the centre
Opportunity to plug
small and mediumsized businesses
into the public
service supply
chain
Reasons to be optimistic…
• Progress since election
- Infrastructure developments
- Transport for the North
- Greater Manchester / Sheffield deals done
- 38 bids and range of asks being reviewed
• Leadership - Focus on outcomes/ NOT
GOVERNANCE
• Urgency – momentum
• Comprehensive Spending review and Fiscal
Devolution?
© 2015 Grant Thornton UK LLP. All rights reserved.
Conclusion …
• The challenges are significant but there may be
an opportunity through devolution…
• Some great new businesses with new ideas
emerging at pace
• Strong established, resilient and growing
businesses to build on
• We have an infrastructure that we have invested
in to grow some of these players
• But we need to do more to compete in the
Champions League.
© 2015 Grant Thornton UK LLP. All rights reserved.
Mike Thomas
Audit Director
T +44 (0)788 045 6173
E: mike.thomas@uk.gt.com