News and commentary

In April, Richard Baker, Director of Policy and Strategy at the North East Local Enterprise Partnership, wrote about partnership work on the North East Trade and Export Strategy with the aim of making trade a key part of our recovery. To add to this, our Analyst Thomas Athey reports on the latest data and what this means for the region.

It’s no secret that the last few years have seen some ups and downs for international trade. The North East, with high exports per head compared to the rest of England, has been more affected by these ups and down than most. Regional manufacturers, who are amongst the firms most likely to export, have faced a number of challenges.

At the North East LEP, we have been working with our partners in the Department for International Trade and North East Chamber of Commerce to develop and implement our trade and export strategy given the importance of exports to our long term growth. To support this, we are monitoring the regional exports data closely.

The latest data reveals just how turbulent the last few years have been, and reinforces the export proposition we set out in that strategy which is key to how the North East can move forward.

Regional manufacturing exports reached their low point in Q2 2020 at a level 39% lower than the same quarter the year before. This quarterly fall was unprecedented and by far the largest decrease in the available data.

More recently the automotive industry in particular, experienced further rounds of disruption. Semiconductor and other supply shortages meant that, even with Covid-related restrictions lifting, production was constrained. Road vehicles exports reached a second low in Q2 2021 at a point 56% lower than the same quarter two years before. They have been gradually building back ever since

Given the importance of automotive exports to the region, the result is that regional goods exports are recovering more slowly in the North East than elsewhere. In the latest quarter the North East goods index was at 96% of 2014 levels. The Northern Powerhouse index was already at 110%. Previously these two indices tracked each other closely.

Even this recovery may be vulnerable to global events. Although the direct value of North East exports to Russia was already relatively low it fell back to less than 1% of the regional total in Q1 2022. The Bank of England has also highlighted many rare metals are mined in Russia, including 41% of global Palladium supply which is often used in the production of catalytic converters. Whilst there are alternative materials which can be used in converters, there are concerns that automotive exports will see their recovery further disrupted.

Yet there are clear positives in the data too. North East pharmaceutical exports remain far above pre-pandemic levels, with products worth £557 million exported in the last four quarters. This was 22% more than in 2019.

Manufacturing service exports have also performed well despite the international disruption. As overall regional service exports were falling in 2020 manufacturing service exports increased by £146 million, becoming the joint largest sector for regional service exports.

This suggests the higher value aspects of manufacturing have remained resilient throughout the pandemic, although future data releases will provide more insight. The exceptional performance of the North East in the latest inward investment data is especially encouraging in this context. Much of this investment has been in areas such as electric vehicles and batteries where the North East can have a competitive edge.

The ups and downs of the last couple of years, however, show the North East needs to continue to be strategic and continue to compete in the higher aspects of the manufacturing value chain. Working with partners we will continue to build a regional evidence base and strategic approach to ensure North East manufacturing can remain resilient in the future.