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Why the North East can’t afford to be left behind in Northern Powerhouse discussions

Neil Warwick, Business Development Partner, Square One Law and Interim Chair of the Northern Business Forum explains the importance of early engagement with regional devolution discussions. 

The recent announcement that the North East Combined Authority has written to Secretary of State for Communities and Local Government, Greg Clark to actively pursue negotiations for a devolution package is good news for the region. There has been a perception that Greater Manchester is leading the way in the “Northern Powerhouse” initiative and there was a danger that the North East could have been left behind. The reality is that Greater Manchester, Liverpool, Leeds and Sheffield have agreed to try and implement the Chancellor’s wishes for a governance structure based around elected Mayors and as a result have been promised the possibility of devolved powers subject, as ever, to negotiating the fine print.

By agreeing to enter into negotiations the North East has not committed to do any more or any less than the other northern cities and authorities. However, it is now a question of timing. By agreeing to the negotiations early, Greater Manchester could have devolved powers as soon as 2017. If the North East delays over its own negotiations devolved powers may not be granted until 2018 or worse still as late as 2019. The real danger therefore is that a potential delay in the granting of devolved powers could inadvertently create an imbalance within the Northern Powerhouse initiative at the very time there is a need for unity.

The North East, both the North East Local Enterprise Partnership and Tees Valley Unlimited, cannot afford by 2017 to be surrounded by Scotland, Yorkshire and the North West who by then would all have some form of devolved powers, and consequently not be able to compete on a level playing field.

There will be a referendum on the UK’s membership of the EU by 2017. Whatever the outcome, there will be both opportunities and threats for regional economies. If the UK remains part of the EU there will be inward investment and export opportunities for businesses. Regions with devolved powers will be far better placed to take advantage of the opportunities quickly. Equally if the UK were to come out of the EU, trading relationships with the remaining EU Member States would have to be hastily renegotiated, and regions with devolved powers would be in a better position to take advantage of the situation.

Being able to compete on the same terms as its neighbours is crucial for the North East as there is a danger that it could become an island in the middle of larger regions with greater powers to determine their own economic policies. If this were to happen there would be limited scope to attract another Nissan or Hitachi to the North East. If fact, areas such as Aberdeen, could for example, become more attractive to the North East. If Aberdeen and the Humber were able to offer their own incentives to offshore companies, the Northern Powerhouse could become a competitive threat to the North East rather than a collaborative opportunity.

The announcement that the North East is now to take part in these discussions has to be a welcome one. It would be unthinkable for the North East to be left behind simply because it had taken more time to analyse the situation. For the Northern Powerhouse to work there will have to be genuine collaboration which will need to be carefully negotiated. Given the North East is already the most isolated of the three regions and has the smallest economy, it cannot further weaken its negotiation position by delaying the implementation of devolved powers. Instead the North East should take advantage of the fact that, with only two LEPs, two combined authorities and a cohesive business community, it has a better chance to agree a united front internally and be much more agile in its negotiations with its other Northern Powerhouse colleagues.The fact that the North East Combined Authority has chosen to focus on the North East becoming the Northern Powerhouse’s export region could prove to be a very shrewd long term play for the region.

Find out more about Neil Warwick 

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