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Will the North East’s warm welcome keep the FDI flowing?

Newcastle and the North East are famed for their warm welcome, which has helped them to attract major investments from the likes of Nissan and Britishvolt, as well as many major business services providers.

newcastle-northeast-fdi
The River Tyne in Newcastle used to be the epicentre of England’s shipbuilding industry, but the wider North East region now has a strong reputation in automotives, business services, game design and green energy, among other fields. (Photo by Oli Scarff/AFP via Getty Images)

Newcastle upon Tyne and the surrounding North East region has its roots in industry, with the city once a titan of shipbuilding and mining. This legacy has continued in the region through the post-war industrial decline and has manifested itself in an innovative manufacturing sector that comes alongside a famously resilient attitude.

The North East region switched from ships to cars with Nissan establishing vast operations in Sunderland. It has also taken strides to diversify its sectoral offering. The North East nurtures tech clusters, energy companies, life sciences facilities and business services by pumping out a particularly high percentage of science, technology, engineering and mathematics (STEM) students from its five universities (Durham University, Newcastle University, Northumbria University, University of Sunderland and Teesside University).

Guy Currey, managing director of Invest North East, explains: “In the North East, the highest proportion of students, between the five universities, are studying STEM subjects. So, the region still has that legacy of engineering capability.”

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Power to the people

Alongside its industrial legacy, the North East is known for its people; friendly, approachable, down to earth and hardy. As the region sets out its recovery strategy following the double blow of Brexit and Covid-19 in 2020, it is the people – armoured with newly devolved powers – that are leading the recovery.

The 2021 PwC Doing Business and Investing in the UK report highlighted that “the face of the Northern market is changing, with the majority of the region now having devolved powers”. The Local Government Chronicle reported on 1 March that the region is far from finished with its devolution plans.

The magazine explained that an outline of a devolution deal designed to unite authorities on either side of the River Tyne is currently under negotiation and is expected to be formally submitted for consideration in Westminster following local elections in May. The PwC report highlights the success of these powers, stating that in 2019 the North East created 2,500 jobs through foreign direct investment (FDI).

In fact, the region ranks second only to London for job creation through FDI. It is considerably ahead of other English regions when compared by FDI jobs per 100,000 people.

In 2020, with Covid-19 forcing much of the world into lockdown and restricting travel, it speaks volumes that the region had one of its most successful years yet in terms of FDI attraction and job creation. Currey highlights the local people – ‘Geordies’ in Newcastle and its surrounding towns and ‘Mackems’ in Sunderland – as a key FDI driver.

“The people in the North East enjoy going out and having a drink,” he says. “They are incredibly sociable and friendly. It is interesting, because a lot of those attributes work through into some of the business sectors that we are keen to attract.”

Geordies and Mackems at your service

Currey believes the ability of people from the North East to quickly endear themselves to others is particularly attractive for customer-facing business services.

Business services like setting up in the North East for things such as customer contact centres, because Geordies – with the accent and the personality that people typically attribute to them – are all about being friendly and open. Guy Currey, Invest North East

“Business services like setting up in the North East for things such as customer contact centres, because Geordies – with the accent and the personality that people typically attribute to them – are all about being friendly and open. That is a real positive for business outlook in terms of getting people to ring up and respond well to contact centres.”

The region is home to 145 contact centres employing about 50,000 people. Barclays, British Airways and Santander all have contact centres in the North East. Furthermore, the North East has one of the lowest staff turnover rates for UK contact centre employees, at 12% in 2020.

The region’s services strengths stretch further, however; there are almost 19,000 financial, professional and business services companies in the region. On top of this, Newcastle has a burgeoning fintech cluster, explains Jennifer Hartley, director of Invest Newcastle.

“We are really big in technology, particularly fintech,” she says. “We were recently recognised along with Durham as an emerging fintech cluster in the Kalifa report. It is really a testament to the companies we have here, from the start-ups right through to big global brands such as Sage, which was originally a spin-out from Newcastle University and is now one of the world’s largest enterprise software providers.”

The North East’s rise in tech has also combined with its culture of being creative in the form of a growing video games subsector.

Hartley says: “Ubisoft now employs more than 500 people in Newcastle. It is one of the biggest studios in the UK and one of the most successful. Ubisoft isn’t the only big developer, however. We’ve also got Sumo games in Gateshead and Epic Games in Sunderland. Alongside this, we have got a whole host of independents.”

Nissan’s shining example in Sunderland

The North East’s skilled workforce also benefits the region’s manufacturing sector. Peter McIntyre, the executive director of city development at Sunderland City Council, explains: “Investors are always more interested in the people and the narrative… and the North East is about the productivity of people and their ability to effectively focus on the task at hand and do it as world beaters.”

The Nissan car plant [in Sunderland] has been the most productive car plant in Nissan’s stable forever and a day. That is a really difficult position to maintain. Peter McIntyre, Sunderland City Council

McIntyre uses the Nissan factory in Sunderland as an example: “The Nissan car plant has been the most productive car plant in Nissan’s stable forever and a day. That is a really difficult position to maintain.”

McIntyre adds that Nissan’s Sunderland workforce has become an example to other plants. “It is people from Sunderland that go to St Petersburg and set up the Russian plant,” he says. “It is people from Sunderland that go to Mississippi and set up the American plant. They take a lot of Sunderland’s secrets with them about how the North East operates.”

The Nissan factory is also a good example of the North East’s resilience. Plagued by concerns over its sustainability post-Brexit, the factory recently announced it was recruiting 100 new people for the launch of the Qashqui model.

Furthermore, Nissan announced in March 2021 that it would be applying for planning permission for a 20MW solar farm to be based at its Sunderland plant. This is a promising sign not just for manufacturing but for the blossoming energy sector in the region.

Currey says: “I think we are going to be the centre of some of the UK’s green industrial revolution in terms of offshore wind electrification and digital technology – gigafactories, electric batteries, things like that. This sector is probably where we get most of our investment inquiries.”

‘Boomerang Geordies’ and the quality of life

It isn’t just a can-do attitude that is attracting investors to the North East. As the graph below shows, Newcastle’s population is better educated in higher-level qualifications than the British average.

At a time when the Covid-19 pandemic has had a hugely negative impact on sectors such as hospitality and tourism, Hartley argues that it has allowed the region to showcase its high levels of education through the flourishing of areas such as life sciences.

“[The North East health service] rolled out some of the first testing and created the Covid Innovation Lab,” she says. “Our private sector life sciences companies have also really shone throughout this time. Companies such as Quantum DX – which develops diagnostic testing and has hired more than 100 people in Newcastle – recently announced a further £11m of investment. It is just one of many life science companies here.”

The region’s five universities, aside from excelling in the STEM subjects, also seem to provide students with a rich quality of life, as Hartley explains. “I am not originally from Newcastle but I came here as a student. After going away, I came back quite quickly and almost every one of my university friends have come back. [We all] recognised that it is a really unique place to live and work. The quality of life is quite unbeatable.”

Hartley lists the benefits of being among what she calls the “boomerang Geordies”. “[The North East] offers really amazing housing that isn’t as ridiculously priced as some other areas of the UK. Its culture attracts lots of people for city breaks. We have also got the very historic countryside with Hadrian’s Wall and Durham Cathedral not too far away. All of that is sitting near the stunning North East coastline.”

North shoring on the rise

It isn’t just more affordable for the people living and working in the North East. There is a low operational cost too, which gives the region an edge when it comes to investment pitches.

We have start-ups right through to big global brands such as Sage, which was originally a spin-out from Newcastle University and is now one of the world’s largest enterprise software providers. Jennifer Hartley, Invest Newcastle

Currey says: “There has been a big change in the way that people are working and the role of the office going forward. This creates a big opportunity in the North East in the form of ‘north shoring’ , which is people moving out of other cities such as London and setting up facilities in the north of England.

“We have been seeing this happen over the past ten years. [We say to investors]: you can get the talent [in the North East], you are not going to have high attrition rates like in London, you will get a loyal workforce, and the cost is lower and more competitive.”

McIntyre adds that although operational costs may be low, the offering is of a high quality that deserves to be valued. “I am always quite nervous about Sunderland being a sort of cost-based proposition because I think that is its history. We are a young city obsessed with quality and we undoubtedly have the ability to negotiate a price point. We want to give absolute quality investment opportunities in Sunderland. It is why we are spending heavily on infrastructure, technology and skills development; we simply want to be the best at everything we do.”

When asked for his North East elevator pitch for could-be investors, Currey says: “Mix the enthusiasm of the workforce, cost base, the availability of assets, and then link that to the opportunities afforded by these new pioneering sectors such as offshore wind and immersive technologies and innovations in manufacturing, I think you have got the perfect mix.”

This mix seems to have worked for Britishvolt, which recently announced plans to locate the UK’s first ‘gigaplant’ manufacturing electric car batteries in Blyth, a town about 20km from Newcastle. The gigaplant will create 3,000 jobs, with a further 5,000 expected to be created in the wider supply chain. The choice of Blyth as the location for this project was a huge vote of confidence in the North East region, and will go a long way to assuaging fears of a post-Brexit slump in its job market and overall economy. No one has commented as to whether it was the famous Geordie welcome that tipped the scales in Blyth’s favour, but the North East will have been able to rely on sparkling references from the likes of Nissan attesting to the region’s qualities when it comes to hosting major investments.

This article forms part of Investment Monitor’s ‘Future of British Cities’ series. Other UK cities and regions covered are:

Ruth Strachan

Ruth Strachan

Senior reporter

Ruth Strachan is a senior reporter at Investment Monitor, focusing on manufacturing, mining and commodities.