Graham's speech at IoD Annual NE dinner 2016

IOD NORTH EAST CHAIRMAN’S SPEECH 11 MARCH 2016

The state of the IoD in the region is good and getting better.

Membership growth is the second highest in the UK.

Engagement on the biggest issues is commonplace

Our Women on Board group is blossoming and reflecting the relevance and importance of the North East’s female business leaders.

Our voice as a leadership group in the helping to influence policy has never been stronger

And as we meet tonight we are able to relax, enjoy some high quality entertainment and to hear about the progress of the Northern Powerhouse – the all-embracing Government initiative that is affecting almost every area of policy in the North of England.

Before that allow me to take a moment to focus on a few elements of business that deserve attention: the current EU debate, the image of the North East, and the economy of the North East.

First, the issue of the day – the EU referendum.

The Prime Minister has fought hard for this deal and has secured positive changes. Businesses will weigh up the reforms when considering the pros and cons of EU membership as they decide how to vote at the referendum.

Immediately after the deal was struck the IoD surveyed a large representative sample of its membership - 60% said ‘Remain’, 31% said ‘Leave’ a small number had yet to make up their minds. IoD members’ operations are deeply entwined with the European Union – more than three-quarters have commercial links with other member states.

 It is vital that people appreciate the consequences for jobs, prices and economic growth. Business leaders may take different positions, but they should not be afraid to stand up. This referendum is a momentous political choice. Let us make sure it is a well-informed one.

The Institute of Directors in the North East, will not come down on one side. However, while the Institute itself is neutral, it does not prevent its members – including me - expressing a personal position. Therefore, in a personal capacity, I am willing to share my own thoughts. On balance I am a reluctant ‘remainian’.  I say this because of pragmatism rather than passion. If I was located in another part of the UK, my instinct might well be to leave but being in the North East gives many people in business a unique insight into life at the front line of the UK’s export efforts.

However there is one aspect of the campaign that has already jarred with me and that is the temptation to play the man not the ball. I have many friends who want to leave the EU, they do so out of deep-rooted principle and their arguments are coherent. Nobody who takes a counter view does their case any favours by playing up to the media’s natural desire to make it personal. It is not unreasonable for those of us who back the remain campaign to urge that the arguments are about policy not about personality.

On 29th Feb I was astonished to read the stark headline ‘Northern Poorhouse’, in the soon to be defunct national newspaper The Independent. This report was about the Joseph Rowntree Foundation which claimed that Northern Cities were growing slower than those in the South. But the phrase ‘poorhouse’ was designed to characterise us as some Dickensian hoard going cap in hand to for charity.  Follow up by broadcasters helped cement the image; two other stories have resulted in national TV crews coming to the region. The first was the red doors of asylum seekers in Middlesbrough. The second was a wise head teacher who told parents not to attend school wearing their pyjamas. Locally I gave the head teacher strong support; she has turned her school around from a failing school to a good school, it is in my home town and she and deserves the endorsement of the IoD.

All these stories play into a media narrative of a poverty stricken North East that is beset with social problems. This could also be true of many parts of London, but the national media are able to balance reporting as they are based in London. The reason for dispatching reporters to this region is all too often to promulgate a ‘grim up North’ narrative at the exclusion of all else. It is very hard to demonstrate the good things about the North when stereotypes are easy pickings for London based media – even dramas and entertainment play their role; I enjoy the brilliant drama Happy Valley but wow does West Yorkshire come across as God forsaken. Sometimes we don’t help ourselves; I confess it would be easier to confound critics if the Ramsden family from Country Durham on Googlebox could persuade their daughter to stop swearing like a trooper or the kids on Geordie Shore could be persuaded to keep their pants on - but we have to accept somethings on the telly are accurate!

Just to show there are other things happening, it is worth looking at the business pages of our local press – they tell the story of our times. Lots of smaller growth stories that when added up result in an impressive economic impact. In just the last FIVE weeks the following positive stories were reported locally:

• Middlesbrough-based removals business E Pearson  to create 27 new jobs.

• T3 Security will recruit an extra 30 staff
• Kirkleatham Catering Academy in Redcar to create 100 jobs

• Accord to bring 100 new jobs Newcastle's former Sanofi site.

• Thaikhun, restaurant,  50 new jobs in Gateshead
• 100 new North East jobs as IT giant Accenture expands
• New BrightHouse store in Coulby Newham 4 jobs.

• Food on-the-go firm Fatso’s wants to create 100 new jobs on Teesside
• Banks Mining, has unveiled plans to create 50 jobs.
• Newcastle virtual reality firm Neutron VR Ltd, 10 new jobs.
•  Car parts manufacturer Unipres in Sunderland has created 22 new jobs
• Architects, ID Partnership-northern 10 new jobs
• Utility Alliance, 50 new workers.

• Aycliffe lawnmower-maker Husqvarna (husk-varna) is to recruit 650 staff.
• Newcastle Building Society is to create 100 new jobs as part of a £10m investment programme.
• Crafter’s Companion – 12 new jobs
• Newcastle's SGP Technology Group - 50 jobs.
• Complete Office Solutions (COS) - 50 new jobs at Portobello Trade Park, Gateshead
• Brasilian barbecue restaurant Cabana in Newcastle – 40 jobs
• Dunlop BTL in Consett - 60 new jobs.
• Virgin Trains is to create up to 100 jobs in Newcastle.
• Fifty jobs & 25 apprenticeships are being created by BT
• Furniture manufacturer Godfrey Syrett - 20 new jobs in Durham.
• Story Homes - 100 new people
• Linden Homes - 30 jobs.
• Prokarya - 30 scientific jobs in Sunderland
• Quick Hydraulics -10 new jobs with its new Teesside site.

In that short list I have referred to 1980 new jobs – in smaller clusters but worthwhile recognising nonetheless.

These are just a few positive business stories that are contributing towards our never ending battle against unemployment. Benefit claimants have reduced in 2016 but at 8% unemployment still represents the North East’s biggest challenge. It is a problem that can only be solved by accepting its causes are multi-faceted. We have vacancies in skilled trades, we have the people – but too often the people’s skills don’t match the vacancies. We also have capacity in the industries were skilled people are losing their jobs; fabrication is an excellent example.

The Northern Powerhouse involves building big things, take the offshore wind turbines delivering renewable energy under licence from the Government in UK waters. But how much of the work is conducted within the Northern Powerhouse regions? This week we had an excellent example of how a major project like this can help the North East supply chain. The main operator of the Race Bank offshore windfarm off the Norfolk coast, Dong Energy, announced three significant UK based contracts with North East firms. DeepOcean from Darlington, will lay the undersea cables, JDR in Hartlepool will make the cables and Tekmar in Newton Aycliffe which will supply 189 systems to protect links.

The IoD does not want public procurement to be undertaken on any basis other than best value for high quality specification. But my own view is that the secondary deals between tier one contractors and the tier two supply chain businesses deserve to be exposed to daylight in the way Dong did on a voluntary basis. Our food manufacturing supply chain is transparent for health reasons, in my view our manufacturing supply chains – when they involve public money or licences - should be transparent for economic reasons. If tier one contractors chose to contract with foreign firms we should know. Our supply chain is good but if it has any gaps or inefficiencies we need the information that gives us an opportunity to change. Throwing sunlight on the supply chain arrangements will subject large contractors to the court of public opinion; if it is paid for with British taxes we want value but we need transparency too.

In my role as your chairman I have been lucky to witness a new North East business sector emerging. The digital sector. Before Christmas, I was delighted to show, Andrew Lynch, the Sunday Times associate business editor examples of this sector in the North East. The efforts of Universities like Teesside to invest in their digital offering and support Digital City Middlesbrough. Sage, a long standing North East plc has changed from being a straightforward accountancy software business to a fully-fledged tech business with cloud computing systems being used by millions of firms around the world. Its HQ in Newcastle Great Park employs 1500 people and profits are pouring in. So much so that it has funded the impressive Campus North in Newcastle, a chic trendy offering where small scale tech entrepreneurs can rent a desk, share facilities and absorb the buzz of new ideas exchanged with zeal and enthusiasm.

All of this activity in the tech sector is leading real change but we should not lose sight of fundamentals in the economy.

At the Institute of Directors, our members support the Chancellor’s plans to deal with the deficit. We know that without bringing public spending under control, the UK’s debt pile will continue to grow. We also know that the public spending that everyone demands is both hard to resist and expensive to pay for. Pennies from heaven have to be earned here on earth, and more often than not it is our members’ firms that are doing the earning and paying the taxes.

We know that the key to future growth is a strengthening of productivity. From my office in Darlington I can see traffic building up on Friday lunchtime in the same quantities as the rush hour after 5pm on other evenings; the early Friday escape is not experienced in many emerging economies. Productivity used to be something we associated with factories and blue collar jobs, but white collar and public sector productivity has never been so important.

Productivity is also hit by increased costs, a number of which will bite on smaller businesses this year and will be used both as a reason to grumble and a spur to demand increased productivity. New pensions arrangements for smaller businesses and the higher Living Wage have to be paid for somehow; together with the Apprenticeship levy – some would say payroll tax – they are a setback any increase in business costs imposed by Government - productivity growth is the only rational way to find the money to pay for them.

This coming year is one in which business will harness the growth we have seen and continue to innovate in order to drive our region forward, creating better paid and more productive jobs.

To do this we need Government by our side, which neatly brings me to introduce our keynote speaker.

As a frontline politician he has made a real impact. He was elected in 2010 with a small majority of just over 300 – and last year he increased his majority by 18 times! He is from the region, understands the region and speaks up for the region with passion and knowledge. In his role as Local Growth and Northern Powerhouse Minister he is at the heart of one of the most exciting projects to emerge from Whitehall for a generation. It is my great pleasure to introduce him tonight and welcome him to the Institute of Directors, ladies and Gentlemen James Wharton MP.