Leaving the EU: North-East Exports
I beg to move,
That this House has considered the effect on exports from the North East of the UK leaving the EU.
It is a pleasure to serve under your chairmanship, Mr Hollobone.
We all agree that the British people’s decision on 23 June to leave the EU was the most profound decision to affect this country since the second world war. I, like many in the House, very much wanted the UK to stay part of the EU, but the country, including the north-east of England, voted otherwise. That decision must be implemented, but as my hon. and learned Friend the Member for Holborn and St Pancras (Keir Starmer) has pointed out, the country voted on the principle of leaving, not on the terms. The detail is therefore important.
The referendum result has created much uncertainty about the UK economy’s long-term prospects, not just internationally but in many boardrooms around the country. I wonder how soon it will be before that uncertainty is felt in households in communities from south-east England to Scotland, from County Durham to Northern Ireland, and from Wales to East Anglia, and how soon it will be before that uncertainty spreads from the boardroom to the shop floor.
I want to use this debate to explain the importance of the European single market to the north-east of England, to raise several issues and to probe the Minister on what he and the Government think is the best option for the north-east of England in a post-Brexit Britain. I know the Minister shares the view that remain was the best option for the British people, but in our own ways we have both taken on responsibility for delivering the best deal for the UK under the circumstances, unlike the former—or perhaps the current—leader of the UK Independence party, Nigel Farage, who abandoned the field of play once he got the referendum outcome he wanted. Like all populists, he was ready to pick up the megaphone to let us know what he thought to be wrong, but when the argument went in his favour he was not prepared to hang around and take responsibility for putting right those perceived wrongs.
The Minister has the unenviable task of securing the best deal for Britain. Since he wanted to remain in the EU and the single market, how is he going to convince his colleagues that maintaining access to the single market is the best option? Furthermore, how are the Government going to implement all the promises made by the leave campaign, of which he now has ownership?
“Let’s give our NHS the £350 million the EU takes every week”—
so said Vote Leave’s website. That slogan was emblazoned on the side of the campaign’s battle bus. Vote Leave committed to “hundreds of new schools” in a campaign video on YouTube, and to the abolition of prescription charges. According to a Vote Leave press release from 14 June:
“There is more than enough money to ensure that those who now get funding from the EU...will continue to do so”.
There was a promise of new roads and the expansion of regional airports, and the right hon. Member for Surrey Heath (Michael Gove) even said in a Vote Leave press release from 19 April that there would be enough money for 14 Astute-class submarines. There was to be money for pothole repairs and tax cuts, and wages would be higher and fuel bills cheaper—no doubt, Brexit would be a land of milk and honey, where the sun shines and everyone lives happily ever after. The Minister is on record, in his blog, as saying:
“There was no manifesto for ‘out’”—
but yes, there was, and the people voted for it.
For the people of north-east England, we must get Brexit right, because although my constituents may have voted to leave the EU, I do not believe that they voted to be poorer, to put their jobs at risk or to see their region fall further behind. If I were them, I can imagine how disappointed and betrayed I would feel if, on top of all the uncertainty, which was not there before, all the promises made by those who supported the leave campaign were not met. That disappointment would be deepened by the fact that so many of those who made the pledges not only now sit on the Front Bench, but will sit around the negotiating table to negotiate our exit. The Minister and the Government have a duty to inform the British people of how those promises are to be fulfilled—the Minister might make a start today. If they cannot be fulfilled, perhaps the Minister will be straight with the British people and say so.
The EU single market is essential to the north-east of England: 58% of the region’s trade is with the EU, which is a full 10% higher than the national average; it is the only region that exports more than it imports; more than 100,000 jobs in the region rely on trade with the continent; and, over the past five years, almost 90 European investment projects have created or safeguarded more than 6,000 jobs, and £1.1 billion in inward foreign investment has come to the north-east from EU members.
According to the North East England chamber of commerce and a report by Ernst and Young, the north-east has seen the second highest increase in foreign direct investment—sitting just behind the north-west—with a substantial 83% increase on last year in FDI projects. An EY survey of investors about the link between the EU referendum and FDI asked how important access to the single market was, and 79% of investors cited access to the single market as a key feature of the UK’s attractiveness, a higher figure than last year’s. The same survey found that 52% of investors thought that a “slight change” in access to the single market would affect the attractiveness of the UK as a destination for business; in the event of a “significantly less favourable” change, the figure rose to 55%.
The North East England chamber of commerce has major concerns about future trade deals. Membership of the single market has brought significant benefits to the north-east of England, attracting business and creating jobs. The chamber stated in its EU referendum briefing paper of July 2016:
“There are also major implications for relationships with overseas markets where existing trade deals have been negotiated by the EU and for the future of trade documentation needed by businesses. Due to the complexities of these issues, there is significant concern among businesses about the UK Government’s capacity to address these issues in the required timescale before Britain exits the EU. Many of our members are also concerned about the effective flow of information so businesses are aware of any changes they need to make to their practices. Assurances about this are vital.”
What assurances about that will the Minister give to companies in the north-east?
In the same briefing paper, the chamber also stated:
“There is also....the hope and expectation that the anticipated benefits of Brexit in being able to conclude trade deals more quickly around the world will be realised. The new department headed by the International Trade Secretary...should aim to quickly set out its plans in this regard so businesses can see that Government is seeking to get beyond a damage limitation exercise to exploit new opportunities.”
I offer this opportunity to the Minister to lay out those plans. Business needs certainty, and that would seem to be the one thing in short supply at present.
As I am sure the Minister is aware, Japanese investment is key to the north-east of England. There are about 50 Japanese companies in the region, including Hitachi in my constituency. It provides almost 1,000 direct jobs, with many more in a growing supply chain. Nissan provides 7,000 direct jobs and 30,000 in the supply chain. With 300 automotive companies in the region, the car industry in the north-east produces £11 billion in sales and is responsible for more than £5 billion in exports.
Nissan is the UK steel industry’s largest customer in the automotive trade, purchasing most of its steel from Tata in the UK, largely from Port Talbot and the strip-producing sites. What does my hon. Friend think about the potential barriers to trade if energy imported from the European Union via interconnectors were to carry a World Trade Organisation tariff for the United Kingdom in future? What will happen to large manufacturing plants and energy-intensive industries when they face larger tariffs on energy imports?
My hon. Friend makes an important point. So much of Brexit has to be sorted out, and I do not know the answers, but I hope that the Minister will enlighten us. There will, however, be major consequences for industry in this country, but especially in the north-east, where a lot of our manufacturing industry is. It employs a lot of people there and provides skills that we need to revitalise the economy in the region.
Throughout the referendum campaign, I was clear about saying that if Britain voted to leave, companies such as Hitachi and Nissan would not immediately cease production, close their factory doors and ship out to the EU. I still believe, though, that if we are not part of the EU single market, the potential for long-term growth must be called into question. Furthermore, what growth there might be could come at a cost to the Exchequer.
Following Britain’s decision to withdraw from the EU, Nissan’s chief executive, Carlos Ghosn, indicated that the company might halt further investment in its Sunderland plant unless the Government agreed to compensate it for any adverse financial impact of Brexit. At the Paris motor show in August, Ghosn warned that
“important investment decisions will not be made in the dark…If I need to make an investment in the next few months and I can’t wait until the end of Brexit, then I have to make a deal with the UK Government”,
and he suggested:
“You can have commitments of compensation in case you have something negative. If there are tax barriers being established on cars, you have to have a commitment for car-makers who export to Europe that there is some kind of compensation.”
Earlier this month, the Prime Minister met with Mr Ghosn to explore what assurances Nissan was seeking. The Financial Times reported that the meeting came ahead of Nissan’s decision on whether to build its new Qashqai SUV in Sunderland, a decision that might be taken as early as November. After the meeting, Mr Ghosn said:
“Since Mrs May’s appointment, we have maintained a clear dialogue with the UK Government during this challenging time”,
and he stressed:
“We want to ensure that this high-performing, high-employment factory remains competitive globally and continues to deliver for our business and for Britain.”
“Following our productive meeting, I am confident the government will continue to ensure the UK remains a competitive place to do business. I look forward to continued positive collaboration between Nissan and the UK Government.”
On the face of it, those are nothing more than warm words, but last weekend The Sun newspaper reported that Nissan is to announce that it will build the Qashqai SUV at its Sunderland plant—I hope so—and that an announcement is imminent. If the new Qashqai model is to be built in the north-east, however, what kind of compensation is Mr Ghosn anticipating? To keep Nissan in Sunderland, what price will Britain need to pay that we did not need to pay before? Don’t get me wrong, I want Nissan to stay, but I believe that it is incumbent on the Government to tell us what the cost is. It seems to me that the much vaunted windfall to the Exchequer from not being in the EU will not be available to spend on the NHS—if ever it was—because it will be needed to subsidise industry in a way we have not needed to before.
The Japanese Government are so concerned about Brexit that they published a 15-page document at the time of the G20 summit in China, pointing out:
“In light of the fact that a number of Japanese businesses, invited by the Government in some cases, have invested actively to the UK, which was seen to be a gateway to Europe, and have established value-chains across Europe, we strongly request that the UK will consider this fact seriously and respond in a responsible manner to minimise any harmful effects on these businesses.”
The document also laid out several requests, such as maintenance of
“the current tariff rates and customs clearance procedures”
and the introduction of
“provisions for cumulative rules of origin”.
The Japanese Government gave those two key reasons, and others, for the UK remaining part of the single market and the customs union. I fear the consequences of all this uncertainty for the continued growth of existing foreign direct investment in the north-east of England and the region’s ability to attract FDI in the future. The Japanese, like many businesses in the north-east, have asked for transparency in the Brexit negotiations. It is not only Westminster politicians who are asking for transparency; business and the wider world are too.
The Minister wrote in a blog post on his website on 25 October 2011:
“A vote to come out of the EU would be to try to reverse nearly four decades of economic development…I am convinced that the advantages of membership outweigh the disadvantages.”
I agree. He said to the BBC just last month that
“we must…try to achieve…zero-tariff access to this market of 500 million people in the EU”.
Again, I agree, but it seems to me that in so doing, the Government are setting out in a direction that the Conservative party accused the Labour Government of taking back in the 1970s and upon which it frowned at the time.
The Prime Minister said in her closing speech at the Conservative party conference:
“It’s not about picking winners, propping up failing industries, or bringing old companies back from the dead. It’s about identifying the industries that are of strategic value to our economy and supporting and promoting them”.
That sounds very much like picking winners to me. We should support our industry and develop an innovative industrial strategy, but don’t let’s write off whole industries. Millions of people may have voted for Brexit, but let us not forget the millions who did not. I am of the view that the Brexit negotiations will be complicated and uncertainty will reign for some time to come.
We know that the Minister’s preferred option is access to the single market—if not membership—but in what form? The existing model? The Swiss model? Will we stay part of the customs union? Does he agree with the report by his own Government that said that leaving the customs union could cause a 4.5% fall in British GDP and a reduction in foreign direct investment of as much as £9 billion, with trading falling by as much as 15.6%?
Brexit is the defining issue of our time, and it is more than apparent that the Government did not have any contingency planning in place to deal with the immensity of the task ahead, so I doubt very much that this will be the last Westminster Hall debate on how the issue affects the north-east of England, let alone the rest of the country. The future prosperity of the north-east of England, and indeed our nation, depends on getting this right. In answering the questions that I have asked today, the Minister will have the opportunity to start to allay fears, provide certainty, promote confidence and offer optimism, and to show vision and belief in our country. We must have the right to stand tall in the world while acknowledging our responsibility to others. I look forward to his response.
Order. The debate runs until 5.30 pm. The guidelines for speeches by Front Benchers are five minutes for the Scottish National party spokesman, five minutes for Her Majesty’s Opposition’s spokesman and 10 minutes for the Minister. There will then be three minutes at the end for Phil Wilson to sum up. I therefore need to start calling the Front Benchers no later than 5.07 pm. Between now and then, the debate is open to Back Benchers. Three Members have stood to catch my eye. There is a galaxy of parliamentary talent before me, and it will be led by Hannah Bardell.
I am delighted to head up that galaxy of parliamentary talent, as you so eloquently put it, Mr Hollobone. I congratulate the hon. Member for Sedgefield (Phil Wilson) on securing the debate. As he says, I am sure there will be many more such debates and opportunities to drill down and have an ongoing conversation. If the Government are not going to have an ongoing commentary on the EU, we Back Benchers certainly will.
As the hon. Gentleman said, the UK’s relationship with the EU is significant for the north-east, which in 2015 exported £7 billion of goods to the EU—58% of its total, which is well above the UK average of 48%. This debate is about the north-east, but I hope he and you, Mr Hollobone, will indulge me if I touch a little on the impact on Scotland and the rest of the UK.
The value of the pound has dropped significantly since the announcement of the referendum result. Although that offers a short-term gain for some, such as those looking to buy property in the UK, increasingly expensive imports and exports will hurt the UK and all the countries in it in the long term. I noted with interest the Financial Times article yesterday that stated that the percentage of foreign buyers in London’s property market had increased from 23% to 29%. It seems obvious to me that that creates further problems for local people, who were already struggling to get on the property ladder. Not only are their savings being devalued by the falling pound, but they will be up against an increasing number of foreign buyers and investors. The weakening of the pound since the Brexit vote has helped Tata Steel’s profits, but as we well know, such companies rely on imported iron ore and coking coal, so they will be negatively affected if tariffs increase in the longer term.
The hon. Gentleman mentioned the impact on Nissan’s Sunderland factory, which ships nearly 75% of its cars to the EU and relies on parts from outside the UK. The north-east economy cannot flourish without the automotive industry, or even with a damaged one. Failing to negotiate trade deals quickly will cause repercussions years down the line. I suggest that the Tory Government’s much-vaunted northern powerhouse is fast becoming more of a northern power cut.
Scotland will feel the impact of the UK leaving the customs union just as the north-east will. In 2014, 42% of Scotland’s international exports were to the EU, and 58% of Scottish exports to the EU are in the food, tobacco and beverage manufacturing industries. I have spoken to several companies in those industries and will address some of their concerns shortly. Last year in Scotland alone, there were more than 2,300 foreign owned companies, employing nearly 314,000 people and turning over £90 billion. When the Government create uncertainty for those companies—I know there will be others in the north-east—hundreds of thousands of workers are uncertain about their futures.
With such uncertainty, it is not unreasonable to ask for a clear plan and an open debate. At the moment, we are expected simply to have faith in the Government—a Government who promised to double exports to £1 trillion by the end of the decade but saw them fall to £511 billion just last year. If those numbers are moving in the wrong direction, how are we to believe that the EU trade negotiations will move in the right direction for the UK economy and its workers, especially given that at a recent European Council meeting, the Prime Minister was given just five minutes—at 1 am, after the dinner plates had been cleared—to set out her view on Britain’s exit from the EU?
We had a debate on the Government’s industrial strategy just last week. The conclusions could not have been clearer. It is nearly impossible to debate industry, trade and the economy when the Government have neither the outline nor an inkling of a plan. There is a lot that we need to debate about the impact on the north-east and Scotland, and I hope we will have many more such debates and the opportunity properly to scrutinise the plans when they come forward.
Let us take the UK’s membership of the EU customs union and common tariff. Beyond the party political and theoretical points are some gritty IT issues that need to be looked at more closely—we know about the UK Government’s track record on IT. If Britain leaves the EU customs union, it will have to go through its own system of customs declarations and security checks whenever trading with the EU. After the Brexit vote, the EU began looking at increasing its capacity for customs declarations from 50 million to 350 million a year to account for future customs forms from the UK. Changing that system will take time, and before it is finalised we will not know how delays will be managed. I recently met the Scotch Whisky Association, which emphasised the importance of the excise movement and control system, a trading system by which all exports are tracked and managed. Staying part of that is key, but we have had no answers about it. Perhaps the Minister can enlighten us.
On the other side, the UK’s current system for importing and exporting non-EU products, which following Brexit will have to be used for all products, is about 25 years old and due to be replaced. However, its replacement, the customs declaration services system, is expected to be functioning by December 2018, just before the UK is expected officially to leave the EU. The CDS system is designed for managing about 100 million declarations a year, rather than the now expected 350 million that will be required once the UK leaves the European Union. That puts us two years behind already.
Desmond Hiscock, who runs the UK Association for International Trade, said that the system
“will not be able to cope and there is not much confidence that the untested and still incomplete replacement…will fare much better.”
Order. I am listening to the hon. Lady’s remarks with great interest. She will be aware that two Members of the House who represent constituencies in the north-east also want to contribute and that, within 30 seconds, she is coming up to having used a third of the allocated Back-Bench time. She might, out of politeness, want to think about drawing her remarks to a close.
Thank you, Mr Hollobone. I will wrap up my comments, because of course I want to let colleagues in. If the Prime Minister truly wants to find the best trade deal for the north-east and for the rest of the UK, she would do well to engage actively across all parties and all countries within the UK.
I thank my hon. Friend the Member for Sedgefield (Phil Wilson) for gaining this important, if not crucial, debate for the region of the country that I come from. I was a passionate supporter of the remain campaign—I thought it was in the best interests of my city, my region and my country to remain a member of the EU—but I absolutely respect the decision taken and totally accept that we are leaving the EU. It is important to put that on the record.
There has been much mention in the debate of the automotive sector and the fantastic Nissan plant—it is not in my constituency but in the city where I live. The issues surrounding that plant bring together all the problems faced by the wider manufacturing industry in the north-east in one place. I welcomed the Prime Minister’s statement after she met Mr Ghosn a week ago in which she said she was committed to
“supporting the right conditions for the automotive industry to go from strength to strength in the UK, now and into the future”.
That was important. However, the automotive industry is not the sum total of the problem we face in the north-east from Brexit. In fact, it is a very small part of it.
Even if some sort of agreement is made for the automotive industry, it would not necessarily include all the companies in Nissan’s supply chain. Those companies produce many parts for cars built in Sunderland and in other parts of the country but, because they also produce parts for other companies’ manufacturing, they may not be entirely protected by a special arrangement for the automotive industry. We have to bear that in mind when we look at the Prime Minister’s comments. I wrote to her a few weeks ago asking her to address the problems facing Nissan and the wider automotive industry and manufacturing quickly. I have not yet received a response, but I am sure I will in due course.
I want to talk about wider manufacturing not just because it does an amazing job in trade for our region—we have a positive balance of trade and there are fantastic examples of business doing well—but because of the impact down the line on our skills shortage. Those big manufacturing companies in the north-east train lots of high-skilled, high-end apprentices not on two-year courses but on four or five-year apprenticeships. The best go on to do degree-level qualifications. There would be a major impact on that if any of those companies started downscaling—goodness only knows what would happen if they disappeared.
We have to think about the long term, training and the future skills supply. We know that, in engineering, a bubble is coming when there will be a shortage of good, trained young people to replace the people heading towards retirement, but in the short time I have I want to talk about the tariffs problem. The investment uncertainty that the debacle since the referendum is causing is enormous. We know of examples of investment on hold for the north-east and of examples where investment has stopped. Those are the soft things. Let us think of the tariff situation not necessarily for the car industry but for wider manufacturing. Many of the companies involved in manufacturing in the north-east import parts and raw supplies for the things they make, so they will be hit by tariffs. They export right around the world, but in the main they export to the EU.
We also have major international companies in the north-east—names we all know—whose cost centres are in central Europe, which creates a knock-on effect. A rejigging of their business models is going on. I do not want to highlight any one in particular because they are general problems that all manufacturers say they are facing, with an impact across the piece. All the parent companies and boards and most of the manufacturing companies in the north-east are not British businesses dealing with British supply chains that provide all the supplies they need to produce products from the UK, and they are certainly not selling everything into the UK. For them, tariffs are crucial.
If we do not get the situation resolved—at this stage we are talking not about the detail but about the broad parameters of where the Government are going to stop the uncertainty and create certainty in the marketplace—the potential threat down the line is that British manufacturing will become more and more uncompetitive, which means we will lose jobs, the training I talked about, and revenues from taxes. There will be a massive impact on the economy of the north-east and the UK in general.
My preference would be to remain part of the single market. The Prime Minister needs to look at that as a matter of urgency and make a decision. If that is not what she and her Government are going to do, we need to know what is on the agenda. We need to be working on a cross-party basis to get the best deal for businesses in my constituency, the wider north-east and the country as a whole.
It is a pleasure to serve under your chairmanship, Mr Hollobone. I am grateful to my hon. Friend the Member for Sedgefield (Phil Wilson) for securing this important debate about the future of our region.
Like many here, I made no secret of my preference for the UK to remain a member of the European Union, but a majority of people in my city and in the region voted a different way. Many people who voted to leave did so in the belief that a brighter economic future lay ahead for the UK and for the north-east. If their optimism is to be fulfilled, it is vital that exports from the north-east to the European Union are protected.
Export trade with the EU is critical to the north-east’s economy. The region is unique in England in being the only one to consistently maintain a balance of trade surplus. Last year, more than half our goods exports were to the EU, and the most recent figures from Her Majesty’s Revenue and Customs indicate that four of the five top export partners for the region are EU countries. Given that the proportion of exports destined for the single market from the north-east is relatively high compared with other regions of the country, those of us who represent north-east constituencies have a particular responsibility to raise concerns about the impact Brexit will have on the region’s economic interests, especially if the Government decide to take the UK out of the single market as well as the European Union.
As has been said, the automotive sector is central to Sunderland’s and the region’s economy and to the future success that lies ahead. A recent report by IPPR North found that the export of road vehicles, parts and accessories accounts for more than 40% of north-east goods exports to the EU and that the value of those exports grew by 118% in the past decade. Much of that trade depends on the continued success of Nissan in Sunderland and it is clear that future investment decisions by Nissan will play a major role in driving long-term economic growth in the north-east. Let us not forget that membership of the single market has been central to that success. The renaissance in car building in this country also demonstrates what can be achieved when Government pursues a focused, sector-led industrial strategy.
I sincerely hope that the decision on where to build the next Qashqai is a positive one for Sunderland. I will welcome any steps Ministers can take to assuage the company’s fears. What will require greater clarity from Ministers is the degree to which small and medium-sized businesses in my constituency and in the supply chain will be protected. Those businesses are already suffering from the collapse of sterling and the uncertainty that has dogged the economy since June. If Ministers intend to offer the automotive sector special protection from the impact of Brexit, presumably on the basis that they intend to take our country out of the single market, it must have wider coverage and not ignore SMEs in the north-east and beyond.
How do Ministers intend to act to safeguard the interests of the rest of the manufacturing sector in the north-east? What of the growing and thriving tech and software start-ups in my constituency, in Rainton Bridge and elsewhere? The region’s current strong track record on exports is a source of pride, but we still face the highest level of unemployment in the UK and a skills gap that holds back our young people as well as our economy. We can ill afford to see a decline in jobs, wages and living standards. As the North East local enterprise partnership has pointed out, we are a region that needs EU funding more than most—and we have a track record of investing it well. I note the guarantee offered by the Chancellor, but the north-east was originally allocated £437 million in EU structural funds up to 2020. Of that central pot, at present more than £198 million remains unallocated. There is clearly room for improvement.
In the north-east we have long needed Ministers to add some substance to the so-called northern powerhouse—a concept that appears to have fallen out of favour with the new Government. Now more than ever we need the Government to use all of the powers and levers available to them to support our region and its people to fulfil our economic potential in these difficult times.
It is a pleasure to serve under your chairmanship, Mr Hollobone. I congratulate the hon. Member for Sedgefield (Phil Wilson) on securing the debate. We have heard from the Secretary of State for Exiting the European Union on the Floor of the House on many an occasion, given how much he is before the House to answer questions. We continue to have these debates because, unfortunately, no answers are forthcoming. In fact, the most interesting piece of information we have heard today is the determination that Brexit is in the masculine form—“le Brexit”—unless, of course, spoken in Italian. That is the latest up-to-date revelation in relation to the debate.
The hon. Member for Sedgefield correctly spoke about the uncertainty that surrounds the Brexit debate and the importance of the European single market, and said that people did not vote to be poorer or for jobs to be put at risk, so assurances are absolutely essential. That was followed up by my hon. Friend the Member for Livingston (Hannah Bardell), who also correctly said that even if the Government will not have debates in Government time—although I should say that the Prime Minister said at the Dispatch Box yesterday that there will be debates in Government time, which is very welcome—Back Benchers will continue to discuss matters that are hugely important to our constituents and businesses in our constituencies.
Hundreds of thousands of workers are concerned about what Brexit means for their future. As my hon. Friend said, if the Prime Minister wants the best trade deal she should interact with all parties and all nations across the whole of the UK. The hon. Member for Sunderland Central (Julie Elliott) spoke of respecting the decision of the referendum, but also of concerns that most major manufacturing companies in her constituency—which also have bases in the EU—have about what it will mean for them. That is an important matter and needs to be addressed. Finally, we heard from the hon. Member for Houghton and Sunderland South (Bridget Phillipson), who spoke of the responsibility to raise concerns about how Brexit will affect constituencies and wider regions.
I know the debate is about the north-east, but it would be remiss not to mention that the people of Scotland have been subjected to a Tory Government they did not vote for, a referendum they did not want and a result they did not vote for. Some 62% of the people of Scotland voted to remain in the European Union, and with that in mind, and in relation to the north-east, we want to work with all parts of the UK that want to retain single market status. To be clear, the Prime Minister and her Conservative Government stood on a manifesto that said:
“yes to the Single Market”.
That is the one definitive piece of information upon which we should be able to rely to hold the Government to account. The Scottish National party intends to take all possible steps to explore all options to give effect to how the people of Scotland voted, and indeed for other parts of the United Kingdom that voted in a similar manner.
Key industries in the north-east could be seriously compromised as a result of the uncertainty of a post-Brexit economy. As we have heard so eloquently from all of the speakers in the debate, the UK Government must provide a clear and comprehensive economic strategy that will allow investment to flourish and jobs to be created, and will attract skilled labour. Prior to Brexit, the UK Government were already failing on key economic indicators and have missed the targets they set for themselves as a result of the failing austerity agenda.
The Prime Minister’s inability to answer the simple question of whether she supports continued membership of the EU single market is damaging business prospects and job certainty throughout the UK. Businesses need to know what is happening next for them. We have heard in the course of debates from many Secretaries of State, not least the Secretary of State for International Trade, whose comments have had to be clarified or amended. I wonder if the Minister can demonstrate that he has achieved “head boy” status and will not get into trouble for giving us the facts for which we have been asking for so long.
It is a pleasure to serve under your chairmanship, Mr Hollobone. I congratulate my hon. Friend the Member for Sedgefield (Phil Wilson) on securing this vital debate. Had he not, I know that my formidable colleagues, my hon. Friends the Members for Sunderland Central (Julie Elliott) and for Houghton and Sunderland South (Bridget Phillipson), who both spoke with such clarity, would certainly have initiated the debate otherwise. It is good to see a strong contingent from the north-east here in defence of their region.
The north-east is the major goods-exporting region of this country, with more than £12 billion of goods exported last year. It is therefore a powerful indicator to the rest of the country about the impact that the Government’s approach to Brexit will have. Let us be clear: 58% of voters in the region voted to leave, and all of us who have spoken from the Labour benches have said that we respect that—and we do. We must now all rise to the challenge of delivering that departure from the EU, but that departure must not undercut our industry, our labour rights or our prosperity. That is our clear message to the Government today. We have heard from several hon. Members about the destabilising effect on industry in the north-east of a divided Cabinet and a Secretary of State for International Trade who is pushing his own ideological agenda that will disrupt investment and threaten jobs in the north-east.
Of the £12 billion-worth of goods exported last year from the north-east, £7 billion were exported to the EU. That is 50% of the region’s total exports, making the region one of the most highly exposed to the uncertainty arising from the Government’s refusal to set out a clear plan and approach to the negotiations with the EU Parliament, or indeed to make that clear to the public. The value of north-east exports to the EU grew 30% from 2005 to 2015, yet in July, after the vote to leave, companies across the north-east suffered the sharpest rate of decline in business activity in four years, leading to scaled-down activity and jobs being laid off. Lloyds bank attributed that downturn to
“post-referendum vote market uncertainty”,
which caused the number of new incoming orders to the region to fall at the fastest pace in almost seven and a half years.
We know the Government will not provide a running commentary, and we do not ask for that, but perhaps they will provide some much-needed clarity to business about their futures. That is what I think all Members here are really asking of the Minister. What guarantees will the Government provide to businesses in the north-east about access to those markets in the future, and how similar will those terms be to the current ones? James Ramsbotham, chief executive of the North East England chamber of commerce, said:
“With the automotive sector being such a major part of the business community in the North East the future of the car-making is of crucial importance to our economy and employment prospects.”
What assurances will the Minister provide to car manufacturers about continued access to import parts from the EU to their supply chains, and to export cars, tariff-free, into mainland Europe?
My hon. Friend the Member for Sunderland Central raised that issue, but there is also a need for the Minister to answer the question about non-tariff barriers. Country of origin rules may well mean that, in the future, if we are outside the EU we cannot provide goods from this country—indeed, from many of the smaller companies in the north-east that my hon. Friend spoke of—that feed into supply chains in Europe for products that are then sold into third countries. They will not be admitted into the supply chain in the first place. The Minister knows that those supply chains are 18 months’ long, which means that decisions will be taken in Europe within the next six months on whether to source items for the supply chain from the UK. This is of vital and urgent importance, and it is critical that the Minister provides some answers on it for business.
What assessment have the Government made of the contribution that skilled workers coming into the UK make to the north-east export industries? Skilled workers in these industries are vital. Have the Government conducted a survey to find out what the skills base is in the north-east and to determine how they will continue to ensure that skills supply in the future?
While the weakened pound has given a short-term boost to certain exports, the steel industry is not benefiting from a low pound. The deal to buy the Tata pipe mill in Hartlepool is clouded with uncertainty, and the suggestion is that it would have been completed by now if it were not for the referendum result. That puts hundreds of jobs at risk. We have heard from my hon. Friends about the household brands that are facing difficulties, but we must not forget the small and medium-sized enterprises and the family businesses that are finding it impossible to invest in their own future in the region until the Government provide a clear plan. Ministers continue to drop heavy hints about their preferred—often contradictory—directions of travel. That is causing these businesses absolute turmoil with their investment profiles.
The priorities of manufacturing bodies are clear. The Society of Motor Manufacturers and Traders, EEF, the Chemical Industries Association, the British Ceramic Confederation and the UK Petroleum Industry Association—all representing phenomenal industries based in the north-east—are demanding guaranteed access to the single market to continue exporting without the extra costs that will make it harder to keep doing business there. Almost two thirds of the north-east’s exports to the EU are reliant on road vehicles, medical and pharmaceutical products and organic chemicals.
It is not just the goods exporters calling for this. A fast-growing marketing and PR agency based in Newcastle told my colleague, the MEP for the region, Jude Kirton-Darling,
“Creative and digital service industries like ours don’t export in the traditional way that goods companies do—but we benefit just as much from...membership and could be impacted badly by exit”
from the single market. Service industries are asking the same questions of Government. What analysis has the Department conducted of the impact on the trading balance in the north-east of different post-Brexit trading arrangements with the EU? Have the Government quantified the impact of losing access to the single market on the north-east economy? Will they do so before making a firm decision on their negotiating priorities? If we default to WTO tariffs post-Brexit, what impact will that have on exporters in the north-east? Bearing in mind the strong dependence on the single market of north-east exports and the regional trade surplus, what special measures will the Government consider to diversify export options for the region and avoid negative employment impacts that might arise?
The Government must clarify what will happen to the UK’s European Investment Bank status. Will we continue to be a shareholder and have unrestricted access to funding, or will we be considered a third country and thus only be eligible for the 10% of the fund made available for third countries? The Government’s webpage entitled “UKTI North East: helping companies export and grow overseas” was last updated in May this year. It reads:
“We’ve helped…create 346.5 new jobs through the European Regional Development Fund (ERDF) project”
“secure a further 1,014 jobs with our trade support activities for the ERDF project”.
That fund was actually proposed by the United Kingdom in 1972, but it is available only to European member states. We need to know what access we will have to those funds in future, because they are vital for industries in the north-east.
The Government might want to update their website, but it might also help if they provided their new strategy. The Government’s strategy has relied on EU funds to boost exports to BRICs markets and create jobs in the north-east. They must now provide answers about how they will ensure jobs and exports are maintained in the future through support for new projects once we have left the EU. The Chancellor’s guarantee of funding while we remain a member state, and for projects agreed before this year’s autumn statement, does not go far enough in giving answers to families, businesses and investors in the north-east. Can the Government commit to continued investment in trade promotion measures for the region post-2020?
Order. I am enjoying the hon. Gentleman’s speech hugely, but he is almost twice over the guideline limit. If he carries on much longer, he will speak for longer than the Minister. He may, out of politeness, want to draw his remarks to a close.
I would not wish to leave the Minister too little time to answer all the questions that my hon. Friends and I have asked this afternoon.
I will simply conclude by saying this. The danger is that the favoured trade model will not give control back to voters who told us that that was what they wanted. If the Government wanted to make the UK a great trading nation, they would not be putting forward options that would decisively cut ties with the world’s largest free trade area. The Government are not pursuing a free trade agenda. It would appear that they are using the vote to leave to embark on a ruthless deregulatory agenda, which will threaten jobs, public services, labour standards and environmental protections in the north-east and the rest of this country. The Minister must provide answers and clarity for business and the public.
If the Minister could conclude his remarks at no later than 5.27 pm, Phil Wilson will have time to sum up.
Thank you, Mr Hollobone. May I start by congratulating the hon. Member for Sedgefield (Phil Wilson) on securing the debate? He has worked extraordinarily hard for his constituency. He did not mention in his speech that he was instrumental in securing the investment from Hitachi in his constituency, which we should all recognise.
It is interesting to speak in a debate such as this. I have to say that I agree with many of the points raised about the debate we had several months ago in the lead-up to the referendum. I think that everybody in this room—with the possible exception of you, Mr Hollobone—was on the same side of the debate on how we should vote in the referendum. It was 58% to leave in the north-east. In my constituency of Wyre Forest, it was 63%, so I sadly failed even more than Opposition Members to secure a remain vote.
I think we are all in agreement that the success of the north-east is entirely relevant to the success of the whole of the UK. We need to work extraordinarily hard to ensure that we get through this process over the next few years and that we are a resilient and strong economic nation afterwards. I will endeavour to address the points raised by hon. Members throughout the course of my speech, but I would like to open by saying a little about the Department for International Trade, in which I am now a Minister, and how we are trying to work with the whole of the UK.
This debate focuses on just one region, but we are representing the whole of the UK, which also involves the devolved Assemblies, so we represent Scotland, Northern Ireland and Wales as well. Irrespective of local votes, we are all Brexiteers together. Our aim is for the UK to be a beacon of open trade for the entire world, with the benefits of that trade to be felt from Bournemouth to Belfast and from Aberystwyth to Aberdeen. That means working with our dedicated regional teams, the devolved Administrations, devolution partners, regional chambers of commerce and local enterprise partnerships to ensure that together we build a strong and resilient economy from the bottom up.
It has been mentioned on a couple of occasions that the Secretary of State was an enthusiastic leaver, but it is worth bearing in mind not only that are we all leavers now, but that Ministers in the Department are balanced. The four Ministers—three in the House of Commons and one in the House of Lords—were on both sides of the debate, and all of us bring a lot of experience and views, giving a balanced view. That is important to remember.
Given the establishment of the Department for International Trade and the importance of our region to trade performance, what additional capacity will the Minister put into the north-east to ensure that we can boost exports further?
I hope to be able to answer the hon. Gentleman in the course of my speech, but he can by all means intervene again if I miss his point.
The performance of the north-east is nothing short of exceptional. It is worth bearing in mind that 30 years ago last month, Margaret Thatcher persuaded Nissan that it should come along and assemble the Bluebird kits. That started off as a relatively small investment and has now turned into a phenomenal manufacturing plant. It is one of the premier auto factories not just in the UK but in the world. The region exported approximately £12 billion-worth of goods in the past year, racking up a positive goods trade balance of nearly £3 billion. That is incredibly important for our current account deficit. The region sold more than £1 billion-worth of cars between April and June alone, as well as nearly half a billion pounds of pharmaceutical and medical goods over the same period. Trade with the EU is important for the north-east—no one is questioning that. The single market is a destination for more than 61% of the region’s exports.
We have heard a lot about Nissan in particular. The Secretary of State for Business, Energy and Industrial Strategy has met Nissan and will be meeting Hitachi to try to make sure that the investment that the hon. Member for Sedgefield secured remains in the UK. We are having ongoing dialogue with those large automotive manufacturers. I have met Nissan twice, and my colleagues in BEIS have also met it. We are continuing to make sure we offer it as much assurance about the future as possible.
The Minister is being generous with his time. One of the crucial points in my hon. Friends’ speeches was the emphasis on small and medium-sized business and their supply chains. What efforts is his Department making to engage with them?
We are certainly engaging with them through the local delivery networks of the Department for International Trade, formerly known as UKTI, and through the local chambers of commerce. That is an ongoing process that will continue. The economy of the north-east is so dominated by big manufacturers that if we get that part right, that should encourage a huge number of small manufacturers.
The hon. Lady raises the right point, which is that we cannot simply look at the big manufacturers. We have a very diverse economy and there are around 5 million businesses in the UK, the vast majority of which employ fewer than 10 members of staff, so we do not forget SMEs.
The automotive industry and the train manufacturing sector are crucial to the north-east’s economy, but what other sectors has the Minister identified that really make a difference? I am thinking particularly of the steel, chemical and processing industries, but what other sectors has he identified that should be prioritised?
The steel industry is in a special position at the moment, as we have discussed in the House over the past few months, for obvious and tragic reasons with the closing down of plants. All sectors are important to the UK economy. We need a diverse economy manufacturing a wide range of products—not just steel but graphene and carbon fibre. Those specialist material industries are also very important.
It is important that over the past 12 months the north-east has sold £4.5 billion of goods to non-EU countries, so it is a region that takes opportunities from the rest of the world. America is behind the Netherlands as the region’s second biggest export destination, not to mention continued significant sales to China and Turkey. There are fantastic local examples of north-east companies finding success beyond the EU. Small companies such as Annie Barr International are delivering vital training courses in China and Hong Kong. Newcastle-based mobile app developers Hedgehog Lab celebrated an amazing 2015, achieving $500,000 of sales in the USA. Those are examples of small businesses that are doing very well.
Our future trading relationship with the EU has yet to be determined, as hon. Members have said, but I will be as clear as possible. When the formal process of exiting the EU has been completed, the sky will not fall on our head. We will continue to trade with the EU. It is our friend, our ally and our trading partner. That will not change. We want to build the strongest possible trading links with our partners on the mainland, which throughout history have brought prosperity to Europe and raised living standards for all Europeans. Trade has always brought us closer together as a continent, fostering a common identity that will never diminish, regardless of whether the UK is in or out of the EU. We want the EU to succeed. It is really important to our country that our nearest neighbours are a success story.
A UK outside the EU can now reset and enhance its trading ties with the rest of the world, which already recognises that products made on these shores are synonymous with heritage, quality and innovation. DIT Ministers are travelling the world, and the extraordinary demand for British brands in places like the far east and America, and across the whole world, is truly remarkable. Let us take the example of cars. Today, a car manufactured in the UK and sold to India would face tariffs of up to 100%. The tariff for selling the same car to Brazil is less at 35% and for China it is 25%. We can do deals with those markets and find opportunities for cheaper tariffs there. A UK in full control of its trading arrangements can start to address the barriers that exist. There is untapped potential in the global economy that the UK is primed to take advantage of.
One or two points were made about delivering a manifesto for leaving. The hon. Member for Sedgefield said that there had been a promise of £350 million a week. He and I remember that that was checked by the UK statistical authority and there were questions about it ever being delivered. Dare I say, Mr Hollobone—I would not want to upset your sensibilities—there was a lot of hype that might be difficult to deliver on, but the Government must deliver the right outcome.
The shadow Minister talked about tariff and non-tariff barriers. Tariffs are probably relatively easy and straightforward to negotiate, because the outcome is numerical. We must be careful about non-tariff barriers, but we are all working extraordinarily carefully in trying to get to the right answer.
We talk about what sort of model we want. One of our problems in this debate is that people try to force the argument into a pre-determined shape: will it be a Swiss model, a Norwegian model or a Turkish model? The answer is that we will try to achieve a British model, which will achieve the best possible outcome that we can imagine. We will not try to do a deal that looks like someone else’s, because we can do our own deal. That is our starting point.
When it comes to the issue of a running commentary, I take a slightly different view. We are all aware of the argument that no one lays all their cards on the table when playing poker—why would they do that? The important point is that we must be extraordinarily careful. We have heard from many people about the importance of businesses not misunderstanding what is going on. They want clarity, but I think it would be more dangerous were we to give the wrong idea about what is happening than no idea. If businesses start chasing false hares, they could head off in the wrong direction, and that would be dangerous, so we must be very careful.
I want to reassure businesses in the north-east and investors around the world that in our future trade negotiations, we will fight to ensure that the UK’s sector strengths, be they automotive, aerospace, professional or financial services, remain as competitive as possible. We will achieve the best deal for the UK. I and my colleagues will continue to speak to businesses and investors, and the Secretary of State will meet big investors in the UK on more occasions.
A thriving north-east is vital to the long-term economic health of the whole country. It is a timely reminder that Britain still makes things the world wants to buy. The British people’s decision to leave the EU does not mean that we will abandon or neglect our manufacturing prowess. We have opportunities. I was on the wrong side of the argument a few months ago, as was everyone else in the Chamber with the exception of you, Mr Hollobone, but that does not stop me being optimistic about the future for Britain. We are a great nation, and we are very enterprising and innovative. A big, economically disruptive event is happening, but I believe that with the Government’s help, when we can provide it, businesses will take advantage of the opportunities.
I thank all hon. Members who have contributed to the debate, especially my colleagues from the north-east of England. I want to make one or two points. The Office for National Statistics may have said the £350 million figure was wrong, but people believed it. They did not consult the ONS’s website to see whether it was accurate, they just accepted it.
I picked Nissan as an example of the issues that will arise. As my hon. Friend the Member for Hartlepool (Mr Wright) said, the north-east is about the automotive sector, steel, chemicals, pharmaceuticals, and research and development. It is on the coast, and we have two ports facing Europe. Europe is important, because 80% of the raw materials and parts we need for industry comes from there. Brexit is a big issue, and I worked tirelessly to try to ensure that we stayed in Europe. This is bigger than party—it is about more than just the Conservative party and the Labour party. It is about the future of the country.
My hon. Friend the Member for Sunderland Central (Julie Elliott) said that the issue is partly a cross-party one. We must hold the Government to account, but we must also work together when necessary, because this issue is for all people whether they voted to remain or to leave.
Question put and agreed to.
That this House has considered the effect on exports from the North East of the UK leaving the EU.