Despite the difficulties with the economy experienced in recent times, statistical and anecdotal evidence shows that Yorkshire and the Humber is in excellent health and getting fitter by the day.
Despite the difficulties with the economy experienced in recent times, statistical and anecdotal evidence shows that Yorkshire and the Humber is in excellent health and getting fitter by the day, as Jim Simpson's diagnosis shows
Yorkshire and the Humber is seeing business in all sectors thriving. The evidence from both anecdote and surveys agrees - the region's economy is motoring.
The region's bankers are seeing this as businesses, newly confident for the future, seek funds to invest. "We're seeing record lending levels in both manufacturing and services on the back of increased order books," reports Mike Needham, regional director for the Royal Bank of Scotland.
He is not alone. Chris Taylor, relationship director for Lloyds TSB Corporate in Leeds, reports a bright start to the year with a marked increase in corporate activity, and, against a background of cautious optimism, greater investment in new fixed assets.
According to Taylor, sales and margin improvements continue to be hard won, with companies increasingly differentiating their offer or brand. "We are seeing more companies seeking new ways of doing things, and outsourcing non-core activities and assets to improve efficiency and reduce costs. Meanwhile, experience across the different sectors continues to be mixed. For example, manufacturing continues to play catch up as activity moves offshore, while other sectors such as food, distribution, IT and property are having a much better time."
On the corporate front, there is a lot of activity too, says Matthew Flinton, corporate finance partner at Addleshaw Goddard. "Although the number of listed companies based in Yorkshire continues to decline the actual operations are in many cases still in the region but under different control.
"As a result there are a significant number of UK private companies and foreign-controlled companies in Yorkshire that are making good profits in the current environment, particularly in retail, food processing and home improvement products.
"There are also a number of active and successful property companies in the region who are benefiting from the growing confidence in the market. This is providing a motor for improved transaction flow and, as the momentum continues to gather pace, a more sustained programme of merger and acquisition activity amongst some of the region's leading businesses looks inevitable."
According to figures from KPMG, this is already happening. The first quarter of 2004 saw continued strong activity in the important middle market space of the UK buyout market. KPMG's private equity group tracks UK buyouts with value over £310 million and reports that there were 24 deals with a value of £31.54 billion in the UK - the highest value quarter in this market segment for over two years. This was reflected in this region with three larger transactions in total with a combined deal value of £3165 million. The largest of these deals was the £3135 million public-to-private management buyout of Burndene Investments, which featured in the top ten UK deals this quarter in terms of value. Other deals included the £320 million management buyout of leisure company ABI, and the £310 million buy-in management-buyout of Multigraphics.
While it might be tempting to write off these optimistic assessments as merely the views of the Leeds-based corporate sector, their views are backed up by the latest evidence from an independent survey commissioned by Yorkshire Forward. This found that 38.6 per cent of companies across the region expect the overall business situation over the next six months to improve, while 53.7 per cent expect it to remain stable. Only 7.7 per cent expect deterioration.
It also discovered that 39.9 per cent of companies in the region have experienced an increase in domestic orders over the past 12 months and 16 per cent have experienced an increase in export orders, compared to decreases of 22 per cent and 12.6 per cent respectively.
Employment is improving too: 29.1 per cent of the region's companies have increased employment levels over the past 12 months and 43.9 per cent have increased output. These compare to 18 per cent reducing employment levels and 19.6 per cent experiencing less output.
Naturally, the improvement in economic conditions can lead to further problems and the buoyancy of the property market is leading to bottlenecks in certain parts of the region. The latest survey from the Royal Institution of Chartered Surveyors reported that although demand was increasing for office, retail and industrial space, there was a lack of industrial development land available.
Mark Brearley, of Mark Brearley and Co in Bradford, says: "There is strong demand for freehold second-hand units all around the city from owner-occupiers. Lack of supply is pushing capital values upwards."
Richard Corby, of CSH Property Consultants in Leeds, adds: "A diminishing supply of second-hand freehold industrial space, much of which is considered for alternative use development, is putting pressure on manufacturers at a time when their markets are fragile."The lack of industrial development land was highlighted as an issue by surveyors in Huddersfield and York. Alex McNeil, of Bramleys in Huddersfield, says: "There is strong demand from both owner-occupiers and investors for industrial sites. A shortage of opportunities to acquire freehold property has resulted in some capital growth whilst the rental market remains tough with shorter lease terms and break clauses now normal.
"There is an erosion of industrial land due to PPG3 policies and many sites are now put to higher alternative uses such as residential. Huddersfield is strangled by green belt and requires the release of level sites taking advantage of the M62 access."
Richard Flanagan, of Lawrence Hannah and Skelton in York, says: "There is still an alarming shortage of industrial property available, whether existing, new or under development. York's green belt review still plods on with no end in sight. More land allocation is needed urgently."
Mark Rudd, senior researcher at the Policy Research Institute, is a major contributor to the regional observation that informs policy at Yorkshire Forward. He says: "Everywhere we go in the course of our economic and labour market research, we consult with employers, individuals and agencies who are nothing but positive about their prospects as a Yorkshire company."
He points out that the Leeds economy has dynamics of its own that make it stand apart from other parts of the sub-region and the region. This, he believes, means the city merits a separate analysis. It is the unofficial capital of the region, with the largest population and business stock in the region as well as attracting more jobs than any other major city in the UK in the last ten years. There has been a huge amount of inward investment in the last few years, particularly in service sector industries, although it still has the UK's third largest manufacturing sector, which employs 51,000 people across the district.
In the five years between 1996 and 2001 Leeds' employee base grew by 20 per cent to around 430,000 people, inevitably resulting in an influx of labour from outside the city's boundary. Despite this impressive growth, econometricians forecast continued economic growth for the city and, in doing so, presented tough challenges for policy makers and support agencies. One of the key considerations is how to ensure that all residents gain maximum benefit from the massive investment. The statistics relating to poverty do highlight the continued need for investment and training in the city, as around a third of the population are still among the 10 per cent most deprived wards in the country.
In a regional context, Leeds is expected to account for 32 per cent of the 99,000 additional jobs in the region in the next few years and continues to act as a regional economic hub. Leeds is also currently being promoted as a model for other cities to follow with regard to efficient and effective regeneration. Rudd makes a comparison with London and the South East to show how the resurgence of Leeds can benefit the surrounding area. "The success of the South East region in comparison to other regions or home nations in the UK owes a great deal to the use of London by policy makers as the engine room or economic hub for the wider geographic region," he says, pointing out that Manchester played a similar part in the economic growth of the whole of the North West. "Businesses, individuals and quasi-public sector agencies are now recognising that having Leeds as an economic focal point and driver of the regional economy has powerful and positive knock-on effects for the whole region."
He believes that Leeds has provided a major marketing tool for cities such as York, whose housing and commercial markets have grown unashamedly on the back of its proximity to Leeds. Inward investment chiefs were able to highlight the "commutability" of York to Leeds while championing the quality of life associated with a historic city that has comparatively few inner-city issues. Other towns and cities in the region are also using Leeds as a positive marketing tool, a focal point and a model for their own development.
The Yorkshire and Humber economy has changed dramatically over the last few years due to economic restructuring and social regeneration, but remains a region of great contrasts. The fast-growing market in self-employment that characterises some of the more rural market towns to the north of the region contrasts greatly with the urban renaissance in the Dearne Valley; and the sharp rise in employment opportunities in Pennine towns such as Huddersfield and Brighouse also contrasts sharply with the reinvention of Kingston-upon-Hull as a major tourist destination.
The Deep, the "submarium" designed by Sir Terry Farrell, attracted more than one million visitors in its first 18 months and has continued to exceed all its visitor targets since. Meanwhile, the £343.5 million council-funded Kingston Communications Stadium has not only hosted international sporting events such as the recent Australia versus Great Britain rugby league clash but has also attracted internationally-known entertainment acts. Elton John filled the 25,000-seater stadium on one of his few dates outside London, while Bryan Adams chose Hull for his one UK appearance on his European tour.
The city's regeneration plan, unveiled in March, is an ambitious scheme to transform the city centre. Some changes can already been seen as the BBC has already invested £325 million into its Connecting Locally project and will be broadcasting from the new building this year. And, just as Leeds successfully capitalised on the vogue for city living, Hull has signed up several developers to build luxury apartments in the dockside area - 311 units have already been built and a further 750 units are on stream out of the 3,000 units envisaged in the masterplan. Some signs of the area's increasing prosperity are that the city's first-ever £3250,000 apartment has just been built within the Queens Court Development and that private rental figures in the city centre have reached an all-time high of around £3900 per month.
For the region as a whole, manufacturing still accounts for 26 per cent of GDP, which is much higher than the national figure of 20 per cent, but GDP per head (£310,983) was considerably lower than that of the UK as a whole (£312,548). As the former mass-production and smokestack industries migrate to Asia the more important it becomes for manufacturers in the region to innovate but, according to Gill Holt, head of the Knowledge Transfer Unit at the University of Leeds, business spend on research and development (R&D) is lower in Yorkshire and the Humber than in any other English region and the region is also low on the European Index for Innovation.
Leeds University has £330 million of R&D contracts currently underway with business, mostly in science, engineering and technology, which generate cutting-edge technology for new products or processes and lead to greater competitiveness. But most collaborators are big companies outside this region with large R&D budgets and only two are in the region, as many companies here cannot afford or do not prioritise R&D.
Yorkshire has recently introduced an initiative to counter this effect - a programme of Centres for Industrial Collaboration, through which funding promotes better interaction between centres of excellence in the universities and businesses in the region by stimulating greater demand from the latter and greater capacity in the former. Leeds University is involved in four of these centres, with one focusing on biomaterials and tissue engineering. An example of a collaboration here is with the Johnson & Johnson company Depuy Orthopaedics, which has resulted in new materials and designs for artificial hip and knee joints, developed and manufactured in Leeds.
Yorkshire and the Humber region is in better shape than it has been for some time. The areas that have been prospering are doing even better while those that have suffered in the past, such as Hull, are demonstrating a new-found vitality. And, while the region has historically under-invested in R&D, it is at least now demonstrating a willingness to tackle the problem.
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