Chris Hearld: How the North should drive forward after Brexit

There are many unknowns about the post-Brexit scenario but I anticipate the challenges already facing the Northern economy will be brought into sharp focus. It’s likely that the critical issues of productivity and talent, already blighting this region’s growth prospects, will become seriously pressing.

So it was heartening that, in producing an Industrial Strategy after the summer’s referendum result, the Government has demonstrated it recognises that the ability of our national and regional economies to respond to a post-Brexit environment will be influenced by some underlying imbalances, weaknesses and strengths.

The fusion of the Industrial Strategy and the Northern Powerhouse blueprint offers the opportunity for the type of planning that could enable Yorkshire to really reach its potential.

If delivered in a region-centric way, based on long term thinking and leveraging meaningful investment commitments, these strategies should not only address post-Brexit risks to our economy but also see the Northern Powerhouse transition from vision to reality.

Considering the region’s workforce and talent in Yorkshire’s significant manufacturing and food production sectors, as well as in hospitality and construction, there is a very real reliance on the skills and labour of EU immigrants.

We are already seeing some degree of attrition from the Yorkshire workforce on the part of EU nationals, with the pound worth less abroad impacting their pay packets in Europe. On top of this, some are uncertain about their position in the UK labour market if there is to be curbing of freedom of movement.

This is a real issue, not just for EU individuals and their families but also for Yorkshire. There is currently no guarantee that these employees will be permitted to remain, however critical they may be to their employers’ operations. So those leading Yorkshire’s businesses may face trying to square the circle of replacing the EU contingent of their workforce with domestic personnel, a challenge historically deadlocked by social, economic and skills based issues. The current debate about skills shortages could broaden dramatically to a wholesale labour scarcity issue.

It may be that this problem generates responses rooted in innovation with some sectors turning to an overhaul of their operational model, rather than just their staffing model. Some of our clients are talking about productivity improvements from the use of tech and automation.

It is to be hoped our home-grown pool of potential labour will also prove increasingly productive on the back of a combination of increasing work opportunities and educational and skills programmes that re-engaging under-utilised parts of Yorkshire’s labour market.

The appetite of the region’s technology, higher education and health sectors for highly educated and skilled immigrants should also be acknowledged. However, as it is anticipated that dispensations will be made, enabling skilled talent to remain in some high priority sectors, I’m not focusing on this here, other than to say Yorkshire cannot afford to lose the input of talented people from Europe, particularly specialists who provide a crucial contribution to our economy and society.

For the North to compete strongly post-Brexit, with both EU markets and trading partners further afield, the economy must improve its rate of production.

Our research on the subject shows that one of the most important levers policy makers can pull to improve our growth potential is education – where we rank behind many and in which the North lags the South. Transport and telecommunications are also vital areas where Yorkshire has a significant weakness compared to some of our peers.

The Government’s ambition for a more active and connected UK is to be applauded but it, as well as business, must properly invest in our ability to trade globally. Beyond some development capital, we have not yet seen this level of commitment to achieving the Northern Powerhouse vision. Could Brexit be the spur for delivering the transformations needed? The acid test will be how quickly companies feel the benefit – with access to new support, better infrastructure, improved trading links and readily available skilled labour. 

Our performance on these issues will play a key role in determining how the Northern Powerhouse fares on a global stage. I hope that as well as undoubtedly putting challenges on the business agenda, Brexit will also drive the creation of the conditions to build a highly skilled, innovative, creative economy for the benefit of the citizens of the North and brand Yorkshire.

Chris Hearld is KPMG’s chairman
 for the North.