Governor Mervyn King backs North’s export potential

Sep 24 2009 by Andrew Hebden, The Journal

“I think there have been big changes in the way the local market works, some of the industries that perhaps the recession brought to an end before, we don’t have those now,” he said.

“What is so impressive here is clearly the enormous improvement in the infrastructure of the region and that ought to give people confidence that, looking beyond the next couple of years... the long-run picture is pretty bright.

“I think going into the recession, the North East was in a much better position vis-a-vis the rest of the UK than it was in earlier recessions and that’s made a big difference. The starting level of unemployment and the structural issues are quite different to what they were then. In that sense there’s no doubt that the differences between regions has become very much smaller.”

Even so, he acknowledged the North East’s relatively high dependence on manufacturing meant it had been harder hit than other parts of the country since the collapse of world trade at the end of last year. But this could also present real opportunities in the upturn.

“It must be very frustrating for businesses in the North East to find that problems in the financial sector that had very little to do with their businesses has caused this sudden downturn across the world which has made life tough for manufacturing and other businesses across the world. That’s a sense of frustration that we all share.”

He went on: “I don’t know at what pace any part of the UK will recover but I see no reason to suppose that the North East will lag behind in the pace of recovery. The downturn may have been a bit sharper but the recovery might be a bit quicker. We’ll just have to wait and see.

“Whereas before there were some industries where the recession was the death knell for those industries and there was structural change that was needed that is not the case now. I’ve seen some very impressive businesses in the North East that know the challenges but they will come through this and prosper.

“In that sense, the legacy of industries that were outdated has gone and I don’t think people should therefore be gloomy about the long-run prospects.

“What I can’t say at all is what the short-run outlook is.”

Mr King said he believed the North East, the only region of the UK with a positive trade balance, could play a key role in driving an export-led recovery. He backed The Journal and North East Chamber of Commerce Go Global campaign which aims to encourage more North East firms to export goods and services.

“One of the underlying causes of the financial crisis were the imbalances in the world economy and I think, looking forward, it’s quite important that China and other Asian countries reduce their surpluses and we reduce our deficits.