The first industrial revolutions started in the Midlands and so will the next one. That's the vision of Sir John Peace the Chairman of the Midlands Engine who is encouraging the regions businesses to up-skill, innovate and sell around the world.
David James of UK Export Advice talked to Sir John about how important international trade is to the economy of the Midlands.
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Sir John thank you very much for talking to us. Just tell me a little bit about what is the Midlands Engine?
Well the Midlands Engine is a very exciting development that is taking place here in the Midlands. The Midlands region is the biggest economic region outside of London and the South East, so strategically it's very important. The Midlands Engine is a partnership, a collaboration between local and national government, between our Universities, our colleges, between businesses - some of the great businesses of the country are based right here in the Midlands. We're here to drive economic growth.
What do you actually do? If I'm a small or medium size enterprise in the Midlands, how do I engage with the Midlands Engine? What's my way of connecting? And what do I get out of it?
Let me give you an example of what the Midlands Engine and Midlands Connect is focused on right now. Which is of course our roads, our rail network - High Speed 2 is not far away now, it's coming - and international connectivity, all of those things need to be planned on a regional basis.
You can't just plan them for Birmingham separately from Nottingham or Derby, you really do have to look at these on a pan-regional basis. Well how do you do that? Well that's where the Midlands Engine comes in; and one of the parts of the Engine is what we call Midlands Connect and its job is to make sure we're High Speed 2 ready. That we can effectively make sure that our enterprises - and even more so the SMEs where the jobs of the future are going to be created - make sure that they can benefit from it.
So what's the vision? Where are we heading with the Midlands Engine?
Late last year we published a report called the Midlands Engine Vision for Growth. This was in response to the government's Industrial Strategy and the papers they produced on the Midlands earlier last year. Now put quite simply we know that the Midlands region has had problems - our educational achievements, our connectivity is hopeless right now. But if we could, between now and 2030 bring productivity levels for the Midlands as a region up to the national average that would add £56 billion to the GVA not just of the region but the whole of the UK. Now that's important.
Just give me the SWOT analysis then, what's stopping us getting there and where are the opportunities?
When I've talked to SMEs, one of the big issues that's effected them is skills. The lack of young - and not so young - people with the right skills to fill the jobs that they have available. Now we do have the people around the Midlands with those skills but social mobility is not satisfactory. And that's why improving our road and rail networks is so important to get people to where those jobs are. But you have to look at this over a period of time. A decade. A decade when we're going through a great deal of change economically, Brexit is around the corner, socially but also we're living through a period of the next Industrial Revolution, four point zero, where the technology is driving so much change in our lives.
And what excites you when you look to the future? What has the Midlands got that makes you think there's a huge opportunity here?
Look historically at the Midlands, it drove the last Industrial Revolution. We have some great people here, great Universities, great innovators and I think by working together in the way that we are, by focusing increasingly on this innovation and enterprise, I think we can significantly grow our trade, encourage more investment for the future but only by working together.
For businesses in the regions, the SMEs, what kind of ethos and business outlook would you like to see them develop?
Well let's be very clear, from a small and medium size enterprise point of view there's a lot of work to be done. Let's just talk about trade for a moment post Brexit. I think only about 15% of our SMEs export outside of the EU. Around 46% of the Midlands trade is with the EU so its a very big issue for the Midlands in terms of what our relationship with the EU looks like. But those that do export, and particularly outside of the EU, their productivity levels - remember back to the £56 billion you can add - typically are higher. So we need to work with our SMEs to make it easier for them to grow their exports into new markets like China and North America. And I think this is where again the Engine comes in. If we are going to grow the economy of the UK it can't just come from Whitehall, it has to come from our regions, regions like the Midlands Engine, like the Northern Powerhouse that can power that growth.
Now the reason I've had an opportunity to talk to you today is because East Midlands Airport has announced that it has carried £10 billion of cargo to and from non-EU countries in that last 12 months. What's your reaction to that?
Well I'm delighted with that announcement and it gives me the opportunity to stress how supportive the Midlands Engine is of the work that's being done at East Midlands Airport. How strategically important it is, because I've talked to you about the importance of growing our trade, growing our exports, well to do that the connectivity with these new markets - our ability to handle freight - is going to become increasingly important. So the investments that are being made now and the companies that are being encouraged to locate to and use East Midlands Airport, either from a freight or a passenger point of view - I think is strategically important, not just to the Midlands, but I would argue to the country.
Over 50% of that £10 billion is exports - e-commerce seems to be a big driver - just talk a little bit about the opportunity that the combination of e-commerce and air freight might present to businesses in the Midlands.
Well first of all let's just talk about the products coming in, imports coming in - many of them are hooked to a supply chain of a major manufacturere like JLR or Rolls Royce, so those are very important to help them grow their business, grow their trade and investment. But we are increasingly living in a global economy. If we are going to grow our exports, if we are going to grow our business, if SMEs are going to expand into new markets it may be that the way they feel is best to do that is digitally, is through e-commerce and therefore it's not just about the World Wide Web and having that connectivity it's also about the ability to deliver the product to those markets, to those customers wherever they are in the world. That takes you back to how do you do it? And that's why East Midlands airport The investments that are being made there also important.
So I read the government's Midlands Engine strategy and East Midlands Airport was mentioned in the first paragraph of the forward by the Chancellor of the Exchequer, as was Birmingham airport and HS2. So just talk a little bit about the importance of those strategic infrastructure assets that the Midlands has already got or will have in the coming years.
Well I think the Midlands is blessed with two great airports. And today we are celebrating the announcement made by the East Midlands Airport. But in Birmingham again we have a fantastic opportunity, particularly from a West Midlands point of view and I think there is a statistic that something like 90% of businesses in England and Wales are within a four hour journey time of the Midlands two airports. That's pretty amazing stuff. So when I hear about London Heathrow needing a new runway I think 'hang on a minute, just look at the opportunity we have right here in the Midlands'. Then you have High-Speed 2 which is reducing journey times not just between Birmingham and London but High-Speed 2 is then going to go westward to Crew, Manchester and Scotland but also eastward through Nottingham, Sheffield all the way up to the east coast. So the ability for people and freight to move backwards and forwards around the country and to our ports, I think it's going to be pretty transformational for our economy.
So I guess we're almost getting a vision of a highly skilled, highly productive, innovative - and I think innovation it's probably the key for the future - Midlands Engine with all these amazing technologically advance products being sold around the world, that's kind of the vision.
100-150 years ago the last industrial revolution, the Midlands lead the way, lead the world. Thought leaders as well as producing goods and services which were consumed by the world. Maybe that's our future, maybe that's what we've got to go back to. What I do know is that the role played by East Midlands Airport the strategic , importance that that airport has to play here is vitally important. And I'm delighted to say that we had some excellent management at our airports that share our vision as part of the Midlands Engine that's driving us to the future.
So I know that East Midlands airport has ambitions to triple their cargo loads over the next 15 years: what's the message to the region's businesses about supporting that and just doing the research about getting involved in this growth?
A wise man once said to me 'it's better to be travelling than to have arrived'. And I think that ambition is terrific and I hope we achieve it. But it's better to be a traveller than to arrive so maybe we can go on even further. The important thing here is we're ambitious for our region we're ambitious for the opportunities which are out there but these investments which we're talking about now are the enablers to make it happen.
Now you recently went on a trade mission to China, representing the Midlands Engine. What's the narrative you talk to the Chinese that the businesses in the region can start to get behind and really start thinking about and getting behind themselves?
Well actually I know China quite well and I've been a couple of times since the one back in November with Sajid Javid. And what I saw and continue to see in China is a warmth, a relationship that the Chinese want to develop more with the UK, President Xi Jinping you will recall when he was over here talked about 'The Golden Era'. The period that he saw as a very special period of time where he would like to see trade between the UK and China grow. And when I go to China when I go to Shanghai or further to the west I think the people of China have taken that to heart and they are looking increasingly to trade with Britain. And you know being made in Britain really is great!
So the Chinese are interested in doing business with us, we've got this assets of East Midlands Airport right on the doorstep which potentially you could put your product on a plane and it could be in China maybe the next day. What's stopping us? What kind of thinking do the businesses in the Midlands need to do to really make a fit for the Chinese market?
Well these things don't happen overnight. And I think what we've got to do is work with the government to put in place the right framework for these things to become reality. Much of it is happening already but I think the scale of it is what we're trying to increase over time. And I think that with China in particular we have the Prime Minister who is been over there recently which I'm sure was a hugely successful trip. But what I did with Sajid Javid last November is exchange with the Chinese an agreement that over the next five years we would achieve certain objectives and investments in different key sectors like life sciences, advanced manufacturing and I think increasingly we are going to move away from just let's just have a vision into things that are much more tangible. And things that will make a difference not just to big corporations but also to SMEs.
I did read that the Midlands is the only region in the UK with a trade surplus with China. What are we doing right? What can we do more off?
Well you're absolutely right. The Midlands does have and I think with the only part of the country that has a trade surplus with China. And I think the reason for that is they simply want products and services that we have to offer. So going forward I hope that surplus is something that we continue to be very proud of but what I would like to see going forward is the scale of it being even more material and significant than it is today.
Now there's big businesses in the Midlands, like Boots, Rolls-Royce, Jaguar Landrover and Toyota and at the moment they have pan-European supply chains and Brexit may be causing them some complication. So what is the potential opportunity for small British manufacturers that perhaps don't want to export their own products but they can support British exports by supplying into the big exporters like JCB is in the company I should mention.
Well supply chains are very important to the large manufacturing companies in the Midlands and the SMEs too. And I think what many of them are having to do is to reassess their supply chains. The free movement of goods around the EU is now more uncertain, the extent to which they will have to change them will depend on the relationship we end up with the EU. But I don't think they are sat on their laurels they are already looking at ways that they can change their supply chains which might create opportunities for businesses closer to home, in the UK. So it's ying and yang there are challenges for sure but there are opportunities as well. It just takes time.
Is there anything else that you would like to say about the Midlands Engine or international trade at this point?
I think one of the priorities for the government as we get further with the negotiations on Brexit is that we mustn't just be fixated on Brexit itself but what sort of economy do we want to create beyond Brexit? And clearly growing international trade and encouraging more international investment is a priority, it has to be a priority for the government and it's certainly a priority we have identified for the Midlands Engine. And you will see later this year we will be publishing our own reports on how we think we're going to do that. But those reports were done in conjunction with all the different stakeholder groups that we have including businesses large and small.
Any last word of advice for businesses in the Midlands looking to the future?
Well the Midlands right now is the fastest growing part of the UK. And that something to be proud of. And I think we are ambitious. We are trying to put together a vision of clarity and purpose that puts together what we are trying to achieve and if we can work together, be very determined, be very enterprising in terms of how we go about growing the economy, recognise that it's not just about economic growth but it's also about the importance of making it easier for people to live their lives, so housing and things like that, are very important issues. Especially we want to attract people to live and learn and indeed grow businesses here in the Midlands so that's very much part of our thinking. It's a very exciting time for the Midlands.
You can hear this interview with Sir John and other international trade experts on the UK Export Advice podcast visit UKExportAdvice.co.uk. Use the sign up box to get new episodes sent straight to your phone.
David James is a specialist in business and strategic communications and the producer of the UK Export Advice podcast. This article was produced with the support of East Midlands Airport, the UK’s busiest pure freight airport.