The future of British trade following the EU referendum has dominated political discourse in recent months, and will no doubt continue to do so as Brexit negotiations begin in earnest over the coming weeks. Oddly however, there has been little mention of the one trade deal that the government has already struck following the Brexit vote: its agreement with car manufacturer Nissan to keep its car plant open in Sunderland.
The importance of Nissan and its supply chain in Sunderland is hard to understate, with around 7,000 people employed directly in car-making in the city. As the new Centre for Cities report Cities Outlook 2017 shows, Sunderland is the highest exporter of all cities in Britain, selling over £40,000 of goods and services abroad for every job in the city in 2014 (second placed Worthing sold £30,000).
But take Nissan and its supply chain out of the equation, and Sunderland would have had the 12th lowest exports of all cities.
The political gain for the government in striking the deal is therefore obvious, as the impact of Nissan leaving Sunderland would be disastrous for the city’s economy. And if the government’s industrial strategy and Brexit white paper are anything to go by, we are likely to see other similar short-term deals in future, with both documents outlining the ambition to strike more sector-led deals.
This, however, would be a mistake – for as our research shows, the Sunderland-Nissan deal doesn’t offer a long term solution for either the national economy generally or Sunderland specifically.
In terms of the national economy, doing specific deals with individual companies or sectors will benefit only a small number of places in Britain. As Cities Outlook shows, exporting industries such as cars, chemicals or pharmaceuticals are located in only a handful of places across the country.
And while Sunderland is not alone in its dependence on a single industry – Derby’s exports are dominated by Rolls Royce, and Coventry by Jaguar Land Rover – in most cities their exports depend on a broad number of sectors. For these places, trade deals with specific businesses or sectors will do little to support their exports.
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For Sunderland, while a specific deal is a no brainer in the short term, it does little to alter the city’s longer term path. Nissan’s success in Sunderland should be rightly celebrated, but it also highlights the city’s over-reliance on one company.
Sunderland has struggled to attract in business investment in high-skilled work (it ranks 44 of 62 cities for its proportion of jobs in knowledge-intensive business services) and it has the lowest number of business starts of any UK city. Even Nissan does little of its high-value activities in the city – for example, while its Qashquai model is assembled in Sunderland, it was designed in Paddington and engineered in Cranfield.
Without this changing, Sunderland will once again be in the position of requiring the government to strike another short-term deal with Nissan in future, as it did in 1984 to tempt the Japanese company to Wearside in the first place, and which it has done on a number of times since over the last three decades.
So to compliment the agreement that government came to with Nissan at the end of last year, policies need to be put in place now to deal with the challenges that have limited its ability to attract in and grow jobs in higher-skilled activities.
In Sunderland’s case this is twofold. The first is to deal with skills. The city performs poorly on a number of skills measures, which undermines attempts to attract in high-skilled jobs. To change this, national and local leaders need to focus in particular on improving GCSE attainment at school level and literacy and numeracy skills in the current workforce.
The second is to improve its city centre as a place to do business. In recent decades a number of local and national policies have subsidised the building of our of town employment space while ignoring the problems of the city centre. This is continuing even now – the local council has used the city-deal it struck with the government to create the International Advanced Manufacturing Park next door to Nissan’s plant, on top of securing enterprise zone status for a neighbouring site.
But until very recently the problems faced by the city centre had been ignored. There has, thankfully, been some progress on this recently, but making the city centre a more attractive place to do business needs to be at the very centre of the city’s attempts to improve the job opportunities available to those who live in and around it.
Improving exports generally will be critical in boosting growth in the national economy, an issue acknowledged in the government’s recent industrial strategy green paper. But in order to help every city across the UK grow their export base, ministers need to focus on trade deals covering all sectors – and should avoid the temptation to prioritise deals for high-profile industries that will only benefit a small number of places.
Paul Swinney is senior economist at the Centre for Cities.