1. © 2015 Grant Thornton UK LLP. All rights reserved. Regional Economy What's the story…. Mike Thomas, Director

2. © 2015 Grant Thornton UK LLP. All rights reserved. Contents Size matters Challenges and Opportunities –A small business story –Medium size businesses –Public sector Devolution/Northern Powerhouse – Can it be the answer?

3. © 2015 Grant Thornton UK LLP. All rights reserved. Size matters – the economy… Generally a very positive story…. Three Northern Regions worth £289 billion – twice the size of Scotland and 10 th largest economy in EU; Economies of 5 largest Northern cities grew by 38.8 per cent 2003- 2013; Population grew by over half a million – more than live in the City of Manchester; Northern ports and airports exported goods worth £55.2 billion in 2014 and imported goods worth £54.2 billion; Rate of job creation in some parts of the North more than double the national rate of 1.9 % (which is the Northern rate also). 29 Universities plus significant cultural and natural assets Rate of new business start-ups is impressive Medium Size Business sector is strong and growing

4. © 2015 Grant Thornton UK LLP. All rights reserved. Size matters – the challenges… But…. the North continues to underperform relative to the world's most successful economic regions!! Centralised system is hampering growth Productivity is lower – against EU and nationally! Historical Infrastructure under- investment Poor transport connectivity Qualification levels and skills are lagging behind Health and Life Expectancy challenges Ageing Population Significant fiscal deficits in each LEP region area…. Reducing public sector resources vs Increasing demand

5. © 2015 Grant Thornton UK LLP. All rights reserved. Growth – a positive story

6. © 2015 Grant Thornton UK LLP. All rights reserved. Jobs Growth – Right type and value?

7. © 2015 Grant Thornton UK LLP. All rights reserved. Jobs Growth – right value

8. © 2015 Grant Thornton UK LLP. All rights reserved. Skills – Need to improve

9. © 2015 Grant Thornton UK LLP. All rights reserved. Investment in Infrastructure - crucial to future

10. © 2015 Grant Thornton UK LLP. All rights reserved. Decline in Public Sector spending

11. © 2015 Grant Thornton UK LLP. All rights reserved. Health and Social Care – Inequalities remain

12. © 2015 Grant Thornton UK LLP. All rights reserved. A significant and growing small business sector c.1 million private sector businesses in the North of England –Employing 5 million people –Turning over £556 billion 99% are small (<49 employees) –2.5 million employees (49% of all employment) –Turnover of 198 billion (36% of all turnover) Only 0.7% are medium (50-249 employees) 74% of all private sector businesses have no employees Source: BIS (2014) Business Population Estimates

13. © 2015 Grant Thornton UK LLP. All rights reserved. The challenge of growth Not a start up problem: 60,000 new registered employer businesses in 2014 Nor a survival problem: 54% of businesses starting in 2011 were still operating in 2014 But a growth problem: –5.9% of businesses starting in 2011 had reached £1 million turnover by 2014 –6.1% of businesses turning over £1 million in 2011 had grown to £3 million by 2014 Source: BGS and ERC (2015) Growth Dashboard; ONS Business Structure Database

14. © 2015 Grant Thornton UK LLP. All rights reserved. Medium Sized Business sector Agents of Growth Report (Grant Thornton 2014) - Outperform the market - Overlooked by policy makers - Pivotal role in employment and innovation - Resilient and most productive - Outpace others on Rand D and capital spending Times Top Track 250 11.10.15 – North has largest number (62) in table, sales of £17.2bn, profits of £820m employing 93,000 people. Access to suitable funding, shortage of skills and expertise and excessive red tape still challenges. -

15. © 2015 Grant Thornton UK LLP. All rights reserved. Barriers to growth Source: GrowthAccelerator 2012-2015

16. © 2015 Grant Thornton UK LLP. All rights reserved. Is Devolution the answer? Can it help with responding to the challenge? Economic Growth is being constrained Public Service Reform needs to accelerate…. Improved engagement with electors and AND citizens – a different conversation …

17. © 2015 Grant Thornton UK LLP. All rights reserved. Benefits of devolution – Why Devolve? Local service delivery record compares favourably with the centre Opportunity to plug small and medium- sized businesses into the public service supply chain The UK is a centralised state Devolution offers a way of reinvigorating local democracy A real opportunity to innovate – focus on outcomes & place

18. © 2015 Grant Thornton UK LLP. All rights reserved. Reasons to be optimistic… Progress since election - Infrastructure developments - Transport for the North - Greater Manchester / Sheffield deals done - 38 bids and range of asks being reviewed Leadership - Focus on outcomes/ NOT GOVERNANCE Urgency – momentum Comprehensive Spending review and Fiscal Devolution?

19. © 2015 Grant Thornton UK LLP. All rights reserved. Conclusion … The challenges are significant but there may be an opportunity through devolution… Some great new businesses with new ideas emerging at pace Strong established, resilient and growing businesses to build on We have an infrastructure that we have invested in to grow some of these players But we need to do more to compete in the Champions League.

20. Option 1 – Disclaimer Strapline Mike Thomas Audit Director T +44 (0)788 045 6173 E: mike.thomas@uk.gt.com