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Four Things the EU Referendum Means for Newcastle and the North East

23/06/2016 09:09 | Updated 23 June 2016

In or out, the result of the European Union Referendum will have a significant impact on the economy of North East England. Many commentators stress the extent to which the North might win or lose from EU funding but arguably, a greater issue for the North is the impact on its trade relationships with EU states. New IPPR North analysis shows that how the North East's relationship with its main trading partners could spell good or bad news for the Remain and Leave camps.

1. The North East has more to lose - or gain - from a Brexit vote.

The North East is more highly dependent on trade with Europe than any English region apart from the South West: 58% of the North East's international goods trade is with the European Union, compared to just under 50% of England's.

The Remain camp could argue that this shows how important EU trade is to the North East. Brexit supporters would counter that it gives the North East the most to gain from a new kind of relationship with Europe.

2. But many think the regions with the most to lose are most likely to vote out.

Bosses in the North East - like Nissan - have been largely unequivocal in their support for a Remain vote. It was reported yesterday that the car giant has threated Vote Leave with legal action for misuse of its logo.

Even so, the Leave campaign appears to enjoy a fairly high level of support. In a recent paper, a team of experts at the Centre for European Reform, the University of Groningen and the Netherlands Environmental Assessment Agency presented an analysis of the integration of UK regional economies with European markets. By linking their findings with opinion poll data, they argue that the areas with most to lose from leaving the EU have the highest levels of support for Brexit.

Whatever arguments they muster, both sides must make an informed and honest case. North East voters are well-informed and loyal to their workplaces.

3. In or out, the North East should not forget its nearest neighbours

In our research, we found that trade with the rest of the Northern Powerhouse is also significant for the North East. The value of 'exports' to other parts of the North of England may be higher than that for many individual countries. In 2010 (the year for which the most recent figures are available) this was around €1.5 billion - nearly twice the value of trade with Germany, with France, or with the Republic of Ireland. And those figures relate to the period immediately after a major recession.

Trade with Scotland is also important. In 2010 the North East had a positive balance of trade with its northern neighbour, and exports to London and the wider South East also made an important contribution to the region's economy. North East leaders need to be aware of how political and economic developments in these key markets present opportunities - and potential risks.

4. Policymakers at all levels should now focus their efforts on diversifying the North East's economy.

Our most striking finding was the dominance of North East goods exports by a relatively small number of sectors. Road vehicles, medicines and pharmaceuticals, and organic chemicals together accounted for nearly two thirds of goods export value in 2015. The North East today stands firm in the world, with a positive balance of payments and many real strengths. But should global demand change - as can happen overnight - the North East could find itself exposed.

Policymakers at all levels should focus on diversifying the economy, based on emerging strengths. Between 2014 and 2015 the impact of policies to do just this can be seen, with a greater range of chemicals, machinery and manufactured goods increasing their contribution to exports. And the region has real potential as a producer and exporter of services. Paul Lancaster, founder of PlanDigital, has highlighted this sector as a growing strength in the North, contradicting outdated and false perceptions in some media.

Whatever the result, it's clear that the North East will need a new strategy to make our region even stronger - join IPPR North on Monday 20 June in Newcastle to discuss what this plan might look like.

Anna Round is a Senior Research Fellow at IPPR North. She tweets at @annainnewcastle

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