Report of the Strategic Director (Growth and Development) attached

This report provides an update on current evidence about the impact felt by Manchester’s economy since the European Union Referendum in 2016, as well as identifying a number of potential risks arising from the decision to leave the European Union. It covers different aspects of Manchester’s economy, including job growth; residential, commercial and infrastructure development; and the impact on the city’s population, including international student numbers.

The Committee considered a report of the Strategic Director (Development and Growth) which provided an update on current evidence about the impact felt by Manchester’s economy since the European Union Referendum in 2016, as well as identifying a number of potential risks arising from the decision to leave the European Union.

The Leader informed the Committee of the developments that had taken place since the report had been published and also referred to the main points and themes within the report included:-

·                Manchester’s current economic position was broadly positive and continued to exceed both regional and national averages;

·                Despite Brexit uncertainty, demand within the city centre office market was strong, with recent estimates suggesting that further new Grade A supply was urgently required;

·                The continued success of the office market in the city had been somewhat tempered by a decline in retail linked to the growth of online retailing.  Nevertheless, the Arndale continued to buck the trend with a series of new lets recently announced;

·                There was a great concern to the city that vital research links with the EU could be compromised by Brexit which would have detrimental impacts on the burgeoning knowledge economy sector within Manchester, mainly located in the Oxford Road Corridor;

·                Several of Manchester’s employment sectors currently relied heavily on the employment of skilled EU nationals. If there was a decrease in EU nationals working in the city, the following sectors could face challenges, impacting on Manchester’s growth ambitions;

·                The implementation of a UK Shared Prosperity Fund to replace current EU funding had been delayed by a year, consequently EU funding would continue to be spent for the next two years;

·                The most significant economic impact of the EU Referendum result had been the striking devaluation of the British Pound.  The consequences of which had had different levels of impact on different sectors and aspects of the economy.

·                Whilst there was a reduction in EU migration into the city, these reductions were being offset by a rise in the number of those entering the city from Pakistan, China and India;

·                The consequences to Manchester companies in terms of import and export trade tariffs should the UK leave the EU without a deal; and

·                Even at this advanced stage of the Brexit negotiations, there was no consensus on what the actual effects of Brexit would be on any aspect of the economy at any level.

Some of the key points that arose from the Committee’s discussions were:-

·                What work, if any, had the Council undertaken to help prepare residents to fill employment gaps that would be left by those posts currently filled by EU nationals, who were leaving Manchester as a consequence of Brexit;

·                How would Manchester’s professional services be impacted by Just In Time manufacturing being delayed and the possibility of the EU cutting out British companies from supply chains;

·                Concern was expressed that although the Foreign Direct Investment (FDI figure for the North West had increased slightly, overall it was still lower than before the referendum took place;

·                What preparations had been made in terms of the labour market following exiting the EU and any possible recession as a consequence of a no deal;

·                Concern was expressed in relation to the impact Brexit had had and would continue to have on health and social care services for Manchester residents due to the migration of a large proportion of the workforce and the impact on the City’s cutting edge research sectors and it was asked what work had been done to mitigate these impacts;

·                Had the Council considered undertaking an Environmental Impact Assessment (EIA) of Brexit;

·                Had any consideration been given yet to the impact of Brexit on the contribution that voluntary and community sectors provided to various sectors of the City’s economy;

·                Had the Council undertaken any planning for Brexit not taking place and the potential economic upturn that this might bring; and

·                To what extent would Manchester be impacted by the effect of Brexit on other Greater Manchester local authorities.

The Head of Local Planning and Infrastructure/City Policy acknowledged that the potential skills gap was a critical issue and providers were aware to this risk.  There was potentially a large challenge to a number of sectors but this would be dependent on the UK’s future immigration policy which was still not clear.  Reassurance was given that Officers and partners were working hard to ensure that they were doing everything they could to mitigate the potential level of impact this would have on the city.  The Leader added there was also the willingness of people to be trained and developed and also the length of time it took to obtain the necessary skills and qualifications in certain sectors, such as Nursing, that would have an impact on filling any skills gaps.

It was acknowledged that in terms of FDI, Manchester was doing comparatively well when compared nationally, however, this was in relation to only Manchester and not Greater Manchester or the Northern region.

In terms of Professional Services and EU companies supply chains, it was reported that all services would be impacted in terms of labour issues and there were a whole series of issues around data that the Council had been working with the Combined Authority on to try and ensure companies were made aware of what they needed to do to minimise the shock of any withdrawal on information flow and GDPR.  More generally, in terms of mitigating the impact to the labour market, it was explained that there were parallels to the 2008/10 period and recession that followed and experiences were being drawn from this to try and mitigate the likely impact to the City’s labour markets.

The Committee was advised that Greater Manchester was probably in a better place than anywhere else in the country in terms of keeping businesses informed of Brexit implications through the work of Manchester Growth Company.  He advised that in terms of the potential impact on Universities and the Research Sector, Manchester had strong footings in these areas and as a consequence, these would likely be sustained regardless the outcome of Brexit.  He advised that alongside the Universities the Council would continue to lobby government to ensure it still bought in to European Programmes and had an appropriate visa programme to allow researchers to come and work in Manchester.

In terms of undertaking an EIA, it was acknowledged that there would be a range of broad issues that would require addressing going forward.  It was commented however, that all current environmental EU Legislation would be transferred into UK law upon exiting the EU.  The Leader added that if there was a no deal then the UK would not be part of any supply chains with EU countries and there was no provision to export British products to the European Union.  This however was somewhat beyond the control of the Council and was entirely dependent on what deals the UK Government could reach with the EU going forward.

The Leader acknowledged the point made around the potential impact on the voluntary and community sector and advised that further consideration would be given to this going forward.  In terms of Brexit not happening, he advised that Manchester was in a very strong position to reap any benefits from a growing economy as a result of international trade.  He also added that In terms of how Manchester would possibly be impacted by the effect of Brexit on other Greater Manchester local authorities, the City had proven its resilience in the past by its ability to recover quickly from past recessions, more so than other GM authorities, and as such it would likely be required to provide employment opportunities for a far greater geography than its own boundaries.  He added the caveat that this would be dependent on the ability to deliver appropriate residential and commercial development in the long term to ensure future job creation.

Decision

The Committee notes the report.