Billions of pounds drains away from the North East economy every year to big businesses based in the South, new research shows.
An estimated £6bn annually is lost to supermarkets, energy companies and chain stores with head quarters based outside the area.
Findings by the High Pay Centre think tank also reveal the North East has just five FTSE 350 businesses in the region – fewer than the Channel Islands.
The full extent of major annual losses to external corporations reveals a picture of regional ‘exploitation’ by the south and counteracts an unfair portrayal of the region as over-dependent on the public sector, argues report author Luke Hildyard.
“The big corporations have so much power they can take money out of the region as fast as the public sector is putting it in so you could say it’s exploitation as much as it is dependent,” he said. “Private sector employment is lower than in other places in the country and there is lower pay so it’s logical that the transfer of money to corporations hits the North East the hardest.”
The think tank chose to focus on the North East’s financial streams to corporations in an attempt to dispel the notion residents contribute less to the economy than they draw from it. He said: “The argument that the North East is dependent on public sector spending is being used to inform controversial policy choices in the region that aren’t being made in context.
“There’s an idea that a small number of people in the South East are responsible for the economy’s success and the ordinary workers in the North East in supermarkets and call centres have to have their costs kept down to a minimum and we need to challenge that.”
An analysis of family expenditure in the North East’s 1.1 million households found that big companies dominate family finances.
On average families spend £170 a month at a national supermarket chain, £120 on gas and electric, £30 on clothes from a chain store and £15 with a national phone company provider.
Mr Hildyard added: “Theses examples highlight how little of a pound spent in the North East remains in the region.”
The report also suggests just five companies in the London stock exchange’s top 350 businesses can claim to keep their profits in the region – Sage, Greggs, Grainger, Bellway and the Go Ahead Group.
Neil Foster, Northern TUC policy and campaigns officer believes the fight for fairer wages and a regional bank to improve finance for industrial growth is key.
The High Pay Centre also recommend greater focus during public procurement on local financial gain, involving regional businesses in the supply chains of national corporations and a currency initiative inspired by a scheme in Brixton, London, to ensure money circulates within the region.
Jonathan Walker from the North East Chamber of Commerce said: “This report highlights what we have known for a long time, namely the need to attract more businesses to the North East and how important it is that we nurture our home-grown firms.
The report ‘The Corporate Conquest’ will be presented on Friday at Newcastle University.