The Corporate Conquest: How big companies suck money out of the North East
New report highlights shows how big companies create an unbalanced economy outside London
NORTH-SOUTH DIVIDE FUELLED BY BIG CORPORATIONS, WARNS NEW REPORT
WEALTH SUCKED OUT OF NORTH EAST AS LOW WAGES FUND EXECUTIVE PAY AND HUGE PROFITS
Major corporations based in London and the South East are “pillaging” wealth out of regions such as the North East, according to a new report published today by the High Pay Centre.
The report challenges the view that the North East is dependent on public spending funded by taxpayers in the South. It claims that much of the money earned in the North East is transferred to London and the South East to fund company profits and spiralling executive pay.
According to the report, supermarkets, “Big Six” energy companies, major mobile phone networks, chain clothing stores and chain petrol stations – which all have a market share of at least 97% – extract from the North East most of the income they generate in the region.
The report says that most products sold in the North East by major corporations are made elsewhere, stored in distribution hubs and transported across the country. This means that hundreds of pounds spent by each North East household on essential items alone leaves the region each week.
The report argues that attempts to rebalance the UK’s economy will fail unless policymakers address this systematic transfer of wealth away from regions such as the North East.
According to the report:
- Just 5 of the FTSE 350 companies are based in the North East.
- There are now 51 McDonalds; 106 Costa Coffees; 41 JD Wetherspoon pubs; 21 Next stores and 19 Topshops in the North East. Before the 1980s, these companies were virtually non-existent in the region.
- Supermarkets have also expanded in the North East over the past 30 years: Tesco now have 65 stores in the region, while Asda have 44.
- 75% of the retail outlets in the MetroCentre – the largest shopping centre in the UK – are chain stores.
These companies provide mainly low-paying, low-skilled jobs to the North East while threatening local businesses, according to the report. It says that as profits and executive pay increase relative to wages for ordinary workers, less of the income generated by big companies in the region is retained locally.
The report says:
- Median pay for workers has stagnated at £23,700, but pay for the average FTSE 100 CEO has increased by over 400% over the past decade, to £4.5 million.
- Between 1977 and 2008, company profits increased from 25% to 29% of national income, while workers’ wages fell from 59% to 53%.
High Pay Centre Director Deborah Hargreaves said:
“The system rewards southern shareholders more and more, and northern workers less and less, as pay falls but profit taking rises. Local shops have been closing as national chains taking their place so profits made from consumers now flow outside the regions they are made in.
“All this makes the North look less productive. The story goes that people in the North contribute less to the economy and they rely on public sector jobs. But the reality is that the North is being pillaged.
“This represents a profound change to our economic life that is rarely discussed. Instead many people, including David Cameron, focus on the misleading claim that the North East is dependent on public spending from taxpayers in the South.”
The report calls on policymakers to help businesses in the North East to attract more local spending in order to rebalance the UK’s economy. It recommends measures to develop the entrepreneurial culture of the region and to encourage large corporations to make more use of local supply chains.
Since 1 January 2020 the average FTSE 100 CEO has earned:
Income inequality in the UK
Wealth inequality in the UK
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Pay for the typical FTSE 100 CEO in 2020 has already surpassed the amount the average UK worker earns in an entire year. We can do much more to achieve a better balance between those at the top and everybody else
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