Almost exactly two years since President Xi Jinping visited the North and announced the UK’s first direct flight to China outside of London, research released today reveals that the connection is delivering a significant economic reward, or ‘China Dividend’, to the Northern Powerhouse.
The study by the economic consultancy Steer Davies Gleeve is the most comprehensive analysis ever undertaken into the economic and social impact of a brand new direct, long haul route between two countries. It has revealed that in its first year of operation the Manchester-Beijing air route, operated by Hainan Airlines, has driven a significant increase in exports, inward investment, and international student numbers into the North.
In addition, the direct flights have delivered a substantial increase in the number of inbound tourists to the North, with many lured by the region’s natural and historic attractions, luxury shopping sites and Premier League football teams.
Already worth hundreds of millions of pounds a year to the North, this “China Dividend” is predicted by researchers to grow substantially in the years ahead as the profile of the region increases further in Asia and as civic and business ties between the North and China are strengthened further.
The report, called ‘The China Dividend: One Year On’, is being launched as a Ministerial delegation from the UK Government heads to Shanghai to promote trade and investment opportunities in the Northern Powerhouse.
Led by Trade Minister Baroness Fairhead and Northern Powerhouse Minister Jake Berry, the group will meet with prospective investors and trading partners at the China International Industry Fair, where the impact study will also be presented.
The report found that in its first year of operation, the Hainan Airlines route delivered the following benefits:
Passenger numbers
- The route has carried 90,000 passengers between Manchester and Beijing, 15% higher than anticipated and delivering an increase in frequency that has seen the service fly daily between the two cities.
- The total number of passengers travelling from Manchester Airport’s catchment area to Beijing (either directly or indirectly in both directions) has risen by 20,415 (+38% uplift) to 74,055 since the introduction of the route. This means the opening of the direct route has stimulated an estimated 28,838 net additional passengers travelling directly between Manchester and Beijing.
Exports
- The value of goods exported by businesses across the North from Manchester Airport to China has increased by 265% to nearly £200m every month.
FDI
- The pipeline of inward investment projects is increasing. Inquiries from China to Manchester property and investment agents have doubled, with the current pipeline potentially capable of creating 850 new jobs in the City Region; a similar picture is likely in the other cities of the North.
- Department for International Trade data demonstrates that the Northern Powerhouse is experiencing a marked uplift in inward investment projects (a 24% increase in 2015/16 over the previous year), and in 2016 accounted for 25% of total UK exports to China (£12.7bn for the UK as a whole, £3.1bn for the Northern Powerhouse).
- There has been a 54% increase in Chinese investments in property in Manchester in 2016, compared to a year earlier.
Students
- The number of Chinese students enrolling at the University of Manchester is double the rate of other universities in the UK.
Tourism
- Since the beginning of the route, Chinese tourists contribution to the region’s visitor economy has doubled to £138.68m p.a, with a further contribution of £626m anticipated over the next five years
- Chinese tour operators such as Nanhu are now incorporating Northern cities and attractions as a core component of their UK leisure tour programme.
Based on the range and scale of benefits realised in just 12 months, the report recommends that securing further direct links to China and other key growth markets should sit at the heart of strategies to drive Northern prosperity and rebalance the UK economy.
The report goes on to conclude that its findings strengthen the case for large-scale investment in infrastructure projects like Northern Powerhouse Rail, which would dramatically improve journey times between the North’s major towns and cities and Manchester Airport, and in turn help attract new long haul air services.
Another key finding of the study is that the Manchester-Beijing route is increasingly being viewed as not just an entry point to the North for the Chinese visitors, but the country as a whole, indicating Manchester Airport could have a critical role to play in strengthening the UK-China relationship in years to come, especially as other airports are at full capacity.
Jake Berry MP, Minister for the Northern Powerhouse and Local Growth, said: “In just one year the Hainan route has brought such significant rewards to the Northern Powerhouse that I feel there is a real appetite in exploring launching airline routes from Manchester to other regions in China.
“As we head to Shanghai we will look to build on the flourishing commercial relationship that the UK and China have established, bringing with us Northern businesses which demonstrate the strengths and opportunities in the region.”
Lord Jim O’Neill, the economist who coined the BRICs phrase to describe the high growth markets of Brazil, Russia, India and China and a driving force behind work to reinvigorate the Northern economy, has written the foreword for the report.
He said: “This is the first time that anyone has been able to pin-point so accurately the benefits of long haul connectivity between two countries and this fascinating report shows that the upside is far wider than one may think.
“It helps to boost skills and knowledge and strengthen civic ties, as well as grow the economy in more obvious ways, such as through export volumes, inward investment and tourism.
“China remains a bigger economy than the other BRIC nations in aggregate and even at a growth rate of six to seven per cent, it will create the equivalent of another India before the decade is out.
“At the earliest opportunity further direct connectivity is needed in order for the UK to realise its ambition of China becoming one of its top three trading partners, This report makes clear why that is the case and should be essential reading for policy makers.
“There is an opportunity immediately before us to do something about this. In particular, we need to make sure that all the key road and rail links function seamlessly to connect the airport to the key centres of population density around the rest of the North.”
Sun Dali, Consul General of the People’s Republic of China for the North of England, said:
“The direct flight between Manchester and Beijing started at the right time and continues to increase and develop cooperation between the North of England and China. The direct route is a perfect example of the ‘One Belt One Road’ and Northern Powerhouse policies interconnecting.
“After one year of this flight, we have seen continued growth in trade and communication between China and the North of the UK and I hope that inter-communication between the UK and China continues to encourage more cooperation between China and the North of England, and hope that more Chinese people come here to set up businesses, study, travel, and have first-hand experiences in this unique and charming part of the world.”
Charlie Cornish, CEO of Manchester Airports Group and Chair of the Manchester China Forum, said: “This is the clearest evidence yet of how important international connectivity is to the growth ambitions of the North and UK as a whole.
“Manchester Airport is committed to playing an active role in creating a vibrant and globally competitive Northern Powerhouse.
“We are demonstrating that through our £1bn investment to transform the airport, which will help attract more long haul services like the Hainan Airlines route to Beijing.
“One of the more important findings in this report is the significant amount of demand this route has stimulated for travel both to and from the UK and coupled with the right support from Government further direct long haul routes between the Northern Powerhouse and the world will ensure that the region can reach its full potential.”
Ryan Zhang, UK General Manager for Hainan Airlines, said: “We have been extremely pleased with the Manchester-Beijing route, which has been one of the most successful we have launched in recent years.
“It has massively surpassed our predictions and expectations, which prompted us to making it daily over the summer months.
“Manchester has proved to be an extremely popular destination for our Chinese customers, whether they be students, business travellers or people visiting friends and family based in the North of England or wider UK.
“We look forward to continuing to grow the route out of Manchester in the coming years and are delighted it has had such a positive impact on the region.”
Rhys Whalley, Executive Director of the Manchester China Forum, said: “Securing a direct air route was a top priority for the Forum when it launched back in 2013 and this study represented a unique opportunity to demonstrate exactly why that was the case by capturing the wide range of social and economic benefits brought about by by direct connectivity.
“The scale of impact in the first year alone clearly illustrates just how significant having strong links with high growth markets can be and why Government should be throwing its weight behind further improving connectivity between the North and China.”
The study comes on the back of a separate study produced for Transport for the North’s International Connectivity Commission, which concluded that enhanced direct access to markets like China was vital if the North was to achieve “transformational” growth in the years ahead.
John Cridland, Chair of Transport for the North, said:“The Independent International Connectivity Commission highlighted key opportunities to ensure the North is connected on the global stage, making it easier for businesses to access international markets. The Manchester-Beijing route, which supports collaboration between the China ‘One Belt, One Road project and the Northern Powerhouse, is a fantastic example of the economic value of direct access to markets and the North’s ability to sustain such links.”
