The Tyne and Wear trading office in Hamburg opened last month as a partnership made up of the five district councils of Tyne and Wear (with Newcastle city council acting as the lead authority), the Tyne and Wear Development Company (which is controlled by the local authority), and 10 companies from the region.
The office will provide the participating firms with low- cost access to the German market and, potentially, to eastern Europe. It will provide a Hamburg address and administrative support for sales trips to Germany. But more important, the firms will also have the services of Dermot O'Toole, the full-time office manager, in building contacts, carrying out market research and following sales leads, as well as acting as a host and guide for managers when they are in Germany.
As the office is shared between 10 non-competing firms, costs have been kept to pounds 3,000 per company, with an additional pounds 30,000 coming from the project's public sector backers.
The Hamburg office should lead to more jobs for the North- east in the longer term. According to Derek Horsfield, chief executive of the Tyne and Wear Development Company, it is vital to improve the export performance of the region's firms if the economy of the North-east is to grow.
'Inward investment has been thin on the ground in the last few years, so we decided to see if we could make the businesses we already have better,' Mr Horsfield explained. 'If we are going to encourage businesses to produce more, the answer is to sell more. And 60 to 70 per cent of production in Tyne and Wear is exported.'
However, smaller firms face several hurdles in breaking into foreign markets. 'Barriers include cost and inexperience' he said. 'Firms don't have people they can put full-time into export sales. And companies which have tried to do business in Germany have been told that they must have an office there or else it is too difficult.'
The Hamburg trading office overcomes the cost issue, and gives the member firms access to local market information, as well as that all- important business address. And the office manager will be able to supply the firms with more detailed information than the DTI can usually provide.
The Tyne and Wear initiative also goes further than other local authority European programmes, which tend to target the European Commission. An increasing number of councils, including Birmingham's and Nottingham's, have offices in Brussels. Indeed, assisting businesses and providing sales leads is part of the work of Nottingham city council's Brussels officer. The Tyne and Wear office in Hamburg differs because it is the contributing companies that have overall control of Mr O'Toole's agenda. He will keep the councils briefed on his work, make written reports every two weeks and meet with them in person every six weeks - primarily to deal with the logistics of the project. But the district councils and the Tyne and Wear Development Company see their role mainly as that of the initiator, enabling businesses to join a project that was unlikely to happen without local government support.
In Hamburg, Mr O'Toole will act as the eyes and ears of the member firms. 'I will talk to trade associations and look at trade publications to get a picture of the competition,' he said. 'The objective is to have set up leads and contacts with downstream client industries in the first month. It is then a matter of cultivating contacts on an on-going basis.' He plans to tailor his work to suit the needs of each of the 10 firms, depending on their own level of expertise. In some cases, he may accompany their staff on visits to potential customers, but others may act independently.
'We are selling the notion that firms can have an initial assessment of market possibilities in a cost-effective way, which saves both money and management time. It is also proof of commitment to Germany.'
John Gibson, the owner of Northern Precision Engineering, one of the participating firms, explained: 'We don't yet know whether it is feasible for us to sell in Europe. This is a good opportunity for us to get across there and have a look at the market. For a fairly limited sum, we can test the water.'
The choice of the port city of Hamburg was easy. It has always had ties with the Newcastle area, and there is a direct sea link. It is the most prosperous city in Europe and provides easy access to the growing markets in the former East Germany and possibly beyond.
The most difficult stage, according to Newcastle city council and the development company, was recruiting the right person to run the office, and they say that Mr O'Toole appears to have been a fortunate find. A graduate in both German and Russian, with a a Master's degree in European marketing, his previous job was with a company that conducted market feasibility studies for German companies that wanted to enter the UK market. He is also experienced in working with small firms.
While Tyne and Wear's Hamburg office is innovative, it clearly remains a project that directly helps only 10 firms, and smaller ones at that. On its own, it is not going to turn round the economy of the North-east. But Derek Horsfield has plans to take the scheme further as soon as possible. The number of participating firms in Germany is not entirely static. As current partners gain confidence, some will feel able to set up independent sales offices or arrange to work through agents and distributors in Germany. Any places that open up can be filled from a second tier of companies which have expressed interest in the scheme. Newcastle city council is also providing parallel courses for local firms on German taxes, law and business language.
Further afield, Mr Horsfield has recently returned from Barcelona where he has been examining the possibilities of a regional Spanish office. He said that as soon as 10 firms agree to take part, that scheme can go ahead. His attentions will then turn to Italy and a trading office in Milan. He expects each to have a different group of participating firms.
If successful, the Tyne and Wear trading offices will ease the difficult first steps into Europe for regional businesses. 'The more help you can get, the better,' said John Gibson.
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