A truly competitive economy
Paul Terrington, PwC’s Regional Chairman, calls for radical thinking to accelerate Northern Ireland’s recovery.
In the current climate, waiting for cheery economic news is like the proverbial bus queue. You wait for what seems like a lifetime and then a convoy appears on the horizon, hopefully headed in your direction.
The 2012 Northern Ireland Economic Conference managed to collect and communicate some of the better news, with the subsequent Investment Conference bearing further good tidings.
Nevertheless, while there are now real signs of UK recovery, this is by no means spread evenly throughout the regions. The International Monetary Fund now expects the UK economy to grow by 1.4 per cent in 2013 – a significant increase on their previous growth forecast of 0.9 per cent. Nevertheless, while UK recovery continues, it is still being driven from London and the South East, where PwC expects growth this year of around 1.6 per cent and 1.4 per cent respectively.
However, move into the regions and a different pattern emerges with Northern Ireland likely to grow by, at most, 0.7 per cent in 2013 – less than half that of London. So while there are real indicators of recovery, they are far from UK-wide.
That said, we have some real strengths that are sometimes missed when the political and media focus is on jobs, occasionally to the exclusion of other indicators.
In my introduction to the conference, and in the subsequent run-up to the Investment Conference, I’ve been pointing to the fact that Northern Ireland is already punching well above its weight in terms of attracting foreign direct investment (FDI) – despite the downturn.
In 2012-2013, with around 3 per cent of the UK population, Northern Ireland won 6 per cent of total inward investment into the UK. In addition, UK Trade & Investment (UKTI) says that Northern Ireland is one of the most successful regions in the UK and Europe for inward investment.
The UKTI data show that, in 2012-2013, Northern Ireland enjoyed a 41 per cent increase in FDI, with the number of investment projects rising from 27 in 2011-2012 to 38 for 2012-2013 – substantially ahead of the 11 per cent increase into the UK overall – with local projects, including legal services, financial services and ICT, securing almost 2,800 FDI jobs in Northern Ireland.
That’s a real strength and the three Economic Conference workstreams – FDI, Skills and Innovation – all emphasised the importance of these as drivers of both inward investment and indigenous growth. The conference and workstreams also noted that a competitive and transparent tax regime, where taxes can be paid easily, is a real incentive to investors.
And while a decision on corporation tax has been postponed until after the Scottish independence referendum in September 2014, the headline corporation tax rate under the current Government will have fallen 8 per cent by next year to become the lowest corporate tax level amongst the G7 and the joint lowest of G20. Add the impact of the Patent Box and R&D tax incentives, and the UK tax regime is one of the most competitive in the developed world.
We now need to capitalise on these advantages, on the steady economic recovery and on the profile the Investment Conference will hopefully deliver. But we should also remember that tinkering around the edges of policy has singularly failed to close the competitiveness gap with the rest of the UK and Ireland.
The real trick will be to identify and embrace radical policies that will play to our strengths and accelerate economic regeneration and social inclusion to create an economy that is truly internationally competitive.
PwC is the lead sponsor of the Northern Ireland Economic Conference.
