Review calls for reform of Invest NI

An independent review into Northern Ireland’s economic development agency has described evidence that Invest NI is having an economic impact and providing true additionality as ‘limited’.

Despite operating with a budget of more than £160 million in each of the last five years, research for the review into Invest NI, found that the organisation was having “little, if any bearing” on the crucial issue of productivity.

However, despite a number of serious criticisms of how the Department for the Economy’s sponsored arm’s length body operates, the review’s authors conclude that Northern Ireland needs an economic development agency, that the agency should continue to be an arm’s length body, and that Invest NI has strengths to be built upon.

Last reviewed a decade ago by the Northern Ireland Audit Office (NIAO), transformational change recommended in the past has yet to be delivered, in the authors’ view.

Amongst the key findings of the most recent review was that of a potentially “complacent” organisation, due to continued broad political support and a broadly positive reputation despite “unduly complicated” internal organisational structures.

Perhaps one of the most telling findings highlighting dysfunction in the organisation is the inability of the agency to detail the number of business support programmes it operated, due to sheer volume.

“Considerable room for improvement in leadership, structure, operation, control, and public accountability.”

The independent review, first ordered by then Economy Minister Gordon Lyons MLA in January 2022, was carried out by a panel chaired by Michael Lyons, a former Chairman of the BBC.

As part of his assessment, Lyons outlines his belief that there is “considerable room for improvement in leadership, structure, operation, control, and public accountability” of the agency.

“Invest NI needs to be more outgoing and a better partner, especially in the context of subregional cooperation. It is a key part of the regional economic ecosystem and must be viewed as such. It can, once reformed and strongly led, make an important contribution to establishing a different trajectory for the Northern Ireland economy but only by working with the departments of the Northern Ireland Executive and other stakeholders, including local councils, universities and colleges and, of course, the companies of Northern Ireland.”

The review acknowledges that Invest NI operates in a “unique economic entity”, emphasising that the limited monetary and fiscal powers highly restrict the ability of the region to drive economic growth and respond to economic and wider challenges.

It further emphasises that low productivity continues to be the “most deep-seated constraint on incomes and growth” adding that this position has been exacerbated by the 2007 financial crash and slow recovery when compared to the rest of the UK. Additional challenges include Brexit, political stalemate at Stormont, and the inflationary budget crisis.

Chief among the reports findings were failings in leadership, governance, and oversight. Identifying profound divisions at Board and senior leadership level in Invest NI, which it says are having a detrimental effect on the organisation, the report recommends the need for formal clarification and reinforcement of the roles and remit of the board, Chief Executive and Executive leadership team.

Identifying a high level of ongoing or repeat, non-repayable support to a number of existing clients, the report suggests that Invest NI’s ‘client company model’ is “inflexible, the criteria are not widely understood by businesses, and it may lead to missed investment opportunities and/or ‘deadweight’”.

As well as recommending a strategic audit of all Invest NI programmes to take place on the back of a finding that the organisations portfolio of programmes is “too large and unwieldy”, even for the internal organisation to fully understand, the report says that Invest NI’s outward facing metrics are not demonstrative of the impact of its interventions.

Stressing that in some cases current metrics better reflect how clients perform rather than what difference financial assistance has made, the report says that the current emphasise of metrics unduly focuses on outputs, particularly job promotion rather than outcomes. It is recommended that metrics need widened to include higher productivity, job quality and innovation impacts.

Perhaps highlighting the significance of the need for a streamlining of programmes, the report authors looking at the green growth economic opportunity state bluntly that “Invest NI had been slow to recognise the significance of the green economy and has been slow to respond to the development of new schemes to support the delivery of DfE’s Energy Strategy”.

Other key findings within the report include:

• an insufficient focus on the development of subregional economies;
• evidence of market failure in the provision of industrial land in a number of areas in Northern Ireland;
• a lack of clarity as to the organisation’s strategy on FDI and how it supports the 10X vision;
• no metric to demonstrate how the agency will increase the quality of new inward investment;
• the current organisational structure does not align with Invest NI’s strategic priorities and main function as a delivery body; and
• the absence of a strategic communications and engagement strategy that articulates the breadth of its activities or impact that these have.

Criticism is not solely reserved for Invest NI. In relation to the Department for the Economy’s governance role, the authors say that strategy, policy and guidance from the Department is unclear and not communicated to Invest NI in a manner that takes account of the business planning cycle.

Additionally, the report notes that the loss of EU funding has required Invest NI to consider significant budget re-prioritisation. However, the extent to which DfE and DoF have resolved the immediate loss of ERDF funding “is also unclear”.

In response to the report’s 17 multi-faceted recommendations, Invest NI says that it recognises the need to be more outgoing and better partner with the wider Northern Ireland public and private sector, adding its commitment to transformative change to be a more efficient, agile and outcomes focused organisation.

“We are determined to transform this organisation, building on its strengths and working in partnership with the Department and our stakeholders to build an ecosystem that delivers a growing economy that works for all.”

Accepting, in principle, all recommendations emanating from the review, the Department for the Economy said that it recognises that fundamental change is required to ensure Invest NI is strategically aligned with 10X policy objectives, and that the agency is operationally equipped to deliver outcomes and interventions to help transform the economy.

The Department has subsequently established a steering group made up of senior officials from the Department, Invest NI board members and the interim CEO to oversee and implement an action plan.

Permanent Secretary of the Department for the Economy, Mike Brennan, said: “The scale of the challenge is considerable, and it is therefore important that we take time to develop an Action Plan which will deliver the necessary change and ensure success. I anticipate that our Action Plan will be ready to announce in the autumn 2023.”