Business

Angela McGowan: It's a terrible time to be poor at investment

While areas like cyber-security and fintech are engines for Northern Ireland's economic growth, international competitors will move ahead of us if we do not raise investment levels

AS Northern Ireland businesses and communities head into yet another fragile period for devolution, our policy-makers face several significant choices over the next few weeks and months.

Despite the perpetual political noise, I think we all desperately want to see Northern Ireland growing as we know it can, competing on a world stage, creating jobs and improving living standards.

Ultimately success will come down to encouraging business investment. But for that to happen, we need confidence. And confidence comes with political stability, a functioning Executive and a stable macroeconomic environment.

The challenge is considerable. We need investment in skills, infrastructure, new industries and cutting-edge technologies. That requires bold, decade-defining decisions and good strategic planning. That investment will need to come from both the public and private sectors, and it needs to come sooner rather than later.

There’s no getting away from it. Business investment has been seriously underpowered across the whole of the UK since the 1990s. The pandemic has unsurprisingly hit it hard. And while the past 18 months have given us a chance to think about how that can change, other countries have been better at translating ambition into action, far quicker.

Right now, in areas like cyber-security, fintech, clean energy and life sciences – those new engines for Northern Ireland's economic growth – our international competitors will move ahead of us if we do not raise investment levels.

So how do we encourage more investment in the things that matter? The CBI believes that the government (national and local) have several levers at their disposal.

:: First: think smarter about taxation. I’m deeply worried that policy-makers think that taxing business - perhaps more politically palatable – is without consequence to growth. Government needs to turn current thinking on its head. For example, across the UK the current business rates systems perversely taxes more than half of business investments. But, by using tax incentives we could be rewarding firms who invest.

We saw during the pandemic that business rates relief was a hugely important initiative for supporting struggling firms. A review of the system locally is due in 2023, but what we really need now is fundamental business rates reform to drive investment. Currently, it is the case that decarbonising your office might cost you more in your next rates bill than sticking with what you have.

We need to start making more use of business rates to support investment and reform those aspects of the rates system that curtail it. For example, in England we have seen the Telecommunications Infrastructure Act 2018 pave the way for full-fibre broadband and future 5G communications by enabling 100 per cent business rates relief for operators who instal new fibre on their networks. It is these sorts of incentives that encourage operators to invest in the broadband network and help speed up delivery.

A similar initiative in Northern Ireland could help propel the region into pole position across the two islands with the provision of 100 per cent full-fibre broadband. Giving, for example, a five-year sectoral rates relief for broadband installation is essentially no different to the proposed incentive of rates relief for an Enterprise Zone. However, the former initiative has the added advantage of not creating the investment ‘displacement’ problem that is associated with Enterprise Zones.

:: Second, focus on Catalytic Public Investment. This is needed to speed up the development of major infrastructure projects, new industries, and cutting-edge technology. We need government to ensure economic competitiveness by investing in new growth markets – a perfect example of this is the market for electric cars in Northern Ireland. With petrol and diesel to be phased out by 2030, electric vehicles will bring benefits in terms of helping to achieve climate targets and providing a cleaner, cheaper way to travel.

But provision of fast charging facilities to meet the needs of EV drivers will be a challenge. Business is keen to be involved, but investment requires a clear policy strategy and given the time pressures, we need to see a government driven initiative to roll out super-fast chargers in the short-term. This requires agility and immediate investment. Business would therefore be keen to see the Department of Economy take the lead on rolling out super-fast EV charging points in conjunction with the private sector as a part of their 10x Economic Strategy. Such an initiative would support the Executive’s aims to drive a greener, more sustainable economy. This green economic initiative would also allow Northern Ireland to increase its share of “green jobs” and help to smooth our transition to a low-carbon future.

Great strides have been made in putting climate change to the front of the agenda. But we can and we must do more. In Northern Ireland, we are the only part of the UK without our own evidence-based statutory targets, yet we have two Bills going through the Assembly, taking up unnecessary policy-makers’ time, to address the same subject. When it comes to planning, a key enabler of net zero and business investment, we see many renewables projects stuck in a planning system where processing times for major applications are now double the target. But the Executive has an opportunity now to be courageous in reforming the system as the Review of the 2011 Act draws to a close. It is an opportunity that cannot be missed.

:: Third, invest in new skills for new markets. Business warmly welcomes the progress made with the Department of Economy’s draft 10x Skills Strategy, but the Executive must ensure short-term year-to-year spending is replaced with long-term funding in this critical area. The Department’s short-term skills initiatives that were rolled out as part of the Covid19 recovery scheme (eg the 1,000 free places in cyber skills awareness and the remote learning courses rolled out by local HE and FE institutions) are a great example of short-term investments that will have long-term pay off. But reform of the Apprenticeship Levy is also needed so that firms can use the levy funds where they are needed most.

If we want to reach our destination, if we want to rev our own engines for growth, speed matters. Decisions are needed. Clarity must come. We must seize the moment and put our money where our mouth is. Because investment is everything.

Angela McGowan is CBI Northern Ireland director

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