Cuts to corporation tax and VAT are 'vital' to help boost economy
Haldane Fisher is one of Northern Ireland's largest building suppliers. Managing director Ian Haldane shared his thoughts on getting Ulster's unique economy on track with BDO's Peter Burnside
"Northern Ireland faces a unique set of circumstances which means the Government needs to take positive initiatives which have both immediate and medium-to-long-term effects," says Ian.
"At national level the Government needs to reduce its spending and banks have to stabilise their balance sheets. In Northern Ireland our specific circumstances mean that we are heavily dependent on government expenditure and we are the only part of the UK with a land-border to a separate tax regime."
A firm like Haldane Fisher can act as a weather-vane for the wider Northern Ireland economy. Individuals and families who feel secure about their income stream and employment prospects will be happy to spend in what's called the 'RMI' market - renovation, maintenance and improvement.
"In this recession we've seen downward revenue since 2007. At the moment the decline is definitely slowing but it may take between three and five years before we see a significant improvement in the market," says Ian.
How has the company managed the downturn?
"As a family firm we have developed a close and long-standing relationship with our customers. We have changed as their needs have changed. We've also engaged in aggressive budget planning throughout the last four years and it has been a key way to keep costs in check. In the past nine months we have achieved around £2m in annualised savings."
So would a reduction in corporation tax offer a pathway to recovery for a firm operating in one of the most challenging sectors in the economy?
"A reduction in corporation tax means that we can reinvest in our business. Concerns that a reduction in tax will simply mean more money for a few rich business people are ill-founded. What it means is more money to reinvest in training, skills, staff, materials and machinery, with a resulting increase in profitability and employment," says Ian.
If it goes ahead, the proposed devolution of corporation tax could take up to two years. Ian Haldane says while the move is welcome, the economy needs decisive action now.
"In the Isle of Man, where we have significant operations, their government was recently faced with a £100m reduction in support from London - a huge amount for an island of about 75,000 people. Their politicians lost no time in responding to the needs of what is a much smaller economy than Northern Ireland.
"One measure was the continuation of a 5% VAT rate for materials used in renovation, maintenance and improvement projects. This has acted as a support to the construction sector, helping tradesmen and small business owners with an immediate reduction in costs.
"A tax on any activity acts as a disincentive and the continuance of this tax on the Isle of Man has provided much needed support for the construction sector at a very critical time. Crucially the continuance has maintained business confidence, that intangible but vital consideration for anyone making spending decisions," he adds.
And what of the general outlook for Northern Ireland's economy?
"Much of what drives the Northern Ireland economy is beyond our control. The recovery has started in the UK and it is vital we keep interest rates low and that banks regain confidence to lend to the property sector. At home it's clear that something needs to happen and my view is that a reduction in corporation tax and a reduction in VAT for renovations will see immediate and longer term benefits for the economy.
"A reduction in corporation tax is vital if we are to attract foreign investment.
"Its indirect effects in terms of spill-overs to suppliers will also be huge. The combined benefits can set the economy on the right course," he adds.