Northern Ireland 'may have to work harder' if UK business rate drops
Northern Ireland will need to up its game in the race for investment from overseas if the Prime Minister goes ahead with a major corporation tax cut, it's been warned.
In a speech to the CBI ahead of tomorrow's Autumn Statement, the Prime Minister set out her plans to help business - announcing an ambition to ensure the UK has the lowest corporate tax rates in the G20 group of advanced countries - as well as measures to boost productivity.
Theresa May also said some clarity would be given to business during Brexit negotiations. "People don't want a cliff-edge; they want to know with some certainty how things are going to go."
Northern Ireland already plans to introduce a rate of 12.5% from April 2018 in a bid to attract more foreign direct investment (FDI) and compete with the Republic's rate, also 12.5%.
But if the UK cuts its rate, that will leave Northern Ireland in competition with the rest of the UK for FDI - particularly if the rate is cut to as low as 10%, as reports last month suggested.
The current rate is 20%.
PwC Northern Ireland partner David Armstrong said the Chancellor was likely to confirm a cut in corporation tax from 20% to 17% by 2020 tomorrow.
But Mr Armstrong said UK-based businesses weren't always enthusiastic about tax cuts, as they could lead to suggestions of business not paying its fair share.
"But the headline rate of corporation tax is a big deal for international investors and has long been perceived in Northern Ireland as the key to attracting new inward investment," he admitted.
Northern Ireland will also have to repay the Treasury for the loss of tax revenue if it has a lower rate - but the lower the UK rate becomes, the less Stormont will have to repay, he added.
Economist Andrew Webb of Webb Advisory said: "From Northern Ireland's perspective, every cut to UK corporation taxes further erodes the expected benefit from reducing our own rate to 12.5%.
"That said, it also reduces the cost of implementing it here."
But he said that if the UK continued to cut its own rate, "we really need to consider our options".
"Perhaps it is time for Northern Ireland to think of a Plan B. How about we give a three-year corporate tax exemption to new local business-starts? That might unleash a wave of entrepreneurship and creativity of our own."
He said the Prime Minister's speech was an attempt to "reboot" her relationship with business after her earlier speeches - some of which accused business of being far removed from the concerns of ordinary people.
Mr Armstrong from PwC also said Northern Ireland would be far down Chancellor Philip Hammond's list of priorities in tomorrow's Autumn Statement - his first budget speech.
"Clawing back the deficit, preparing for Brexit and getting innovation, productivity and economic performance back on track are his national priorities," Mr Armstrong added.