Report casts huge doubt on Invest NI ... but is it fair?
Under fire - but Stephen Kingon argues InvestNI has been unfairly criticised
Whilst the board welcomes the recent publication of the Independent Review of Economic Policy, and many of the recommendations within it, it has generated some debate questioning the performance of Invest Northern Ireland.
Since inception, Invest NI has encouraged over £4.5bn of investment in supporting 21,000 new businesses, the growth of our locally owned business base and in attracting inward investment.
Almost 30,000 new jobs have been promoted, a further 15,000 safeguarded, whilst every pound provided to help local companies explore export markets, it has resulted in £5 of sales in return.
The main criticisms of Invest NI in the report were that it has had no impact on raising productivity, that too much support has unnecessarily gone to too few companies and that the wrong type of jobs have been targeted.
The reduction of the productivity gap was a key element of the Programme for Government introduced in 2007 and, as such, was reflected fully in the productivity actions outlined in our third Corporate Plan issued in 2008.
At around 20%, the 'productivity deficit' has three main elements, each of which constitute roughly 7%. These are Northern Ireland's high levels of economic inactivity, the structural composition of our economy and our predominantly small business base which lacks critical mass to be fully competitive. Invest NI has little influence on economic inactivity where, at almost 30%, it remains higher than any region in the United Kingdom.
We also have a number of large, but relatively low productivity sectors, such as agriculture, retail, transport and distribution which are outside our remit. Conversely, we have too few high productivity sectors of sufficient scale. Clearly, this has a restraining effect on overall productivity, and the need to stimulate a sectoral shift is a key priority in our current Corporate Plan.
In addressing the competitive element, our Corporate Plan also outlined how we wished to work closely with our indigenous business base to assist them to realise their potential and improve their international competitiveness. Our initiatives in this respect included expanding export markets, increased support for innovation, increased business improvement support and assistance to enable businesses to scale up and achieve critical mass.
An analysis of productivity within Invest NI clients, shows labour productivity (GVA per head) was £43,824, some 36% higher than the Northern Ireland average. Productivity is also higher in large businesses, illustrating the importance of helping more companies to grow to scale.
Within Invest NI clients, manufacturing productivity was £48,556, almost 7% higher than the Northern Ireland average for all manufacturing companies, whilst in the services sector, it was 18% higher than the overall Northern Ireland figure. While these trends are clearly encouraging, it is important that both we, and our clients, relentlessly pursue continuous improvements in order to substantially reduce the gap which exists between Northern Ireland and the rest of the UK.
A further issue raised by the review panel was that too much support was directed to too few companies and that many of the companies supported would have gone ahead with projects, regardless of whether or not public funding had been provided.
In respect of the level of support required to secure a project, we apply a number of checks at the time of the initial appraisal to ensure that we are not providing more assistance than is required to enable the project to locate and /or proceed in Northern Ireland. Any subsequent evaluation carried out with the benefit of hindsight to determine whether or not that assistance was required is based on methodologies that are more qualitative than quantitative and are an art rather than a science. Consequently the determination of 'deadweight' is not an exact science. In the review, the fact that 10 companies had received almost 30% of support received some prominence. Given the relatively small number of large-scale employers in Northern Ireland, and the wider economic contribution they make, it is hardly surprising that significant amounts of support go to a relatively small number of companies.
The 10 companies in question - Bombardier, Seagate, Almac, Citi, Randox, FirstSource, FG Wilson, Nacco, Allstate and Coca-Cola - make a huge economic impact, collectively employing some 14,500 people, roughly 10% of total employment in manufacturing and tradable services. In addition they account for a significant proportion of Northern Ireland exports and business spend on innovation and Research and Development.
These companies, and many others, including over 80% of foreign owned investors, having invested once in NI, have reinvested, grown and become part of the fabric of our economy. This ability to support local and international companies as they grow to scale is an important tool in developing the private sector. Ceasing to support such growth ambitions, as the review suggests, would in the board's opinion be an opportunity lost.
The report suggested also that too much focus been placed on attracting low-paid jobs, such as contact centres. However, it is important to note that the agency had mainly a job creation focus in the earlier stages of its life.
In recent times in this role we did not promote Northern Ireland as a cheap labour economy, but rather as a cost competitive, near shore location for international business with a relatively young and talented workforce.
As a board we consider that the achievements of the Invest NI staff has not been fully recognised in the report, particularly against the background of the political instability that prevailed in the early years of its operation and in the light of achievements set out in our annual performance reports. Despite these achievements, the board and executive management are not complacent and are on a path of continuous improvement. In addition, as a board, we welcome the proposals to give Invest NI more freedom to operate, greater levels of delegated authority, a more flexible budgetary regime and a central role in economic development policy moving forward. These are hardly responsibilities that would be entrusted to an organisation which was not fulfiling its role.