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We must not diminish the conditions for doing business

By Stephen Kelly

Published 22/09/2015

Former Finance Minister Peter Robinson and the current incumbent, Arlene Foster
Former Finance Minister Peter Robinson and the current incumbent, Arlene Foster

I enjoy John Simpson's regular column. I also enjoy John's company. He is generous with his time and knowledge, and I always leave knowing more than I did before we met. Of course, that does not mean that he is always right. Indeed elements of his September 8 column, "Why Stormont crisis needs some unpalatable decisions", will likely engage us in lively debate when we next share a drink at his favourite coffee house.

I'll concede some of John's arguments on the need to balance the Stormont books and leave arguments over welfare reform to others. However, the contention that we should surrender the only small competitive advantage for our manufacturing sector in order to set our own corporate tax rate is dangerous and unpalatable.

Any potential demise of our government may not be mourned by some of the general public, but we can point to many positive examples of the benefit of local politicians, making local decisions for the local economy - having low household taxes should be celebrated and indeed industrial derating policy is one action which as the then Finance Minister Peter Robinson said was not simply about preventing harm but "doing something good". That "good" must continue, especially as it is a pre-accession EU relief which if gone could never return. That's not just risky, but foolish.

Our sector endures some of the most expensive energy prices in Europe, it costs up to five times more to ship goods across the Irish Sea than the English Channel and indeed, on average, manufacturers already pay more rates per business than all sectors apart from energy.

Manufacturers require very large spaces which, unlike other parts of the economy, cannot be commercialised.

Manufacturing is critical to our economy. Mostly home grown provincial SMEs but still a quarter of our GVA, 13% of our GBP and with 80,000 jobs, our third largest employment sector. They are the backbone of economies in towns and townlands. We need to cherish the sector and improve the conditions for doing business, not diminish it. To meddle with industrial rates will be to put our economy, indigenous businesses and the one in five families who depend on a manufacturing wage in peril.

Most manufacturers don't have much problem in paying their corporation tax - you need to make a profit first. It's a high cost, low margin, and usually small profit sector. For every additional £100,000 in rates, a manufacturer would need to create an additional £1.3m in net profit just to stand still. That number increases with allowances and even more for those who won't benefit at all from any NI corporation tax rate reduction.

Corporation tax powers present an opportunity to transform the economy. It is one important tool in a toolbox of measures needed to secure investment and jobs. It would undoubtedly increase our attractiveness to foreign direct investment (FDI).

But it is more than a marketing tool. It will free up capital to invest in production capacity, machinery, skills, exporting and jobs. A lower rate should be another complementary "good".Improving but not diminishing competitiveness of other areas.

With a shrinking public sector, it will be up to business to create the jobs. We should set the goal of manufacturing meeting the EU target of 20% of GDP through a new manufacturing strategy with industrial rates, competitive energy prices and an improved labour environment at its core. We will create wealth and work across Northern Ireland.

Some final thoughts. Why are we not seeing any of the promised efficiencies from the Review of Public Administration?

Or, if the unpalatable decision is that more money must be raised through rates, perhaps we could look at the potential that everyone should pay at least something? John and I will probably mull over that with our pot of coffee.

Stephen Kelly is chief executive of  Manufacturing NI

Belfast Telegraph

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