John Simpson: Serious questions loom for the new heads of Invest NI
Invest NI, the development agency for business in Northern Ireland, carries responsibility for the delivery of improved performance by local businesses and attracting investors in new businesses.
The agency has recently published its annual report for 2018-19.
The report is extensive on the undoubtedly thorough governance processes followed by Invest NI, although it is lighter in terms of economic analysis and useful comparators.
There are big changes taking place in Invest NI.
After an extended period, because of delayed appointments procedures in the absence of local political institutions, the chairman, Mark Ennis, has stood down and his successor, Rose Mary Stalker, has been appointed.
And Kevin Holland has now been appointed chief executive to succeed Alastair Hamilton.
The incoming chair and chief executive carry responsibility in the effectiveness of the delivery of services by Invest NI.
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The inherited methods of attracting incoming investment merit reconsideration and further refinement. Northern Ireland’s attractiveness for FDI (foreign direct investment) is undergoing increasing challenge.
The outgoing chair and chief executive both have the comfort and reassurance that, in the latest annual review, there is a series of successful results which are consistent with meeting the performance yardsticks set some years ago.
Mark Ennis describes the last year as one where “our customers faced a myriad of uncertainties including Brexit … and a cautious business environment” in which “their performance can only be described as exceptional”.
In 2018, Invest NI reported 9,033 additional jobs alongside £3.3bn in increased sales by its clients. These results in 2018 read well against the background of a modest performance by the UK economy.
Slightly tendentiously, Invest NI suggests that Northern Ireland, last year, saw economic activity grow at a faster rate than the UK as a whole.
Depending on the precise statistical comparator used, Northern Ireland may actually have had a slower rate of growth.
More tellingly, in a 10-year comparison, whilst the UK economy has grown by 17%, Northern Ireland has seen economic growth of less than 2% and, in historic terms, Northern Ireland has still not recovered to the peak output levels of 2007.
Businesses influenced by Invest NI are contributing to a slow rate of growth in the local economy, but not sufficiently strongly to allow Northern Ireland to catch up with the average for the UK economy.
The performance gap is even larger if performance in Northern Ireland is set against the recent trends in the Irish economy.
Invest NI is a large organisation spending over £172m each year and employing over 650 people.
This is a large, highly professional organisation with a top tier of 10 employees as executive directors, recently increased by the advertisement of two new posts, paid at salaries averaging over £70,000 pa.
A big deficiency in the annual report from Invest NI is the absence of any significant review of the effectiveness of spending, or tax concessions, on the attraction of FDI.
Programme spending annually of £120m is not analysed to show the main forms of programme spending. £25m spent on capital grants is given little analysis.
Invest NI no longer publishes a list of the main financial beneficiaries of its decisions.
A significant change in Organisation for Economic Co-operation and Development (OECD) policy affecting foreign direct investment is in process, as the developed countries try to reduce tax avoidance by businesses, using the ‘Base Erosion Profit Shifting’ guidelines.
Invest NI is silent about local thinking on these potential international ‘rule’ changes. One significant tax policy change is noted.
The powers to devolve corporation tax to Northern Ireland have been placed on hold “pending future developments”.
Gone, maybe forgotten?
During 2019, there needs to be an anticipation of the impact of Brexit and the possible changes in State Aid rules inherited in a post-Brexit environment.
Invest NI now faces serious policy questions for the years ahead.