New-look Invest NI making all the right connections
Chief executive Alastair Hamilton has successfully re-organised Invest NI so that it now relates more successfully to the business community with an improved range of services.
The ingenuity and adaptability of Invest NI is illustrated by improved performance measures. Whilst the total commitment of funds for assistance has fallen (a reflection of the overall reductions in private sector capital spending) the number and range of offers of assistance is dramatically higher - up by 32% in 2011-12 compared to the previous year. The planned investment by clients of Invest NI, in the same period, fell by 22% from £576m in 2010-11 to £452m a year later.
Another feature of the changing balance of activity is that an increasing proportion of the support from Invest NI has been allocated to local businesses.
There has been a big effort through Invest NI to help businesses improve their competitiveness and cope better with recession. A new feature is the establishment of the Jobs Fund which has an earmarked budget of £19m set aside for a range of temporary measures to stimulate the creation of 6,500 jobs over the four years to March 2015. Because there is less pressure on other funds from inward investment, this can also be seen as a reallocation process.
The creation of the Jobs Fund does not mean that Invest NI has a completely free hand in offering assistance to local businesses. Invest NI has opened the door for assistance of several types but all with the underlying ambition to offer assistance, of a one-off nature, to improve efficiency and productivity, including research and development and innovation support, and marketing. In keeping with the EU-wide rules, Govern-ments must avoid subsidies to continuing operating costs: Governments can offer, within ceiling constraints, efficiency investments. Invest NI also embraces support related to energy and water efficiency and skills enhancements for employees.
As Invest NI prepares for the next financial year, 2013-14, and further ahead, there are the uncertainties of the impact of the continuing recession but there are also other serious policy issues to be tackled.
Invest NI has authority to assist new investment, subject to EU-wide rules on the scale of financial assistance. The current guidelines are effective until the end of 2013 and are currently subject to review. Northern Ireland, through the UK Government, has a strong interest in continuing to qualify under article 87(c) of the European Treaty as a region with economic needs where the European Commission will retain a favourable margin for investment aid for less prosperous regions which have qualified under article 87(c). This outcome is not guaranteed. Both West-minster and Brussels need to be persuaded. During 2012 there was a decision by the UK Department of Business that Northern Ireland's automatic 100% Assisted Area Status should be removed. That could open the door to dividing Northern Ireland into sub-regions, some with lower incentives. Invest NI (and the Department for Enterprise, Trade and Investment (DETI) have concerns about the possible consequences and also about how this may affect the European designation of parts (or all) NI for article 87(c) status.
Draft new EU regional aid guidelines are due later this month and will spark a serious political debate.
In addition, a complex debate is likely on the acceptable ceilings on aid for new investment. Currently, the rules impose ceilings of 35% of capital spending for small firms outside Belfast (30% in Belfast). For medium-sized projects the limits are 25% (or 20% in Belfast). For large projects the limits are 15% (or 10% in Belfast). These limits are low, by historic standards. However, controversially the Commission is considering removing financial assistance for the largest projects!
The debate about how to attract extra investment is critically important and now adds greater weight to the arguments for devolving corporation tax authority. Invest NI has demonstrated useful flexibility in response to the recession. Rebuilding coherent policies for a grow-ing economy is a critical challenge.