Belfast Telegraph

We already know the problems - now it's time to fix them

By John Simpson

Leading business consulting organisation EY has published the updated version of its international review of the attractiveness of the UK, and the regions in particular, for foreign direct investment (FDI).

Northern Ireland, after a number of years of good performance, is singled out as experiencing a large decrease in the number of FDI projects negotiated during 2015.

The updated report is both surprising and worrying in two contrasting ways.

First of all, the UK remains a significant beneficiary of an inward flow of FDI.

However, the leadership of the UK in seeking FDI has been weakened in the past year by a large margin.

Germany is in second place behind the UK, but the lead margin in the UK's favour is assessed to have narrowed.

Second, the evidence for the UK regions is starkly less favourable for Northern Ireland, and this seems to be associated with a number of location-related features in which, with no big surprise, the region needs to make substantial improvements.

Whether unhappily or by fortunate coincidence, the EY survey also draws on international evidence to point to a conclusion on the current UK referendum debate.

EY offers convincing statistical evidence that potential FDI investors have already been negatively influenced by concerns about the outcome of the referendum.

That suggests that any deterioration in the UK's relationship with the European Single Market would likely have a number of adverse consequences.

EY is discreet in the use of language and turns the prospect of a Leave vote into a challenge.

The company suggests an after-referendum response of an immediate engagement programme to make FDI investors aware of the increasing ability of different countries within the UK to develop policies to offer both enhanced regional facilities and incentives.

In a telling contrast, EY also draws attention to the much improved performance of Scotland - and also the North West, North East and Midlands regions - which has significant increased its market share.

The EY statistics for 2015 show a 51% rise in the number of projects recorded for Scotland.

In contrast, Northern Ireland records a 62% decrease from 2014, when the number of projects fell from 39 to 15.

A Northern Ireland decrease is no surprise since in 2014 the prospect of a change in EU aid rules gave a one-off acceleration boost to developments.

That was less conspicuous in Scotland since the Scottish referendum may have distorted the outlook there.

The main lesson for Northern Ireland is that, even with the pending change in corporation tax rates, there needs to be big improvements to influence location decisions.

The critical reasons for regions to attract FDI are identified and - to no great surprise - repeat what is already well understood.

Regions such as Northern Ireland need to focus on availability and skills of the labour force, as well as better transport infrastructure, more competitive labour costs and - more complex for a small region - the availability of business partners and suppliers.

EY has put the spotlight on what actually needs to be done and has shown that the EU referendum is more critical to FDI than the pro-Brexit campaign appears to appreciate.

Belfast Telegraph