Will a new year herald a new beginning for the Northern Ireland economy now that the chance to set a lower rate of corporation tax is almost within its grasp? That’s the big question and, as usual with any issue, it has just has many opponents as supporters. It is hard to find agreement in Northern Ireland on anything – from flags to parades, corporation tax rates, welfare benefits – never mind what direction the economy should take. However, in less than 48 hours time political leaders in the North will have to get down to the serious business of agreeing a new budget for 2015-2016.
The Executive will also begin to adopt a comprehensive programme of public sector reform in January and start the process of implementing major welfare changes. The North’s elected political leaders also need to start seriously talking about the the prospect of asset sales to fund their ambitious projects, such as the potential sell-off of Belfast Harbour and possibly the introduction of new taxes.
Welcome to 2015.
At first glance, it would appear that the North did not do too badly on the economic front last year – overall unemployment fell, some house prices rose modestly, new car sales grew slightly and the private sector continued to make a steady recovery.
According to Richard Ramsey, chief economist Northern Ireland with Ulster Bank, the local economy is estimated to have grown by 2 per cent in real terms in 2014 and he expects a similar rate of growth (1.5-2 per cent ) to follow through next year.
However, as Danske Bank’s chief economist Angela McGowan warns, there are clouds on the horizon. “A declining block grant, penalties around welfare reform and failure of the Executive to accept the need to raise local revenue streams means that Northern Ireland is facing a growing financial crisis,” she says
Ramsey and McGowan are not the only economic experts concerned about the impact of possible political tensions on the economic landscape.
Business advisers PwC has also drawn attention to what it describes as “outstanding issues” in the draft budget for 2015-2016 – chiefly that the last budget did not balance and the current one on the table has inherited all its problems.
Happy 2015 indeed.
Despite the anxieties though about what might just be around the corner for the North’s economy, it is worth remembering that there were some major highlights in 2014.
Not least was the impressive performance by the regional business development agency Invest NI. In the first half of the year, it secured major investment projects that are expected to deliver 10,800 jobs.
Some, including the projected 807 new jobs to be created by PwC and the 628 jobs by Moy Park, were by existing companies but other investments came from companies new to Northern Ireland such as Baker & McKenzie, which intends to generate 256 jobs, and Proofpoint, which plans to create 94 jobs.
New changes to European Union legislation will mean that next year Invest NI will no longer be able to offer the same financial incentives to possible investors However it could – from April if everything goes to plan – have the prospect of being able to offer a lower rate of corporation tax than anywhere else in the UK.
Home-grown successes such as Newry-headquartered First Derivatives, a global provider of software and consulting services to the financial services industry, and Belfast media company Sixteen South, which produces award-winning children's television programmes, continued to flourish.
There were also a number of Northern Ireland businesses that caught the eye of prospectors resulting in a flurry of deals, particularly in the first half of the year. One of the biggest was the acquisition by Tennessee-based Astec Industries of Omagh-based Telestack. The Tyrone company specialises in material handling systems which are used in the port, aggregate and mining industries. Astec hopes its $36 million acquisition of Telestack will help it develop its business across the globe.
According to James Donnelly, a partner in Tughans Solicitors which handled the Telestack deal, Northern Ireland is attracting a lot of new interest from American companies.
Donnelly says that deal and the acquisition by the Illinois-headquartered Brunswick Corporation of Bangor-based Whale Pumps in 2014 reflects that interest. He expects this will continue as other major US investors, such as Boston-based Liberty Insurance which also acquired Newtownards based Hughes Insurance last year, scout for new opportunities.
Of course it was not just US companies that saw an opportunity in the North last year. According to research from Experian, one of the biggest corporate transactions of 2014 was by Intu, the major UK shopping centre owner, which bought the Sprucefield Retail Park for nearly £70 million.
The second biggest deal of the year was the acquisition of Antrim Resources (NI) by First Oil Expro – the largest private, UK owned company producing oil and gas in the UK North Sea – for £32.3 million.
Northern Ireland’s changing economic fortunes also attracted back some business es such as the property consultancy group Lambert Smith Hampton (LSH) , which acquired BTWShiells Commercial division in 2014. LSH had had a presence until 2003.
All of this activity shows that Northern Ireland can attract the right kind of attention – it remains to be seen if corporation tax will be the “game changer” in 2015 that its supporters believe it can be.
