The British government has rejected calls to bring Northern Ireland's corporation tax rate into line with that of the Republic.
In his report to the Treasury yesterday, Sir David Varney said that "implementing a different corporation tax rate for Northern Ireland, as compared to the rest of the UK, does not offer the best way forward for building a strong investment strategy for Northern Ireland".
In March this year - at a critical stage in the emerging DUP/Sinn Féin agreement to restore devolution to Stormont - Sir David was asked by then chancellor Gordon Brown to conduct a review looking at how tax policy might support economic growth in Northern Ireland.
The only surprise at Westminster, however - then or yesterday - was that senior unionist politicians in particular had appeared seriously to think London would agree a corporation tax rate cut for Northern Ireland, which would have obvious implications for the UK as a whole.
The more hard-headed and realistic attitude of Northern Ireland's finance minister, Peter Robinson, on the other hand, was reflected in his reaction yesterday.
While describing the outcome as "disappointing", Mr Robinson suggested that "we have always urged caution about the potential outcome of the review". The Northern Ireland Executive will discuss its response today.
A spokesman for the Minister for Enterprise, Trade and Employment, Micheál Martin, said the department would not be responding to Sir David's report until today.
The report said a cut to 12.5 per cent in line with the Republic would cost almost £300 million (€421 million) a year in lost tax receipts and would displace existing businesses from the rest of the United Kingdom.
"The likely displacement of both capital and profits from the rest of the UK, and the fact that this would be subject to a lower rate of corporation tax for Northern Ireland, would certainly come at a long-term cost in reduced resources to be shared by UK regions or in the financing of public services."
The policy, the report continued, would result "in a net loss of about £2.2 billion over 10 years, with no prospect of full cost recovery over the long run".
The report noted that the Northern Ireland economy has historically been reliant on public sector investment for its growth, but that political progress over the last decade to transform Northern Ireland into a peaceful, stable society had already helped attract inward private sector investment.
Sir David recommended a strategy to develop private sector investment in Northern Ireland based on maximising the benefits of the competitive advantages that already exist, including current financial investment incentives.
Publishing his report, Sir David said: "While there is not a clear and unambiguous case for changing corporation tax in Northern Ireland beyond the UK-wide measures announced in the 2007 budget, I am convinced that, in the light of the successful peace process, Northern Ireland can potentially emulate the economic success of the Republic."
The British government said it has asked Sir David to undertake a second review, which will explore in detail how to expand the private sector and enhance Northern Ireland's competitiveness.
Chancellor Alistair Darling welcomed the report and said his government accepted the conclusion "that there is no convincing case for such a change" and Sir David's finding that there is "substantial scope" to build on benefits already accrued from the peace process.
Sir George Quigley, former chairman of the Ulster Bank, expressed his disappointment. He said: "The person leading [ this review] was closely associated with the Treasury and his team was stuffed with Treasury officials."
He accused the Varney review of "largely ignoring the evidence produced by significant business figures all over the place, not least in the Republic. They are quite clear that corporation tax has been critical."