Select Committee on Northern Ireland Affairs Minutes of Evidence

Examination of witnesses (Questions 1 - 19)




  1. You are most welcome. Thank you very much indeed for coming. We are delighted ourselves to be in Londonderry/Derry to conduct this particular aspect of this inquiry and this is the first examination that we are having in connection with it. We will do our best to make sure our questions follow a logical order but it means that they may come from different parts of the horseshoe. If at any stage you want to gloss anything that you say, either now or in writing afterwards, please do not hesitate to do so, and we shall reserve the right to ask supplementary questions in writing after the event if there is something which either was not clear or which we thought needed following up on. We are most grateful to you for the memorandum which you sent to us in advance. I do not know whether there is anything you would like to say of a general nature before we embark on asking questions ourselves?
  (Mr Robinson) Chairman, we are delighted to be here. I am the Chief Executive of the Industrial Development Board and I am accompanied by Leslie Ross, who is Deputy Chief Executive and who has responsibility for inward investment. There are maybe just a couple of points, if I may, that I would like to make. We have obviously supplied you with the memorandum and with our three-year strategy, "Competing Globally", and, in addition to that, we have added the recently published end-of-year results for the year ended in March. I think, Chairman, there are a couple of points I would like to touch on in that. It is not possible, in providing you with the information, to provide all the detail, nor is it appropriate, so the process of developing the strategy and refining the strategy is subject to an annual review that we ourselves do as an Executive and then present to the IDB Board as part of the process of submitting that to the Minister. So this process of choosing our sectors to concentrate on and choosing the markets to be active in is subject to an annual review and, of course, we are required to change it in response to market circumstances. Today there is a rapidly emerging opportunity in all of this "E" business, "E"-commerce activity, and that is an aspect that we are embracing very wholeheartedly now, the opportunities there, and that is not reflected in our memorandum because it shows the historical position. The end-of-year statement points to the encouraging trend of Northern Ireland winning more new inward investment and there are several reasons for that, we believe. Undoubtedly, the political progress of the last 18 months, the last few years, has helped greatly in that. We also have tapped into a well of goodwill from the international companies that are already established here, and we are getting tremendous support from senior executives in those companies to help us market the Northern Ireland message. In addition, I think we have a number of the key components that multinational business is looking for today in its operations—a very well-educated, bright, young workforce, very adaptable and flexible, and very strong university/industry links—and those are very important facets in today's marketplace. Plus, there are a couple of other aspects that are also very positive from our point of view. There is a growing and quite strong awareness now of the importance of economic development within the entire community of Northern Ireland. We have seen that find expression in the district councils with their economic development resource. Community groups have become very active in all of this and so I think there is a sense in which all of Northern Ireland is acutely aware of the opportunities and that awareness is still growing, which is very helpful to us. I also believe, Chairman, that in the last few years the marketing and selling activities of IDB have been more professional and that has contributed also to the improvement. I think we have established clearly in the memorandum the importance of inward investment to the economy but I would just underscore that with a few key statistics: 50 per cent of manufacturing employment in Northern Ireland, some 52,000 jobs, is in externally-owned businesses. They are responsible for three-quarters of the exports that go from Northern Ireland, so I think that is a very powerful testimony, and 10.5 per cent of the GDP of Northern Ireland arises from inward investment. Those are very important strands in the economic life of Northern Ireland that externally-owned businesses play. Chairman, those are the only points I would like to make in the way of underscoring some of the things in the memorandum and pointing to some other aspects, and we are quite happy now to take the questions.

  2. Thank you very much indeed and those introductory remarks are thoroughly helpful. I have said this to my colleagues before but I am taking the opportunity in open session of saying it again so that it concentrates everyone's minds, that because we are seeking to visit a couple of inward investment projects during the balance of the day, we may go slightly clippety-clop in terms of our questions and it may also be helpful if the answers are reasonably concise as well if we are going to get the whole way through our programme. Let me ask you some ground-clearing questions to start. What precisely does IDB mean by the terms "new inward investment" and "inward investment" and could you give an indication of how you classify investments by companies from Great Britain who have not previously invested in Northern Ireland?
  (Mr Robinson) When we refer to new inward investment we are referring to companies making the decision for the first time to establish in Northern Ireland. So those are first-time investors. We then talk about inward investment as a general term encompassing both those that have recently made the decision and those that made the decision at some time in the past. When you visit Du Pont this afternoon I think you will see that with some 30-plus years' experience in Northern Ireland it does not quite fit the bill to refer to Du Pont in the sense of having made many of the decisions about coming for the first time, but yet we are acutely conscious of the fact that the ownership of Du Pont and many of the key decisions rest outside Northern Ireland. So they are still very firmly within the inward investment category. We seek then as an organisation to ensure that the task of attracting new investment gets very high priority and the primary responsibility for that rests with Leslie Ross's Group. When a company becomes reasonably established in Northern Ireland as being here for maybe 18 months or two years, the responsibility within our organisation passes to a group of people in what we refer to as the Established or Home Industry Group, because we feel that many of the project-related issues of getting established are best dealt with by Leslie's team. Very often these are to do with getting utilities sorted out, many of those very important, vital early tasks, but once they are established, it is more important, we feel, and also of benefit the local economy to draw them into the network of employers' organisations, of being involved in promoting good management practice and we can best promote that through the established industry sector. So that is why we classify companies in that way and what the rationale is, Chairman.

  3. Thank you very much indeed. Did you pick up the Great Britain question?
  (Mr Robinson) Sorry, I apologise for that. In terms of inward investment, we treat companies where the decision-making process is in Great Britain as inward investors because we see the major task is not only seeing successful operations but also having a line into the corporate decision-making, a line that is independent of the local management, because we always believe it is important that we can calibrate directly for ourselves the corporate view.

  4. And you would also define "new inward investment" in the same way if it came from Great Britain?
  (Mr Robinson) Absolutely.

  5. As a matter of curiosity, would that practice be different from that of the relevant bodies in Scotland, Wales and England in terms of investment from other parts of the United Kingdom?
  (Mr Robinson) I think that the processes we all deal with are similar, Chairman, and we all see in our discussions with companies the importance of understanding not only where the operations are but where the decision-making process lies and that does put particular demands on your relationship with the company in terms of securing further investment and so on. So I imagine that, irrespective of how the other agencies classify them, they would approach the task in a very similar way.

  6. But for purposes of statistical comparison, all four territories would report in the same way, so that you would be comparing pears with pears and not pears with apples?
  (Mr Robinson) We do that. Movement of investment within the United Kingdom is not as well understood and not as well measured. However, we all have very good calibration of investment coming into the British Isles from outside.

  7. And the statistical analysis of that would be uniform?
  (Mr Robinson) Yes, absolutely. When I make reference to market share, Chairman, I would be doing it on an analysis that was comparative with the Scottish or the Welsh or any of the English regions.

  8. The next question of a ground-clearing nature: how many staff, first in Northern Ireland and, secondly, elsewhere, does IDB employ in support of the inward investment activities and what proportion would that be of total IDB staff?
  (Mr Robinson) The Inward Investment Group has 105 people in it. That is out of a total headcount of 360. About 40 of the 105 are in the overseas offices. The rest form a support group within headquarters.

  9. In the memorandum you refer to the six target sectoral areas and you indicate that 70 per cent of the inward investment targets fall within those target areas. How do you treat the other 30 per cent? Do you regard that simply as a bonus? Clearly if somebody appears on your doorstep who lies outside the sectoral areas you are going to respond to them but is there anything we ought to know about how you treat people who are outside the six targets?
  (Mr Robinson) Not particularly. Our treatment of those companies would be broadly similar. The difference is in how we spend our resource and our marketing resource. For example, in a targeted sector we will attend major trade events. In America, for example, in the automotive components sector there is a major event each year in Detroit. We clearly see that as a pivotal area and event for us to promote Northern Ireland in the States. So we will have a direct presence at that event in Detroit. We do not seek to cover all the engineering shows in America, all the plastics and injection moulding shows. So the main difference is in how we devote our resource, but if we get any lead or we get any opportunity to identify anyone, then we will seek to land the project in absolutely the same way as if it were coming through the targeted sector.

  10. Since the areas in which what I will call the non-targeted companies fall is a pretty substantial part of the global economy, would you indicate why you do not regard them as being generically sensible to pursue? I appreciate that you need to have targets but is there anything else about them that makes them inappropriate for Northern Ireland?
  (Mr Robinson) It really, Chairman, comes down to effectiveness. We believe firmly in these target sectors the growth rates are such that you are much more likely to find companies that have expansion plans and within some very specific subsectors of engineering or, as I say, injection moulding, you may well have some reasonable growth but it is much harder to get those companies and so the selection is all about scarce resource and devoting it in such a way as to maximise the impact.

  Chairman: Very clear.

Mr Beggs

  11. What proportion of new inward investment projects attracted to Northern Ireland require selective financial assistance?
  (Mr Robinson) In terms of the projects that IDB deals with, all of them have received selective financial assistance. There was a number of years ago an initiative by the Government to relocate some jobs from the South East of England. They were primarily within the public sector and we did have at that time a few projects come in that obviously did not receive selective financial assistance. But in essence all the projects that come in that we report on we support them, but, of course, there are other activities. There is other investment coming into the Northern Ireland economy, inward investment, that does not fall within our remit and so that would not be reported on. I am thinking particularly that we provide no support to property development, for example, and there is a lot of that happening. Equally well, we do not support the distribution sector and again you would have investment coming in in that way.

  12. Within what range has the percentage of total investment met by selective financial assistance varied over the past five years?
  (Mr Robinson) Primarily we have been bringing down the contribution, the selective financial assistance contribution, to the projects as a general trend. In the last 12 months, however, the industries that we have been attracting and the dynamic sectors of the economy, which are primarily software and call centres, the levels of capital investment involved in those projects are considerably less than in manufacturing. So in some of those projects our actual contribution is higher towards the project cost but overall in those cases the level of support per job being promised is significantly less. So while the contribution is going up, the overall commitment of public resources is coming down.

  13. Has the level of financial assistance needed to secure projects fallen since the signing of the Belfast Agreement?
  (Mr Robinson) It would be hard to form any conclusion definitely on that. The figures, as we have published them in the end-of-year statement, actually show that the percentage has gone up, as I say, but the overall level of support has come down. That is on the second page of the end-of-year statement. So the answer to your question is no. The point I would make, however, in answer to it as well is that we are not really comparing apples with apples because the nature of the projects signed up in the last year by and large is quite different in character from the projects we have been signing up over previous years.

  14. What do you estimate your overall "hit rate" to be, measured as the percentage of initial inquiries which lead on to investment in Northern Ireland and what factors lead the others to fall by the wayside?
  (Mr Robinson) In our annual report and in the memorandum, we indicated that the visits made in terms of first-time visits by potential investors and repeat visits, that is, where we are identifying people as potential investors and they are coming back, those combined have been running at about 200 a year for the last few years. What those statistics cannot show is the quality of project because it is just simply a numerical representation. We have signed up in the last year 21 new inward investments, the previous year was 12 and before that the pattern was 11, ten and seven, so we can say that in the last five years we have increased the number of new inward investors by about three times and the pattern of visits into Northern Ireland has been broadly the same. So we think that that points strongly to improved targeting on our part and I guess as well a more realistic assessment in the early stages of talking to people, usually in their markets, about whether or not we think either the project has merit or that Northern Ireland's prospects of landing that project are reasonable, but I think that those figures show that we have been improving our "hit rate" quite considerably. Of course, there is a little bit of mismatch in timing because you sign a project in one year and you may well have had the visit in the previous year but I think it is a reasonable extrapolation of that to say that we are now moving into something like one in ten visits leading to a project.

Mr McWalter

  15. In your opinion, what are the key commercial factors which lead potential investors to give Northern Ireland active consideration as a destination for their activities?
  (Mr Robinson) In our experience, in all projects there are a number of influences and sometimes quite a large number of influences that come to bear in this. You look, first of all, at their motivation for coming to the markets in some ways, if you are looking at a potential investor from the Far East, there is no doubt that they are looking at the European market and a priori it is a decision about the European market. Within that, from the Far East, English-speaking is undoubtedly a positive contribution because of the fact that for most of the people in the Far East they see in business terms learning English and everything revolving around English as being important. In contrast, if you are looking at the American market, while certainly in most cases they are looking at Europe, there is also a component of looking at perhaps the United Kingdom and supply to the United Kingdom and Ireland as their goal and maybe they are not, therefore, quite so ambitious in terms of Continental Europe. That would happen in a minority of cases but it is noticeable from America, not from the Far East, and, of course, the question then of language is more about the familiarity of operating within an English-speaking culture than the opportunity to learn the language as happens with the Far East. Then within Europe the decision to come to Northern Ireland is again quite different. It is almost certainly to do with supply to the United Kingdom and Ireland market because there is comparatively little attraction in their minds at the beginning in supplying back into Europe. We quite often change that thinking as things move along but it is not there in their initial stage, and, of course, relocation within the United Kingdom is primarily about availability of labour and cost. So those would be the different influences that are at play in the early stages. Then we move into demonstrating that Northern Ireland can meet their requirements in various ways and the priority varies from company to company, about the availability of very good people, about the infrastructure and their ability to get in a manufacturing sense product to market or in the sense of tradeable services, the very high-quality telecoms infrastructure that we have here in Northern Ireland. Those are the issues then that start to come into play in projects coming from the four different market areas (if I can describe it that way).

  16. So a lot of those factors one could almost describe as cultural rather than commercial factors? In your answer they dominated?
  (Mr Robinson) I think there is this element. We do have a saying in our business that it is people who make the decision and, therefore, it is understanding who it is you are dealing with and understanding the individual who will make the decision, because very often the people who come in the early stages are not the decision-makers. So a big part of our early task is understanding who will make the decision and what are the issues in that person's mind. So yes, I would agree with you that the cultural and the human element is undoubtedly part of all this.
  (Mr Ross) Chairman, if I could come in on the back of that. The investor invariably is a different type of investor on almost every occasion, but undoubtedly people issues feature highly in terms of the priority of what they are looking for. Investors ask questions like "What is the productivity and how can we operate profitably? Can we operate more effectively and more competitively in Northern Ireland than in any other location?" So they look at a range of component parts of the cost structure. They are also very much influenced by the existing businesses in Northern Ireland and how successful they have been. So the testimonials have increasingly become very important to us in selling Northern Ireland to potential investors. Of course, you also get into areas such as the capabilities of the universities and, as Bruce said, telecommunications. Potential investors do get into the financial aspects and the ability to operate very profitably in Northern Ireland, but the higher consideration is Europe and the English language and the ability to service markets worldwide through food, transportation, etc.

  17. Many of the things that you have said could be said also of those countries or those destinations which would be competitors—the Republic of Ireland and other parts of the United Kingdom, perhaps less so with other European Union countries the English language factor but there will be other compensating virtues that some of those countries will have no doubt. From where do you face the greatest competition? Do you nearly grab the cat by the tail and then find that somebody else has grabbed it by the head?
  (Mr Robinson) That is the story of this business entirely. If you deal with something like 200 visits a year and you land 20 of them, there are a great number that escape your grasp.

  18. Lots of cats?
  (Mr Robinson) Exactly. The point you are making is very important, which is, how do we distinguish, how do we differentiate this product and how do we capture the imagination of the potential investor, and we spend an enormous amount of our time in thinking about that and our energy in seeking to do it. Leslie made reference to the testimonials. In the marketing campaign that we mounted in the United States in October, we used American focus groups to help us to work through the branding process and it is, of course, a truism in this business to say that the success of these companies is very important and they are a very good proxy for doing business in Northern Ireland, but I think what we learnt when we got into it in some more detail was that it was also important to have that testimonial from as senior a person within the organisation as possible. So that is a big part of it. So some of this appeal is to say, with a little bit of licence in this, "Your peer in this industry, who is highly respected, has made the decision to come to Northern Ireland," and that is a part of how we seek to differentiate. We also would work exceptionally hard at thinking very clearly about what we understand to be the real key needs of the corporation and then work very hard specifically to present those to a company because that is how you differentiate. If everybody is going to score 90 per cent on their assessment, it is the 92 per cent that is actually going to get the prize and so you are into that amount of detail. Then I do think we work very hard at some of the natural strengths of people in this part of the world, their natural warmth and hospitality, and again you find that culturally on the West Coast of America the comparatively easier-going way of life here and less formal address and so on of people all works for us as we seek to differentiate ourselves. But those are the strands and you have to work at them exceptionally hard to make the distinction.

  19. I think you have described some of the factors that tend to clinch it for Northern Ireland in your 20 out of 200 cases but how do you compare with the rest of the United Kingdom? Are you suggesting that in the rest of the United Kingdom people are cold and frosty and less welcoming and more formal and that is why you win?
  (Mr Robinson) All I can say is that there is a certain amount of evidence coming to us from the customer base. For example, in network services there has been a lot of extensive work done about the impact of the different regional accents on the caller and there is no question whatsoever that the Ulster accent comes across exceptionally well. People from this part of the world succeed in conveying to the caller—and this is not me telling it, this is important businesses like Abbey National telling us—a real interest in their problem and a desire to help solve it, and let me repeat, I really do think this is about the difference between scoring 90 per cent and scoring 92 per cent and sometimes these are the differences that do allow us to get projects.

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