Select Committee on Northern Ireland Affairs Minutes of Evidence

Examination of witnesses (Questions 20 - 39)



  20. Are you allowed to engage in red-blooded competition with other parts of the United Kingdom or are there some forms of constraint or gentleman's agreement that you are under in such matters?
  (Mr Robinson) There is a structure in place to manage the competition because clearly there is competition, and that structure is through DTI and the Invest in Britain Bureau (IBB) and they have representation in the Embassies, in the High Commissions and in the Consulates around the world, and where we also have a presence in the market we seek to work closely with them to integrate our activities because we certainly see them as a source of some leads. Equally well, we recognise that there will be projects we may come across that Northern Ireland is not really in contention for. So there clearly are the opportunities for mutual benefit in this. Where the IBB arrangements are being particularly focussed is on the question of the competition around grant-aid. I think it is generally seen that competition in other ways is actually quite healthy, but I will ask Leslie if he wants to elaborate. He deals with the liaison particularly with IBB.
  (Mr Ross) The framework for co-ordination across the UK is in place and there is a Committee on Overseas Promotion which meets quarterly in London, chaired by the DTI, at which the Invest in Britain Bureau, the Scots, the Welsh and all the English regions attend. This is the structure where debate and discussion take place on areas of common interest. There is also an arrangement in place whereby we notify the IBB, especially in relation to large projects. There is an understanding and acceptance by IBB that competition with the UK, so long as it is not about money, is healthy and is helpful to the potential investor. It has been recognised that the potential investor will be looking at other regions, very seldom at just one region and if they look at different of regions in the United Kingdom they are generally focussed on issues such as "What sort of people have they got? What skills have they got? What is the transportation like? What are the university linkages?" and all those sorts of issues. In this way you are selling your infrastructure in its widest sense as distinct from selling grants, and whenever we are marketing or selling Northern Ireland, we do not focus on grants. They will become an element of securing projects but they do not generally feature in the business case that has to be made in respect of investing in Northern Ireland or, indeed, in the initial discussions that companies would have with us.

  21. That is very interesting. There is a clear tension between, on the one hand, co-operating with the rest of the United Kingdom to make more noise but at the same time there is the capacity for talking up your own product and talking down other parts of the United Kingdom. Do you think that the balance will change post devolution and the competition will become rather more red-blooded than it has been even between yourselves and the rest of the United Kingdom?
  (Mr Robinson) That is hard to judge at this stage. What I think will happen with the RDAs in England is that we will see a more focused marketing message coming out of the English regions. So to that extent I think competition will increase because they will focus on that. We know that, for example, the RDAs are quite interested in attracting executives from ourselves and the Scots and the Welsh because of their experience, so I think the competition will increase for that reason. But there is a parallel with how we operate here in Northern Ireland ourselves and the district councils and the interests between the various groups because this is all about location and you can only have one winner in this. There are no silver medals in this business. You only get the project or you do not. So we seek as well here in Northern Ireland, in discussions with districts councils, to create the sense of the competition coming in at the appropriate stage, and there is an appropriate stage, but that it is not up-front. I think we have, first of all, to convince the company that Northern Ireland is the right place to come to and then where they seek to locate within it. I think in a parallel way with the United Kingdom, that very often there is the debate, first of all, "Should it be within the United Kingdom?" and, as I say, we can benefit from that. So I think that is the balance.

  22. Finally, perhaps, and bearing in mind that there are going to be investors looking for specifically an Irish location, for some of the reasons you have mentioned, how do you compete with the Republic of Ireland, and in particular can you match their financial incentives?
  (Mr Robinson) The way we are competing at present with the Republic of Ireland is primarily on availability of people and cost. There is no question that the success that they have had in recent years has led to some strain on availability of resources, particularly in the Dublin area. It is getting harder and harder to recruit people and also there is a degree of wage inflation going on. There are also considerable infrastructure disadvantages in the Republic vis-a"-vis Northern Ireland. So those would be the three main components of our marketing against them at present. If you look at the projects that have come to Northern Ireland in the last year, in software and in network services we would have been head-to-head with the IDA in virtually all of them. I think that the pattern of success in those areas demonstrates that we can match the offer.

Mr McGrady

  23. In your memorandum to the Committee, part of your strategy statement says that you wish to provide equality of opportunity and fair treatment and to give particular emphasis to areas of greatest disadvantage. I presume that the mechanism for doing that is to use the targeting social need concept, but in your memorandum in that respect you say that 75 per cent of all first-time locational visits from inward investors should be to TSN areas. How do you manage to achieve that or how are you moving towards achieving that objective?
  (Mr Robinson) The results show that we are, on first-time visits, getting close to achieving it. The emphasis, as you say, in the equality really, the vehicle for us delivering on that, is through TSN policy, with the commitment of both the visits and the investment. We have seen over the last few years a reasonable amount of success in getting companies to locate there but obviously in the final analysis it is for the companies to choose where they locate. What I think is very important then for us to seek to do, particularly with the Training and Employment Agency in the lead, is also to see that the job opportunities are actually available in those communities of greatest need, that it is not just a question of location, it is also a question of seeking to have those job opportunities available to the people in those communities, and that is the ultimate working-out of that TSN policy.

  24. The secondary part of your target or your objective in that respect was that 75 per cent also of first-time investment projects, not just the visitations but the actual successful applications, as it were, be located in or adjacent to TSN areas. How far do you think you have progressed with that, because I am sure you would agree with me that the history over the past ten to 15 years has been anything but targeting the areas of greatest unemployment. In your answer would you indicate in some way to the Committee the difference between "located in" and "adjacent to"? I do not mean in terms of miles but I mean in terms of the "chill factor", which very often means that short distances are barriers to mobile labour?
  (Mr Robinson) We would recognise the point you are making about the availability opportunity and the question of adjacency. I think also it is important to realise that in getting projects to locate, the availability of land, availability of suitable property, is quite an important issue for the company. So in referring to the adjacency we seek to make clear that the opportunity is also available to the community and we as have progressed along this road we have learned a lot and some of that we are still applying and finding fresh ways to apply. As I said earlier, the key issue, I think, is that the job opportunities are available to people in the communities and that the location of the project is designed, and that commitment to locate within the community is designed, to get around this issue of the chill factor. We have also been working with the Training and Employment Agency and new investors coming in on programmes, both on New Deal and Bridge to Employment programmes, which are designed to take specific opportunities into the communities and use community training providers as a way of preparing people for the job opportunities and allowing them to compete. We have done that most particularly in West Belfast on the Springvale site.

  25. Have you any indication of how successful you are or otherwise in achieving the two targets which I mentioned, the 75 per cent new first-time visitations and the 75 per cent actual inward investment location?
  (Mr Robinson) In the submission we indicated there were 55 new projects in the last four years. Thirty-seven of the projects, that is, 68 per cent, and 6,149 jobs promoted, that is, 87 per cent, have gone into or adjacent to those areas.

  26. The reason I ask that question is that that is a very surprising statistic you have given. By experience—not by statistical knowledge but by experience—I know that large tracts of TSN areas have had no inward investment at all in the past ten years, so you must have had an enormous upsurge between April 1995 and March 1999 which has not yet come through?
  (Mr Robinson) And that is the case, Chairman, as I sought to illustrate by saying five years ago we were talking about seven new inward investment projects going through, 10, 11, 12 and now 21, so that much of the growth has happened in the last year and the last two years.

  27. Before I go on to the next question in this respect, could I ask you to give us some geographical breakdown of how you interpret targeting social need, what areas and how you define them as such areas? Do you simply take the Department of Education's assessment and say, "That's okay with us," or do you do your own thing, but that is for another day, if I may? The next question I wish to ask is, given your strategy of bringing employment to the areas of unemployment, are these regions which are designated given any sort of aid priority over and above areas of full employment? Is that a factor, or sufficient?
  (Mr Robinson) The primary instrument that we have is that new investment coming into areas of social need can get up to 50 per cent capital grant and investment going into the other areas in Northern Ireland can get up to 30 per cent capital grant. So that is the prime policy instrument for achieving this, but, in addition, we have been working towards developing, because just as we have moved the marketing of Northern Ireland away from a lot of money as the reason for coming to Northern Ireland towards the availability of good people, so we believe that in helping getting investment into these areas, if we simply emphasise the money that in itself does not deliver all that we want, and so we have been working to help develop the opportunity to attract good people as part and parcel of the policy towards TSN, and we see also issues like the availability of telecoms widely throughout Northern Ireland as very helpful to us in promoting that policy. So that infrastructure is a component of it as well and has to be a component of it.

  28. How do you apply this strategy objective of trying to get inward investors to settle and develop in these areas of need and unemployment? Does that have a debilitating effect on their subsequent decision-making? In other words, presumably you direct them quite forcibly to these areas? If they reject that enticement does it make it more difficult for you to sell to them to come into other areas?
  (Mr Robinson) I think what I would go back to, Chairman, is the process we go through with an inward investor. Typically, we are engaged with him over 12, 15, 18 months and your initial assessment of the project and the prospect of being able to land it for Northern Ireland and so on play a big part in influencing your strategy and how you deal with the company. So we put a very considerable emphasis back on to the initial contacts with these companies, very often in their own offices, and it is very important to understand the culture of the company. For example, as no doubt Members of this Committee are aware, some companies in America will lay a great deal of emphasis in their mission statement on social responsibility and will place that quite high on their own personal agenda. You might very often find they are running programmes already in some of the deprived areas in the cities they are in. These are all the strands that help, these are all the bits of intelligence-gathering that help to shape and understand the likelihood of getting the project and what we have to do to get it. So the process of taking people to see particular areas will start much sooner and then it goes through a set of iterations and we test it out, and we understand, for example, whether the project manager feels comfortable with all those concepts or not or whether the decision-maker does. So it is a much more longer-term and evolutionary approach to that part of the selling and that is what I will be seeking to convey.
  (Mr Ross) Potential investors have become very sophisticated. That has become very obvious over the last three to four years, and before they come to Northern Ireland they tend to prescribe to us what it is they want to see and who it is they want to meet. Of the initial number of potential investors that come, many will not leave IDB House because they come in in the morning, go out in the evening and they want to have all the meetings conducted in one location there. For those who go outside IDB House they will state their requirements, such as "I want to meet the transportation providers or the universities or existing investors in a particular sector," Therefore by the time they visit Northern Ireland they have a model that they want us to implement and it becomes quite difficult to try to persuade as many investors as we might like to get out to all of these council areas; but it is still our objective and part of our strategy to do so.

  Mr McGrady: Thank you very much. Could I end by asking you, could you provide a geographical analysis of your statistic on associated job promotions in areas of TSN from April 1995 to March 1999?

  Chairman: Was that rhetorical or are you seeking information?

  Mr McGrady: I am seeking that they supply the information that we need and they very generously nodded their heads in assent.[1]

  Chairman: We will make sure the nods get into the shorthand note.

Mr Grogan

  29. Your memorandum indicated that over many years the troubles in Northern Ireland have affected your ability to promote Northern Ireland abroad. To what extent has the signing of the Good Friday Agreement changed that? And did you also say to an earlier question that the nature of inward investment has changed in recent years? Could you elaborate on that as well?
  (Mr Robinson) Chairman, I said earlier that undoubtedly the political progress we have made, especially over the last year, has helped us in terms of presenting Northern Ireland as an investment location, and yet I also indicated the quality aspects, which are harder to measure, but that the quality of the projects coming in now we judge to be significantly stronger. We can see that in a number of the investments that we have got recently on the software side. We have two very major American insurance businesses, Allstate and Liberty Mutual, who have come to Northern Ireland to set up software development centres and they have no particular marketing reason to come to Northern Ireland. Allstate are not selling any products in the United Kingdom at all; Liberty Mutual is doing it on a very small scale. When you talk to financial services companies right around the world, but particularly in America, those are excellent testimonials. Equally well, we have seen Abbey National and Prudential commit to very substantial investments in the last few years in Northern Ireland. Abbey National actually announced an expansion of the original project at the time when they were just opening the building. So those again are very important and valuable testimonials. That is the calibre of company. We have also had recently coming into the telecommunications sector Fujitsu, who have come in in the last few years and again announced a major software development, a very powerful testimonial for us in Japan.

  30. Is the continuing political uncertainty over the future of political structures something that inward investors raise in meetings with you? Is it a matter of concern now, and shall we say the Good Friday Agreement were to collapse, what effect do you think that would have on your job of attracting inward investment?
  (Mr Robinson) The investment decision invariably is a decision for some five, seven, ten years in the minds of the executives and so long-term outlook and long-term prospects form a core part of the decision-making. That is beyond any question whatsoever. There is no doubt that, as I say, the progress has helped us greatly and that if that were not to continue, clearly from our point of view that would be a disadvantage in terms of marketing Northern Ireland as an investment location.
  (Mr Ross) I want to come back, Chairman, on the nature of the investment. If you step right back the nature of the investment is obviously determined by the market conditions, so that by looking at the growth of sectors in the market, in world terms, one sees that software, network services and telecoms are the three key sectors which offer us the greatest opportunity, and determines for us the nature of the investment we are likely to get. The nature of our achievements over the last year simply reflected the market conditions in the world.

  31. Just switching to the performance of your overseas offices, how do you determine their success? Is it the number of leads that they get or the number of projects that result from those leads, and which would be your best performing office over the last few years?
  (Mr Robinson) I think the key issue for us is landing projects. As I described it earlier, there are no silver medals in this business and over the last few years the States has been particularly strong for us. We have found with the Far East a combination of, obviously, in the last 18 months their particular financial difficulties, which have also produced a major devaluation of many of those currencies, so that manufacturing in the Far East has become cheaper just by definition of those devaluations, and so the Far East has got very quiet for us. As to Europe, we are rethinking our strategy and our approach. Europe has not been a happy place for us over the last number of years and we are rethinking our way through that. So the States and Great Britain have been the two very strong points. We have over the last couple of years been doing particularly well also out of the South East of England, as I said, because of these growth sectors that Leslie referred to of software and network services. The structure we have in America is that we have really centralised everything in Chicago and our offices outside that are quite small. We have two people on the East Coast in a recently-opened office in Boston; we have two people in Atlanta, an office we opened four years ago, and we have a reasonable presence, about five people, on the West Coast in San Jose and San Jose is doing very well, but we tend to run the States through Chicago and not as independent offices. So it would be a bit invidious to point to any one of those because in many ways you could argue that the offices are only satellites of the network.

Mr Donaldson

  32. Gentlemen, I suppose it is not insignificant that we are here in Londonderry, which has enjoyed quite a degree of success in terms of attracting inward investment, and that does raise, I think, the question of the role of, for example, local authorities. As you will be aware, the previous government introduced a provision whereby local authorities could use their ability to raise funds through the district rate to promote economic development in their areas. We have 26 local authorities in Northern Ireland. What steps do you, IDB, take to co-ordinate the work of other bodies, including local authorities, in seeking to secure inward investors, and do you find at times, as a result of 26 players in the field, some perhaps more active than others, that you have to arbitrate between the competing claims from different local authorities?
  (Mr Robinson) Chairman, as I indicated earlier, the involvement of district councils and the economic development officers has produced what we consider to be a really significant interest in economic development and that has been very positive and I think the vast majority of district councils are very good at approaching and stimulating local enterprise and seeking to develop and stimulate new businesses in the area. Of course, there is a significant interest in all those areas, in all the district councils, in inward investment and we have, as a result of those developments, dedicated a resource in IDB to deal with the liaison with the local councils. While we have investors coming in who seem to be very serious about Northern Ireland, we think there is a real strength in the local councils, where there is a provision of some of the key requirements for that project, coming in and playing a part, because certainly our experience in America is that business in America particularly is used to close interaction with the local political infrastructure, and so it is very valuable for us to draw in the local councils at an early stage, where, as I say, the project seems to fit the ability of the area to deliver. What I think we have seen emerging in the last 18 months is some recognition on the part of the councils and the economic development officers that there was a certain amount of catching-up to be done, a certain amount of basic work to be done on developing promotional material for the area and so forth, and now that that has been done and now that a lot of the stimulus has come for local enterprise, actually they are more effective if they themselves to start to join together into bigger groups; for example, the very interesting development in what is most of County Antrim, as it happens, where actually the seven economic development officers there have come together to develop a local supply database covering all those district councils. So I think that the process of a certain amount of competition undoubtedly was there for a time but I think it is working its way through very successfully, where most of the district councils realise that as an area they are quite small in relation to the task and the challenge and that they are naturally coming together. So I think that situation is working well. Most of the councils also have undertaken their own initiatives, particularly in visiting parts of America and building twinning relationships, and again those have been very positive because they have provided a direct interface with the councils and the officials understanding the demand of American business, and we have found that as they have gone through that process they have a greater appreciation of some of the issues that we are seeking to deal with. We also feel—though there may be one or two exceptions to this—that by and large when they feel that there is a prospect there they seek to draw us in to get advice, sometimes to use our promotional material and support directly, sometimes to continue to front it, and we understand that and see that, because it is back again to limited resource, the more resource that is being deployed in seeking new investment from our point of view, the better.

  33. In terms of your co-operation with local authorities, to what extent is that proactive as well as reactive? For example, recently you have opened two new industrial development sites, one on the Belfast Road at Downpatrick and one at Knockmore in Lisburn. Obviously there is a strategy there somewhere on your part which seeks to attract investors into those two locations. To what extent is that strategy being developed in co-operation with other agencies at a local level, such as the respective district councils?
  (Mr Robinson) Certainly from our perspective we are moving forward on that and we are happy and we believe that on some of the issues that we have worked through with the councils there is a recognition on both sides. You are using the illustration of those two sites. We see them as very different, with very different characteristics and, therefore, very different in what we want to do and I have been seeking to convey in the answers to these questions that we have become more and more targeted and focused on the specific requirements, and what we are seeking to do as well with the councils is to encourage them to see those sites as very different. The one in Downpatrick is 50 usable acres out of a 75 acre site. We believe it is going to be beautifully landscaped. It is right beside the Quoile River. There are all sorts of opportunities to appeal to high-tech industry and tradeable services. You can literally see the Mourne Mountains from the back of the site. All our presentations to outside investors, our computer-generated material, have the Mourne Mountains in them and the Downpatrick Cathedral and St Patrick's burial place as part and parcel of the offering there. On the other hand, we would see Knockmore as the type of site where we are more likely to attract the very big investor with several hundred jobs because it is right beside the major urban area and at the hub of the whole road infrastructure and rail infrastructure for this island. So we can see quite different characteristics. One of the issues for us, of course, is hopefully to see that the officials in those areas and the councils in those areas also recognise that in making that distinction it is a market-driven distinction. It is not us finding some way to carve up the cake in some way differently. It is not us applying it, it is rather showing the market which is driving the choice or decision by the company.

  34. Each inward investment project forecasts the number of jobs it will either create or safeguard. To what extent are these targets actually achieved in practice, i.e. what has been the number of projects over, say, the last ten years that have either exceeded, met or failed to meet their targets for permanent jobs? And overall, what percentage of forecast jobs have been created and still exist, say, five years later?
  (Mr Robinson) That is a major amount of data that underlies that. If I can hit the headlines, Chairman, we will happily come back with some more detailed data on that to answer these questions.


  35. Of course.
  (Mr Robinson) The conversion rate of jobs promised to jobs delivered on the ground, the average is running at 70 per cent and that has been the case for about the last ten years. The Committee of Public Accounts undertook work on this in the early 1990s and at much the same time looked at the Scottish and Welsh experience and they were broadly similar. We were marginally better than the Scots, I believe, and slightly worse than the Welsh. They were all bracketed very much together. The pattern over the last few years, as I said, has remained very much at that 70 per cent of them actually being delivered. The average time that those exist we show in our annual report. The average life of those is about eight years and again that performance would be broadly in line with other development agencies. What also, of course, I am conscious of is that there was a more recent Audit Office report into new inward investment. We are still not sure what is happening about that. We have not had an opportunity to respond to it, and so it is probably not appropriate, Chairman, to go into much detail, but the factual bit of that was that it referred to the fact that of the new inward investment, about 50 per cent of the jobs had been provided and 50 per cent of the assistance was paid. Sorry, I should have said in reference to the 70 per cent, of jobs achieved noted above that a similar amount of the assistance promised was paid, about 70 per cent of the offers made, were paid. As I say, the new inward investment was the first time that that analysis had ever been done as a sub-set the overall investment results and there are a number of elements and issues in that but I think it would be proper to leave that to come up before the Committee of Public Accounts.

  36. Can you clarify what you mean by the average lifespan of a job being eight years?
  (Mr Robinson) As the project builds up and people come on board, we monitor that change in employment that the companies are required to return to us. We then monitor those employment returns for quite some time after the project has been up and running and we have the requirement on the company to provide us with the data. So we do long-term time series analysis to support that and it shows that the projects continue and the jobs continue for, as I said, up to eight years. Eight years would be the period.

  37. Are you saying by that that where IDB attract an inward investor to Northern Ireland, the average expectation, or the average reality, of the lifespan of those jobs, ie the employment that they provide for the local community, is eight years? Are you saying that of the companies you have attracted into Northern Ireland over the last 15 or 20 years and even longer the IDB have been operating, the jobs that are attracted here on average last eight years?
  (Mr Robinson) Yes. If you were to work at, say, a nominal 100 that we promote, 70 of those are delivered and that produces 560 man-years of employment, eight times seven.

Mr Hunter

  38. Chairman, continuing that line of questioning, could I refer you to the Comptroller and Auditor General's report of October 1998. I was going to ask for any general comments you may have on that report because one of the points that are emphasised in it is the short duration of many jobs created by IDB activity. There is also perhaps some adverse criticism of overseas promotion. Do you feel the comments in this report are fair in that respect?
  (Mr Robinson) In seeking to put some factual information on the record, Chairman, as regards that, as I have indicated, it is the first time any analysis has been undertaken on this sub-set of new inward investment and the corollary is that the 70 per cent overall indicates that businesses that are established and re-invest obviously achieve quite a high level of delivery. You will also see on close scrutiny of that report that there were 52 projects reported and that 15 of those projects subsequently expanded and there is no analysis in the report whatsoever of what happened to the 15 projects after the expansion, so that the subsequent performance does not form any part of the report. Of course, those subsequent expansions would also have received some public funding but there is no analysis undertaken of that. So you can see, Chairman, that I would be suggesting that it is an incomplete analysis if it does not go on and look at the 15 good performers as to what happened subsequently. The second thing is that I think it points clearly, as I say, to the matching of the money to the achievement and indicates that IDB, in structuring the offers to those companies, structured them in such a way that, as the companies achieved their targets, the public support went in and if they did not achieve their targets there was no public support paid. I think that is an important aspect, that in structuring the transactions the IDB offers recognised some of the risks inherent in the projects. I think on the aspects you mentioned about promotion, the comments in there, I have been seeking, Chairman, to indicate that the process of inward investment is actually quite long term and it is exceptionally difficult to track when you produce costs on an annual basis, to disaggregate those costs that adhere to a project, a project that continues through two or three financial years, to get some sense of what the cost was, and that was one of the areas. Another aspect was, as I indicated in an answer to an earlier question, the manner in which we manage the operations in North America, with a head office and separate offices working really largely with a centralised system. I would question the value of starting to analyse the costs on an office-by-office basis against projects when you operate that way, particularly when you add this point that we also have sought to make about the passing of responsibility for the cases over to Belfast and the work that continues, that the overseas offices' responsibility moves to supporting the work, the work that is then being driven from this side of the Atlantic, where, having got the visitor in for the first time, much of the detailed work is then done out of Northern Ireland. I think that when you look at some of the issues about cost and cost-effectiveness, to disaggregate them to offices is not as meaningful as to deal with the overall cost-effectiveness, which I would readily accept is an important issue.

  39. I have been prompted to ask if you would like to submit written comments on this report or are you satisfied with what is said there?
  (Mr Robinson) Chairman, I would be keen to be guided a little bit by you in this because of the nature of its being an Audit Office report. It is somewhat unusual territory you find yourselves in, where the PAC has not yet heard the report, we have not been called and we are not quite sure what is going to happen.

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