Select Committee on Northern Ireland Affairs Fifth Report


VI. IMPACT OF INWARD INVESTMENT

General

55. NIEC drew attention to the general consensus from economic research that inward investment is likely to be beneficial if it involves process innovations and thus contributes to enhancing the skills and knowledge of the indigenous work force.[123] It adopted a cautious view of the relevance of financial inducements, arguing that, from a purely economic perspective, inducements may be unnecessary since, should a location have the right competitive conditions to attract investment, this would be attracted without inducements. If the conditions were not right, it argued that the cost of securing the investment may outweigh the benefits. It also highlighted concerns that, if inward investment is attracted by inducements rather than 'fundamentals', the kind of investment attracted to a peripheral location is likely to be 'shallow' in the sense that it will not integrate into the local community.[124]

56. In 1991, NIEC had concluded that a policy of attraction of inward investment to Northern Ireland could not by itself secure the rate of growth an economic strategy should seek to achieve. It cautioned against offers of assistance for assembly or branch plant operations and argued for the attraction of "projects which will introduce new products and technology and will offer scope for developing higher order corporate functions."[125]

57. The Council also drew attention to the consequences in Northern Ireland of the historic unreliability of jobs based on inward investment. It pointed out that, between 1973 and 1990, the number of externally owned plans had declined markedly, with employment in the inward investment sector falling by over 50 per cent.[126] One factor in this had been disinvestment by British firms throughout much of the 1980s.[127] Since 1990, there had been a marked improvement, with the number of externally owned plants increasing from 207 to 232 in 1998, with a consequent increase in employment from just over 41,000 to nearly 53,400.[128]

58. CBI commented on the longer term benefits that inward investment could bring and on the broader benefits that would arise from developing a world class sub-supply base, capable of expanding beyond the original inward investor. It drew attention to the greater extent to which multi-national plants in Northern Ireland make use of 'best practice'.[129] Mr Gillen, of ICTU, wanted to see a formal linkage mechanism set up between foreign investment companies and local indigenous companies,[130] something which NIEC has also proposed.[131] Mr Ingram commented that a large number of service jobs had been created on the back of inward investment, although he conceded that some of these might have happened anyway.[132]

Inward investment and job creation

59. NIEC considered that Northern Ireland was failing to maximise the opportunities provided by linkage between large externally-owned companies in the Province and indigenous suppliers. Measured by the proportion of expenditure on material inputs sourced in Northern Ireland, this declined significantly over the period 1986 to 1996.[133]

60. In terms of TSN policy, NIEC pointed out that the location of a new project in a TSN area does not necessarily guarantee jobs for the people from that area. It therefore saw the policy imperative as providing residents of such areas with the means and skills necessary to apply for jobs, irrespective of location. Besides this, development of public transport infrastructure and the further education sector were seen as having an important part to play and the whole process will be facilitated by continuing peace and political stability.[134] It noted that the higher rate of grant payable in respect of projects in TSN areas acted as an incentive, and that enhanced economic activity in the most popular locations was leading companies to look elsewhere.[135]

61. A number of witnesses stressed the importance of transport links generally. CBI pointed out that, although there should be encouragement to investors to set up in, or close to, TSN areas, this was not always appropriate. So it was important to be able to get workers to the jobs, wherever they decided to locate.[136] CBI also mentioned the importance of good communications links into, and out of, the Province.[137]

62. ICTU stressed the importance of attracting key features of an inward investor, such as the corporate headquarters and research and development facilities, and not just an assembly operation, to create an ongoing commitment.[138] Adam Ingram commented that part of the Government's approach had been to build on large inward investors and "then to try and spin that out into the wider economy", an area which he foresaw might be developed further.[139]

63. CBI witnesses pointed out the need to differentiate between requiring inward investment to locate specifically in an area where there is social need and the investment available to meet the needs of that area. It instanced Fujitsu, which invested in, and secured a labour force from, West Belfast as it trained its own work force in the assembly line skills that were needed, rather than seek an already skilled work force.[140]

64. One area where IDB is making considerable efforts to attract new investment is call centres. CBI drew attention to the targeting of this business, particularly from Great Britain, capitalising on the English language skills of the Province.[141] IDB commented that "the Ulster accent comes across exceptionally well."[142] Dr Bradley, however, was less attracted to call centres as desirable inward investment. He saw this as "a transitional arrangement for part-time mainly female work. I should think as a long-term proposition they are very vulnerable, not necessarily through pure cost considerations but through technological developments."[143]

Impact on existing employers

65. One of the adverse effects claimed for inward investment is that it may attract skilled labour away from indigenous employers. CBI, drawing on anecdotal evidence, commented that there were indications of this, but there were other indications that some companies were not unduly concerned about any such turnover as they were training anyway.[144] John Simpson agreed that an incoming inward investor could derive a competitive advantage from the assistance received,[145] and Bombardier Shorts drew attention to this also.[146] ICTU intimated that there could be displacement of employment but could not offer any direct evidence.[147]


123  Ev. p. 24. Back

124  Ev. p. 25. Back

125  Ev. p. 25, 27. Back

126  Ev. p. 27. Back

127  Q 85. Back

128  Ev. p. 27. Back

129  Ev. p. 49-50. Back

130  Q 329. Back

131  Ev. p. 30-31, 34 and Q 88-90. Back

132  Q 371. Back

133  Ev. p. 30-31. See also Q 88. Back

134  Ev. p. 35. Back

135  Q 83. Back

136  Q 123. Back

137  Q 136. See also Q 139-141. Back

138  Q 344. Back

139  Q 358. Back

140  Q 123. Back

141  Q 105, 106. Back

142  Q 19. See also Q 105 and Q 181-182. Back

143  Q 308. Back

144  Q 124. Back

145  Q 195. Back

146  Appendix 18, p. 187. Back

147  Q 349. Back


 
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