Northern Ireland as an enterprize zone

Written evidence from Limavady Borough Council

1. Introduction

1.1. The Northern Ireland Affairs Select Committee has invited interested individuals and organisations with an interest in the development of Northern Ireland as an Enterprise Zone to submit written evidence to its inquiry.

1.2. Limavady Borough Council welcomes this inquiry. The Council is the local authority for the Borough of Limavady.

2. Background to the area

2.1. The area is located on the north-western periphery of the region. It is characterised as a predominantly rural area. In its latest District Council economic briefing, the Department for Enterprise, Trade and Investment notes that the area has 1498 claimants. This represents 6.8% of the workforce.

2.2. The area has suffered from several closures of large factories and public sector employment, most notably the former Seagate plant, the army camp at Ballykelly, the downsizing of HUCO Lightronic and closure of Daintyfit.

2.3. While the past two months has seen a slight decrease in unemployment, it has increased 8.8% over the past year. It has the third highest level of unemployment in Northern Ireland after the Derry/Londonderry and Strabane areas.

2.4. The area has had virtually no inward investment over the past five years. The number of Invest Northern Ireland client companies has remained relatively static.

2.5. At the 2001 Census, 64.9% of the population aged 16-74 had no or low levels of qualifications. 10.4% of the same population had degree or higher levels of education. Anecdotally, it is known that the area suffers from high levels of numeracy and literacy difficulties.

2.6. In 2009, the area had 1415 VAT-registered businesses. The profile of the area suggests that the main private sector industries were in construction and manufacturing, both of which have suffered over the past three years. As a knock on effect of this, wholesale and retail have also suffered.

2.7. While a high level of start-ups was recorded on a regular basis through the local Enterprise Agency, this has significantly decreased – as it has in all areas in Northern Ireland. There is still much interest in starting a business in the local area, however, a much reduced level of business is emerging from the enquiry stage.

3. The Wider North West Region

3.1. Derry/Londonderry and Strabane have higher levels of unemployment. Similar levels of educational underachievement and reliance on benefits typifies the wider area. Some international investment has come to the North West, however most of this has been based within the city centre of Derry and one or two further investments in Strabane.

4. Why should Northern Ireland be declared an Enterprise Zone?

4.1. Northern Ireland is at a considerable disadvantage to its neighbours. These can be listed simply as:

· a lack of entrepreneurial spirit, diminished by a heavy reliance on the public sector

· a lack of real enterprise engagement by schools and colleges

· higher corporation tax than its nearest neighbour

· a rural landscape, with good linkages, but not nearly good enough to service large industrial sectors beyond those areas connected by motorways

· higher energy prices

· a weak housing and construction sector

4.2. The term "enterprise zone" could be limited to the notion of financial inducements or tax benefits. There is, however, an opportunity here to spread this concept further to that of an Enterpreneur Zone.

4.3. Such a concept could be used to look at a joined-up approach beyond the admittedly important concepts of tax benefits and financial inducements. It could also include joined-up thinking on enterprise in education; enterprise as an option for the unemployed; enterprise as an alternative to the increasingly-costly third level education option.

5. How might an enterprise zone operate?

5.1. In terms of a structure to how the financial aspects of this might work, there has already been much discussion about corporation tax, and this paper will not labour that.

5.2. However, there is also an opportunity to support local businesses through actions from Councils in Northern Ireland. Each of these would have a financial cost; these are presented here only as potential ideas, and obviously each would have to be investigated further, given the current strain on both central and local government finances.

5.2.1 A rates exemption for start up businesses in their first year of trading – this could encourage small businesses by removing one of the barriers to starting up, especially in retail or shop-front businesses.

5.2.2 Similarly, some form of phased-in payment of rates – for example one-third, two-thirds, full rates over a period of three years could be an added incentive.

5.2.3 Currently Economic Development is a discretionary power for local Councils. Both the Northern Ireland Local Economic Development Forum and the Northern Ireland Local Government Association have been lobbying to change this to a statutory power. While this is still at a very early discussion phase, there may be opportunities for Councils, Enterprise Agencies and Invest Northern Ireland to work more closely together and produce actions, programmes and incentives which could further strengthen the small business sector. This could involve more radical and localised efforts to raise awareness about enterprise and entrepreneurship as an option for work or career.

5.2.4 While already under consideration, the implementation of some form of BIDs (business improvement districts) system would start to begin a process of regeneration in town centres, allowing previously un-used or under-utilised areas to be brought back into use.

5.3. In summary, then, there are some limited opportunities for Councils to impact on the local business environment, with actions that are financially tangible for SMEs. However, to reiterate, these would need further examination in terms of costs and administration.

5.4. As mentioned there are many initiatives aimed at spreading enterprise awareness. These include organisations and programmes such as AdvantageNI, The Prince’s Trust, Young Enterprise, the Go For It! campaign, as well as efforts from local authorities, schools, colleges and the Universities.

5.4.1. As part of the wider remit of an Enterprise Zone, there is anopportunity to create some joined-up working and thinking about how enterprise awareness is encouraged.

5.4.2. It would require considerable planning and resources to ensure a joined-up campaign of awareness building, bringing all agencies together, under one brand, which is recognisable by the wider population.

5.4.3. It is inevitable that no one campaign could satisfy all needs; however at a time of greater efficiencies, there is surely never a better time to develop a campaign which could be synonymous with the concept of an Enterprise Zone, and which also serves its audience from one single source or brand.

6 Are these proposals aimed at any particular sectors?

6.1 Inevitably, an Enterprise Zone should aspire to inspire, across all sectors. One aspect of business development over the past ten years has been to focus on high growth and/or high value sectors.

6.2 The value of enterprise across all sectors should be championed. Not everyone will have an opportunity to run a software company. But those who wish to take small-scale services or enterprises as a work option should be equally valued as those who wish to develop an export-orientated business.

6.3 That said, the region has the assets to make the following sectors a priority:

6.3.1 Creative Industries – encompassing all aspects of these from individual craft to high-end digital content providers

6.3.2 Tourism – especially those who develop local product or have a niche market for their area

6.3.3 Renewable Energies and Green Technologies

6.3.4 Food and Drink – especially those who have export capabilities to markets in Europe, China and the United States

6.4 In terms of priority, there is an obvious opportunity to harness the power of new and existing initiatives such as the Project Kelvin link, the University of Ulster’s Science Park initiatives and other third-level sector programmes.

6.5 It should be noted that the key to developing these will be in ensuring that the very smallest start-ups secure the same level of support as the very largest, in terms of marketing, sales development, product development and mentoring support.

6.6 There is therefore an obvious need to ensure that the support mechanisms in place harness the best of expertise that the region has to offer; there is an opportunity and need to upskill those who hold positions in business development to ensure that they are aware of market opportunities and the latest in technology developments.

7 How long should the Enterprise Zone operate for, and what aspects might be made permanent?

7.1 One of the main weaknesses of the Northern Ireland economy is its reliance on the public sector. This is a generational problem. Despite the cuts which are forecast for government in Northern Ireland over the next four years, there is a need to develop an entrepreneurial culture.

7.2 While this is obviously in the realms of ‘crystal-ball gazing’, some of these measures may need to be in place for a period of ten years; perhaps even more.

7.3 It is easy to see how foreign direct investment will more-easily be swayed by financial incentives; however, if the purpose of developing an enterprise zone is a broader concept, involving a sea-change of attitude from all sectors of Northern Ireland society towards becoming an enterprise culture, it will take much longer for these measures to trickle down to the base line of potential entrepreneurs – especially if the teaching of enterprise as a concept in schools and colleges is to take hold.

7.4 In addition, careful consideration should be given to economic blackspots within the region. Many areas do not have the luxury of the level playing field of attention that more urban areas receive. For example, Limavady has experienced under-investment in terms of foreign direct investment. While the focus of this paper has been on growing indigenous business, there are obvious opportunities to create new zones of enterprise within the region, benefiting rural dwellers, as well as spreading the spin-off opportunity that foreign direct investment can bring.

7.5 While the rule of thumb is that the region is promoted as a whole, (by agencies such as Invest Northern Ireland), there should be careful consideration given to targeting special focus on those areas which have been neglected by government agencies over the past ten years.

8. Summary

8.1 In summary, this response recommends:

· broader investigation of rate-varying powers to incentivise home-grown business, based on a cost-effective approach in these leaner times

· development of a joined up approach to enterprise development, especially from school years onwards

· development of expertise and mentoring which is industry-based, experience-led and relevant to priority sectors

· focus on priority areas such as creative industries, green technologies, tourism and food/drink markets

· better use of existing facilities and real value placed up relevant linkages with universities and other intellectual assets in the region

· a value placed on entrepreneurship at all levels – from lowest to highest value added businesses

· a spatially-aware approach to developing new areas of enterprise within the region, bringing equal opportunity to rural dwellers and spreading the potential for wealth creation across the whole region.

20 January 2011