Corporation Tax in Northern Ireland - Northern Ireland Affairs Committee Contents

Written evidence from Bombardier Aerospace Belfast

1.  Historically, the UK Government has used enterprise zones (EZ) to encourage investment in largely depressed urban areas, mainly through the provision of enhanced capital allowances.

2.  Repeating this recipe is unlikely to sufficiently stimulate increased growth in the private sector to achieve the necessary re-balancing of the Northern Ireland economy, unless additional measures are implemented. The lower level of EU support that Northern Ireland will receive as a result of the loss of Objective 1 Status also needs to be taken into account.

3.  The fundamental driver should be a harmonisation of the corporation tax rate with that of the Republic of Ireland. The lower corporation tax rate is widely accepted as being key to the Republic's ability to attract higher levels of FDI and is both the simplest and quickest way to begin to rebalance Northern Ireland's economy. It will significantly increase Northern Ireland's attractiveness as an investment location, including for R&D-driven, high value added investment which has been an indispensable element in the Republic of Ireland's development as a formidable performer in the world's export markets.

4.  In addition, further fiscal measures should be implemented to specifically target our knowledge-based sectors, including, for example, the enhancement of R&D tax credits. The tax credit system is widely viewed as an efficient mechanism for incentivising R&D and stimulating investment in innovation in the UK. Such investment is a core driver of productivity and growth in the economy. The R&D tax credits serve to reduce the cost on an individual company of undertaking R&D, and also encourage more R&D investment. There are not only benefits for the individual companies involved in the R&D work, but also "spill over" benefits and multipliers that accrue to the wider economy.

5.  In relation to Bombardier Aerospace, tax credits form a real part of the decision making process on where to place R&D projects. During the last three years the credit has been considered in approximately 300 different projects, and has featured in the decision making of every single one. This has resulted in investment in R&D projects in Belfast of over £200 million over that same period.

6.  Measures designed to stimulate the manufacturing sector (specifically SMEs) should also be considered in order to encourage their development and more effective integration into the supply chain of larger companies. Bombardier Belfast spends some £180 million annually with suppliers across the UK and Republic of Ireland, more than half of which goes to suppliers in Northern Ireland. We are committed to working with our suppliers to help them improve their competitiveness and become more integrated into our supply chain. One of the ways we are doing this is through the UK aerospace's Supply Chains for the 21st Century (SC21) programme, to which we allocate significant time and resources.

However, there are further opportunities to develop and grow manufacturing SMEs, and measures to help achieve this could include a reduced small company corporation tax rate, further rate exemptions and enhanced training grants.

7.  Whatever incentive mix is eventually agreed, it is essential it has a sufficiently long horizon (at least 7-10 years) to encourage significant long-term investment decisions.

8  Fiscal measures are of course only one, albeit essential, ingredient in the EZ mix. Required improvements in areas such as education, skills development, security, and infrastructure are already well recognised and should be followed through.

20 January 2011

previous page contents next page

© Parliamentary copyright 2011
Prepared 9 June 2011