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
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