Written evidence from John Simpson
GIVING COHERENCE
TO NORTHERN
IRELAND AS
AN ENTERPRISE
ZONE
1. If the Northern Ireland economy is to make progress
then Northern Ireland must establish its credibility as a good
place to do business or to start and develop a business. The ambition
is to emphasise the positive features of the business environment
to attract mobile and indigenous investment.
2. Presenting Northern Ireland as an enterprise zone
can serve to convey a positive perception of the region and emphasise
key qualities or characteristics that encourage investors to give
careful consideration to the likely merits of locating in Northern
Ireland.
3. The enterprise zone concept should combine a mixture
of stronger marketing for the region and identified special selling
points particular to Northern Ireland.
4. However, the enterprise zone concept, as a marketing
tool, cannot stand alone, particularly if the underlying business
infrastructure contains weaknesses. Therefore, consideration of
the elements of enterprise zone policy also depends on the broader
range of features affecting business development. Expressing that
linkage in another way, effective marketing of an enterprise zone
depends not solely on the specific special incentives but even
more importantly on the substantive wider development strategies.
5. This suggests that the debate on the characteristics
of the enterprise zone must be preceded by a reconsideration of
progress in improving the general business environment. There
are several features which need to be acknowledged. For Northern
Ireland, in a comparison with other UK features, this includes:
- fewer new business starts than the UK average;
- an overall lower output per person (or employee);
- a complex misleading perception of being a low
labour cost region;
- few outstandingly successful businesses;
- too high a proportion of the labour force with
modest or low qualifications; and
- a regulatory and planning regime that (at best)
can be unhelpful.
6. There is no major continuing reason why Northern
Ireland should not take steps to enhance its locational advantage.
This will call for changes to make enterprise activity more attractive
mainly by demonstrating conditions for enhancing profitability
as well as demonstrating supportive actions by related agencies
and departments.
7. Some features will act as a constraint.
8. For some businesses, geography and associated
transport costs may be a marginal disadvantage. For others, the
higher costs of energy may make a difference, although this difference
is now much narrower. Questions of scale may affect locational
decisions since the local or all-island market may frustrate gaining
economies of scale. None of these is a fundamental game changer.
They will be factors relevant only to some investment proposals.
9. Other more significant features relevant to business
success might emerge in:
- labour skills and productivity ;
- labour costs;
- the availability of skilled people and the operations
of education and skills providers;
- the direct and indirect impact of locational
factors including infrastructure;
- the impact of Government regulation (on employment,
environment, social obligations); and
- costs for Government services, including rates
and any local taxes.
10. In a slightly different context, account must
be taken of the availability and cost of capital needed by entrepreneurs.
Arguably there is no discrete capital market in a region such
as Northern Ireland. This does not preclude the possibility of
either an institutional barrier or a market failure. The case
to encourage greater availability of debt funding, equity sources
or venture capital needs to be revisited. To date there has only
been modest use of venture capital although recently there has
been some success in building a Halo Business Angel network
11. If Northern Ireland is to become an enterprise
region these features underscore the logic of a two part approach.
12. First, the fundamentals of a modern business
environment must be in place and convincingly demonstrated. Second,
against a background of a society that welcomes and supports enterprise,
some additional features to advertise, sell, or incentivise the
prospectus would be helpful. The top-up or additional perks may
be, in themselves, relatively inexpensive but conspicuous enough
to attract the interest of potential investors.
1. The general business environment
13. Whilst there has been much recovery and progress
in the last decade, Northern Ireland has not yet adequately demonstrated
that all the fundamental features of a modern business environment
are firmly in place. Some of the features that await positive
developments include:
- 1. Planning regulation and administration
- 2. Overall regional planning strategy (and
the Belfast Metropolitan Area Plan)
- 3. A coherent and committed plan for physical
infrastructure improvements including roads, transport and urban
centre enhancement
- 4. Agreed policies on the development of
water and sewerage services (and their financing)
- 5. Fiscal coherence as it affects local taxation
(rates)
- 6. Coherence of disparate Government policies
for the economy
- 7. Formulation of delivery plans for skills
and training for young people to meet changing needs
- 8. Demonstrable political stability in good
governance
- 9. A comprehensive economic strategy (as
expected from the Kate Barker review)
These are some of the main agenda items for the reshaping
of general regional economic strategy. However, the search for
an enterprise, or enterprising, region will rely, primarily, on
improvements in these features.
2. Added features for an Enterprise Zone
14. If the fundamentals are being tackled, what might
be added to underscore the creation of an enterprise zone with
particular attractions?
15. Alternative suggestions can be identified:
- Concessions for new corporate businesses
through defined tax allowances
- Significant initial, time limited, concessions
on local Council tax (rates) for new enterprises
- Some (careful) easing of planning restrictions
- Guarantees to lenders to support favourable
borrowing arrangements
- Extra high profile training and skills qualifications
for modern businesses
- Tailored facilities to link a business with
dedicated expertise in higher educational institutions (a stronger
knowledge transfer scheme)
16. Ideally an enterprise region should be successful
because of the ways in which businesses can be assured of a sustaining
and helpful operating environment. A sound local economy, backed
by unique selling features, is a desirable base on which to build
a dynamic region.
3. The lead responsibility
17. If Northern Ireland is to develop as an enterprise
region, whilst there must be an appreciation of the objectives
and support from all the institutions of Government, whether from
Brussels, London or in Northern Ireland, the main leadership role
must lie with the devolved Northern Ireland administration. The
extensive devolution of most of the relevant responsibilities
means that lead responsibility lies in Northern Ireland. When
the decisions on the devolution of authority for corporation tax
have been finalised, then the role of the local initiatives should
be even clearer.
18. Devolution of authority to determine the basic
rules for corporation tax, as well as the tax rates, would not,
as a single change, be sufficient to generate a Northern Ireland
economy that would become successful. The Northern Ireland Executive
would be the group with responsibility for the enterprise zone
policies.
19. The search for supportive mechanisms to enhance
the enterprise culture in Northern Ireland is an essential component
of economic progress in the years ahead. The failure of the recent
past has been a failure to modernise, adapt and plan for an economy
where achievements are enhanced.
20. Without becoming a more enterprising economy,
Northern Ireland might remain well down the European league table
of self-sustaining vigorous regions.
17 February 2011
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