FSB Northern Ireland s response to Economy 2030: a consultation on an Industrial Strategy for Northern Ireland

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1 Strategic Policy Division Department for the Economy Room 124 Netherleigh Massey Avenue Belfast BT4 2JP Dear Strategic Policy Division 25 th April 2017 FSB Northern Ireland s response to Economy 2030: a consultation on an Industrial Strategy for Northern Ireland The Federation of Small Businesses (FSB) is the UK s largest business organisation with around 170,000 members from across all sectors of industry, including 6,000 in Northern Ireland. We promote and protect the interests of smaller businesses and, to that end, work with decisionmakers to create a better business environment. We welcome the development of an economic strategy and the opportunity to comment on this draft. We believe such a strategy is essential for taking the Northern Ireland economy forward over the next decade and beyond. However, an economic strategy, with its associated Vision, Priorities, and Pillars, will only be effective in the context of an agreed Budget, with a Northern Ireland Assembly, Executive and Ministers to deliver it. Our 6000 members have told us very clearly that the most pressing concerns of the small business sector for the future are those of political and economic uncertainty 1, which leads to hesitation around growth and expansion. As the UK re-negotiates its relationship with Europe, a united voice from Northern Ireland politicians is urgently needed to protect our unique interests. We are of the view that the draft Northern Ireland Industrial Strategy will need to be reviewed and revised to take account of the UK s negotiations and exit from the European Union, and in light of the UK s Industrial Strategy 2030, which includes proposals for all parts of the UK. Northern Ireland needs to consider these proposals and determine how they can be 1 FSB NI, 2015, The Contribution of Small Businesses to Northern Ireland 1

2 incorporated or addressed at a local level. Having said that, we offer some comments on several aspects of this draft Economy 2030: Industrial Strategy for Northern Ireland. FSB NI accepts the Strategy s draft Vision, To be a globally competitive economy that works for everyone and the five identified Pillars for Growth. We welcome the international research into successful small economies, which helps to look at Northern Ireland in a global context. We agree that it will be important to regularly monitor Northern Ireland s performance against other small advanced economies. However, the Ambition Statements under each Pillar are somewhat generic and most of the actions ( what are we going to do? ) included under each Pillar require much more detail. A number of new Strategies (such as a Business Growth initiative ) are proposed but it is difficult to comment on these until they are drafted and greater detail is available. Naturally, we would welcome the opportunity to input and shape these, and look forward to meaningful engagement from the early stages of their development. Other strategies and actions included have already been agreed in the course of the last Northern Ireland Assembly term: some are live ( Going for Growth ) and others are yet to be implemented or fully implemented (Securing our Success: NI Apprenticeship Strategy; new business start-up programme, etc), requiring budgets to be agreed. All have involved extensive consultation and considerable input from stakeholders such as ourselves and other business community representatives and organisations, and it is incumbent upon those elected to govern Northern Ireland to deliver the strategies and actions to which they have committed. We are pleased to note that many of FSB s comments and proposals made in response to the draft Programme for Government and Call for Evidence on a draft Economic Strategy have been taken into account and adopted, including monitoring business demography as a key measurement of the health of an economy. Sectoral Focus We agree that there is a need to support both strong and emerging sectors and high-growth and exporting companies, but we caution that it is also necessary to ensure support for all businesses in all sectors and at all stages of growth in Northern Ireland. The majority of businesses service local markets and communities, and focusing only on the performance of certain types of business or sectors underestimates a huge part of our potential. Supporting small businesses in identified 2

3 sectors must not come at the expense of the majority of private sector firms who provide local goods and services. There is a need to link ambitions and actions in relation to innovation, entrepreneurship and enterprise. FSB recognises that companies that innovate and collaborate are more productive, more inclined to export, and employ more highly qualified people than others, and that innovation is critical for the economic well-being of the NI economy. FSB s view is that the best way to encourage innovation is to remove barriers to small businesses and increase access to business support. There is good evidence to suggest a connection between higher rates of entrepreneurship and overall economic prosperity, particularly in innovation-driven economies like Northern Ireland. 2 Enterprise is an important driver for competitiveness and job creation. 3 To rebalance the NI economy and achieve a sustainable and growing private sector, attention must be given to increasing the number of small firms. Further, if innovations developed here are also to be progressed and commercialised here, rather than being bought by foreign investors for exploitation elsewhere, this will require investment in the development of more entrepreneurial people with the necessary traits and competencies to launch new ventures and develop existing ones. Northern Ireland has considerable potential for more business venturing and ambition for selfemployment opportunities. Women, minorities and graduates are just some of the untapped potential which has yet to be fully leveraged. Numerous initiatives have started and stopped in the past, but a much greater commitment to the continuity of these is needed if change is to be effected. Enterprise parks and digital hubs; Tech hubs We welcome the proposal to create six new SME support centres enterprise parks - and six new digital hubs, and to develop new tech and science parks and campuses. However, it is not clear whether these are to be separate initiatives or if the digital hubs are to be incorporated in the enterprise parks and / or science parks. Much more information is required in relation to eligibility, application, terms and conditions etc. We also express caution in relation to restricting business support to particular or defined geographical areas, or indeed, sectors, as this risks treating some businesses more or less favourably than others and reduces the support available. We would draw your attention to our 2 The Global Entrepreneurship Monitor (GEM), GEM: Northern Ireland Report 2013, Mark Hart, Karen Bonner and Jonathan Levie 3 Mark Hart and Maureen O Reilly, ERINI, Global Entrepreneurship Monitor 2005 (August 2006) 3

4 recommendations in our recent paper on Business Support, especially on the creation of a Small Business Advocate and a network of Small Business Advice Centres 4. FSB also strongly recommends the development of an Enterprise and Entrepreneurship Strategy for Northern Ireland. Corporation tax We welcome the commitment to lower corporation tax and promote Northern Ireland internationally as a top destination for inward investment... ; FSB research 5 indicates that there is strong support for a reduction in Corporation Tax amongst small businesses, and that it would significantly contribute to generating confidence amongst small businesses, as well as attracting and encouraging Foreign Direct Investment, increase the level of profitable companies in NI, stimulate innovation and investment in research and development, and boost employment in Northern Ireland. It is essential that the Assembly delivers political stability and demonstrates budgetary responsibility in order to meet the conditions required to devolve the relevant powers to set a new lower level of Corporation Tax, with actions to achieve it. Enhancing Education, Skills and Employability FSB continues to stress the need to match the skills profile of the population with the skills needs of the economy. We welcome the commitment in the Industrial Strategy to this, and to providing greater support for businesses who upskill their workforce. This is of particular importance in the context of a lower rate of Corporation Tax and an accompanying increase in inward investment which will require a highly skilled workforce. The proposed action to deliver new models of youth training and apprenticeships which facilitate progression up the skills ladder across a wide range of occupational areas, while welcome, is a prime example of the inclusion of a commitment which has already been made and agreed. Rather than this repetition of current policy, we would like to have seen a specific commitment to the provision of adequate resourcing to encourage small employers to participate in Securing our Success: NI Apprenticeship Strategy and Generating our Success: NI Strategy for Youth Training. 4 FSB NI, Business Support in Northern Ireland, FSB NI, The Contribution of Small Businesses to Northern Ireland,

5 Regulatory Reform We welcome the reiterated commitment to comprehensive regulatory reform and would press for the implementation and delivery of the NI Executive s existing and agreed Better Regulation: An Action Plan for Reform 6, rather than the development of a new Open for Business Strategy. Given that the cost of regulation on business in Northern Ireland is not measured, though the collective cost is estimated to be more than Corporation Tax and Value Added Tax combined, we also recommend that consideration is given to FSB s proposals for the introduction of a regulatory budget 7. Connectivity: Building the Best Economic Infrastructure To achieve a sustainable, inclusive, globally competitive economy that works for everyone, the NI Industrial Strategy needs to ensure that all parts of the economy are effectively connected to each other and to all key markets beyond. We support targeting Belfast and Derry/Londonderry as regional drivers of growth, and we would support the conferring of a city deal on them to help maximise their potential. However, we urge the Executive to ensure that infrastructure needs across Northern Ireland are addressed. The cities of Northern Ireland should be much better connected to each other, as well as to the rest of the UK, and to Dublin and the Republic of Ireland, which is an essential market for the UK. Successive administrations have been unable to deliver on important infrastructure improvements such as the A5, the A6 and the York Street Interchange, but given their importance to helping Northern Ireland to achieve its potential and increase its productivity and prosperity, we would urge the Department for the Economy to support and encourage the Department for Infrastructure to progress indeed to complete - these projects as soon as possible. We would also advocate expediting, in conjunction with the Irish Government, a regular high speed rail service that can transport passengers between Belfast and Dublin Airport and City in under an hour. We welcome the commitment to enhance the security, sustainability and cost-efficiency of our energy supply, as well as the creation of a new Energy Strategy. Businesses in Northern Ireland pay 10% more for electricity than the rest of Europe. While we respect the need to attend to 6 March FSB, Regulatory Reform in Northern Ireland,

6 the sustainability and security of our energy system, we believe it is important to monitor these costs and to evaluate the competitive impact of Northern Ireland energy costs on investment and growth. FSB recommends that consideration is also given to the regional balance of energy infrastructure within Northern Ireland. There is a current under investment in the transmission system in the western and northern parts of Northern Ireland, which places a barrier to new economic developments in the west and north of Northern Ireland. Addressing this imbalance is essential to achieving regionally balanced growth. Universal broadband coverage is essential to delivering a regionally balanced economy, and there are still large areas of Northern Ireland, particularly in the west, where superfast broadband is almost nonexistent. FSB welcomes the renewed commitment to make Northern Ireland Europe s best connected region for broadband and digital infrastructure by FSB looks forward to continuing to working in partnership with the Executive, the Assembly and the Department for the Economy to deliver the Economic Strategy, and as a key stakeholder in the development and implementation of action plans. Please do not hesitate to contact us if you have any queries in the meantime. Kind regards Wilfred Mitchell OBE Northern Ireland Policy Chairman 6