Northern Ireland’s business news

Posted on November 7, 2013 · Posted in Business Month

Up and down

 

Northern Ireland’s employment rate rose by 0.1% to 66.7% in the quarter ending August. The UK rate rose by 0.3% to 71.7%.

 

UK retail sales rose by 2.2% in the year ending September.

 

Construction activity in Northern Ireland rose for the first time since 2007 according to the latest RICS survey.

 

Consumer confidence in Northern Ireland is continuing to rise, a Danske Bank survey has found.

 

The UK remortgage market has rebounded strongly – it was up in September by more than 10% on the previous month and by more than 20% on September last year.

 

Inflation as measured by the Consumer Price Index was unchanged in September at an annual rate of 2.7%.

 

News stories

£250m capital spending reallocations

 

Finance minister Simon Hamilton has reallocated £250m of public expenditure that cannot be spent as previously approved.  This includes £80m of potential revenue underspends in the current financial year and £115m of capital spending freed-up by the delays on the construction of the new A5 Londonderry to Dublin road, which is currently blocked for legal reasons.

 

A £65m scheme to improve the A26 Coleraine to Ballymena route, including the Frosses Road, has now been given the go-ahead.  Other schemes to be fast-tracked are the A31 Magherafelt by-pass and further work on the A8 Belfast to Larne corridor.  The Department of Health has received additional capital allocations to build a new £15.5m children’s hospital in Belfast, plus £5m for health estate improvement work.  In a further boost to the construction sector, education minister John O’Dowd separately gave approval to a £106m school estate improvement programme.

 

Hamilton approved funding for preparatory work for improvements to the A6, the Belfast to Derry road, at the Randalstown/Castledawson section.  But he said the A6 upgrade for this and other sections could not be approved while the A5 remained an Executive commitment, given the high cost of the two projects.  “Delivering both in parallel is unaffordable without there being a serious detrimental impact on all other departmental capital budgets,” said the minister.

 

Business leaders expressed disappointment at the lack of progress on the A6.  Philip Gilliland, President of the Londonderry Chamber of Commerce, said: “we are extremely unhappy and disappointed” at the decision.  The CBI called for the scheme to be made a major priority for Northern Ireland’s infrastructure.

 

Attention may now focus on whether there is a cheaper alternative option connecting Belfast and Derry.  Transport expert Wesley Johnston, who compiles the Northern Ireland Roads website, said that some proponents of the A5 upgrade had suggested this would also serve as an improved link between Derry and Belfast, via Ballygawley.  However, Johnston calculates this would add 32 miles onto the route and require 47 miles of road dualling.  Assuming an average 70 mph on the new A5 compared to 50 mph on the existing A6, it would not cut journey times.

 

Back in the 1960s, a motorway was planned for Belfast to Derry via Limavady, close to the existing A2.  Improving the A2 would provide an alternative route about 13 miles longer than the A6, but cut journey times by about 12 minutes.  It would also avoid cutting across the Glenshane Pass, which can be difficult for the Road Service to keep open during severe snow.

 

An A2 based route should also be cheaper to upgrade, as most of the route is already dualled, or scheduled for it.  Dualling the length of the A5 or A6 would each cost around £800m, says Johnston.

 

Dublin abolition of air travel tax ‘unhelpful to NI airports’

 

The abolition of the €3 Air Travel Tax on flights from the Irish Republic from April next year has been described by the CBI as “unhelpful” for Northern Ireland airports.  Air travel from Northern Ireland already has difficulty competing with flights originating in the South, with the UK Air Passenger Duty on short haul flights set at £13.

 

Air passenger duty in Northern Ireland was devolved to the Assembly by the UK Government last year and is set at zero.  Finance minister Simon Hamilton says that to also devolve and abolish short haul Air Passenger Duty to the Assembly would be unaffordable – he puts the cost at £60m to £90m a year.

 

“I believe that the reduction of APD is a matter for the whole of the UK and I am not therefore convinced that devolution is the answer,” he said.  The Executive is instead lobbying the UK Government for the abolition of Air Passenger Duty.

 

A study conducted by PwC concluded that Air Passenger Duty abolition would generate 60,000 jobs across the UK and boost Corporation Tax revenues by about £250m a year.  Ryanair responded to the announcement of the abolition of Ireland’s Air Travel Tax by proposing to fly an extra one million passengers out of the country next year.

 

Many flights leaving Northern Ireland are uncompetitive compared with flights from the Republic.  Random checks on single flights to New York from Belfast International with United found costs in excess of £1,000, compared to around €500 flying from Dublin with Aer Lingus.  Flybe abandoned its Manchester route from the City of Derry airport last year, yet flies from the small Donegal airport to Dublin and Glasgow, with onward destinations.

 

The Northern Ireland Consumer Council calculates that the UK’s Air Passenger Duty is the EU’s most expensive air passenger tax and is more than twice the cost of the next highest – Germany’s which is just over £6 a flight.

 

The CBI NI Chairman Ian Coulter described the decision by the Irish government as “undoubtedly unhelpful to our local airports”, but doubted if it would have “a significant impact” on them.

 

Mayors’ challenge

 

The mayors of Belfast and Derry have been invited to submit bids for a share of €9m to fund innovative and transformational projects for their cities.

 

Michael Bloomberg, New York’s mayor, launched the project saying: “The Mayors’ Challenge has been a big success here in the United States and now we’re bringing it across the Atlantic to find a whole new set of cutting-edge ideas.  On so many issues, cities are redefining the future, and the Mayors’ Challenge is intended to help accelerate that progress and spread it far and wide.”

 

The grand prize winner will be awarded €5m and another four cities will receive €1m each.  The criteria are bold ideas that are transferable to other cities.  EU cities with more than 100,000 residents may submit bids –so only Belfast and Derry in Northern Ireland are able to apply.  The scheme is backed by the network of major European cities, EUROCITIES, with support from LSE Cities, a research centre at the London School of Economics, and Nesta, the UK innovation foundation.

 

Belfast mayor Máirtín Ó Muilleoir told Business Month: “[I] am looking at it hard.”  He said he received the invitation to participate on his return from a trade mission to Silicon Valley.

 

Derry’s mayor, Martin Reilly, said he that the Challenge represented a “positive opportunity for the city”.  “The initiative focuses on innovation and would provide us with a platform to look at new ideas for the future benefit of the city,” he said. “I will be recommending that council participates in the programme and work should commence now on submitting an application.”

 

Mayors of participating cities need to indicate their interest by 11 November and submit bids by 31 January.  Twenty shortlisted will be invited to attend an ‘ideas camp’ in May to discuss proposals with and policy and programming experts.

 

Northern Ireland pays least tax

 

Northern Ireland pays the lowest income tax per capita of any of the four UK nations, according to analysis conducted by the Institute for Fiscal Studies.  Average tax take is £5,700 per person per year in Northern Ireland, compared to an average £7,300 per year in the UK as a whole.  Total tax take per person in both Northern Ireland and Wales is significantly below the UK average.

 

The IFS explained: “Wales and Northern Ireland have less income and wealth than the rest of the UK and correspondingly raise less revenue per person from all the main taxes on earnings, savings and profits: income tax, National Insurance contributions, corporation tax, capital gains tax, inheritance tax and stamp duties all yield at least 25% less revenue per person in both Wales and Northern Ireland than in the UK as a whole.”

 

However, residents of Northern Ireland pay only slightly less VAT than the UK average, because more of our basic spending is subject to VAT.  Northern Ireland’s high dependence on private road transport and home heating oil means that residents here spend £76 a year – 18% – more on fuel duty than the UK average.  There are also signs of a worryingly high cigarette addiction, with the population of Northern Ireland spending 79% more – £120 a year – than the UK average on tobacco duty.

 

Doubts over shale gas jobs

 

Shale gas exploration may only create around a third of the jobs that had been projected, according to analysis conducted by engineering consultants Amec for the Government’s energy department.  The Government had predicted that 74,000 jobs would be produced by large scale extraction of shale gas.  Amec also cast doubts on expectations that local people will benefit from job creation, pointing out that only 17% of people employed in a fracking operation in Lancashire lived nearby.

 

Jobs are likely to be short-term, lasting from four to nine years, says Amec.  This suggests that the number of jobs created and their duration is likely to be less beneficial than in the North Sea oil boom, against which shale gas extraction has been compared.  The shale gas industry does not expect any significant job creation in less than a decade.

 

There had been hopes that 3,000 direct and indirect jobs would be created if fracking for shale gas gains approval in Fermanagh.  The chances of the project being given the go-ahead may have increased with a statement from the National Trust, which owns land in Fermanagh, indicating it has an “open mind” on the industry.

 

Social enterprise ‘not a public sector substitute’

 

Social enterprises cannot be used as a substitute for the public sector in providing services for the vulnerable, Social Enterprise Northern Ireland’s conference has heard.  Seán Coughlan, chief executive of Social Entrepreneurs Ireland, told the delegates: “You cannot find revenue models to solve all social challenges.”

 

Speaking to Business Month, Coughlan explained: “There are certain social issues where the provision of products or services to address social issues cannot generate revenues.  In that context, you can easily imagine social enterprise models as not being appropriate.”

 

Examples where social enterprises are unlikely to generate revenues include mental health support services and women’s refuges.  “In those circumstances you need to look to more charitable or philanthropic models to address those challenges,” said Coughlan.

 

The keynote speaker at the conference was Liam Black, who has been a social enterprise champion for the UK government and founded several social enterprises.  Black is also the former chief executive of Jamie Oliver’s Fifteen social enterprise chain.  Black told the conference’s 175 delegates from across Ireland and the UK of his ‘A to Z’ of good practice in the sector.

 

“A is to avoid anxiety and Z is to get enough sleep,” Black said.  “Focus on customers, work hard to generate finance, get the culture of the company right.”  In fact, he added, many of the core ingredients of running a social enterprise effectively were the same as with any other form of business.

 

New Europa transport exchange

 

Outline plans have been revealed for a new public transport hub at Belfast’s Europa centre on Great Victoria Street. Regional development minister Danny Kennedy said: “With passenger journeys up by around 1.5 million on last year alone, the current Translink infrastructure is now operating close to capacity.  I am committed to supporting the growing number of passengers who choose to use public transport and I wish to improve infrastructure to meet future demands.

“We live in challenging economic times and public money must be used wisely. It is only right that we plan ahead and invest for the future. This exciting and ambitious project will provide a firm foundation for the development of public transport for generations to come.”

 

Translink intends to use the new Europa hub as the city’s main transport centre, with cross-border Enterprise trains running from the Europa instead of Belfast’s Central Station.

 

A source close to government said that private finance is being examined for the project, which could be structured as a Private Finance Initiative or Public Private Partnership.