Coleraine becomes NI’s Data Centre capital

Posted on September 18, 2014 · Posted in Business Month

There was little on offer in the Budget specifically targeted at Northern Ireland. But Coleraine benefited from one announcement that is expected to lead to new jobs and substantial investment. The north coast town is to become Northern Ireland’s data centre capital.

 

A small enterprise zone is to be created on the edge of the town, forming the basis for a high technology business park within the University of Ulster’s campus. Coleraine’s will be the first of the new generation of enterprise zones in Northern Ireland, offering substantial financial support for capital intensive investments.

 

However, the inducements available for enterprise zones here is different from those in England. For businesses locating in English enterprise zones, discounts can be provided on their business rates, improved access to higher quality telecommunications infrastructure and fast planning decisions.  In some instances, enhanced capital allowances are available, though European Union state aid rules prevent these being available alongside business rate discounts.

 

Of these incentives, three are irrelevant to Northern Ireland. We already have a telecommunications infrastructure that is better than most of England’s and business rate setting policy is devolved to the Assembly.  A fast track planning decision was achieved for the Coleraine development, without needing enterprise zone status to achieve it.  The decision was made in just nine weeks, but before enterprise zone status was granted.

 

It is the enhanced capital allowances that were the vital ingredient for Coleraine, attracting a £20m investment from specialist investor 5NINES into a new data centre. This has provided a more effective substitute for the job based grant assistance that in other circumstances would have been provided by Invest NI, but were not attractive in this instance because only 15 jobs are expected to be created in the near term.

 

A data centre is an essential part of the modern digital infrastructure, particularly as the use of cloud computing accelerates. Cloud technology enables businesses and individuals to store data remotely, rather than overloading their own systems and devices.  Demand for cloud storage is escalating with the massive increase in use of and storage of data.  Data centres are heavy users of energy, so access to reliable electricity sources is necessary, as well as very high quality telecoms connectivity.

 

Finance minister Simon Hamilton explained the importance of the capital allowances in attracting 5NINES. “Designating this Enterprise Zone in Northern Ireland is another tool to lever economic growth,” he said. “It will enable the 5NINES project to benefit from the additional incentive of enhanced capital allowances, which allows them to claim 100% first year allowances for qualifying plant and machinery expenditure. This is particularly attractive to capital intensive investments such as this data centre.”

 

Officials say the approval of the Coleraine enterprise zone was not connected to the almost simultaneous announcement of around 300 job losses at the Driver and Vehicle Agency operation in the town. Negotiations with the Treasury have taken place over an extended period and the planning approval for the data centre was agreed in October, several months before the decision was taken regarding the DVA redundancies.

 

The University of Ulster failed to respond to a request to discuss the development on its land, or its involvement in the project. But minutes from a meeting of the University’s governing council shed some light.  The minutes record: “The Vice-Chancellor confirmed that there would be no cost to the University under the terms of the proposed contract with 5NINES. The agreement with 5NINES would hopefully act as a catalyst for further businesses to locate in the Business Park.”

 

There are two key advantages for 5NINES in locating at Coleraine. One is the enhanced capital allowances agreed with the Treasury, the second is its near location to the landing point for the Project Kelvin high speed broadband cabling with North America.

 

According to one senior person familiar with the deal, the recently deceased Eddie Haughey, Lord Ballyedmond, was actively involved in bringing the scheme to fruition. Lord Ballyedmond was a generous benefactor to the University of Ulster.

 

Sinclair Stockman is also rumoured to have been a central figure: he is a visiting professor at the University’s computing faculty and chairman of data centre development company, Data City Exchange. Both Stockman and Data City Exchange failed to respond to requests for comment, as did 5NINES.

 

However, Justin Gilbert, a partner in 5NINES – which is developing data centres globally – has previously spoken to the Belfast Telegraph. He said:  “Local people have been very, very supportive of what we are doing, particularly Coleraine Borough Council. We travelled all over Northern Ireland to find the right spot and clearly because of the landing station, Coleraine has a big benefit.”

 

He explained that data centres are not only central to the infrastructure for high technology sector expansion in Northern Ireland, but they can also indirectly generate substantial numbers of jobs. “We need data centres if we’re going to make a new digital industry in Northern Ireland,” he said. “We could generate over 16,000 jobs, but in order for that to happen someone has to build data centres, which are the foundation of any digital economy.”

 

The company is expected to follow-up the Coleraine data centre with similar projects elsewhere in Northern Ireland, including in Belfast. 5NINES is a substantial business, holding contracts with many heavy users of cloud storage systems and other data centre services, including the UK Government and leading outsource service provider Capita.

 

Enterprise Minister Arlene Foster stresses that the creation of the data centre at Coleraine is extremely important in terms of building a high technology infrastructure in Northern Ireland and in attracting related inward investment. She said: “Over many years the Executive has shown the priority that we attach to having a world class telecommunications infrastructure. This opportunity allows us to further exploit the extensive superfast fibre-optic broadband network available across Northern Ireland and the direct international connectivity that Project Kelvin provides to North America and continental Europe.

 

“Data centres are a strategically important piece of the telecommunications infrastructure and the Executive was keen to demonstrate its support for the proposal in an innovative way. Such investments can be crucial in the development of the ICT sector as a whole and will, without doubt, enhance the proposition Northern Ireland can offer to inward investors who are increasingly globally connected.”

 

In a written reply in the Assembly, the minister added: “Subject to timescales for establishing the zone, we will liaise with the University of Ulster and Coleraine Borough Council as appropriate to agree how the site will be marketed…. Invest NI’s overseas sales teams will promote the new data centre to relevant companies in international markets. This, along with the excellent telecoms and IT research base at UU Coleraine and the engineering talent available in the North West region, should help attract more FDI [foreign direct investment] and local companies to explore the location as a suitable place to establish and grow their operations from.”

 

If building telecommunications infrastructure is like a digital jigsaw, another piece is now being fitted into place. The whole of Northern Ireland should benefit, though Coleraine most of all.