Farewell Alistair Hamilton

Posted on March 18, 2019 · Posted in The Detail

Alistair Hamilton caught people off guard when, after ten years in the role, he resigned as chief executive of Invest Northern Ireland.  Despite his previous position as a DUP special advisor, he leaves with a reputation for avoiding sectarian bias.

 

Having said that, businesses in the north west remain strongly critical of Invest NI’s performance in the sub-region.  Unemployment and economic inactivity are at much higher levels there than in the east.  Explanations for that lie more with skills deficiencies and weak road and electricity infrastructure – and poor telecommunications connectivity in rural areas – than in factors under Invest NI’s control.

 

Responsibility for resolving those challenges lie with government – except, of course, we don’t have one.  And there might lie a partial explanation for Hamilton going now.  Things are only likely to get worse from here on for Invest NI and for investment coming into Northern Ireland.  The ongoing stalemate at Stormont plus Brexit creates a difficult time for inward, and indigenous, investment.

 

Not that Hamilton is giving much away.  “I intend to explore new opportunities and further expand my other areas of interest,” he explained in his resignation statement.  “There is never a good time to leave such a position, but it has been my intention to step down after ten years in the post, which would be during 2019.”  So we have to guess what his reasons are.

 

Invest NI’s critics – and there are many, especially in the north west – complain that its performance is poor compared to that of the IDA in the south.  But its defenders point to the advantages held by IDA.  Firstly there is the lower corporation tax rate – 12.5% in the Republic, against 19% (18% next year) in the UK.  An agreed cut to bring the tax rate down to 12.5% in NI is on indefinite hold because of the lack of government here.

 

Then there is the question of skills.  The Republic has shown a much stronger commitment to creating a fully skilled labour market, with a much larger higher education sector and more focus on vocational skills.  Too many of Northern Ireland’s best students go to Britain or the Republic to study and too few of them return.  As John FitzGerald recently observed, NI has a serious brain drain crisis.

 

A senior politician in the Republic recently remarked to me that the IDA benefits from having a very influential role in policy making.  When politicians tell them to increase investment in Cork or Galway, IDA responds by saying what changes to policy and investment are required to enable this to happen.  The perception is that Invest NI does not hold the same sway, holding back its capacity to direct investment to Derry or Strabane, for example.  (Though it is willing to provide stronger financial incentives to encourage investment to weaker areas.)

 

All these challenges for Invest NI get much worse because of Brexit, especially if it is seeking to promote investment in border areas.  A newly published government report warns that Northern Ireland will be the second worst affected UK region from a no deal Brexit, leading to a regional economy possibly 9.1% smaller than it would have been without Brexit.  Only the north east of England would be worse hit, because of that region’s heavy dependence on exports.

 

Northern Ireland has already experienced one significant collapse blamed on Brexit.  Flybmi, which carried out daily flights from the City of Derry Airport to London Stansted, claimed that its collapse was the result of its inability to win future charter contracts with EU airlines, because they were uncertain of Flybmi’s future access to EU airspace, as well as higher fuel costs following the Brexit-related devaluation of sterling and the UK’s partial exclusion from the EU’s Emissions Trading Scheme, meaning that Flybmi would have had to buy carbon credits.  Observers, though, point out that Flybmi was already reporting losses.  Its sister airline, Loganair, has taken over the route.

 

We do know that investment into NI and the rest of the UK has reduced because of Brexit.  As we have previously reported, 61% of NI businesses expect to be damaged by leaving the EU, while a study by accountancy firm EY concluded there had been a 54% reduction in new foreign direct investment coming into NI in 2017.

 

Despite these factors, we cannot be confident in linking Alistair Hamilton’s departure from Invest NI to the Brexit impact.  What we can say is that it would be no surprise if it was a factor.  As indeed it is to much else that is going wrong in the UK’s economy at present.