Business Month – December 2011
Up and down
Average weekly earnings in Northern Ireland rose 1.5% in the last year. Incomes are 20% below the UK average, but the trend is contrary to the UK as a whole – where earnings remained stable.
VAT in Ireland is to rise from 21% to 23% in this month’s Budget in the Republic. The rise is expected to increase retail demand in the North from cross-border shoppers.
Research and development investment in Northern Ireland increased 8% last year, to £483m.
The FTSE 100 lost 10% of its value in two weeks in November, but remained above its low in early October.
Retail property vacancies in Northern Ireland fell in the last quarter from over 17% to 13% – but Northern Ireland remains the UK region with the highest proportion of vacancies.
Consumer confidence has fallen for the fifth consecutive month and is now at a record low, according to the Nationwide’s Consumer Confidence Index.
House prices in Northern Ireland are still falling, according to the latest survey by RICS of its members. Some 30% report lower prices, while 69% said they were unchanged. But there were signs of increased sales.
New homes’ prices are also falling: in the last quarter the average price for a new home was £144,600, some £20,600 below the figure in the same period last year.
PfG seeks 25,000 new jobs
Over 25,000 new jobs will be created in Northern Ireland, if plans in the Programme for Government are successful. The Programme also seeks to attract £300m from Foreign Direct Investment, increase the value of manufacturing exports by 15%, stimulate £300m in indigenous research and development and increase visitor numbers. The Executive intends that by 2020, there will be 4.5 million visitors a year to Northern Ireland, supporting over 50,000 jobs.
For the first time, the Executive also made a clear pledge in the Programme to seek the devolution of Corporation Tax rates and to cut these to a level that is competitive with the Irish Republic.
However, enterprise minister Arlene Foster said that the eurozone crisis meant that implementing the Programme’s economic strategy was going to be difficult. “With that in mind, our overarching goal remains the pressing need to strengthen our competitiveness through a focus on export-led growth,” she explained. “To achieve this we will continue to prioritise the need to deepen and diversify our export base in order to increase employment and wealth across Northern Ireland,” she said.
“There are certain sectors and markets where we believe we have the greatest potential to succeed. At the same time, we recognise the need to be responsive to new national and international market opportunities.”
She added: “Rebalancing and rebuilding the economy are the twin goals we have identified in order to become more competitive and we have outlined a range of actions and investments to achieve this. We have also included targets to monitor our performance.
“This is an ambitious strategy and one that requires a partnership approach, from the Executive and public sector, as well as companies and the workforce within the private, community and voluntary sectors. I would encourage all stakeholders to take the time to carefully consider and respond to this document and play their part in helping us deliver the right economic strategy for Northern Ireland.”
Weak prospects for NI economy
Northern Ireland is predicted to grow its economy by just 0.8% next year and 1.1% the year after, according to the downgraded outlook published in Ernst & Young’s Economic Eye. It forecasts further job losses in the public sector and in manufacturing in the coming months, as economic activity constricts because of the global and eurozone crises.
While the Republic did well to shows signs of recovery earlier this year, E&Y expects that it will return to recession in the latter half of this year. Domestic demand is predicted to decline further in the Republic next year.
E&Y welcomed the Programme for Government, but said it could be 2021 before the Northern Ireland economy recovers to generate a net additional 25,000 jobs – the number of jobs the Programme aims to generate by 2015.
Neil Gibson, economic advisor to E&Y, said: “The PFG is an ambitious policy document which strikes the right tone of local responsibility for growth whilst recognising the necessity to expand the region’s export base. The Economic Eye forecast suggests that meeting the targets set out will be very challenging indeed, particularly those relating to job creation.”
E&Y expects unemployment here to rise to 7.8% next year and to 8.3% in 2013, as the impact of public sector cuts are felt. It believes there is little prospect of Northern Ireland generating additional employment through exports and suggests that employment recovery will be gradual, with unemployment still at 7.1% by the end of the decade.
The official unemployment figures may be boosted, adds E&Y, through welfare reform moving people who are currently economically inactive onto the unemployment figures.
Executive urged to rescue retail sector
Northern Ireland’s large retailers have urged the Executive to take decisive action to support the troubled sector. The Northern Ireland Retail Consortium has delivered a five point plan to the Assembly’s finance committee.
The NIRC is urging the Executive to abandon the proposed Large Retailer Levy and fund the extension of the Small Business Rates Relief Scheme by other means. Other measures proposed include a wider rates reduction scheme – lifting the rates burden on all commercial and domestic properties in an attempt to lower costs and boost retail demand. The Executive is also being asked to move urgently to overhaul the planning system, to commit to a programme of workforce skill development and to introduce Business Improvement Districts on an accelerated basis.
NIRC Director, Jane Bevis: “The Executive is right to be looking to help small businesses through rate relief, providing it is fairly funded. That means all sectors which stand to benefit should contribute. There also needs to be a focus on collecting bad debt and reducing the cost of local government in Northern Ireland with the ultimate aim of lowering rates for all, households and businesses alike.
“Retailers are at the heart of our towns and cities but many need a shot in the arm. Reforming the planning system and prioritising town centres, along with urgently legislating to create Business Improvement Districts, would give a much needed boost to regeneration efforts. Finally, retailers want to see their commitment to staff training matched by national initiatives to improve the skills of the Northern Ireland workforce.”
Figures produced by NIRC suggest that retailing footfall in Northern Ireland has fallen by 5.5% in the last year – the third worst regional performance in the UK.
Rates burden ‘higher out of town’
Retailers in out of town locations often pay higher rates burdens than do their competitors in town and city centres in Northern Ireland, according to a leading firm of surveyors. The disclosure challenges the assumptions made by some campaigners seeking protection of traditional retailing areas.
“Large out of town retailers are paying higher rates per square foot than large retailers in town, but it depends on the strength of the out of town location – for example, retailers at Sprucefield are paying far more than those in Lisburn City Centre,” said Nicholas Rose of RHM Commercial. He added that retailers at the Bloomfield and Springhill shopping centres also pay higher rates than those in Bangor town centre.
Rose said that the debate over retail rates had been misled by the arguments put forward by some, who have claimed that inner city retailers are effectively subsidising out of town centres. “The problem is that people do not compare like with like when they are making these bold assertions,” he explained. “Typically, they compare small shops with large out of town foodstores, which is comparing apples and oranges.”
The view that out of town retailers are paying more in rates than comparable retailers in urban centres was confirmed by a person closely involved in discussions on the possible imposition of a large retailers’ levy, who spoke anonymously.
However, Glyn Roberts, chief executive of the Northern Ireland Independent Retail Trade Association, said that it was “absolutely not true” that out of town retailers pay more in business rates. “They are actually paying less per square foot than town centre retailers,” he said. “We don’t believe the rates bill they pay fully reflects the fact that they have free car parking. We believe that car parking should be a factor [in the rates bill].”
A spokeswoman for the Department of Finance and Personnel attempted to clarify the situation. “‘For out of town shopping centres that have free car parking, the rateable value of individual shops takes into account the advantages of this free car parking – although it is not accurate to say that business rates are levied on these car parks, per se,’ she explained.
Department ‘prepared for Southern Cross failure’
The Department of Health, Social Services and Public Safety was engaged in a series of meetings with the failed care homes provider Southern Cross prior to the transfer of operations of the homes to other businesses. The disclosure was made to Business Month in response to a Freedom of Information Act request.
Contingency meetings were convened by the Health and Social Care Board, at which both Southern Cross and DHSSPS were present, dating back to June this year. In the initial meeting, the Southern Cross representative suggested that it was “unlikely” that any landlord would take legal action against the company for non-payment of rent, “the only scenario that would force Southern Cross to go into administration”.
Yet Southern Cross – the largest care homes operator in the UK – is to cease trading before Christmas. It has now transferred 743 homes across the UK to other operators, leaving just five operational homes and four non-operational homes to be transferred.
In the meetings, Southern Cross warned government officials that “fees in Northern Ireland were less than the total cost of providing care”. It was also clear from the meetings’ minutes – although detail on individual homes was redacted – that at least one of the 25 Southern Cross homes in Northern Ireland required significant investment.
As the summer passed, the financial crisis at Southern Cross intensified because of the company’s commitment to pay above inflation rental increases to homes’ landlords at a time when occupancy rates were falling.
Officials responded by holding weekly teleconferences to keep abreast of the situation and to plan for the transfer of Southern Cross homes to other operators. The conversations involved the other devolved governments in Scotland and Wales, the Department of Health and the Association of Directors of Adult Social Services.
Minutes of the meeting make clear that health minister Edwin Poots was aware of the actions taken. The report was told “the minister appeared content with the current approach i.e. it was the responsibility of the Southern Cross Company to deal with its own financial affairs and that HSC only intervene (press statement) when necessary”.
Consumers complain about used cars
More than 70% of complaints to the Consumerline trading standards help line in the first 10 months of this year were about the sale of used cars. Most of these 1,000 calls related to faults that were revealed after cars had been purchased.
Other leading causes of complaints – over 13% of calls – were related to misleading claims by traders, or the failure of sellers to provide full information. A further 7% of complaints were about substandard service.
Stephen Thompson, Consumerline manager, said: “We continue to receive a high number of complaints which are often due to some traders refusing to deal with legitimate complaints or provide appropriate compensation. We want to help people understand their rights when buying a used car from a dealer and we are working with the industry and local authority trading standards to get this message across. Dealers who fail to treat customers fairly or sell cars that are defective could face enforcement action.”
Ennis is lead Invest NI
Mark Ennis, executive chairman of SSE Ireland, is to become Invest NI’s new chairman from January. SSE Ireland is the Irish division of the SSE group and is one of the largest energy businesses on the island.
Enterprise Minister Arlene Foster said: “The position of chair of Invest Northern Ireland is a challenging job and it is essential that in times of economic difficulties, we have strong and effective leaders who are equipped with all the skills and knowledge needed to deliver change.
“Mark….. has gained extensive business development experience across large and medium-sized businesses. I am confident that his experience and drive will prove vital as we tackle the challenge of rebuilding and rebalancing the Northern Ireland economy.”
Foster thanked outgoing chairman Stephen Kingon for his work. “Stephen has made a significant contribution to the success of Invest NI during a difficult economic period,” she said. “Throughout the last five years, he has consistently shown strong leadership in response to the economic downturn. I have also welcomed the strong lead he has given to implementing the changes which I have sought following the Independent Review of Economic Policy.”