Northern Ireland business news – July 2013

Up and down




Higher transport and clothing costs drove up the UK rate of inflation from 2.4% in April to 2.7% in May.


Mortgage lending for UK home purchases rose by 22% in the last year. Remortgage lending fell by 5.5%.


Northern Ireland house building completions increased by 64% in the last year and starts rose by 49%.


Retail sales volumes in the UK rose by 1.9% in May compared to a year before.  Non-store retail sales volumes rose by over 19% in the same period.




Northern Ireland house prices have flattened out, according to the latest RICS/Ulster Bank survey. Surveyors expect prices to remain steady over the summer.




Shopper numbers in Northern Ireland fell by 3.1% in May compared to last year, confirming a stronger contraction in our retail sector compared to Great Britain.


Unemployment in Northern Ireland as measured by the Labour Force Survey fell by 0.6% in the last quarter, to 7.8% – though up by 0.7% over the last year.  The claimant count also fell.


Invest NI retains grant aid capacity


Invest NI will retain its capacity to provide grant aid to attract inward investment, under the economic pact announced jointly by the UK and Northern Ireland governments. 


It was widely expected that Northern Ireland would next year lose its Assisted Area Status, which recognises its economic disadvantage.  Under European Union state aid law, this would have forced Invest NI to end its provision of Selective Financial Assistance.


The ability to offer Selective Financial Assistance is central to the operations of Invest NI.  In the 2012/13 financial year, Invest NI offered financial support of £130m.  According to Invest NI, grant aid has assisted it to create 3,000 jobs in the last three months.


Northern Ireland is also set to receive further support from EU programmes.  An additional £154m in EU structural funds has been approved for Northern Ireland over the next seven years and £42m of Peace IV funds will be made available. 


The Executive will also be permitted to borrow an additional £100m for capital projects that will create shared education campuses and housing projects.  The CBI estimates this will generate 1,400 construction jobs a year.  Of potentially even greater importance, Northern Ireland will have access to the UK Government’s £40bn Infrastructure Guarantee Scheme.  This could enable a number of major projects here to go ahead.


Ministers agreed that enterprise zones can be established in Northern Ireland’s most deprived areas, which would lead to tax breaks on some types of investment.  A new integrated visa system will be introduced to enable tourists in the Republic to use their visa to also visit Northern Ireland.


The pact confirms that ministers in the two administrations have accepted that the Government is on course to comply with its agreement to provide £1.8bn in funding to improve Northern Ireland infrastructure.  There had been disagreements between the UK Government and, in particular, Sinn Fein on whether the commitments entered into by the previous government had been met.


Nigel Smyth, the CBI’s Northern Ireland director, said: “This package of measures will clearly help improve the economic environment and encourage trade and investment, which will be the key drivers of the economy in the future.”


Inward investment up


Northern Ireland has benefited from a series of major job announcements from inward investors in recent weeks.  The trend looks set to continue, with a G8 investment conference to take place here in October.


Some 416 jobs are being created in Larne as a result of a major investment by Terumo BCT, which manufactures medical devices.  The parent group is based in Japan.  The investment has been supported by a £2m grant from Invest NI.  A further £500,000 from Invest NI and the EU’s Regional Development Fund leveraged in an additional £2m from Terumo BCT for a research facility. 


A further 229 jobs are being created in Craigavon, through a £13.7m investment by Almac Pharma Services, backed by £2m in support from Invest NI.  The investment will lead to a new pharmaceutical development and analysis facility, as well as an expansion of an existing production line. 


Invest NI says it has been particularly effective in supporting job creation in the North West.  It claims it supported nearly 700 new jobs and £54m in investment in the 2012/13 year in the combined Derry, Strabane, Limavady and Coleraine areas.  These include 315 jobs from foreign direct investment and 105 jobs from new business start-ups.


However, ministerial announcements of jobs in the four council areas in that period claimed less than 300 new jobs had been created.  A spokeswoman for Invest NI responded: “Not all of these projects have been publically announced so it would not be possible to reconcile the figures using [announcements in] press releases.”


Green investments on way


The Government backed funding vehicle for stimulating energy efficient investment is looking at several projects in Northern Ireland.  The Green Investment Bank began operations at the end of last year to promote a low carbon economy in the UK and claims to be the first state-backed financial institution of its kind anywhere in the world. 


It has £3bn of funds available to invest and seeks to generate a financial return as well as environmental benefits.  A £635m commitment from the bank to 11 projects in Great Britain has levered in an additional £1.7bn of private funds.  One of the most high profile schemes involves the Drax power station in Yorkshire – a target of climate change protesters against its high carbon emissions – to convert it from burning coal to biomass generation.  The power station would have closed without the new investment.


The Green Investment Bank is actively engaged with several proposed schemes in Northern Ireland.  It has four priority sectors: offshore wind farms; waste to recycling projects; waste to energy schemes; and energy efficiency improvements for large scale, non domestic, energy consumers. 


“We have got something in all of those sectors in Northern Ireland,” said a spokesman for the Green Investment Bank.  However, these projects remain at discussion stage and some may not be approved. 


Planning flexibility for rural areas


Significant changes to planning policy for tourism facilities have been introduced by environment minister Alex Attwood.  Under the changes, it will be easier to gain approval for major tourism developments in rural areas.


Applicants no longer need to demonstrate a ‘need’ for new facilities, such as a hotel or guest house.  Caravan parks will no longer be restricted to areas where these have already been earmarked in development plans.  Holiday parks will similarly be removed from these restrictions, but will be subject to a new requirement for developments to integrate into surrounding countryside and prove that they are of a high quality, in terms of layout and design.


The minister said that the changes will make is easier and quicker to bring forward planning applications and make them more likely to succeed.  The initiative supports the Executive’s ambition to double the size of the tourism industry in Northern Ireland.


Social development minister Nelson McCausland has brought forward legislation also intended to make Northern Ireland more hospitable to tourists by making it easier for cafes to have tables and chairs on pavements adjoining their premises.  It is hoped that this will extend the ‘pavement cafe’ culture.  Councils will be permitted to charge a “reasonable” fee for issuing licences for street cafes.


The minister also launched a consultation on the introduction of Business Improvement Districts, legislation for which has now been enacted.  BIDs provide a mechanism for improving traditional retail areas in cities, towns and villages, but, where these go ahead, retailers will make an additional financial contribution towards their operating costs.


Parents to gain more rights at work


Working parents may have enhanced entitlements to paid leave to fulfil childcare responsibilities, under proposals released for consultation by the Department for Employment and Learning.  The proposals are similar to measures being enacted in Great Britain.  Employment law is a devolved responsibility of the Northern Ireland Assembly.


Both parents would be entitled to parental leave in certain circumstances, under the proposals.  New adopters would be given similar rights to paid leave to those of natural mothers, while natural and adopted fathers will be entitled to some rights to leave of absence.


It is also proposed to extend the right to request flexible working to all employees.  The existing statutory process for dealing with these requests would be replaced by encouragement to adopt approaches based on a Code of Practice. It is intended that this will support more flexible working practices, not just for parents and carers.  This flexibility could improve the operation of the labour market, hopes DEL.


Employment and learning minister Dr Stephen Farry said: These proposals have clear potential to benefit working families, and indeed employees generally, whilst helping employers embed more flexible employment practices that are well suited to the needs of today’s changing economy.

“A Bill is currently progressing through Parliament that will introduce these rights in Great Britain. It is clear to me that there is a desire for a frank and open debate on working parents’ rights in Northern Ireland which takes account of these developments. I would welcome the views of stakeholders in order to inform my decisions on whether to follow the UK proposals or to take a different approach.”


Flag protests hit hotels


There has been a big drop in hotel occupancy levels in the early part of this year, apparently as a result of the flag protests.


Overall, there was a 4% reduction in hotel rooms occupied in the first quarter of this year, compared to 2012.  But this masked a massive 15% reduction in occupancy rates in Fermanagh and the Lakelands and a 6% fall in Belfast and Castlereagh.  There were also painful 4% reductions in occupancy levels in both the Antrim and Ballymena sub regions.


Two sub-regions showed growth in occupancy rates.  The Armagh/Newry/Ards area benefited from a 4% rise in occupancy levels in the year.  However, it was Londonderry that showed the biggest growth in demand for accommodation on the back of its position as UK City of Culture.  Room occupancy rates in hotels rose by 8% in the year and bedspace occupancy rose by 6%. 


The figures showed that hotels at both the cheaper and most expensive ends of the market suffered the biggest losses of trade.  There was a fall of 8% in room occupancy at hotels priced at £40 to £50 a night, with a 4% fall in room occupancy in hotels where rooms cost more than £60 a night.  Hotels with rooms priced between those levels saw a rise in room occupancy of 5%.    Occupancy rates were highest in four and five star hotels.


Bank switching made easier


Small firms and individuals have been promised a simpler and more reliable system for switching bank current accounts.  Details of the new Current Account Switch Service were released at an event at Stormont.


Gary Hocking, chief operating officer of the Payments Council – the body responsible for the UK’s payments system – said that too often bank customers were dissuaded by inertia from changing banks, even when they were unhappy.  Research had shown, he said, that there were four factors working against banking competition. 


Customers regarded changing accounts to be “too much hassle”, they feared the process would go wrong, banks were not trusted to properly manage the transfer and customers were unsure how to change accounts.  The new switch service addresses all these points, provides a guarantee the process will operate efficiently and will ultimately, if it achieves its objective, make banking a more competitive market.


The switch service campaign emerged from recommendations from the Vickers Commission review of the banking sector, which concluded that there was too little competition between banks.  Consumers of telecoms and utilities are much more likely to switch providers than are bank customers.


Banks have agreed that the switch service will operate free of charge, with a switch date of the customer’s own choosing, with the new provider taking responsibility for the efficient transfer of all existing payment instructions.  The new bank will guarantee for a 13 month period that the process is problem free and will refund any charges arising out of the transfer.


Antoinette McKeown, chief executive of the Consumer Council, said that she hoped the new system would encourage banks to compete more effectively.  “Banks appear to offer the same thing and don’t seem to offer different things,” she said.  “So consumers don’t see the benefit of switching.”


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