Business Month – news – March 2014
Up and down
Up
For the eighth consecutive month, the majority of Northern Ireland surveyors have reported rising house prices.
UK construction output rose by 2% in December against the previous month. It is now 3.9% above the recessionary trough, but 12.2% below its pre-recessionary peak.
The number of homes in Northern Ireland increased by 3,800, 0.5%, in the year to March 2013: 81% of new homes building was undertaken in the private sector and 19% by housing associations.
There was an 8% rise in tourists to Northern Ireland in the year ending September 2013 compared to the previous year: tourism spend rose 10%.
Down
Footfall in Northern Ireland’s shops fell by 1.1% in January, compared to the same month last year. For the UK as a whole, footfall rose by 3.3% in a year, according to a survey by IPSOS.
There was a slight fall in repossessions last year. Some 3,694 repossessions were initiated last year, down from 3,732 in 2012. The figures have been broadly flat for five years.
Belfast’s digital revolution
Belfast is on the cusp of a digital revolution, according to Lord Mayor Máirtín Ó Muilleoir. The UK’s Department for Culture, Media and Sport has awarded the city £13.7m from its Urban Broadband Fund as part of the Government’s Super-Connected Cities initiative. The allocation has been topped-up by an additional £3m from Belfast City Council as part of its £150m Investment Programme, the objectives of which include making Belfast a digital sector leader by 2015.
Some £9m from the initiative will go towards a ‘Connection Vouchers’ scheme, under which small firms, social enterprises and charities can apply for up to £3,000 in grants towards the cost of installing high speed broadband connections. A pilot project has already successfully taken place in parts of the city.
Councillor Ó Muilleoir said: “The Super-Connected Belfast initiative will put Belfast on the map. It will provide the infrastructure to allow our indigenous businesses to reach their full potential from their Belfast base, while it will encourage major international companies already here to stay and encourage others to consider investing in the city.
“The Belfast Connection Vouchers Scheme is a super opportunity for our small and medium-sized businesses, charities and social enterprises to reap the rewards from having superfast broadband.
The benefits are enormous from increasing efficiency; saving time and resources; reducing the need for business travel; increasing productivity through faster processing times; and quicker communications with suppliers and customers.
“Increased productivity can free up time for local companies to explore new products and services and grow their businesses. High grade broadband is further more reliable with businesses benefiting from service level agreements from their suppliers ensuring they get the support they need.”
Electricity prices
The Northern Ireland Utility Regulator has confirmed that it is seeking to impose new price controls on the main electricity supply company, Power NI, part of the Viridian Group. Under the Utility Regulator’s proposals, Power Ni would be permitted to increase charges by less than the company has requested.
Power NI has been requested by the regulator to consent to the changes by 13 March. However, Power NI has previously challenged moves by the Utility Regulator to restrict its price increases, saying this would damage infrastructure investment.
However, Manufacturing NI says it is essential that action is taken to reduce the costs of electricity in Northern Ireland, which figures produced by the regulator show are the second highest in Europe. Only Italy has higher electricity costs – and the gap between Italy and Northern Ireland has narrowed recently to near parity. Manufacturing NI argues that prices in Northern Ireland are about 20% higher than those in the Republic.
Stephen Kelly, chief executive of Manufacturing NI, said: “it’s almost a year since the Utility Regulator began publishing comparative prices for the EU for non-domestic electricity consumers and in that time, rather than seeing our electricity prices becoming competitive, we find that we are quickly moving to be the most expensive electricity market in Europe. This is damaging economic recovery, impacting on investment and job retention and creation.
“The ETI [enterprise, trade and investment] Committee in Stormont have been investigating prices since last summer and we hope that their report and recommendations will address this unsustainable situation and send a strong signal that they do not expect the current upward trend on prices to continue. They, along with the [enterprise] minister and regulator need to take action now before we have the unenviable position as the most expensive electricity market in Europe.”
The Viridian Group did not respond to requests for comment.
NAMA to sell NI portfolio
Ireland’s National Asset Management Agency (NAMA) is set to sell its portfolio of property assets in Northern Ireland. It is reported that NAMA has received a bid for the assets from PIMCO, part of the giant Allianz insurance group, valuing the assets at €1bn, compared to their book value of €4bn.
The potential write-down reflects the scale of Northern Ireland’s property crash in the years since the boom. Many of the properties within the portfolio are particularly distressed as they include vacant land that had once been intended for commercial development, but for which there is now little or no development demand.
PIMCO has already bought other property portfolios from NAMA, including some prime real estate in Dublin.
Finance Minister Simon Hamilton welcomed signs of progress that could lead to the kick-starting of property development in Northern Ireland. He said: “The assets which are presently held by NAMA could undoubtedly be used to boost the Northern Ireland economy if they were managed in a way which unleashed their potential in the short term rather than waiting for them to realise their value in the longer term. We will continue to work with NAMA to seek to ensure that Northern Ireland’s interests are protected in all circumstances.”
A spokesman for NAMA said: “NAMA constantly reviews its portfolio to assess opportunities for maximising returns from loans or assets within the portfolio. In addition, it frequently receives approaches from investors expressing interest in acquiring loans or assets in its portfolio and reviews such approaches on an ongoing basis.”
PIMCO did not respond to a request for comment.
Public procurement ‘to be opened up’
Bidding for public sector contracts will be made easier, with small firms given better access to public procurement, finance minister Simon Hamilton told a conference jointly organised by the CBI and the Northern Ireland Executive’s Central Procurement Directorate (CPD).
“We now have proposals for simplified processes in public procurement: the standardisation of terms and conditions across buyers in the public sector; a continued focus on increasing transparency; and increased opportunities for working in partnership with the private sector,” said Hamilton.
“With the Northern Ireland Executive spending close to £3bn a year on public procurement, the business community has a vital interest in procurement policies and how these can be improved to deliver better value for money and reduce costs to suppliers.
“Public sector spending will continue to be under pressure. Indeed the Chancellor has said that he will be seeking further significant reductions in spending after 2016. That, in turn, underlines the importance of reform if we are to ensure that in the future we can deliver the public services that Northern Ireland needs.”
Jackie Henry, chair of CBI Northern Ireland’s Public Service Reform Committee, said: “This was an excellent opportunity to detail the work we have already undertaken with CPD on areas like standardisation of terms and conditions of contracts and driving innovation in public sector procurement.”
Solar energy sector grows
Northern Ireland is set to benefit from an increase in the provision of solar energy, potentially providing a significant boost to its supply of renewable energy.
Ireland’s first large scale solar farm has just been given planning approval. A 27 acre scheme to be located at Downpatrick will generate over 5 MW of electricity, sufficient to power more than 1,500 homes. It is backed by an investment of over £6m and has been put together by BNRG Renewables, a Dublin based renewable energy company with significant interests across Europe. Construction is expected to be completed within three months.
Environment minister Mark H Durkan, who approved the scheme, said: “This type of development helps sustain our environment through the use of renewable energy and also supports economic regeneration through the creation of jobs. It is anticipated that over 50 jobs will be created during the construction phase alone.”
A second major solar power scheme has also been given approval by the Department of Environment. Bombardier Aerospace will install five hectares of roof mounted photovoltaic panels to generate 3.8MW of electricity. Bombardier was also given approval for a heat and power scheme that produces biogas through anaerobic digestion.
Enterprise minister Arlene Foster said that she hoped to see many more large scale renewable energy schemes come forward. “Renewables are key to a low carbon future and we are committed to delivering the right framework to attract and secure private sector investment to deliver our shared goals,” she told a renewable energy conference. “The successful development of our renewables sector over the last few years has shown what is possible and we need to ensure further long term growth.”
Changes to unfair dismissal payments
Payments by employers for unfair dismissal and redundancy have been increased, the Department for Employment and Learning has announced.
The limit on the compensation award for unfair dismissal has increased from £74,200 to £76,600, while the calculation of a week’s pay for the purpose of calculating redundancy payments has risen from £450 to £470. The new limits came into effect on 16 February.
Employment and Learning Minister Dr Stephen Farry said: “The increased limits relate to a range of employment rights including statutory redundancy payments; the basic and compensatory awards for unfair dismissal; the limit on guarantee payments made when employees are not provided with work; and the minimum basic award for unfair dismissal in health and safety and certain other cases.”
The levels of compensation are uprated to reflect changes in the inflation rate, as measured by the Retail Prices Index. The levels are different from those in place in Great Britain.
Employers are liable for challenge for unfair dismissal if an employee is dismissed on religious or political grounds, because of their gender, age, sexual orientation, pregnancy, or family responsibilities. It is also not permitted to dismiss an employee for trade union membership or taking part in lawful industrial action. Employees may also claim unfair dismissal if they do not believe the employer gave the real reason for dismissal, that the reason was unfair, or if the employer acted unreasonably.
District rates rise
District councils have set their rates bills for 2014/15, with rises kept to a maximum of 2.75% and the majority of councils either holding their district rates charges at the same level as 2013/14, or in some cases reducing their rates charges.
The highest increase for the non-domestic rate – the rate applied to businesses – was in Larne, at 2.75%. The next highest increases have been set in Derry, at 2.58%, and Strabane at 2.5%. Increases of between 1% and 2% have been agreed by the Armagh, Ballymena, Banbridge, Carrickfergus and North Down councils.
Belfast struck the same rate as in 2013/14, while Ballymoney, Castlereagh and Omagh have cut their rates bills. This is last time the existing 26 district councils will set a rate, as they are being replaced by 11 new ‘super councils’ from next year.
The majority of the rates bills received by businesses and households is charged by the Northern Ireland Assembly. The Department of Finance and Personnel will submit regional rate proposals to the Assembly in early March for the 2014/15 year. A spokeswoman for DFP said that given the previous decisions of the Executive and Assembly to hold increases at the level of inflation, the increase in the regional rate for both domestic and non-domestic properties will be 2.7%.