Welcome Return to Realism in Northern Ireland
Author:
Angela Reavey
Angela Reavey, Chair of the Ulster Society of Chartered Accountants, outlines USCA's view of the prospects for Northern Ireland's economy under the new Executive.
The new Northern Ireland Assembly ushers in what we all hope will be a new era of long-term and stable Government in Northern Ireland.
The very fact that people from Northern Ireland will be making decisions and implementing policies for themselves after a long period of direct rule will help to bring the kind of commitment and energy required from Ministers to rebuild a dynamic economy.
With devolved government restored, the new Executive has begun to grapple with some difficult policy challenges. A new draft Programme for Government is expected in the next few months and it will undoubtedly stimulate a much needed public debate about the economic policy options for NI.
It’s safe to say that for the general population, a genuine wave of general optimism has followed the spectacular political developments of recent weeks and months. Rising optimism and confidence is likely to inject formerly frustrated and deferred business and household investment as well as giving an instant boost to consumer spending. Tourism activity in NI is likely to exceed expectations this year as overseas interest in Northern Ireland responds to the new political reality. The regeneration of Belfast and other towns and cities continues apace too, with new bars, restaurants, hotels and shops breathing life into the province and the £300 million Victoria Square development due to open in Spring 2008.
The feeling of optimism has chimed well with a flurry of ‘good news’ stories emanating from the new Department of Enterprise, Trade and Investment and particularly from Economy Minister, Nigel Dodds in recent weeks, including a £2 million investment, creating 77 jobs, by global financial services company Wombat Financial Software and an £18 million investment by Fujitsu Services which will create over 400 new jobs.
Recently in Washington approximately 1 million people filed into an exhibition at the Smithsonian Institute which showcased the best of what Northern Ireland has to offer in cultural, social and, above all, economic terms. For probably the first time it was completely free of the shackles of the past as Ministers from the four main political parties worked together day and night to present a united message. The reaction so far has been nothing but positive.
Most of Northern Ireland’s economic fundamentals are strong, including incomes, wealth, and business confidence, and should ensure that the next 12 months sees an acceleration of economic growth. Northern Ireland is also experiencing record levels of jobs, combined with historically low levels of unemployment and this also provides evidence that the economy is moving in the right direction.
The recent strong economic growth and employment performance in Northern Ireland has been achieved despite significant changes in the structure of the economy.
Northern Ireland’s once-vibrant manufacturing sector has been eroded over the past number of years; its dependence on traditionally labour-intensive industries such as textiles and shipbuilding mean that it has suffered at the hands of globalisation.
However, manufacturing output has more than held up with considerable advances in productivity. Moreover, the service sector has shown impressive growth in output and employment – more than compensating for the significant falls in manufacturing employment.
Nowhere is the optimism surrounding the economy in Northern Ireland better reflected than in the housing market; although increasingly to the chagrin of first time buyers.
Northern Ireland is in the grip of an historical housing boom. In some areas, prices have doubled in the past two years.
According to recent figures produced by the Department of Communities and Local Government (DCLG) in London, for the first time average prices in Northern Ireland have risen above those in England. The average price for a house in Northern Ireland was at £217,579, while the average in England hit £214,424.
No social gathering is now complete without talk of hotspots, gazumping and a possible housing market crash. Everyone, it seems, has a tale to tell of someone who has made a killing on the property market. However, with wages not increasing at a similar rate and more disposable income than ever being spent on mortgages, the house price boom will continue to be critical to the health of the economy in Northern Ireland.
ICT, Business Services and Financial Services in Northern Ireland are all in rude health.
All of these sectors have benefited from the availability of a highly educated, skilled and a dedicated workforce. Educationally Northern Ireland consistently outperforms other regions in the UK and Ireland. The region’s education system has long been recognised as one of the best in Europe with over 60% of the region’s young people going on to Further and Higher Education.
In Financial Services, there are several factors coming together at present, that bode well for Northern Ireland and specifically Belfast.
Proof of Northern Ireland’s growing financial services success isn’t hard to find – all we need do is look at some of the new market entrants and some of the home grown success stories that have emerged over the last few years. Northern Ireland has attracted major financial services companies including Citigroup and Wombat, whilst others such as Allstate and Liberty Mutual continue to grow.
The provision of financial services is recognised as a strategically important sector for Northern Ireland and currently employs almost 20,000 people in activities such as accountancy, retail banking, insurance, pensions, software and business processing. In recent years, top international corporations such as Abbey, Halifax, and HBOS plc along with leading US corporations have set up operations in Northern Ireland and all are benefiting from having chosen Northern Ireland as their preferred location for a broad range of operations in the financial services sector.
In addition to globally recognised companies, a number of locally owned companies such as First Derivatives, Harco Technology (now owned by Wombat), Singularity and Datactics are also competing successfully in global financial centres such as New York, London and Tokyo. Several factors are contributing to this success at the moment, not least lower operating and labour costs and rising skill levels.
It is widely acknowledged that the internationalisation of financial services in NI and ROI has been one of the most significant success stories over the last decade. The all-island financial services sector contributes Stg£5.5 billion to the economy, North and South, and employs more than 93,000 people. The International Financial Services Centre (IFSC) now hosts half of the world’s top 50 banks and half of the top 20 insurance companies and accounts for up to 20,000 jobs.
I am a firm believer in applying winning formulas and with the political will in the new spirit of ‘Realpolitik’ in Northern Ireland and the support of the sector, the IFSC’s successful model could be replicated or extended to create an IFSC ‘satellite’ in Belfast.
Northern Ireland has the infrastructure and the highly qualified workforce. A possible location could be the 185-acre symbol of economic regeneration in Belfast and Northern Ireland, the Titanic Quarter. This would both bring benefits to Northern Ireland and would help the sustainable development and growth of the IFSC, and avoid the growing threat of the IFSC being overstretched with the inevitable result of overspill.
Cooperation in the financial services is potentially a real source of competitive advantage for the island of Ireland in a hugely competitive global market. The potential benefits to both parties of increased cooperation, including increased efficiency in the delivery of services, improved productivity and skills, are manifold.
For my part, I can say that the Ulster Society of Chartered Accountants (USCA) is fully prepared to work with Government, to engage with politicians and those charged with putting in place policies which will deliver real benefits to the economy and to the wider community. The Ulster Society of Chartered Accountants stands ready to play a full role in the new Northern Ireland and as Chairman it is my intention to be a facilitator as well as a participant in that important dialogue.
Angela Reavey, BSSc, FCA, is a Partner with BDO Stoy Hayward in Belfast and was recently elected Chair of the Ulster Society of Chartered Accountants (USCA).