It was reported on Monday that OCO – a Belfast-based company that among other things quantifies FDI for clients (eg. investment agencies) – has concluded that last year 6,878 new jobs were created from 35 investment projects in Northern Ireland.
Belfast is second only to London as the investment hotspot in the UK, according to OCO [not sure what explains the time-lag between the press release being issued and the BBC report].
Sounds unbelievably good. How was this quantified?
Well, the information is collection by the OCO Monitor™ – a business solution that analyses data from 9,000 media sources and market research and publication companies. Each project identified is cross-referenced against multiple sources and over 90% of projects are validated with company sources.
The OCO findings must be authoritative – Invest NI has used the OCO Monitor for four years. Indeed Leslie Morrison endorsed the OCO Monitor findings saying that “Northern Ireland is in a prime position to capitalise on foreign direct investment opportunities”.
Great. But not all great. My issue is this: if all the above is true, and I have no reason to doubt it isn’t, then surely this pulls the rug from underneath anyone arguing for a corporation tax cut.
The variance in tax rates within Ireland as an economic area does not so disadvantage Northern Ireland as to cost it jobs. Maybe our low wages, low operating costs and low office rents (which, alas, are rising all the time) are enough to entice investors at the moment.
So, with nearly 7,000 more jobs created inside a year, economic activity has expanded as a direct result of increased FDI. Clearly, the case for corporation tax is undone if the evidence above is correct.
Varney is expected to make an announcement soon. But if the man in charge of attracting foreign investment opportunities to NI thinks we’re presently ‘in a prime position to capitalise on foreign direct investment opportunities’, then I suggest the First Minister puts the champagne back in the fridge. [Although he would have needed to be an optimist to take it out in the first place.]
In the meantime, capital gains tax increased to 18% – which could see mass divestments of small businesses while the 10% rate still applies. Upping CGT will be an open invitation for experienced businessmen to cash in early. This could prove utterly disastrous for a NI business community that’s 98% SME.
SME divestment could see a contraction of the private sector – precisely the opposite of what the local economy requires. So with large-scale employment in the public sector, and moves from unions to buck pay restraints, inflation is in danger of rising and consequently so too are interest rates. We could be on the cusp of a high-tax, heightened inflation and high-interest rate economy.
Higher interest rates, the potential for rising unemployment and a credit crunch within an economy built on borrowing? Uumm, 70s-style recession anyone? Watch your asses homeowners!
Not so long ago politicians were issuing statements like this talking about the generous economic package that was essential and the reduction in corporation tax rates we needed so as to avoid burdening the ratepayers with high rates and unneccessary water charges.
Sounded great at the time, but it now looks deluded in retrospect. Can’t see any of that happening. Our Ministers seem powerless to do anything more than urge efficiency and perhaps look to the RRI borrowing facility for a bit of a dig out.
Still, the First Minister could lead a prayer meeting or two. Every little will help. ‘Cos I see trouble ahead… big time.