JTI ‘consultation’ and the economic folly of NI’s politics of ‘separate development’…

gallaher-limited-logoIf Gallahers leaves Ballymena it will mark the end of one of Northern Ireland’s long term industrial successes. Originally founded in Derry in 1857 by Tom Gallaher, the Gallaher group built itself up into a world wide concern by the end of the 19th Century.

Ian Paisley Junior was very quick to pin the blame on Sinn Fein MEP Martina Anderson for voting through anti smoking regulations in the EP, even though a quick look at the figures (514 in favour to 66 against, with 58 abstentions) confirms that that battle was already lost.

The days are long gone since a publicly bellicose Paisley could rely on a quiet (and unacknowledged) intervention from John Hume to pull the Gallaher pudding out of the fire at the European Parliament. Indeed economic and political influence outside our borders is not a strong suite of either OFMdFM party.

In the BelTel Paul Gosling provides a more realistic overview of why Belfast is sucking up most of the resources and FDI opportunities in such a way that means that if JTI workers do lose their jobs they are unlikely to get replacements anytime soon.  In particular he makes core costs arguments that affect manufacturing:

The Manufacturing NI lobby group complains that electricity charges in Northern Ireland are the second-highest in the whole of Europe, behind only Italy. It argues that generator margins are too high and the rewards for renewable production are too great.

Stephen Kelly, Manufacturing NI’s chief executive, says: “Utility regulators north and south reported that, in some cases, generator gross margins were as high as 79%, with net profit running into hundreds of millions of pounds.

“This is at the expense of all customers and is utterly unacceptable and unsustainable. Unless action is taken, we have no hope of being globally competitive and building a strong economy.”

The local regulatory regime certainly lacks aggression in pressing companies on their internal costs; although most of our politicians, for reasons better known to themselves, seem not to want to go there.

Gosling continues…

Increasingly, the employment base of Northern Ireland is moving into services and into Belfast. In the last two months alone, more than 2,000 new jobs have been announced for Belfast – almost all in the services sector.

As well as the 800 jobs with PwC, there were 338 jobs at another accountancy firm, Deloitte. Two law firms, Baker & Mackenzie and Allen & Overy, are to engage 256 and 100 people respectively – in Belfast. Outside the Belfast metropolitan area, about 500 jobs were announced in the same period, of which 348 are for one employer, Almac in Craigavon, in pharmaceuticals.

It is easy to understand the attraction of Belfast for inward investment. Our capital city has two universities, good schools, excellent digital connectivity, mostly good road connections and two airports. Nowhere else in Northern Ireland can compete with that.

One factor in the preponderance of services going into Belfast is to do with the UK’s rate of corporation tax – 21%. In the Republic, the main rate is 12.5%. Inward investors are, therefore, more inclined to locate profit-generating activities in the south, while support services can go into the north, where average wages are lower than in either the Republic or Great Britain.

And in education…

Away from Belfast and its commuter territory, our graduate numbers are small, thanks to Northern Ireland having the smallest university sector per head of population of any the UK’s four nations.

We export one in three of our highest-achieving school pupils who go onto university, half of whom do not return. Meanwhile, our lowest-achieving school pupils present our economy and society with a serious problem.

One report this week pointed out that, in 2013, more than 9,000 Northern Ireland school-leavers did not reach the expected minimum standard of five or more GCSEs at grades A* to C, leaving them in many cases short of the basic skills to go into work. Equally worrying, while the unemployment rate in Northern Ireland is falling steadily, it is remaining steady for long-term unemployment.

We can debate whether the causes are social deprivation, lack of pupil and parental aspiration, or poor schools, but the reality and outcome is clear. While many school leavers have the skills for a golden career, many others have too few skills to get almost any job.

And many of those young people live in the deprived areas of Belfast that are not benefiting from the jobs boom.

And finally…

A few months ago, it seemed as if a “golden circle” existed that stretched from Lisburn across Belfast to Antrim and Ballymena, which together sucked in most of the new investments. Now it feels as if that golden circle has contracted to Belfast. Yet, in many cases, it is the residents of those nearby towns and suburbs that are getting those Belfast jobs.

That may be of little comfort to laid-off workers in Ballymena, whose working life has been in manufacturing and for whom answering customer services calls offers little money – and even less attraction.

None of this will be reverse quickly or easily. Certainly not whilst NI’s political leadership obsess on what divides people: ie,  flags, the past and border polls. It cannot be reversed with participation and leadership emanating from only one side of the political divide.

We have power sharing at the highest levels in Northern Ireland now, but what we lack is a willingness to work those institutions for the benefit of all the citizens. Ballymena is reeling with news that long ago came to Derry with the long trailing out of one time big industrial employers.

Turning that around means taking economic development seriously on a regional basis. It also means extending policy horizons out to twenty or thirty years, and not relying solely on a single trick (low corporation tax) which is as likely to impoverish public sector employment as grow the private.

The bedrock of the Republic’s prosperity was a major investment in post primary education in the 1960s. It also saw the Republic turn outwards politically for the first time in its history. That sixty year cycle is now coming to a close and something else may arise from the current crisis which for good or ill replaces that.

If everything remains stuck in political rent seeking and mendacious rows over the past there will be little space or political will to get on with future.

Arlene Foster’s criticism was much more nuanced and much more to the actual point of need here:

“Martina Anderson felt it was the right thing to do, but wasn’t prepared to join the dots and to make the association that if she followed through on that support that it would cost jobs.”

Ah yes, ‘joining the dots’, a house divided, and all that…

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