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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  • Megatron_

    Struggling to see the nuance in Arlene’s party political point. Blaming Martina Andersen here is about as correct as blaming a small farmer for global warming.

    The real larger point here is can NI be a self sustaining economy while remaining so close to the black holes (in the gravity sense) of London and Dublin. Wales seems to have a similar problem in many ways.

    i sort of think it can’t. The world has changed and migration across and within borders (to which NI is particularly vulnerable) means the only show in town i specialisation . governments work for companies. The south has basically turned into a niche exporter based in Dublin and Cork and fuck the rest of the place (and people who don’t want to work in said niche export or service industry).

  • Megatron_

    A few points…

    1. Arlene’s point is hardly nuanced. That is the type of lazy stuff Mick that annoys SF supporters here. You are taking part of her sentence and applying it more generally to make a point (probably not nuanced) more generally. Martina Anderson had as much to do with this as a small farmer has to do with Global warming, and probably less.

    2. It remains too tempting for some to ascribe the South “success” to one big initiative. In truth lots of things made a small difference – free secondary education was one of them but it shouldn’t be overstated. If there was one overriding thing IMO, it was the willingness to play by the rules set by big business. It has even gone as far as setting its goal as “the best small country in the world to do business”. Whether that makes it a good country to bring up children in (for example) is tangential at best to the main goal.

    3. In effect the south strategy is to be a niche exporter of pharma, tech and financial services in Dublin and a bit in Cork and the rest of the country can scrape by on small farms, tourism and people returning home from dublin at the weekends (or on commute). It is difficult to argue against this strategy because the race to promise bigger profits for corporates in exchange for anything they want is a global phenomenon (which the UK is very much a part of).

    4. Unfortunately for Belfast, squashed as it is between established hubs of Dublin and London (and without historic ties that tie companies like Standard Life to Edinburgh) it is in a very difficult space when it tries to find its niche. The thing about the Dublin niche is that there are lots of high paying jobs that can incentivise the commute (I myself do 3 hours a day). Who wants to commute from Derry or Omagh to Belfast for £25K a year when they can probably find some cash in hand work at home which tops up the social welfare payments – even if it was in their long term interest to do so.

    5. I don’t think ultimately that NI has the resources or capacity to solve these problems – for example Wales has made remarkably little progress in this regard despite a properly functioning executive. ROI has basically given up in the regions (as far as anyone can tell) and just going to focus on Dublin. You can hardly blame NI for doing the same with its much smaller geographical area. Just don’t think it will work for them long term – but nothing probably would.

  • Michael Henry

    Brag the old days that never happened- ” from John Hume to pull the Gallaher pudding out of the fire at the European Parliament ” to today’s days saying that the office at the Assembly as little control outside Ireland’s borders- what a snide remark-

    514 votes in favour- 66 against-58 abstentions – what difference could John Hume make- you do know how many votes he lost in the European Parliament –

    John Hume was a MEP MLA MP he had no time for issues as he was travelling to and from 3 well paid jobs at the same time-

    John Hume will tell you himself that his Proudest thing was being a founder member of a Credit Union during the 60s- his later Political careers were second fiddle and nothing for him to be Proud of-

  • kensei

    My grandmother is 81. Her sisters both died in their sixties of cancer. Both smoked. I can clearly recall going to see my great aunt near the end, because I really reget doing it. That wasn’t how I wanted to remember her. I’m extremely glad Martina voted the right way. Try that for nuance, Mick.

    Megatron is spot on. The South did well for a whole variety of factors, and its success remains concentrated around Dublin, with outliers in Cork and Galway is where the universities are. Its been known for an age that NI has a deficit in uni places, but as the UK overall has a surplus it was never addressed. The result is the people export you cite. Ballymena is commuter distance from Belfast. Concentration is needed for economic development. Spreading wealth is something we can worry about when we actually have wealth.

  • streetlegal

    Good to see that the Ballymena nicotine pushers are going out of business.

  • NMS

    I thought the piece was very accurate. But it was EU membership, followed by probably 20 years of spending on education, before the improvement in the Irish economy was visible. I would suggest that the input of the Regional Technical Colleges now ITs played a much more important role than the traditional universities. You can see that particularly say in Sligo but also with the other regional towns with Institutes. Certainly it was into the 1990s before there was a credible build up of high skilled employment.

    It is worth noting that there has been little real growth in the numbers of those employed in FDI companies, the difference is that as those companies changed, there were suitable workers for the new roles. For example, Microsoft started off as a very basic operation copying software, packing etc., employing around 1,200. It still employs around the same number, except the roles have changed with an average salary now in the region of €100,000 out in Sandyford.

    However Ireland also has a problem replacing these traditional (male) unionised well paid industrial jobs. Many such men have found it impossible to get back into the Irish workforce, certainly at anything like their similar pay scales.

    My understanding is that most of those who leave UKNI to go to university kick with one particular foot. It has been said to me by a number of people with similar backgrounds, who live in Ireland, that they feel the North is now an alien place for an educated person of a Protestant background, squeezed between the various competing interests. If UKNI is seen as a cold place by a significant number of those who have the skills a modern economy requires, then it is in a terminal way.

    The lack of a clear regional industrial policy or even a clear policy on education makes the UKNI position particularly bad. At the same time there are companies such as Almac, Norbrook etc. However there is little room for UKNI in an Irish state, as it would be bringing just trouble with it. Even many of those who do have qualifications, e.g. teaching qualifications, there is already a significant oversupply within this State.

    Perhaps it is time to try something new?

  • kensei

    Several of my close friends / family are in London or Edinburgh and they are from a Catholic rather than Protestant background. There might be a differential but the drain of people to London (or Australia) is a cross community problem.

  • NMS

    Kensei, point taken, certainly if you have a look at the GAA transfer lists there is considerable movement from West of the Bann.