The impact of Brexit has some unique implications for Northern Ireland and the future of our economy writes Johnny Hanna, Head of Tax with KPMG in Belfast.
Northern Ireland business people and those who promote enterprise here have proven themselves a hardy lot. Our local market is small, the level of economic subvention is probably unsustainable and many of our brightest and best seek their fortunes elsewhere. Add Brexit to the mix and the list of issues we need to manage become even longer.
In our view, and to help resolve many of these challenges, Northern Ireland needs to trade its way to a better economic future. Anything that inhibits or hinders this objective must be addressed as a priority. There are two main areas of focus that can help chart a way forward foreign direct investment and the further development of domestically owned business.
In the first case, the potential loss via Brexit of unrestricted access to the EU market is a major concern in terms of our ability to attract FDI and any deal that the UK cuts with the EU must have a strong NI input. The importance of local political consensus on this is essential as Northern Irelands unique circumstances are not always understood or appreciated elsewhere. Whatever the final outcome of Brexit negotiations, the need for continued easy access to both the Republic and the rest of the EU is vital for all businesses. In this context we also need clarity on Corporation Tax. The announcement of a 12.5% rate locally from 2018 was welcome but has been undermined somewhat by the former Chancellors announcement of a UK wide rate of under 15%. We need to explore how NI might enjoy a continued positive differential in this regard.
Despite the very serious challenges of Brexit, it is also important not to underestimate what we do well here. Northern Ireland enjoys a competitive cost base, attractive levels of personal taxes and a skilled workforce. Our international reputation has been enhanced through increased visitor numbers and a range of globally famous attractions. We also have a track record of success in many sectors such as software development, legal outsourcing and financial services and no doubt InvestNI will continue to promote the benefits of a cluster effect in these sectors to potential new investors. We also produce high quality goods and services for which there is proven market demand and our most successful exporters are maximising their potential across the water, in the Republic and elsewhere - both EU and non-EU.
However the development of economic policy has not always been a political priority and as a result we are having to play catch up on issues ranging from infrastructure to education. The negative impact of Brexit should be driving a real sense of urgency on a range of topics for the benefit of both inward investment and domestic business. For example in education, the vital importance of STEM (Science, Technology Engineering and Maths) cannot be underestimated and placing an increasing priority on these subjects is an economic priority.
Meanwhile, we need to develop a more coherent infrastructure policy for air transport, the North South electricity market and the road and rail network including links to Dublin and the rest of the island. Such policy ambitions were recently underlined in a joint North /South CBI and IBEC report highlighting the economic benefits of joined up thinking. For example, the continued failure to bring the A5 and A6 to international standards is making it harder for business in the North West to move goods around the island and to markets elsewhere.
If we fail to address these issues as a matter of urgency, we will end up counting the cost in terms of employment potential right across Northern Ireland. Whilst we face major additional challenges as a result of Brexit, it may also act as a catalyst in driving economic policy to the top of the agenda and keeping it there.
This article was originally published in Agenda NI and is reproduced here with their kind permission.