Angela McGowan, Regional Director CBI Northern Ireland, comments on the findings of the Irish CEO Outlook 2017.
KPMG’s 2017 survey of CEOs at a global, national and local level raises many interesting issues. Despite the challenges and disruption from a range of factors including geopolitical change, rising global competition, cyber security and accessing talent, the clear majority of business leaders are determined to ensure that their companies will adapt and succeed writes Angela McGowan, Regional Director CBI Northern Ireland.
Many Northern Ireland firms are growing at a very healthy level and these companies have ambitious plans for further expansion. However the challenges are well documented. The fear of crashing out of our biggest and nearest export market without a trade deal is probably paramount. Other challenges include access to skills if UK migration quotas are imposed and overall competitiveness as the weaker pound raises input costs for producers. In addition, a shortage of labour combined with the imposition of a National Living Wage and an apprenticeship levy could potentially push up labour cost inflation in the medium term.
In 2016 a CBI survey found that an overwhelming majority of businesses (over 80 percent) across Northern Ireland did not want to leave the EU. But regardless of Northern Ireland’s desire to remain, our population share of the UK has left us with limited influence on this issue. Local CEOs fully recognise the scale of the change being imposed upon them, but nonetheless they are still committed to making a success of their organisations. An important aspect of the CBI’s work is making sure that the complexity and seriousness of the issues that the Brexit negotiations present are fully understood by policymakers.
We know that Northern Ireland is uniquely exposed to the potential changes the UK’s exit from the EU presents, as it is the only region of the UK that shares a land border with another EU member state.
This exposure was made clear in a 2017 survey of CBI members based in Northern Ireland: when asked, 87.3 percent of respondents saw the UK leaving the EU as a threat to their organisation. Over 32 percent of Northern Ireland’s total exports go to the Republic of Ireland and this proximity has, over the years, led to ever increasing economic integration throughout the all-island single market. For that reason, a detailed understanding of Northern Ireland’s distinct needs is required for those involved in the EU negotiations. Negotiators simply must consider our unique economic circumstances so that local businesses and jobs are not placed in jeopardy.
The Northern Ireland economy is structurally very different to the rest of the UK. Small and medium sized businesses dominate the economic landscape. In addition, agriculture and agri-food processing account for a much higher proportion of local economic activity compared to GB. It is widely recognised that small firms along with a small population, skill shortages and a historical lack of investment in the region’s connectivity have resulted in local productivity levels remaining well below the UK average. Indeed, in recent decades the only noteworthy improvement in Northern Ireland’s productivity gap between NI and GB was experienced between 2004 and 2007 when the local population was boosted by a positive annual net migration figure.
On average the local economy benefited from an extra 8,053 people coming into this region every year during that period. That rise in migration was driven largely by EU migrant workers who eagerly joined the local labour pool and allowed Northern Ireland firms to take on bigger orders and expand production in ways not seen in the preceding years.
Thus, access to both skills and nearby markets are very real challenges looming on the horizon for NI CEOs. Over and above these challenges we cannot forget about long term structural issues such as re-balancing the economy, addressing educational output, tackling youth unemployment and under-investment in infrastructure.
However, we should also remember that while challenges exist, so too do opportunities. Interest rates remain supportive for CEOs to invest and firms should also be exploiting the weak pound to sell more into Europe and other countries when they still have full tariff-free access to those markets.
To strengthen our chances of success we need a strong voice for Northern Ireland in the months ahead. The CBI has been working hard on getting the message from local businesses into both Westminster and Europe through our London and Brussels offices. But to ensure that the UK’s Brexit negotiators take full account of Northern Ireland’s unique situation, we need our devolved government up and running. When the business community and a Northern Ireland Executive raise their voice in tandem around these important issues - the impact will be infinitely more powerful. Ultimately, it is only through business and government working collaboratively that we can deliver the best economic outcome for Northern Ireland.