Brexit, border and business

Newly appointed Director of the Confederation of British Industry (CBI) Northern Ireland, Angela McGowan, discusses the likely economic impacts of Brexit and her ambitions to protect the organisation’s members.

Figures for the first quarter of 2017 showed economic growth in the UK at 0.2 per cent. The annual estimation is for a growth of 1.7 per cent, but for Northern Ireland, that annual growth forecast is even less – at 1.2 per cent. McGowan explains that while economic growth in the face of Brexit is a welcome sign, it’s highly likely that growth will soften further.

Earlier this year, the CBI in Northern Ireland conducted a survey which outlined that 87 per cent of their membership viewed leaving the EU as a threat to their business. CBI have consistently lobbied for special circumstances for Northern Ireland in the face of a split from the EU, or at the very least, the introduction of transitional arrangements that would maintain access to the customs union until a deal could be formalised.

“Economic growth has slowed slightly and we know that Brexit hasn’t even happened yet. Consumer facing industries have been impacted the most because of rising inflation. But manufacturing and business services in Northern Ireland are still holding up well. There are also some businesses in Northern Ireland that are benefiting from the depreciated pound, this has added to their competitiveness while they still have full access to the EU single market and all those other markets that the EU has trade deals with across the globe” she says.

“Some members I have talked to, the global players in mid-Ulster for example, are doing fantastically well and competing internationally but that doesn’t mean that they aren’t concerned about the future. In the medium and long-term they are concerned about things like cost pressures, access to supply chains and of course supply of skills.”

McGowan believes that immigration has been a key factor in improving Northern Ireland’s productivity levels: “From an economics perspective any limitations on immigration will not just enormously challenge our companies, but will have a much wider impact on the entire region as our long-term economic potential will be dented.”

In the absence of a Northern Ireland Assembly, McGowan points to constant communications with CBI headquarters in London, and collaboration with the Republic of Ireland’s Ibec as the region’s main channels of influence in the Brexit negotiations. However, she believes that she can detect a change in mood, one that is moving away from a hard Brexit.

“In recent weeks and months, I can see a lot more level-headed voices coming out from the cabinet and policy makers. As time goes on the impacts of a hard Brexit on the UK are becoming clearer. Nobody voted to be poorer and as reality sets in there is a need for practicality and pragmatism.

“While I don’t think a formal deal will be done by the March 2019 deadline, I do believe it is in the EU’s interest not to see economies collapse. That’s where I think the transitional arrangements will come in to play. No one wants to see a cliff edge whereby businesses fall into WTO rules and I think many in government now realise that can’t be the case.”

Border

Reiterating the detrimental impact that any delays to trade or movement at the border would have, McGowan says that the onus is on those policy makers and politicians who supported Brexit to live up to their promise of a ‘frictionless’ border.

“There would be both political and economic implications of a hard border. Economically, the implications are huge. Free movement and trade has allowed for the build-up of supply chains on an all-island basis. It’s not an exaggeration to say that some of our members would be unable to survive if that changes. Any new border would have implications for investment location decisions and job losses.”

Outlining that some members will be forced to relocate to save their business, McGowan sees the need for local politicians to better understand the economic implications of a hard Brexit deal.

“No one wants to see a cliff edge whereby businesses fall into WTO rules and I think many in government now realise that can’t be the case.”

McGowan says that the argument for different trade deals with countries outside of the EU proving potentially fruitful for her members has been one aired to her many times, but contends: “I firmly believe in the tried and tested gravity models of economics. To trade with an EU market of half a billion people which is right on our doorstep, makes economic sense. For me there are worries about throwing the baby out with the bathwater when seeking to overlook Europe for markets further afield.”

Growth

In terms of growing the economy in Northern Ireland, McGowan believes that the Brexit outcome could throw into jeopardy the progress made over recent years. Referencing a reduction of the public sector and an expansion of private sector jobs, she said that following the financial crisis, policy attention to areas such as infrastructure and the knowledge economy had only just started to get off the ground.

The benefits of investing in these areas is evident in the economic upturn in the Republic of Ireland. “Policy makers in Ireland put a great focus on high value added and knowledge-based sectors but they also had the economic foundations right and took advantage of what EU membership had to offer. They are registering consistent growth levels because they developed and stuck with a good strategy. Even now, in the face of Brexit, which could heavily damage their food supply lines to the UK, they have developed an industrial plan to expand Irish exports into the EU.

“The contrast highlights the political deficit that exists here in Northern Ireland. The business community has major concerns and frustrations about the speed in which we are trying to develop our economy across a variety of sectors. Those concerns and frustrations have only been heightened by Brexit.”

DUP deal

McGowan welcomes the extra money being available to Northern Ireland after the UK General Election but also references a chronic under-investment in the local economy over recent years. She believes that only a Northern Ireland Executive will be best placed to ensure that the money is being appropriately allocated to the foundations of economic growth.

Suggesting that failing to achieve a reduction in Northern Ireland’s corporation tax may have been a missed opportunity, she adds: “CBI was a lead lobbyist for the corporation tax reduction. Such a move was aimed at attracting global firms to invest in our economy. Internationally competitive firms bring with them things such as good management practice, technology transfer and over time they build local supply chains too.

“Lower corporation tax would also give a boost to our indigenous companies who see it as an opportunity to plough money back into investments.

“Unfortunately it’s not going to happen without an Executive. We need to get to a place where we have an agreed budget and a sustainable fiscal position, neither of which have been arrived at. For the business community, it is a shame because having touted the potential of a lower corporation tax, to be seen not to deliver on that will damage our international representation. There are plenty of challenges for business right now, but I have no doubt that if we in Northern Ireland all worked together constructively we could be one of the best economies in the world, I refuse to give up on that idea – it could happen yet.”

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