Northern Exposure

The impact of Brexit has some unique implications for Northern Ireland and the future of our economy writes Johnny Hanna, Partner and Head of Tax with KPMG in Northern Ireland.

Northern Ireland business people and those who promote enterprise here are a hardy bunch. 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 becomes 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 (FDI) and the further development of indigenous 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. Any deal that the UK cuts with the EU must have a strong Northern Ireland input. The importance of local political consensus on this is essential as Northern Ireland’s 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 of Ireland 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 per cent rate from 2018 was welcome but has been undermined somewhat by the former Chancellor’s announcement of a possible UK wide corporation tax rate in the future of under 15 per cent. We need to explore how Northern Ireland might enjoy a continued positive differential in this regard.

Despite the 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, financial services and agri-food. No doubt Invest NI will continue to promote the benefits of a cluster effect in these sectors. 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 skills. 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 Mathematics) cannot be underestimated. 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 further afield as well as provide people with enhanced mobility for work. The proposed £100 million Investment Fund to invest in private sector led projects is now essential.

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.

Johnny Hanna, Partner and Head of Tax with KPMG in Northern Ireland.

Tel: 028 9024 3377

Email: johnny.hanna@kpmg.ie

 

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