As he approaches his retirement this year after 26 years with CBI, Northern Ireland Director Nigel Smyth discusses how 2016 has been his busiest yet as the organisation seeks to inform, reassure and give a voice to its members in the wake of the Brexit referendum.
Nigel Smyth can point to the successful cross-border business council with Ibec, which helped to almost double trade for Northern Ireland, CBI’s influence on bringing about peace and political stability through the peace process and over 400 policy responses as just some of the highlights of his legacy at the head of CBI in Northern Ireland.
Delivering an honest assessment of the current state of the Northern Ireland economy, Smyth believes that businesses in Northern Ireland, especially the medium sized companies, are still “unwinding” from the financial crisis almost a decade later. Recovery mode, he says, has helped to grow and improve the local economy in recent years, especially in the private sector, but the sheer scale of the public sector means that Northern Ireland has looked on enviously as economies in the rest of the UK and the Republic of Ireland grow at an impressive rate. Growing the private sector in Northern Ireland has been an ongoing challenge since Smyth arrived at CBI in the early 90s, after a career in geology. “We’re facing a scenario now, quite starkly, that we probably need to create 100,000 jobs in the private sector by 2026 to ensure growth. One of my biggest concerns would be that there isn’t a wider enough understanding of how much the business community contribute to the local economy in terms of expenditure and in taxes etc,” he said.
CBI is a key influence on the political decision makers and helping to shape policy that will best benefit their membership, CBI openly welcomed the fresh, outcomes-based new format of the Programme for Government, while maintaining a reservation that the final document will include more focussed targets and prioritisation for some areas. One of those areas Smyth would like to see a more sharpened proposal, in both the short-term and long-term, would be ensuring economic growth. He pointed to three key areas: creating more opportunities for businesses to grow, aligning education with necessary skills and providing a financial incentive to get people into work, all of which will be helped with the implementation of a lower corporation tax rate.
“One of my biggest frustrations over the past two decades has been around education,” explained Smyth. “The speed at which globalisation and digitalisation has impacted on local economies means that we need a much more responsive education system and we need a consensus on the outcomes we’re getting from the education system. Education should not be about exam results, employers are recruiting people for their attitudes and behaviours as well, which aren’t being measured and our undervalued in our current system. There are too many people choosing careers in areas which are densely populated but at the same time there are some great opportunities out there in areas where Northern Ireland does not possess the skilled labour force.”
Describing the proposed introduction of lower corporation tax as a “game changer”, Smyth said that he remains 99 per cent certain that it will be implemented in Northern Ireland, even after the Brexit referendum result. However, he admits that hopes of mirroring the south’s ability to attract companies such as Google, Facebook and PayPal, to locate their European Headquarters in Northern Ireland, have been severely dented. “I’m very confident that it will still happen and I believe it remains crucial to growing our economy. However, we also appreciate that it is just one element of a package need for growth including investment in ensuring the right skills exist in Northern Ireland and that we have the right infrastructure. A lower rate of corporation tax is a catalyst for Foreign Direct Investment (FDI) but those investors will want certainty and I think for the next two or three years, until we know our trading relationship with Europe, we’ll struggle to attract those large companies,” he added.
Economic evidence has always indicated that Northern Ireland would be the region of the UK most at risk during any distancing from Europe. Smyth was vocal prior to the referendum that a vote to leave would be damaging to the economy and over 80 per cent of CBI’s members supported the Remain camp. However, despite the outcome, he is confident the decision will not fuel another recession. “Our message was clear all along that a vote to leave would mean fewer jobs and a slowing down of the economy but we always said that while we might not thrive in the short-term, we will survive,” he said.
“The level of uncertainty is unprecedented. For the business community, who want access to the Single Market and access to people and skills, there’s a desire to know what the relationship between the UK and Europe will be. Those negotiations are going to take at least two to three years and that might be too long for some of the big investors to hang around. The details of any deal for access to the market are also going to be crucial for Northern Ireland. One example is our food and drink sector, which is disproportionately big and relies heavily on subsidies. Any extra tariffs would have a huge impact on the local economy going forward.
“The fact is that we’ll not be able to gauge the full impact until we know the full terms of any negotiations but trade with Europe will go on and a fragmented Single Market is in no one’s interest. Companies in Northern Ireland have proven themselves to be resilient, clearly some sectors will be more at risk than others, but they will manage and they will adapt,” he concluded.
Angela McGowan has been appointed as the new Director of CBI and will take up her role in October.