Posted on Tuesday 5 June 2018 by Ulster Business

BF957691 Northern Ireland

Northern Ireland has a proud history as a major regional centre for manufacturing industry, writes John Simpson.

Despite the disadvantages of being an off-shore region, physically separated from the bigger industrial base in Great Britain, the skyline of the Belfast conurbation was dominated by the profiles, first, of the gantries for shipbuilding and, second, the industrial buildings and chimneys of engineering giants fabricating (what then was) modern machinery. This successful heritage could also be seen in diversified businesses in the other urban centres.

In the 21st century the skyline has changed. Thankfully, the physical appearance of modern industry has changed for the better. Gone are the ‘grey smokestacks’, gone is the stress of noisy welding, riveting and a polluted atmosphere, and also, gone but not forgotten are the large industrial units employing thousands of people generating large numbers of employees returning to poorer urban living standards than are now the norm.

The images of 19th century engineering have left an artistic challenge but an uncomfortable inheritance. Engineering and manufacturing in today’s industrial environment is, by contrast, clean (largely pollution free) and demands more people with skills and qualifications than even 70 years ago.

The price of success – meaning being competitive in international markets – is being able to combine modern skills, developing production techniques ahead of other world leaders, and quoting delivery prices and timescales that give compelling contract (or tender) prices that clinch successful outcomes.

The degree of success or failure is neatly illustrated by a telling statistical comparison, expressed in global terms. Compared with 50 years ago, the number of people employed in manufacturing industry in Northern Ireland has fallen by over 50%. That change sits alongside estimates that the real value of manufacturing output has more than doubled.

On that comparison both the pessimists and the optimists can draw conclusions. The compelling conclusion must be that, without that process of change, that improvement in productivity, there would have been a less satisfactory outcome.

The engineering skills that built big ships still exist, with Harland & Wolff still one of Northern Ireland’s most famous institutions.

The refurbishment of cruise liners in the dock that built the famous Union-Castle liners shows that continuity is possible. The lighter engineering skills for aircraft have now moved into the skills of modern composite fibres. Some engineering skills have mutated into science and information technology. Other skills are less traditional: the evolution of Norbrook, Almac, Randox and the Eakin products, all point to a new, still narrow but broadening, industrial base.

Heavy industrial processes relying on manual effort, linked to modest earnings, are giving way to higher-value-added opportunities. The change must be welcomed and re-enforced.

Northern Ireland has offered a more stable environment for manufacturing investment in recent years. Significantly, following the Good Friday Agreement, the last 20 years have allowed a more settled business environment to function. The environment has not been as positive and encouraging as could be hoped but it was better than during the period of the active Troubles.

There has been a modest but positive and continuing flow of external investment, much of it in the form of re-investment by existing externally owned businesses. There has been the anticipation of an improved business performance enhanced by the prospective introduction of a separate and lower rate of corporation tax.

The anticipated improvement in the business environment has now been made less certain. Until there is a final agreement on the shape and form of the Brexit treaty, it is rash to predict how business will be affected after March 2019.

There is a long list of inherited policies, as linked to the evolving EU regulatory framework, for which there must be, in different degrees, uncertainty about continuity, change or distortion. This is not an easy combination of circumstances in which to assess possible business development propositions and, to add to the uncertainty, for official agencies such as Invest NI, to set out guidelines for a persuasive local development strategy.

Stormont departments and Invest NI will be a source of influence and positive intervention to incentivise business investment. However well chosen, the supportive efforts of Government policy are likely to be only a marginal (but necessary) influence. The first priority must be further enhancing the in-built competitiveness of locally based businesses.

The critical initial building block is that the main contributions to an enhanced industrial strategy must exist in the complete range of ‘inputs’ that emerge easily because there is an inherited infrastructure to meet the needs of new and growing businesses, there are readily available features such as efficient public services and public utilities, and critically that there are adequate numbers of people with personal skills and qualifications to allow the needs of new businesses to be met.

A second priority is an enhanced investment strategy for Northern Ireland. It will draw on an improved social, economic and infrastructural environment. Refined and targeted improvements to the Programme for Government building on a refreshed delivery vision from Invest NI will attract keen critical evaluation but, if there are deficiencies in the wider infrastructure or in the educational delivery mechanisms, marginal incentives will be less effective than is needed.

The preparatory assumptions are easily articulated. Even if fulfilled, there remain difficult questions.

There are significant ‘unknowns’. How will the trading conditions for Northern Ireland industries be changed by Brexit? Will the trading conditions with the continuing EU remain as now (or nearly so) or will there be a customs frontier around the UK?

Decision making based on an assumption that there will be a seamless trading relationship for NI with the EU 27 would be a considered risk. Decisions based on a continuing stable exchange rate for the pound and euro, might be understandable but far from guaranteed. Decisions based on an expectation of continuing regulatory alignment may be somewhat optimistic.

Then there are decisions which will reflect local or national features. If the UK leaves the EU, do regions like NI take advantage of a new freedom to move away from EU constraints?

Alternatively, is the UK likely to agree to retain the policy constraints inherited from the EU on the application of guidelines on the use of State aid to give a boost to a new industrial development strategy?

To avoid international criticism, is the UK likely to commit to regulatory alignment, officially or unofficially, on observing rules inherited from the EU on maintaining effective competition policies?

The emerging post-Brexit environment brings new uncertainties. To stand still, make no new policy moves, could be a major mistake. Perhaps a working assumption of a successful Brexit, an agreed (near) customs union, and a seamless Irish border should be the starting point. Disappointment on the assumptions will mean serious rethinking. Best to assume success rather than failure. ■

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