Based at the Northern Ireland Science Park, halo is funded by Invest Northern Ireland and Intertrade Ireland with the purpose of stimulating angel investing in NI-based companies.

“I am delighted to be the 100th Angel investor to join the halo network,” Business Angel and 100th halo network member, Stephen Houston, said. “It’s the ideal opportunity for individuals with experience, equity and contacts to gain access to the potentially lucrative investments.

“Due to the economic climate, many small start-ups have found it tough to find funding for their business ideas. halo offers Northern Ireland’s entrepreneurs a route to market and support for their growth plans. This in turn helps to generate growth and employment within the local economy – creating a ‘rising tide’ for the whole community.”

According to Alan Watts, halo Director, having the 100th Angel come on board the network is testament to the calibre of early stage companies setting up in Northern Ireland.

“The halo network benefits all parties involved – we facilitate the initial meeting and then let business relationships flourish. The companies seeking investment not only receive financial aid to get their concepts off the ground – they also gain the business background, skills, experience and contacts that come with the Angel. I would encourage individuals who meet the Angel criteria to come forward and support the innovators of tomorrow.”

(Left to right) Charlie Kerlin, Grant Thornton Partner in Corporate Finance, joins Trevor Blayney, Managing Partner of Grant Thornton at the launch of the Grant Thornton International Business Report 2010.

Optimism among local privately held businesses on their economic outlook for 2010 has improved considerably over the last year, according to the latest International Business Report survey from advisors Grant Thornton UK LLP.
The Grant Thornton International Business Report 2010, which surveys more than 7,400 privately held businesses in 36 countries, shows that optimism of private companies in Northern Ireland has surged, albeit from a low level, by 46 per cent in the last year. This gives Northern Ireland a balanced score of minus 6 per cent which outperforms the Republic of Ireland at minus 42 per cent, however local optimism levels are the lowest in the UK.
Revenue expectations amongst local private companies also increased this year with 80 per cent expecting revenues to increase or stay the same in 2010, compared to only 27 per cent that expected revenues to increase in 2009. In addition, only 20 per cent expect their revenues to fall this year compared to 43 per cent that expected a fall last year.
“Overall, Northern Ireland businesses responded well to the economic downturn in comparison with the Republic of Ireland and other UK regions,” Trevor Blayney, Managing Partner of Grant Thornton, said. “Business people have made the hard decisions, adjusted their costs relative to revenue and this shows a big improvement from the 2009 survey. While there is a clear upturn, it is expected that it will take time to flow through to profitability.”
According to the survey profit expectations amongst local private companies remain weak. Whilst 58 per cent of the private companies surveyed expect their profits to increase or stay the same this year, profitability expectations levels for Northern Ireland have plummeted from the 2008 level of 54 per cent to a low balance score* of minus 6 per cent in 2010.

Pictured with MLN Facilitator Bill Manson of Podiem are Champions Aaron Shimmons of Tartan IS (left) and Jack McIlduff of Europa General (right).

A business initiative offering free support and resources to managers and leaders in Northern Ireland is re-launching its services.
MLN – or the Management & Leadership Network – is about to ‘take off again’ as a private sector supported initiative, having previously been funded by the Department for Employment and Learning.

Bill Manson has been involved with MLN since its inception in 2002. He says: “We are excited about working with owners and managers again. Our funding came to an end in 2009 but feedback from the local business community encouraged us to identify other means of continuing to deliver the key features of MLN’s services.

“The new MLN is committed to building on the momentum of our previous achievements and we have been able to reinvent ourselves with the support of local ‘champion firms’ and ‘ambassadors’.”

Existing and new members will have free access to best practice resources and up-to-date local expert guidance in key business issues through regular e-zines, supported by the MLN website. MLN will continue to provide signposting to funding and relevant business events. In addition, members will have access to free master classes, delivered by experts, including business to business networking opportunities.
Funding for the initiative now comes from ‘champion firms’ from different industry sectors, which recognise the importance of the management and leadership agenda. A group of recognised business and management figures are working as ‘ambassadors’ – supporting and endorsing the MLN message.

MLN’s legal champion, McGrigors, is supporting the initiative while Europa General Underwriters (N.I,) Ltd, are MLN’s insurance champion. Brian Ambrose, Chief Executive of George Best Belfast City Airport, is one of MLN’s ambassadors.

Belfast man Gary Mills has been appointed to a top job in retailing and has taken up the post of operations director for Tesco in both Northern Ireland and the Republic of Ireland.

This means that Gary, who until recently was stores director for the Tesco business in Northern Ireland, has now added the Tesco Ireland operation to his portfolio. It makes him responsible for around 160 stores and 22,500 employees North and South.

“This is a wonderful opportunity and I am delighted to have taken up this role. It will help dispel the myth that there are no prospects in retailing which is increasingly being regarded as a career with a real future,” Gary said. “If the number of applications we receive for jobs at our stores are anything to go by, more and more people have been inspired to look at the opportunities available in the retail sector.

“At Tesco we have very clear, defined career paths and if an employee’s ambition extends beyond Northern Ireland, they can take advantage of the opportunities offered by our stores in GB, ROI, Europe and beyond. This is an excellent way to develop a career and see a bit of the world at the same time.”

Tesco is one of the largest private employers in Northern Ireland with more than 9,000 people in their stores, depots and local support office which is nearly double the number of people employed by the Stewart/Crazy Prices Group when they were acquired by Tesco in 1997.

Within Tesco there are many instances of people starting on the shop floor who eventually run the shops they work in or move into other jobs within the business, gaining valuable leadership and professional skills along the way.

Mr Mills explained “When I began my career as a trainee manager in Stewarts in Bangor I couldn’t have imagined that little more than 20 years later I would be Operations Director for the island of Ireland.

“Yet these career progressions are not uncommon as we nurture all the potential we can and offer training schemes where those who have the drive and determination to succeed can fast-track their careers.

“Our employees are part of the reasons why Tesco has been so successful in Northern Ireland. In return, we offer a competitive rate of pay, complemented by an excellent benefits package. Tesco can offer flexibility and a range of hours and shifts that are attractive to people who want to fit their work around the needs of their family.”

An effective and productive organisation relies heavily on a healthy workforce. This applies equally to mental health and well-being as Dr Robert Kerr, lecturer in Organisational Behaviour at the University of Ulster explains…

There is often some confusion when people start talking about employee well-being. Some feel the concept is too fuzzy and many are unsure as to what well-being actually refers to. When we talk about employee well-being, what we are really talking about is our employee health both mental and physical.

So why should organisations be interested in employee well-being?
Putting aside the obvious costs associated with poor physical health (e.g. lost productivity, absenteeism and turnover), mental health-related costs can be significant. The World Health Organisation estimates that one in four of us will be affected by mental illness. In 2006, The Confederation of British Industry calculated that stress-related absence alone cost UK businesses £660 annually per employee. ‘Presenteeism’ can also occur. This is when employees perform below par due to illness or a negative mental attitude. The Sainsbury Centre for Mental Health estimated that employee ‘presenteeism’ cost UK employers up to £15.1 billion a year.

But employee well-being is more than simply counting the costs of ill-health, it is about employees realizing their full potential and living a productive life. Improving employee well-being creates a healthier more engaged workforce. The Chartered Institute of Personnel Development identify employee well-being as a key source of productivity and sustainable competitive advantage and the 2008 PricewaterhouseCoopers report ‘building the case for wellness’ argues that focusing on employee well-being can result in improvements in your company profile, competitiveness, profitability, productivity and employee engagement.

Okay, so accepting there is an obvious business case for focusing on employee well-being where do you start?
Basically you need to assess your current level of organisational well-being, decide where you want to be and work out how you are going to get there (your well-being strategy). There are many sources of support to help you in this process. Locally both the University of Ulster and Business in the Community (BITC) are actively involved in well-being related research and interventions with a number of organisations. In 2007 BITC launched the campaign ‘Business Action on Health’ with the drive to embed health and well-being into the heart of every business. Within the University of Ulster Professor Marie McHugh, Dean of the Ulster Business School, leads an active research team working with a number of UK organisations in this area.

A key question in running your well-being strategy is how to maintain momentum?
One innovative way to maintain momentum is enlist enthusiastic volunteers from your workforce to act as well-being ‘champions’. Every organisation will have employees actively involved in creating, running or participating in health and well-being related activities in their spare time. These employees probably cajole other work colleagues to join them. Why not provide an opportunity for these employees to contribute to your campaign. Other employees are probably interested in running some sort of well-being related activity, be it a social activity, keep fit class or charity event, but most will have no idea where to begin. Providing a framework of support for these potential well-being ‘champions’ can create a structure that harnesses their natural drive and enthusiasm towards well-being related activities into momentum for your well-being campaign. McDonalds use the term ‘freedom within a framework’. By giving employees a support framework you can facilitate strategic consistency while allowing local creativity and innovation to shine. The framework should not limit the creative process but rather focus it towards the key aims of your well-being strategy. Don’t tell people what to do with a list of rigid policies, but empower them with room to move and create (the ‘freedom’).The ‘framework’ comes in the form of tools and guidelines that any employee interested in running a well-being event must work within. This system allows you to centralise the communication strategy for greater consistency of voice and profile but decentralise the actual administration of many well-being events to localised ‘well-being champions’ – helping you to communicate your well-being brand values in a local voice.

For those trading south of the border or further afield, movements in the value of sterling can have a huge impact on profit margins. James Beattie, relationship manager with First Trust Bank’s Global Treasury Services, takes a look at how to manage a key factor in the exporter or importer’s armoury.

Gloomy appears to be the word most frequently used to describe the UK economy at present and there appears to be no immediate prospect of a change in sentiment. In January, the headlines that dominated the financial press were all fairly negative. These included the fact that the UK limped out of recession as the economy grew by a mere 0.1% in the final quarter of last year. In addition, it was proclaimed that we have endured the deepest recession since the Second World War. Not particularly encouraging stuff.

It is clear that all sectors of the local economy are experiencing difficult conditions. The housing market remains under significant pressure, there is a growing question mark regarding the strength of consumer demand, mounting concerns over the health of the public finances, and the labour market remains tight. Yes, belt tightening appears to be the order of the day.

Perhaps surprisingly, given the economic weakness, Sterling has managed to claw back some lost ground versus the Euro. It moved back above the €1.15 level at the end of January. This was a five month high as demand for the UK currency increased on the back of growing market concerns about the risks to the Euro from the uncertainty over Greek fiscal policy. There is continuing speculation that the Euro will remain under short-term pressure due to the fiscal challenges facing not just Greece, but also Ireland and Portugal.

Sterling faces an important test over the next few months; the forthcoming General Election could produce a period of volatility as the markets worry about the far from certain outcome. Secondly, concern is growing over the new government’s plans to tackle the UK’s serious fiscal problem. This is a priority for either a Labour or Conservative government as the UK is under the spotlight by the rating agencies. A sovereign downgrade is not out of the question which would have a negative impact on Sterling.

The weakness of Sterling against the Euro in 2009 had positive implications for Northern Ireland, as it attracted significant levels of consumers from across the border. With significant question marks over levels of disposal income for local consumers, the ongoing influx of shoppers from the Republic will be extremely welcome by local retailers.
The perception that Sterling trades in fairly tight ranges against the major trading currencies is clearly outdated (many readers will remember when the Pound versus Punt exchange rate pivoted around the parity level with a degree of fondness). Perhaps not surprisingly, Sterling volatility causes inevitable problems for local finance managers. There is no doubt that finance directors and financial controller’s desire currency stability. Recent foreign exchange volatility has presented a challenge both for exporters and importers alike.

Companies who import products or services from the ‘eurozone’ should take a long, hard look at their pricing policy. Any business that is not managing its foreign exchange requirements closely could be in for a nasty surprise when it comes to paying for imports. Some companies try to avoid paying suppliers in the hope that the exchange rate improves. This can often cause real damage to the importer – supplier relationship.

Importers who continue to avoid currency losses on their operations are those that utilise current market rates when formulating prices and immediately hedge their anticipated currency requirements when a deal with a supplier is struck. This enables the business to accurately predict future cash-flows and protects from further Sterling depreciation. It also helps to delay price rises at a time when competition for products and services is intense.

On the other side of the coin, exporters must also recognise the importance of effective foreign exchange management. The attractive levels currently available for conversion of Euro receipts may or may not last. However, it would appear prudent for local exporters to evaluate the benefits of ‘locking into’ current market exchange rates for future sales.

Local exporters often identify the ‘worst’ exchange rate that safeguards the minimum desired levels of profitability. If the Pound rises to this level (known as a ‘stop-loss’), the company should hedge at least a portion (if not all) of its anticipated exposure. This will ensure that good opportunities to exchange currency receipts are not missed.

Given the increasing economic volatility, effective management of currency exposures is now more difficult than ever before. Ignore it at your peril.

Fusion Media Group

Stumbling across one of the most exciting companies to emerge from Northern Ireland in many years reaffirms the belief that this region can be a leader in whichever sector we set our mind to. David Elliott went along to Lightstep’s offices to hear more about a company making waves in the life safety market with a seemingly simple yet highly effective product.

Not many people know the London Underground extends far beyond the confines of the metropolitan area to a station which emerges at a commercial park in Dunmurry.

The Lightstep stop – complete with train, track and a vending machine – is tucked away in the offices of the company of the same name, one which is making waves in the increasingly important sector of life safety. Lightstep Technologies has attracted interest from some of world’s largest organisations and could, its directors believe, become one of the biggest firms to come out of Northern Ireland.

Before rushing out to Dunmurry to catch the next train to Covent Garden, it’s worth mentioning at this stage that the Lightstep station is a mock up of the real thing and part of a demonstration suite which offers an insight into the company’s products.

In an underground station, a high rise building, an airport or any one of the hundreds of other situations where the product is quickly finding a use, its intelligent evacuation system does exactly what its name suggests: it uses a built-in “intelligent directional lighting system” to evacuate people from a building, plane, tunnel etc quickly and safely in the event of an emergency.

It’s probably best explained from the user’s point of view. During the evacuation process, green LED lights form arrows on the floor, steps and lower walls and point to the quickest and most efficient way out of the facility. Red lights, formed into Xs, stop evacuees from going in the wrong direction. At its most basic, a simple system which is easy to understand even in the most pressurised emergency environment and, crucially, language non specific.

That’s not to say the system’s technology is basic; far from it. The clever part is Lightstep’s software which feeds information from sensors throughout the building or as the emergency situation develops and changes the LEDs to direct people away from dangers such as fire or crowded areas. And that’s one of the reasons Lightstep’s products have grabbed such immense interest across the globe, but particularly in the US.

Life saving
Founder and executive chairman Kieran Patterson uses the 9/11 Twin Towers disaster as an example of where the system could have saved lives.

“The vast majority of people lost their lives in the Twin Towers not from the impact of the two planes but on floor four,” he said. “First responders (fire fighters) were coming into the building using exactly the same stairwells as the people trying to get out and it became a crush situation on floor four.

“This was worsened by the fact some of the people climbing down were exhausted and had to stop on the stairwells for a rest. But there were two empty stairwells in each tower which weren’t being used. Our system would direct people to those empty stairwells.”

The principle sounds simple – direct people out of an emergency situation safely – and is something you’d have thought would have already been developed but in reality there is little or no direct competition.

The closest are standard emergency signs but these are generally placed above head height and quickly become obscured by smoke in a fire situation and, not being connected to an intelligent software system, could just as easily direct evacuees to a dangerous area.

“Ours is the only system in the world which will help you get out of the building rather than merely alerting you to the existence of an emergency,” Andrea Morrissey, the company’s public relations and marketing consultant, said.

Understandably, those responsible for protecting lives in situations where a high density of people are present have not only sat up and listened to Lightstep’s offering but are signing up to the system.

The wall of Lightstep’s meeting room is littered with flow charts listing interested organisations but most impressively is probably the New York Fire Department and the US government.

“We’re dealing at the highest levels within the US government, the very pinnacle of the security industry in the US,” Kieran said.

At a recent conference in Florida at the Centre for Global Preparedness, a gathering of some of the world’s leading security professionals, the company’s presentation left industry experts speechless. And at a trade fair in New York, the President of the American Institute of Architects was so impressed with Lightstep that the company has now been appointed an associated member.

Couple all this with the personal support of the US’s NASDAQ Stock Market International President John T Wall – who had been in Lightstep’s Dunmurry office the previous week – and it’s fair to say there is serious potential for this relatively young company.

Grand designs
The brainchild of Kieran while searching for a way to placate the planning department’s fire regulations during the building of a three storey house, the company has come a long way from humble beginnings in 2003.

“I scribbled the idea down on the side of a newspaper on a Sunday afternoon, went off and bought colouring pens, looked at my drawings and thought ‘this thing has legs’”, Kieran said.

Turning those legs into a product meant working closely with Dr Andy Barr from Marturion, a Lisburn company which develops high-tech medical devices.

“The fit with Marturion works perfectly but it wasn’t a straightforward process. I wanted it to do certain things, I knew where I wanted the product to go but I didn’t know how we’d get there.”

“But after working on it for some time I remember getting a call from Andy to say he had cracked the technology.”

With the technology worked out, it was on with getting the product out in the market.
An initial trade mission with Invest NI to Boston was the first contact with the US and since then the country has become the biggest potential market for Lightstep’s products. But as word has spread, interest in the technology has emerged throughout the world and throughout many different industries.

For instance, it’s currently in discussion with one of the largest coal producers in India which, with 3,000 kilometres of underground tunnels, is another huge potential customer.

“It’s not just a product for buildings,” said Andrea. “We’re looking at mines, aircraft, airports, trains, and ships.”

While initially publicity shy, Lightstep has now embraced all forms of marketing, in particular e-marketing through the likes of Twitter and Facebook.

“We had an international launch on October 1 2009 and since then the coverage has been astounding,” said Andrea. “It’s been a really effective way to get the Lightstep name out to a global audience plus it’s a great way for shareholders to hear what’s going on with the company. We can see increased traffic to our website and general enquiries through this medium.”

Kieran starts most of his enthusiastic stories with “we, the team, here at Lightstep…”
It’s easy to see the levels of enthusiasm in all of the team and why this has become such a huge success in a relatively short period of time. The culture and the spirit which has grown in the company is best described as ‘the best available… plus one!’

While there is no direct competition, industry leaders in the field of emergency alert systems are obviously cottoning on to the huge gap in the market Lightstep is filling. To protect their copyright, Lightstep has nine patents against the technology and Kieran reckons they have a 24-month development advantage.

“This company has gotten so big, so quickly,” he said. “It’s amazing how quickly a simple idea became potentially Northern Ireland’s biggest company.”

Our dependence on fossil fuels can’t carry on indefinitely. Are we in Northern Ireland building a strong enough renewable energy sector to offer a viable alternative and is government policy doing enough to encourage the sector’s development? Symon Ross reports…

While the Copenhagen Accord on climate change reached late last year was short of what many campaigners had been hoping for, the high profile of the event at least confirmed that the question of global warming is now high on the world agenda.

Whether or not you agree with the science of global warming, what cannot be argued with is the fact that fossil fuels are a finite resource. Oil and gas reserves will run dry and that means renewable energy will have to make up a far greater proportion of our energy needs in future than they do today.

According to recent statistics released by the Utility Regulator, around 10% of electricity distributed in Northern Ireland came from renewables in 2009, including landfill gas and biomass.

That leaves us some way short of the target of 40% renewable electricity by 2025 in the Executive’s Strategic Energy Framework. When looking at total energy use rather than just electricity, the dream of a renewably powered Northern Ireland looks further off still.

“Overall Northern Ireland would be at the bottom of the renewable energy league for Europe. Of all the energy we consume about 2.5% of that comes from renewable energy sources. That would be at the bottom of the EU 27,” says Michael Doran, director of advisory group Action Renewables.

“DETI do now have an appreciation that renewables will be an important part of the mix. But my only concern is that they are relying too much on onshore wind. There’s still a lack of drive within government departments to find renewable energy solutions.”

Despite lagging in many respects, Northern Ireland does at least have a number of local manufacturers successfully tapping into the growing renewables market at home and abroad.

Former shipbuilding giant Harland & Wolff has diversified into renewable projects, completing 90 wind turbines for two offshore wind farms last year, helping develop the prototype wave-energy generator Wavebob and assembling the marine turbine unit now installed in the tidal waters of Strangford Lough.

A host of local firms also manufacture, export and install solar products (Kingspan Renewables, Willis Renewables, Solmatix), wave and tidal generators (PureMarine Gen) and wind turbines (Vertical Wind Energy, Limavady Gear Company, B9, J.A Graham).

Incentives blow by
It is from wind that the Executive foresees much of its 40% target being achieved.
However, Tony Gordon from Co Antrim-based vertical axis turbine maker Vertical Wind Energy believes that farmers and non-domestic users in Northern Ireland are less likely to help achieve this goal by installing their own wind turbines.

That is because feed-in tariffs – payment incentives for generating carbonless electricity – were introduced this week in the UK but not in Northern Ireland. The Executive did not sign up to the 2008 Energy Act that created legislation for these payments, so there will be a lengthy delay even if it does decide to implement them.

“We have one of the best wind profiles in Europe and we are largely a rural population so all the points for stack up hugely in Northern Ireland. Not having this sort of incentive package is crazy really,” said Mr Gordon.
“Nobody is addressing it or taking ownership for it. I can think of at least two companies that would benefit greatly from this here. It is a great sadness we can’t sell into Northern Ireland.”

VWE’s sales office is in the Northeast of England and it is planning one in the Republic because its incentives are better than in Ulster. Mr Gordon believes failure to catch up will create risks for the burgeoning renewables industry here.

“There’s not going to be a huge amount of incentive to create new products and new businesses if there is no market here. There’s potential for manufacturing jobs and technical creativity that go into these things – we’ve got great universities here in NI, great minds, and there’s a real danger those skills are going to be wasted,” he said.

Last year a coalition of industry bodies and environmental campaign groups under the banner Green New Deal called for a new approach to tackling climate change, recession and rising energy prices. The group highlighted that 99% of Northern Ireland’s energy is imported and fuel bills account for around 10% of the province’s income. They believe investment in green buildings, power generation and transport infrastructure could give a country the competitive edge as it emerges from recession.

Nigel Smyth from the CBI, part of the coalition, believes renewables are an insurance policy against very high fossil fuel costs and carbon prices.

“The renewables sector offers significant potential for growth in the future, with hundred’s of companies already operating in this space. Clearly some technologies have good short-term opportunities including large-scale wind, energy from waste plants and biomass. These need to be encouraged, with the biggest barrier at present being planning policy and guidance,” he said.

“Progress has been achieved over the last twelve months but if the Executive’s Programme for Government 2025 target for greenhouse gas emissions is to be achieved planning policy must be more favourable to these investments.”

Mr Smyth believes more needs to be done to encourage and support research into relevant low-carbon technologies – including wave and tidal energy and micro generation – fast-tracking existing technologies to full deployment, enabling public procurement to aid technological demonstration and making sure the right skills are in place.

“Northern Ireland’s tradition of innovation will hopefully ensure that local companies take advantage of these emerging opportunities,” he said.

In the corporate sector there are some firms not directly involved in renewable energy production that have spotted the business benefits of aligning themselves with the sector.

Wrightbus is making energy efficient buses in Ballymena, while Fermanagh-based Balcas has enjoyed huge success with its wood pellet fuel under the Brites brand. Elsewhere, building materials maker Brett Martin is installing its own wind turbine and twelve firms including Glen Dimplex, the Carvill Group and Gilbert-Ash are associate members of Action Renewables, meaning they have committed to investing in renewable energy technologies.

However, many firms, large and small, still only pay renewable energy lip service.
“Generally the uptake is very low and in my opinion that’s because they don’t see any leadership from government,” says Michael Doran.

“What is having a detrimental effect on the market here is for companies who are renewable energy manufacturers or installers, they don’t know what’s coming round the bend. It is hard to do business planning in that environment.”

Courtesy of Shell

Being able to predict the next move for oil prices would be a very useful skill but one which has proven difficult to learn for even the most long-serving energy professionals. David Elliott takes a look at how the experts expect the oil price to evolve over the next 12 months.

You only need to fill your car up with fuel or order home heating oil to realise the price of energy has risen sharply over the last few months. This not only translates into higher household bills but also draws on costs for a business and can seriously impact profit margins.

As a result, putting together a business plan for an energy-dependent company can be fraught with difficulty as this volatile natural resource bounces up and down ‘like a fiddler’s elbow’, to quote an oft-used phrase used by traders familiar with its unpredictable nature.

To get a handle on where the black gold of the commodity arena is headed can sometimes be described as a guessing game but in the absence of a crystal ball it’s certainly worth gathering together educated guesses from the experts in this slippery field.

While markets for gas, diesel, petrol and the other elements which make up the energy complex are all influenced by a specific set of fundamental factors, the overriding benchmark for all these grades is the crude oil market.

At the time of writing in early February, a barrel of West Texas Intermediate crude oil on the New York Mercantile Exchange for March delivery traded around $74 a barrel but this will no doubt have changed significantly by the time you read this. Putting a finger on whether the same barrel of oil is headed higher or lower – as Bruce Forsyth used to say – than $74/bbl is the $60,000 question for traders making their money from buying and selling oil and for businesses where energy of any form makes up a considerable proportion of monthly outgoings.

Before taking a look forward, it’s worth taking a look at historical price movements for crude over the last few years. In 2003 crude was trading at around $30/bbl and had been for some time. Over the next few years it embarked on a steady climb higher on the back of growing demand from developing countries such as China and India, tightening supply as oil fields such as those in the North Sea approached the end of their workable life and the overriding spectre of peak oil, the theory that the world is running out of oil. By 2007 it had climbed to $80/bbl. By July 2008 it peaked at $147/bbl.

With this the shackles were off. Experts weren’t ruling out a run up to $200/bbl and suddenly previously uneconomical alternative energy sources were coming into their own. But it’s this latter reason, combined with the fact more high cost oil extraction methods also became viable – thereby adding more to the supply equation – and that the global economy entered one of the worst periods of recession in years, that meant such high prices were unsustainable.

What goes up must come down and during the latter half of 2008 and early 2009 prices plummeted to nearly $33/bbl and in doing so took the wind out of the sails of the oil bulls who predicted sustained higher prices.

Obviously the market has picked up again since but where to next? For this we turn to the investment banks who, although not flavour of the month, year or indeed decade, tend to have huge investments in the oil market and therefore employ some of the world’s foremost experts in the field.

Analysts at Deutsche Bank don’t think there’s much chance of further gains for oil
“Over the past year, we believe oil prices have been driven higher by rising equity markets, a falling US dollar and more extreme weather,” they said. “In terms of physical fundamentals, we believe the high level of oil inventories in the US, rising OPEC (Organisation of Petroleum Exporting Countries) spare capacity and strong non-OPEC oil production growth will present a set of hazards of oil prices this year.”

OPEC controls about 40% of the world’s oil production and while not as influential as it has been in years past, can still have a significant influence on the oil price if it decides to alter its output levels.

Evolution Securities, a brokerage in London, believes $70/bbl is a fair price for oil in the next year.
“Until the major oil producers begin to report an upswing in demand for their products, we maintain our long-term oil price assumption at $70/bbl,” it said.

While this suggests the upside for oil prices if pretty much capped, there doesn’t seem to be much potential for significant downside.

Mike Wittner, an analyst at French bank Societe Generale, feels this $70/bbls level will provide a floor.
“If crude prices fall significantly below $70/bbl with some momentum and appear to have the potential to stay well below $70/bbl, we believe OPEC…will cut actual output in order to support prices,” he said. “In our view, OPEC intends to defend a $70/bbl floor.”

Barclays Capital takes a more bullish view.
“We expect the price of West Texas Intermediate (crude) to average $85/bbl this year and $97/bbl in 2011 versus an average of just $62/bbl in 2009,” it said.

But as with all markets, nothing is certain.
“Nigeria’s internal politics, Iran’s nuclear programme and the Iraqi parliamentary election increase price uncertainty,” the bank concluded.

Price uncertainty probably sums up the oil market’s future best. While a period of relative stability around $70/bbl looks likely, any political disruption in any of these large producing countries could see prices spike higher. For how long is difficult to say but, given a weakening demand seems to be a constant amongst most experts, upside potential doesn’t look likely to last.

Off course, nobody thought the crude price would spike to $147/bbl in 2008…

Michael Cooper

DETI minister Arlene Foster has put together an action plan in response to the recent Independent Review of Economic Policy, or IREP. John Simpson casts a critical eye over the plan and asks whether it will help the local economy.

Regional economic policy is to be reshaped and more effectively targeted on clearer objectives. The Minister, Arlene Foster, has set out her agenda drawing on the proposals made in the IREP chaired by Professor Barnett.

The proposals are wide ranging and include restructured policy making arrangements in the Minister’s department (the Department of Enterprise, Trade and Investment), improved operating mechanisms for Invest NI, plans for the Executive to set clearer priorities for the economy and facilitate their implementation as well as a shift in the way in which official finance is used to leverage better results.

In total, Arlene Foster has approved a radical shake-up in business development mechanisms. Many of the IREP proposals now officially adopted can only be implemented with the co-operation of other departments.
Businesses will find that investment proposals put to Invest NI for support will continue to be assessed for their additionality and will also be subject greater rigour about the merits of the investment in terms of generating an economy creating higher value added goods and services.

The Minister has divided her recommendations from IREP into four generic groups where the critical practical impact come as part of changes in assistance to business from Invest NI.

Assistance to business
The debate provoked by IREP had several themes but two gained more attention than the others. First, can businesses expect Invest NI to continue to offer Selective Financial Assistance (SFA) to additional investment whether by new foreign direct investment or from established businesses with an extra investment programme? Second, how will the type and scale of financial assistance be affected by new EU rules on State Aid and Regional Assistance?

These questions lie at the centre of much of the financial assistance available from Invest NI. Local business organisations took exception to the prospect that Invest NI would narrow the eligibility criteria. IREP was thought to suggest that existing businesses should be refused assistance for ‘repeat’ investment. This could have meant that welcome expansion plans would be rejected even where, in comparable terms, they were equivalent (or stronger) than the merits of FDI.

The Minister has dismissed that idea. SFA will continue to be widely available. However, to enhance effectiveness and maximise its impact, as well as meeting changing EU requirements, the criteria will become more selective. Critically, awards will be more directed to proposals that involve explicit R&D applications or significant innovations.

In support of this shift towards R&D and innovation-related investment, the Minister points out that these objectives already account for 38% of Invest NI’s programme spend.

Selective Financial Assistance and State Aids
SFA will be available for all eligible business investments subject only to an assessment of the contribution to the economy, including creating higher value added (per employee) and contributing to productivity gain.
The debate about SFA extends logically into the emerging impact of tighter EU State Aid rules. The IREP report outlined the prospect that after 2013 Northern Ireland, along with other similar parts of the EU, would no longer be permitted to offer current forms of SFA under the tighter rules on state aid. Also, the permitted scale of aid begins to reduce from the end of 2010.

The Minister has hedged her strategy on state aids. Her statement points to the preparation of an argument to be made in Brussels (presumably after approval in Whitehall) for Northern Ireland to be given a derogation from the incoming EU rules. Post 2013, the Minister hopes to have options to continue SFA-type programmes.
The focus of the proposal is that any derogation would be defined to allow support for improved business competitiveness, particularly for innovation and R&D.

This strategy on State Aid is cleverly constrained to emphasise that there would be selectivity in application. More generalised SFA would attract less sympathy from the EU Commission.

The more detailed arrangements for the continuing but refined application of SFA have been referred to one of the official implementation groups involving DETI and Invest NI. Its report is timetabled to be available in June 2010. The initial guidance suggests that the review group can be expected to set higher ‘job quality thresholds’ for assistance and some selectivity for strategically important projects and those in areas of particular need.

Venture capital initiatives
There are very few ideas from IREP that the Minister has rejected. One rejection is the suggestion that the role of Invest NI in support, or provision, of venture capital should be narrowed to smaller seed corn type projects. The Minister wants Invest NI to continue to intervene to develop the local venture capital market.

Encouraging higher productivity
When the IREP proposals were first published there was very significant misunderstanding and even misreporting of some of the critical parts of its analysis which were (inappropriately) labelled as showing that Invest NI had wasted some of its resources. That was an unhelpful misreading.

The Minister has now consigned that argument to the past. She says: ‘There is no evidence in the report that resources have been wasted.’

The substantive question raised by IREP was whether Invest NI funding had always been allocated to projects that might otherwise not have occurred in NI. The methodology used by IREP was not reliable and although it did raise doubts about the effective additionality of Invest NI’s decision making, it could not be proven that, even with hindsight, better decision making was possible.

When the Minister says that there is no evidence that resources have been wasted, her statement goes (too far) from the overstated criticism into an unqualified compliment.

A more important issue where IREP questioned the outcome of Invest NI’s actions was in asking whether an assessment could be made of the extent, if any, of productivity gains by businesses assisted by Invest NI.
In the Invest NI evidence, there are no acknowledged relative or absolute comparators on the achievements of Invest NI clients. Over recent years, Invest NI has been reticent in assessing overall client performance in terms of productivity or value added per employee. The Minister would accept an aspiration that there should be improved performance assessment and has put her department into a pivotal role by agreeing that in future it should be responsible for performance monitoring.

Clearer targets and accountability
The Minister has set the framework for decision making by Invest NI. Invest NI is expected to publish more detail of its new operational methods. There is now the prospect of a more focused action plan from Invest NI and, where it matters, assistance to businesses which can best benefit the local economy.