22 April 2015

In a previous article written for Ulster Business, I likened several government strategies to the mistake made in Australia when the cane toad was introduced to tackle the problem of cane beetles. In principle it was a good idea, but in practice it became Australia’s largest environmental mistake. To this day the cane toad remains a pest and one of the few animals around the world that residents are actually encouraged to eradicate where possible.  The analogy’s reference point to Northern Ireland business remains the “Modern Government Lease” and the detrimental effect it has had on office and investment values alongside creating a scenario where development of new facilities is simply not viable.  In a recovering economy, one which is heavily based on inward investment and attracting service companies to locate here, why are we seeing no development?

Invest Northern Ireland is being rightly lauded for its encouragement of and success in attracting new service sector jobs to Northern Ireland; over 6,000 have been announced in the year to March 2015, but there is a serious flaw in the plan. Where are these companies going to locate? There is currently only one office development under construction and we will be waiting at least another couple of years before anything sizeable comes out of the ground in the city centre. Delivering a viable grade A project requires a minimum rental level of around £18 per square foot, and yet on the INI website I find the following statement, “Prime office rents are among the lowest in Western Europe. New, purpose-built and fitted-out office space costs are easily affordable with Northern Ireland maintaining the lowest net-rent in the UK. Office space is going for £12-50 per sq ft in the Greater Belfast area”. Quite simply this is ludicrous and highlights the limited commercial understanding within the public sector. Until it wakes up and realises that development is required, accepts that rental levels need to be viable and that quality product must be delivered, many of the previously announced job opportunities will be slow to come on stream.

Another huge “cane toad” moment came recently when we again experienced political brinkmanship surrounding welfare reform. From a business perspective we are poised to receive a huge economic boost with a reduced corporation tax rate which will be a real incentive to inward investment. Such investment is the key to advancing the Northern Ireland economy, creating jobs and improving citizen wealth. However, despite prior agreements, we arrived at another deadline/impasse/peace process defining moment/stand-off, with our political leaders looking backwards as opposed to seizing the opportunity to present the stability Northern Ireland needs for its future.
As I consider public sector” cane toads” I cannot ignore the impact of the influx of giant international equity providers who have been buying up the local banks’ debt. Whilst the positive side of recapitalising our banks is obvious, the effect of these opportunistic raiders will be felt for years to come. The profits made will leave Northern Ireland and we all know that reinvestment is difficult enough without all value being sucked away to a corporate boardroom in another jurisdiction. These funds follow the world market and descend on a region, extract maximum value and then move on with little thought for the consequences in their wake.

One of the true advantages to being an independent practice is the ability to look out for clients’ interests as opposed to being governed by the demands of a corporate shareholder. The interconnectivity between multi-national corporations tends to mean that local businesses’ needs get lost in the drive to meet a wider corporate strategy. 

Our experience is that deals get done that bear little relevance to local circumstances, and in the longer term will mean that indigenous businesses will struggle to compete on a level playing field.  The big equity players are not here for the long haul; they are here for a limited spell and then will be gone. We need our local banks to continue their recovery in order that they may again take the lead in supporting well thought out local development activity and help move us forward.

At Osborne King we are fortunate to have retained a solid client base but moving projects forward remains our biggest challenge. We need our politicians, public sector and financial institutions to see the true potential of investing now for all of our futures. We need to move away from flag waving politics and create the enterprise culture that will develop our economy further. We need a reduced rate of corporation tax to create a positive commercial advantage over other regions and accelerate our economic growth. We need a simple change to rating policy which will exempt new development from vacant rating liability until first letting is achieved. We need the newly integrated councils to deliver planning decisions quickly and effectively allowing development proposals to be pursued. We need some seriously joined-up thinking between government departments and agencies to encourage the private sector to further invest in projects.

In short we need our politicians to stop posturing and prevaricating and actually get on with delivering the “peaceful” future we have been promised for the last 21 years. It is only with a strong economy that other issues will be successfully tackled. Let’s finally eradicate a few cane toads in Northern Ireland!

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