Time to encourage firms with a selfish interest in trading in NI

BELFAST BRIEFING: As the recession bites, politicians need to support companies in the North for the long haul, writes Francess McDonnell

Take your pick of any office in Northern Ireland, any building site, factory or small firm – and pay cuts, reduced working hours or lay-offs will undoubtedly be among the top “water cooler” conversations of the day.

Workers in the North are growing increasingly anxious about their job prospects and with good reason. Each week there are more lay-offs and dire warnings about the outlook for the local economy.

The latest is from Bank of Ireland Northern Ireland which warns that up to 1,000 jobs could go per month this year as the economy contracts by 1 per cent.

The problem is what can Northern Ireland and its political leaders do about this? The answer in reality – as the North’s Executive knows only too well – is very little.

It can offer attractive financial incentives to indigenous firms and foreign direct investors but this, in itself, will not save jobs in Northern Ireland.

The Executive is powerless to influence corporate decisions made thousands of miles away. It also cannot just step in and save locally-owned firms which, for one reason or another, have no chance of survival.

Last week Seagate and Nortel put the future of their investments in the North under the spotlight. Seagate plans to implement pay cuts and has warned of potential redundancies. Nortel filed for bankruptcy protection in the United States and has warned that its operations in Europe – including Northern Ireland – will face a similar predicament.

If the likes of Seagate or Nortel wanted to pull out of the North and take more than 2,000 jobs with them, no amount of financial assistance from the Executive would convince them otherwise.

The North can boast of very few blue-chip international investors – Seagate, Caterpillar and Nortel were at the top of that tree. The few it now has are in the process of reducing their operating costs in the North, which nine times out of 10 – as Caterpillar’s actions at FG Wilson in Larne will attest to – results in job losses.

There are exceptions to the rule and the chief one in Northern Ireland at the moment is Bombardier Aerospace. The Canadian aerospace group pledged to invest £500 million (€552 million) in its Belfast operations last year – the largest single investment by a company in the North.

Bombardier directly supports nearly 6,000 jobs and thousands more indirectly. It also has long-established, multimillion pound, mutually supportive relationships with suppliers in the North. The group has received substantial government support in Northern Ireland where it has been offered a total of £155 million towards the cost of its latest investment project.

But what makes the Canadian group different from some foreign direct investors is that it has committed to Northern Ireland for reasons not solely based on financial incentive packages.

Economists believe the Executive has no option but to try and continue to attract foreign direct investment to improve the North’s growth prospects. But the questions in the current climate are what type of international company would consider locating in Northern Ireland and would it be worthy of millions in financial support?

Richard Ramsey, Northern Ireland economist with Ulster Bank, says foreign-owned companies have had, and will continue to have, an important influence on the local economy.

“Some of the largest foreign-owned companies, such as Seagate, Bombardier and FG Wilson , account for a disproportionate share of Northern Ireland’s exports, employment and research development investment,” he said.

“Attracting foreign direct investment is often just the first step of maximising the potential impact on the Northern Ireland economy. The challenge is to attract and weave this investment into the fabric of the Northern Ireland economy so that the investment becomes embedded.”

But many people believe it is equally important – perhaps more so in the current economic downturn – for the North’s political leaders to focus on what Ramsey describes as the companies that have “a selfish strategic and economic interest in doing business in Northern Ireland”. Companies, for example, like the Almac Group, the international biopharmaceutical business, which will not pull out of the North overnight.

Craigavon-headquartered Almac, which was founded in 2001 by Sir Allen McClay, is unlike most companies in the North, upbeat about its prospects for 2009. The privately-owned firm increased its local and international workforce by almost 250 last year and expects to expand further this year. Almac, which employs 1,428 people in the North and 762 in the US, is a major contributor to the Northern Ireland economy.

A report carried out recently by PricewaterhouseCoopers (PwC)suggests Almac’s wages and salaries bill is in the region of £35 million per annum in the North. It also sources significant goods and services locally which not only sustains thousands of jobs but also pumps much needed capital back into the economy. It spends on average £16 million per annum on goods and services within the North.

According to PwC it is estimated that Almac contributes direct value, when added to the local economy, of £88.7 million per annum.

Almac has received financial support from the Northern Ireland government but it is not the reason why the company is based in Craigavon or why it re-invests and expands in the North.

According to Alan Armstrong, Almac’s chief executive officer, it is because Almac is “rooted” in the North. “Northern Ireland will always remain the root of the tree. We are building a large facility at Yardley in Pennsylvania in the US, but we are in Northern Ireland for a variety of reasons and they will not change.

“The roots of our company are in Northern Ireland, we have a good ethos, there is a good work ethic and our business is global. We believe Northern Ireland is a fantastic location for us to operate from,” Armstrong explains.

This is one company where pay cuts, reduced working hours and possible lay-offs are not on the horizon.