Darling's Robin Hood economics a model for North to follow

BELFAST BRIEFING:Budget 2010 may not be a panacea but economists say it could set agenda for Executive, writes FRANCES McDONNELL

CULLYBACKEY ON the banks of the river Maine can lay claim to few serendipitous events in its history. But the complete transformation of its rural police station into a state of the art business centre could mark a changing point.

The new Co Antrim centre has officially opened its doors just as the dust is settling on the UK chancellor’s budget which promises, in theory, to be one of the most pro-small business budgets in years.

The Maine Business Centre will offer affordable accommodation to start ups and established small firms – exactly the kind the UK chancellor sees as the “backbone of future economic growth and jobs”.

The North currently has more than 66,000 small firms which each employ 20 people or less. Last week, Darling unveiled a £2.5 billion package of measures designed to give small businesses a helping hand. These included steps to enable them to get better access to finance, lower taxes and more time to pay them.

The UK chancellor has also instructed two partly nationalised banks, the Royal Bank of Scotland, the parent company of Ulster Bank, and Lloyds, the parent company of Halifax, to provide £94 billion of new business loans over the next year. He has stipulated that half of this must be made available to SMEs.

A £500 million Growth Capital Fund will also be established in the UK to provide fast-growing companies with the private capital they need to expand.

Other initiatives include reducing business rates, increasing investment allowances and increasing entrepreneur’s relief, which will allow entrepreneurs to hold on to more of their cash when they sell up.

In an ideal world budget 2010 should make life easier for small business owners and would-be- entrepreneurs in the North but will it make any difference in reality? According to the experts it might but nobody is taking any bets just yet.

Lindsay Todd, Northern Ireland tax leader with PricewaterhouseCoopers believes there are opportunities for small firms but the impact is still unclear. “The real issue for the Executive is the state of the local economy and its dependence on Westminster.

“One-third of the 122,000 new jobs created over the past 10 years have been lost in the past 24 months and, with nearly 30 per cent of these in construction, they are not coming back in the short or medium term,” Todd states.

Glenn Roberts, the senior partner at Deloitte Belfast suggests the latest initiatives in the UK budget could be a step in the right direction but they “do not provide a great deal of support for entrepreneurial and fast growing businesses”.

“Like all policies time will tell whether SMEs will truly benefit. There are questions around how banks will be forced to lend,” Roberts warns.

But Richard Ramsey, Ulster Bank’s chief economist in Northern Ireland, says the issue for many businesses in the North at this time is not about investing for the long term but simply surviving tomorrow. In this context budget 2010 and its theme of “Securing the Future” may not deliver all it initially promises for Northern Ireland.

Ramsey says the £2.5 billion package for small businesses was funded largely by the chancellor’s new £2 billion tax on UK bankers’ bonuses. He describes this as a classic example of “Robin Hood economics in practice” and he believes it could set the agenda for local politicians to follow in the future.

“After the election, Northern Ireland will have to deliver its own fiscal austerity package and economic development strategy. Robin Hood economics needs to lie at the heart of such strategies,” Colin Walsh, managing director of Belfast-based venture capital fund manager Crescent Capital, says the one upside to the economic downturn has been the emergence of talented and experienced people who are now looking for new opportunities in Northern Ireland.

“These are very capable individuals, some of whom are also involved in management buyouts, who are creating very exciting opportunities in Northern Ireland at this time,” Walsh says.

Crescent, which has backed businesses such as Andor Technology and Amtec Medical, is actively looking for investment opportunities in Northern Ireland-based IT, life sciences and manufacturing companies, he says. He believes the North offers a “vibrant” opportunity for investors and entrepreneurs alike.

Crescent is currently in the process of establishing a fund which could total £60 million.

If Darling’s latest budget does nothing else but encourage new entrepreneurs in the North to take a risk then it may well pay for itself in the long run.