O’Conall Street

I am displeased and concerned the main parties in the North are heading for a stand off over the devolution of policing and justice. Sinn Fein and the DUP are squaring up rightly over the near certain slippage in the May deadline for the transfer of powers to Stormont. O’Conall Street will save it’s shoppers the ins and outs of this particular spat. You could say SF handed the DUP a string of vetoes on critical issues at St Andrew’s or that the DUP are spending too much time looking over their shoulders to Jim Allister. Bottom line is that on this issue the DUP is in the driving seat and has the legislation on its side.

This is not a principled battle, it’s a political one. The DUP say it is not about if but when. SF have moved onto new ground today by trying to link the DUP’s foot dragging to an undermining of NI’s attractiveness as an investment location. Many in the business community will be worried by this stance. The two are clearly not connected and investors are very unlikely to consider the devolution of policing and justice a deal breaker, however much the majority of both communities might want to see it happen.

What investors will be looking for is clear incentives from the British Government to invest here. To be fair to Nigel Dodds he continues to lobby hard for this. I hope SF raised this important issue with An Taoiseach when they met yesterday although there are no reports of them having done so in today’s press.

Two reports came out yesterday which further strengthen the case for fiscal incentives in the North. The first was from Ulster Bank which points out in its PMI report that private sector activity in NI has declined for the third month in a row and it now at its lowest level since August 2002. According to a report on Business World the bank said:

 ”Following a weakening in private sector output for the sixth consecutive month, February signalled a new survey low among NI firms. The latest survey represented the third month of declining output levels in NI which is in marked contrast to continued growth within UK firms. With the levels of new business declining for the third month in succession, NI firms have become increasingly reliant on the backlogs of work built up before the current slowdown. As a result, employment growth remains weak but encouragingly still in positive territory and stronger than four other UK regions. The current weakness in activity is most apparent within retail and services with the latter experiencing its first fall in output in the survey’s history. This suggests that the NI consumer is reining in expenditure as rising inflation, particularly in relation to food and energy, erodes disposable incomes. Meanwhile the subdued levels of demand are restricting the pricing power of NI firms in the face of persistent cost pressures.”

The second report came from the CBI out of London and highlighted the UK’s increasingly high corporation tax. According the CBI the UK is slipping globally and becoming more uncompetitive.

They say the UK has now reached a tipping point. The ever rising business tax burden and the failure of the tax system to respond to increasingly global business activity is creating a corporate tax system which is unsustainable in the long-term. To tackle this, the CBI report proposes a headline corporation tax rate of 18 per cent within eight years, with the cut more than paying for itself over time through increased economic activity.

O’Conall Street would commend these reports to the folks on the hill (Stormont for those of you who are no BBC NI viewers). The big political debates are important and parties are entitled to their views but the economy must transcend politics and the parties must unite to strengthen it.

John Simpson has a good article yesterday in the Belfast Telegraph Business Supplement (not available online yet) picking up on something we highlighted on O’Conall Street last month, Gordon Brown’s commitment to reopen the debate on business tax discreation for Scotland . The debate about fiscal disharmony in the UK has already started and its Scotland that is in the lead. It appears the government there is really putting the economy first.

This entry was posted on Tuesday, March 11th, 2008 at 9:34 am and is filed under Business, Politics, Public Affairs. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.