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The issue was raised once again following last week’s Spring Budget announcement by the Chancellor Jeremy Hunt, which of course confirmed plans for the UK-wide main rate to increase to 25 per cent from next month.
It puts us massively out of kilter with our closest neighbours in the Republic of Ireland, which, on the face of it, surely places Northern Ireland at a disadvantage.
I expect we can all agree that in order to grow the economy and our businesses, we should do everything we can to create an environment that makes it easy for businesses to invest in themselves first.
So, for me, the question is how do we best go about that and if there is a ‘golden ticket’, what is it?
Based on enquiries by potential international investors, studies have consistently shown that access to markets and access to clients are the top two reasons why businesses would seek to invest into the UK.
By comparison, a favourable rate of Corporation Tax ranks behind other drivers such as access to resources, skills and technology.
A reduced rate of Corporation Tax in Northern Ireland was never going to represent the ‘golden ticket’ on its own, however coupled with the other tax incentives that the UK has to offer and Northern Ireland’s unique position of now having access to both UK and EU markets, it could certainly cause investors to consider Northern Ireland more closely as a preferred region.
The importance of other tax incentives is supported by the experience across the UK where, despite having the lowest headline rate of Corporation Tax in the G7, it has lagged behind all of its major peers in terms of business investment.
What did make a significant difference, however, was the introduction of the ‘Super-Deduction’ in 2021 which provided companies with 130 per cent allowance on capital spending.
Research by our colleagues at Grant Thornton UK, for its Business Outlook Tracker, found that the measure had significantly boosted investment in mid-sized companies since its introduction.
It found more than two-thirds (67 per cent) of mid-sized business had made use of the super-deduction, with the majority of those (79 per cent) stating it had encouraged them to invest more than they would have otherwise done so.
Those are incredible figures.
It was no surprise then that the Chancellor brought forth an oven-ready replacement in the form of ‘full expensing’ for capital investments in IT and ‘plant and machinery’ which will go live on 1st April.
Available initially for three years, the potential for the measure to become permanent was music to the ears of businesses and is set to make the UK’s ‘plant and machinery’ capital allowance regime the joint most attractive across the 38 OECD member countries.
That is particularly important as we seek to attract foreign direct investment.
The Chancellor also talked about introducing ‘at least one’ investment zone in Northern Ireland.
Okay, nothing new in that, you might say – but if this particular prospect is grasped, is there an opportunity to effectively enable a low tax environment across the whole region through the supply of tax reliefs, not just on ‘plant and machinery’ but on ‘bricks and mortar’ and a range of other expenses such as rates and Stamp Duty Land Tax?
We need to start putting more pressure on politicians to reform the Northern Ireland Executive and then make every effort to see an investment zone delivered and fully leveraged.
We’ve already got many of the raw ingredients required to supercharge this part of the world.
In his statement, the Chancellor talked about focusing efforts on enterprise towards supporting growth in the “sectors of the future” such as green industries, digital technologies, life sciences, creative industries and advanced manufacturing.
If these are sectors of the future, Northern Ireland is already well on its way with many of our high growth companies in these very industries increasingly making waves, not just here but across the world.
Combine that with our access to markets, the ‘full expensing’ regime and the potential benefits of an investment zone, and we might just have found our ‘golden ticket’. We just need to ensure we have the infrastructure and skills pipeline to maximise the potential of the prize.