The good news, relatively speaking, is that after a significant drop across all indicators in Q3 22, NI Chamber’s recently published Quarterly Economic Survey showed that business performance in Northern Ireland during the final quarter of the year remained steady, albeit at a very weak level.
Most businesses are still trading either well or reasonably however, there are signs that businesses are not performing as well as they were during the same period 12 months ago. So whilst it is welcome that in such a challenging environment, our members are not reporting material deteriorations since the last quarter, performance is still weak and business prospects around profitability have declined. In such a difficult trading climate, it’s imperative that we find ways to mitigate the challenges and target growth simultaneously.
With the right approach, business rates is one of the few tools a functioning Executive could use to drive ambitious, sustainable growth. Reforms which provide reliefs and incentives for sustainable investment would go some way to helping us meet our ambitious 2030 climate change targets.
Across the UK, business has long been critical of how non-domestic rates are applied. Often, they have been considered to be an outdated tax, not reflective of a modern, digital age. Currently the UK has some of the highest property taxes in the G7 and with rates being devolved, Northern Ireland finds itself at the top end of that.
Some notable progress was made in 2020/21, when businesses successfully campaigned to bring non-domestic rates here closer into line with the rest of the UK. That move saw the previous Executive reduce the rate by 12.5%.
There was further progress when the Department of Finance announced a move to the new three-year revaluation process; REVAL2023. That was a significant step in the right direction towards creating stability and predictability in the rate through more regular, periodic revaluations. The results of that first revaluation in three-years were published last week and as you might expect, it will impact some business positively, and others negatively.
Whilst creating certainty in the process is welcome, revaluation without corresponding policy reform is simply not enough. Business understands the need to widen the tax base, but the starting point has to be an evidence-based, objective assessment of the current system of reliefs and exemptions.
If we are serious about green growth, we need to see ambitious green reliefs and a ratings system which adequately supports those enterprises that are investing in our sustainable future.
As it stands, without appropriate reliefs in place, renewable energy assets are seeing an increase of 70% on average across Northern Ireland as a result of the REVAL2023 process. Inaction on policy reform is in effect penalising those driving our world-leading potential at a time when we should be heavily focused on incentivising it.
If we are serious about green growth, we need a functioning Executive to grasp the importance of this issue. The private sector is up for a discussion on making Northern Ireland’s public finances sustainable but at the same time, many business leaders will not have missed that in the Northern Ireland (Executive Formation etc) Act 2022, the Secretary of State has been granted authority to raise the regional rate. This comes as the UK government looks to plug the holes in Northern Ireland’s public finances if no Executive is in place to prepare a budget for next year.
Fiscal levers are limited, but at time of rising costs and much soul searching about how to drive economic growth, raising the regional rate would be a regrettable step. What we need is the acceleration of a modern, fair system of reliefs which provides certainty, helps accelerate green growth and enables Northern Ireland to trade competitively on the world-stage. With that in mind, if we continue without an Executive, businesses will be paying close attention to what happens with business rates in 2023/2024.
