View from the Chair

Tackling barriers to business growth

2nd Nov 2021

Paul Murnaghan, President, Northern Ireland Chamber of Commerce and Industry

Last week, Chancellor Rishi Sunak unveiled his autumn budget and while it contains some measures which will help businesses, with inflation expected to rise above 4%, trading conditions in the medium term are going to remain very challenging.

Significant barriers to business growth exist right now. To illustrate the point, NI Chamber’s most recent Quarterly Economic Survey provided some of the clearest indications yet that while there are positive signs of recovery in the Northern Ireland economy, inflationary pressures from higher costs, supply-chain and logistics problems, increasing labour shortages and wage pressures are negatively impacting business confidence.

After an improvement in recent quarters, confidence dipped during Q3 21, especially for manufacturing businesses. Confidence around profitability was particularly low, with more manufacturers expecting profitability to fall than those expecting it to rise. Within the sector, expectations to raise prices are high, with rising raw material costs as the key driver.

In addition to the rising cost of raw materials, manufacturing businesses have been faced with the additional, time intensive barrier of migrating to the new Customs Declaration Service (CDS). As of Sunday (31 October), the old CHIEF system was replaced by CDS for all Rest of World imports into Northern Ireland.

While 45% of businesses who responded to our survey have adapted well to new trading arrangements, the Northern Ireland Protocol continues to present some firms with challenges. Almost a third said they were still finding new trading arrangements difficult and a core of around 13% continue to find them extremely challenging.

The publication of the EU’s proposals on the Protocol was welcome and it is positive that both sides acknowledge the problems and are willing to move position. However, while the proposals will go some way towards reducing the complexity of the Protocol and the burdens on businesses, they are by no means enough for all businesses, especially in manufacturing. The devil is in the detail or lack of it.

We acknowledge that these are ultimately discussion papers and yet another phase in wider negotiations, however both sides need to reach a balanced agreement soon, focusing on removing barriers and resulting costs for businesses.

While challenges undoubtedly exist, there have also been some recent and much needed positive developments for business. The Chancellor’s commitments to additional spending for Innovate UK and on levelling–up are welcome. In terms of Innovate UK, Northern Ireland businesses need bespoke support to help them avail of this funding. We are pleased to see funding allocated to upgrading the electric vehicle charging network, an urgent requirement which NI Chamber and our members have been highlighting.

We welcome cuts to Air Passenger Duty, something NI Chamber has been calling for, for some time. It represents a step towards improving our connectivity with the rest of the UK. That said, while a reduction in APD may provide some boost to Northern Ireland’s airports, it won’t take effect until 2023, so in the short-term, they still need more immediate support, similar to the Airport and Ground Operations Support Scheme, which is available in the rest of the UK.

In principle, we welcome additional funding for the region via the block grant and will await with interest, to see how businesses here will benefit from it. It is important that commitments to rates relief for hospitality and leisure businesses are extended to businesses in Northern Ireland. We will be hosting a budget briefing for members with Finance Minister Conor Murphy later this week (Thursday), to establish what the outcome of the Budget and Spending review means for business and public finances here.

Businesses have suffered an enormously challenging 18 months and continue to deal with supply chain problems, labour shortages, price rises and soaring energy bills, so there are still difficult months ahead. The private sector is doing everything it can to overcome the many obstacles in its way and doubtless, there will be unexpected bumps in the road. In which case, government must be prepared to take whatever further action is needed to enable the economy to fire on all cylinders soon.