Investigations & Analysis - Northern Ireland
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Going to plan? How Invest NI's strategy is really working out

05 OCTOBER 2012

Invest NI
Invest NI / Press Eye

By Niall McCracken

WHEN the Northern Ireland Audit Office’s report into Invest NI’s performance over the past 12 years was published in March 2012, much of the media coverage at the time promoted a positive impression of steady progress measured against its targets.

However, The Detail has probed further into the Audit Office report’s underlying criticisms of Northern Ireland’s leading business development agency and we can now expose the gaping hole in its investment strategy after 2013.

Revised figures provided to us by Invest NI reveal that the downscaling of projects and the withdrawal of some investors has led to a loss of £83m in potential investment into the local economy in just over a year and a half.

We have also looked at the quality of jobs Invest NI is promoting and have spoken to one leading economic expert who claims the longevity and success of jobs promoted here have remained largely unchanged since the mid 1990s.

The NIAO report outlined that there was an expenditure of almost £1bn (£932m) from 2002-07. When jobs lost were taken into account the report outlined that Invest had only created 328 net jobs over a five-year period, equating to an average of only 65 jobs per year.

We asked Invest NI for a more up-to-date figure accounting for the most recent job losses at major firms like FG Wilson, but they told us these figures would not be available until later this year.

However The Detail understands that when the FG Wilson and other recent job losses are accounted for, the job creation number will drop below zero.

The analysis has been hampered by Invest NI’s own systems to monitor data because it bases its figures on “jobs promoted” instead of actual jobs created.

Jobs promoted figures are essentially the promise from investors to Invest NI of their initial intention of jobs it hopes to create at the start of a project, but it is not a firm contractual commitment.

BACK-UP PLAN?

Foreign Direct Investment (FDI) job promotion has accounted for almost 48% of Invest NI’s total grant and programme spend of £720m since 2002.

However in its report the Audit Office concludes that Invest NI has no plan on how it will promote this economic development after 2013.

Selective Financial Assistance (SFA) is Invest NI’s main programme for foreign direct investment; this is a grant given to foreign investors to support projects.

It operates within the European Commission’s Regional Aid Guidelines, under which Northern Ireland has been almost alone in the UK as being eligible for assistance at levels between 30% and 50% of total project costs.

However from January 2011 this fell to between 10% and 35% because Northern Ireland is no longer considered an underprivileged area. As a result this assistance me disspaear all together from 2013***, the Audit Office say that post-2013, Invest NI may be unable to offer any investment or employment related-support to large companies.

We asked Invest NI and its sponsoring department, the Department of Enterprise, Trade and Investment (DETI), to clarify their position on a future strategy. Invest NI’s response reflected the role of Westminster in shaping economic strategy here.

In a statement it said: “The process to determine the availability of regional aid in Northern Ireland post-2013 is ongoing and has yet to conclude. Invest NI and the Department of Enterprise Trade & Investment are actively engaged with the Department of Business Innovation and Skills in London to secure the best outcome for Northern Ireland.”

Meanwhile a spokesperson for DETI referred to the role of the wider EU, stating that discussions were ongoing with the European Commission and Member States on revisions to the Regional Aid Guidelines (RAG) for the period 2014 – 2020.

PLANNED INVESTMENT

In the NIAO report, Invest NI’s performance is measured against its corporate plan for 2008-11 by looking at “planned investment” only. The report outlines that Invest NI had a target of attracting £1.26bn in investment commitments, and as of March 2011 the report outlined that they had commitments from investors of £1.277bn.

But when we asked Invest NI to outline how much of this investment was likely to be realised as of September 2012, the revised figure was £1.194 billion -accounting for a loss of £83m in potential investment in just over a year and a half.

Planned investment
Planned investment

Invest NI says this can be explained by businesses “making changes to planned projects, such as investments increasing or decreasing during the life of the project”.

VALUE FOR MONEY

In the report, the Audit Office estimates the extent to which new jobs within Invest NI’s client companies have been counter-balanced by jobs lost.

The figures show that employment in Invest NI supported companies only increased from 86,322 in 2002-03 to 86,650 at the end of 2006-07 despite expenditure by Invest NI of almost £1bn (£932m) during the same period. This is only an increase of 328 jobs.

Invest NI confirmed that this small figure for jobs created was affected by jobs lost during the same period:

“These summary figures mask a substantial change in client employment. During the period there were 28,873 jobs created. However, these were offset by 28,545 job losses, mostly due to the contraction of certain industrial sectors such as clothing and textiles. Job gains were greatest in the business and financial services sector.”

Invest NI said when considering the net jobs figure it is important to include some context. While some sectors have experienced “significant decline” in recent years, Invest NI claims that without their “intervention to support the promotion and creation of new jobs in developing sectors, such as the Aerospace or the Business and Financial Services, unemployment figures would be much higher.”

At the end of last month it was confirmed that 760 job losses at FG Wilson would go ahead. We asked Invest NI if they could provide us with a more up to date figure for job creation up to September 2012, taking into account recent job losses, but they said these figures would not be available until the end of this year.

JOBS CREATED

The Audit Office report outlines targets to promote new jobs through inward investment, however, these targets only take into account jobs promoted and not actual jobs created.

Graham Gudgin is a Research Associate at the Centre for Business Research University of Cambridge. He says these figures are misleading.

NIAO Report 2012
NIAO Report 2012

He says: “The NIAO report judged that Invest NI had been more successful in its latest 2008-11 plan period compared to previous three year periods ‘despite challenging circumstances’. However Invest NI changed the basis of its reporting in a way that concealed an important deterioration.

“In the past Invest NI has separately reported figures on jobs created in new and existing foreign-owned firms, but for the latest period amalgamated these two categories. This disguised the fact that inward investment in new firms to NI fell from 1840 jobs promoted per annum in 2005-8 to 1260 jobs pa in 2008-11.”

The NIAO’s report does however highlight the change of target by Invest NI for FDI job promotion in 2008-11, as well as the fact that the total number of new FDI jobs promoted by the Agency in 08-11 (7,533) was lower than the previous three-year period (8,692). The Audit Office also commented that Invest NI’s jobs promotion target for 2008-11 (6,500 jobs) was considerably lower than the 8,692 promoted during 2005-08. However, it acknowledged that this target was set in the context of the difficult economic climate.

Invest NI say they never try to conceal figures and such figures are often available in press releases and external presentations.

We asked Invest NI if out of the three targets for job promotion, it could outline how many led to job creation. It was unable to do so.

In a statement it said: “Invest NI job-related targets have historically been set on the basis of jobs promoted rather than created and, therefore, historical information of this type is not accessible.

“Invest NI is presently developing systems to more accurately measure the number of jobs actually created, but will not be in a position to report this until later in the financial year.”

Invest NI’s most recent information (at 31st March 2012) shows that, due to certain projects not proceeding as initially planned, the projected performance against these targets was actually lower than outlined in the audit office report.

- Target: to promote 6,500 new jobs – outturn total was 7,533 [in Audit Office Report]

Updated figure now 7,470

- To promote 5,500 new jobs with salaries above NIPSM- outturn total was 5,636 [in Audit Office Report]

Updated figure now 5,584

- To promote 2,750 new jobs with salaries 25% above NIPSM outturn total was 3,360 [in Audit Office Report]

Updated figure now 3,318

POST-TROUBLES JOB PROMOTION

Mr Gudgin also questions the contribution Invest NI has made to job promotion in Northern Ireland since its inception. He claims figures from successive annual reports and performances reviews have been largely static.

He said: “The rate of job promotions in new inward investment projects into NI over the period since Invest NI was formed (2002-11) has been much the same as over the last decade of the Troubles ,1985-95, (i.e. 1410 jobs pa as against 1320 in the troubles period).

“The main difference between these periods is that whereas most jobs were formerly in manufacturing most are now in services. “

The Audit Office report states that of the 15,331 new jobs promoted between April 2002 and March 2008, 9,128 (60%) were in `contact centres’, more commonly known as ‘call centres’, only 33% of which had wages above the Northern Ireland private sector median (NIPSM).

In February this year this year one of Northern Ireland’s biggest call centre companies announced it was closing its Armagh call centre and reducing its workforce in Belfast, with a loss of 255 jobs.

The company has received almost £5.5m financial support from Invest NI in the last seven years.

We asked Invest NI out of the 9,128 jobs in all contact centres outlined in the NIAO report, if it could outline how many were still operating.

In a statement Invest NI said:

“Invest NI does not hold data on job duration but is working to introduce systems that will collect this information for all assisted projects which have an employment component.

“Invest NI is presently developing systems to more accurately measure the number of jobs actually created, but will not be in a position to report this until later in the financial year.”

The Detail understands that NIAO’s report into Invest NI’s performance will not be brought in front of the Public Accounts Committee until sometime in early 2013.

© The Detail 2012