1. 1 Responding to the Independent Review of Economic Policy Chartered Accountants in Business Annual Lunch David Sterling DETI Permanent Secretary 10 June 2010

2. 2 Overview CURRENT POSITION ECONOMIC STRATEGY Recession Economic Prosperity Jobs Wealth 1 2 Executive Sub Group Economic Strategy Programme for Govt & IREP Key Themes & Issues

3. 3 The UK economy has faced its longest recession since records began… Recession Last recession almost 20 years ago Growth Unbroken economic growth for 63 quarters Recession UK economy contracted for six quarters Greater South East 44% of UK output is driven by London, South East and East of England

4. 4 Retail Hotels & Restaurants Construction Mining Manufacturing Business & Finance Other Services Transport Energy LARGER SECTOR LARGER CONTRACTION Contraction Business & Finance, Manufacturing and Construction severely impacted during downturn …and the Northern Ireland economy has also been badly impacted…

5. 5 Prosperity Gap Northern Ireland living standards have remained around 20% below UK average Lower Prosperity than NI North East, Wales …but low prosperity has been a long term problem… N Ireland relative to Rep of Ireland GVA per capita was 48% of RoI (2008)

6. 6 MAIN REASONS FOR LOWER PROSPERITY JOBS Not enough people in employment and too many economically inactive WEALTH Not enough high value added employment in the private sector Low prosperity is due to jobs and wealth creation

7. 7 Overview of Labour Market TOTAL WORKING AGE POPULATION 1,097,000 IN EMPLOYMENT 740,000 INACTIVE 309,000 Want Job 15 % Sickness 30 % Student 37 % Don’t Want 85 % Family 23 % Retired 6 % UNEMPLOYED 48,000 Long Term 40 % Other 60 % Youth 27 % Other 73 % Other 3 %

8. 8 Job Growth NI economy added over 177,000 jobs between 1994 and beginning of recession Job Losses NI economy has lost 33,500 jobs since March 2008 Northern Ireland was successful at job creation until the downturn…

9. 9 Public Admin Manufacturing Health Construction Education Agriculture Retail Energy Transport (Tourism) Hotels & Restaurants Mining Other Services Financial Services Business Services Under Represented Including high value added business and financial services Over Represented Including public services and lower value added sectors …but is under represented in high value added activities… Output (NI vs GB)

10. 10 Small Firms Northern Ireland economy is dominated by small firms Large Firms Northern Ireland lacks critical mass for R&D, exports and investment 18% 29% …and lacks sufficient large firms to invest in high value activities…

11. 11 ECONOMIC STRATEGY 2

12. 12 The economy is at the centre of the PfG… Economy Growing a dynamic, innovative economy is central to achieving all goals in the Programme for Government Recession These priorities remain key to driving economic growth PRODUCTIVITY EMPLOYMENT

13. 13 1 Restructuring of Economic Policy: 4 Key Areas The way economic policy is coordinated in NI 2 3 4 The way DETI and Invest NI provide assistance to businesses The freedom and flexibility Invest NI needs to do its job. The way policy is developed and monitored.

14. 14 1. Restructuring of Economic Policy: The Co-ordination of Economic Policy in NI Department of the Economy Executive has agreed to consider establishing a Dept of the Economy as part of the Strand One Review. Sub-Committee of the Executive First meeting of the Sub-committee took place on 20 May 2010. Economic Strategy Executive sub-committee on the economy to develop draft economic strategy for Northern Ireland by end of 2010.

15. 15 2. Restructuring of Economic Policy: DETI and Invest NI Assistance to Industry Concept of Client Company Rationalise Programmes Invest NI to review the number and breadth of programmes by June 2010. Shift towards R&D&I IG to bring forward recommendations on when and where SFA should be used by June 2010. DETI / Invest NI to consider how shift toward R&D&I is further addressed in 2011-14 PfG. Business Expansions IG to consider the potential use of debt instruments in appropriate circumstances. Invest NI to develop proposals for a tiered portfolio of support to the wider business base by September 2010. Venture Capital Invest NI to continue to intervene where appropriate to support the development of the venture capital market. Invest NI to outline its proposed VC strategy going forward.

16. 16 3. Restructuring of Economic Policy: Autonomy, Flexibility and Decision-making Increased Autonomy Proposals to increase Invest NI delegated limits agreed in principle. Economic Appraisal A new protocol for handling cases has been agreed. A new appraisal methodology for R&D projects is being developed End of Year Funding IG currently exploring what greater flexibility might be achievable but unlikely that recommendation can be implemented. Invest NI Board Precise role and remit will be reviewed in the context of the work on revising governance arrangements.

17. 17 4. Restructuring of Economic Policy: Policy Development and Monitoring DETI Policy Development DETI currently undertaking a review of staffing structures to ensure that resources reflect priority areas. Target for initial proposals - June 2010. Invest NI Performance DETI will oversee the production of the next Invest NI Performance Report - end of 2010/11. Economic Dev. Body The Minister has stood down EDF. A smaller economic advisory group (drawn from business and economics) met for the first time on 28 May.

18. 18 A cross-departmental Executive sub-committee on the economy has been established… EXECUTIVE SUB COMMITTEE ON THE ECONOMY Other departments as necessary

19. 19 …along with the EAG to strengthen independent economic advice to the ETI Minister ECONOMICS Kate Barker Frances Ruane SKILLS Bill McGinnis BUSINESS Michael Ryan, CBE Mark Nodder Alan Armstrong Stephen Kingon Gerry Mallon Lorraine Hall ECONOMIC ADVISORY GROUP (EAG)

20. 20 A new economic strategy will build upon existing economic strategies… INNOVATION Regional Innovation Strategy MATRIX Higher Education Strategy INFRASTRUCTURE Regional Development Strategy Investment Strategy for NI ENTERPRISE Draft Enterprise Strategy Social Economy Strategy Draft Tourism Strategy EDUCATION &SKILLS Success through Skills 2 FE Means Business Essential Skills for Living STEM Strategy School Improvement Programme OTHER Anti-Poverty Strategy Rural White Paper Sustainable Development Strategy for NI EMPLOYMENT Protecting employment in short term Attracting new jobs through FDI Welfare reform agenda NEW ECONOMIC STRATEGY FOR NI

21. 21 …and will focus on six key themes as drivers of the Executive’s overarching goals IMPROVING PRODUCTIVITY INCREASING EMPLOYMENT 1. CONNECTIONS TO THE GLOBAL ECONOMY (attracting inward investment, growing exports) 2. ENCOURAGING BUSINESS GROWTH (entrepreneurship, social economy, green economy, tourism, access to finance, planning) 3. STIMULATING INNOVATION AND R&D (R&D and absorptive capacity, wider innovation, business to business / HE / FE collaboration) 4. IMPROVING LEVEL AND RELEVANCE OF SKILLS (literacy, HE, FE, existing workforce, low skilled) 5. ADDRESSING SUB-REGIONAL GROWTH (role of cities, rural economy, housing) 6. DEVELOPING ECONOMIC INFRASTRUCTURE (transport links, energy, telecoms, tourism product) CROSS CUTTING THEMES (equality, sustainable development)

22. 22 Key Challenges Global economic outlook Public expenditure cutbacks Implementing change Gaining consensus on the right economic strategy for Northern Ireland