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Chartered Accountants identify NI Protocol, now replaced with Windsor Framework, as main opportunity for business Significant increase in perception of number of businesses facing financial distress 22 March 2023 - A survey of chartered accountants in Northern Ireland shows that more than half (54%) believe that prospects for the economy in the year ahead are ‘poor’, with only 7% rating the outlook as ‘good’ or ‘very good’. Three quarters of those surveyed believe that the Northern Ireland economy is either contracting or stagnant, with only one in four believing the economy is growing at present. A long list of negative influences cited in the survey was headed by political instability and cost of living pressures, with 82% of those surveyed saying that the NI Executive should be restored. The survey from Chartered Accountants Ulster Society also shows a significant rise in the number of Chartered Accountants who feel that the number of businesses in financial distress was increasing (77% in 2023, up from 44% in 2022). Despite a difficult year ahead, respondents identified the Northern Ireland Protocol as the biggest opportunity for Northern Ireland in the years ahead, citing its potential to provide a unique trading position for businesses here. The survey was conducted prior to the publication of the Windsor Framework, which replaces the Northern Ireland Protocol. A low cost base, high skills offering, geographic location, English speaking workforce and the ability to potentially lower corporation tax were also cited as plus points for the local economy in terms of attracting more inward investment. Key Issues The biggest negative issues for the year ahead are ‘rising inflation and squeeze on living standards’ (96%), ‘cutbacks in Government spending’ (95%) and ‘current political conditions in Northern Ireland’ (93%). 75% of those surveyed identified ‘EU Exit’ as a ‘strongly negative’ or ‘negative’ factor on the performance of the local economy.  The survey showed that the rise in the cost of doing business is leading most businesses to absorb the costs, or pass on the price rises to customers, with only 10% having to look towards staffing cuts at present. EU Exit The survey did show some modest positives for business from EU Exit in terms of sales/ turnover growth and export growth outside the UK. However, the predominant impacts for business were negative, particularly in the areas of business costs, purchases from Great Britain, access to EU workers, profits growth and investment plans. A majority of respondents to the survey (78%) held a strong belief that Northern Ireland’s reputation had been damaged by the handling of the EU Exit process. 72% of those surveyed believe that the Northern Ireland Protocol presents an opportunity for Northern Ireland and 76% believe that the Northern Ireland Protocol challenges can be addressed. The Windsor Framework is the most recent attempt to overcome these challenges.  Governance 82% say that the Northern Ireland Executive should be restored, while 69% feel that more powers should be given to Permanent Secretaries within government departments until the Executive is restored. The survey found mixed views on whether there should be further devolution of tax powers in Northern Ireland, with 44% saying ‘yes’ and 40% saying ‘no’. Corporation Tax was considered the most suitable tax to devolve, followed by short haul Air Passenger Duty and the Apprenticeship Levy. Skills Attracting and retaining people and skills dominate the challenges facing businesses in Northern Ireland, with 85% saying that it was becoming ‘increasingly difficult’ to find the right people for jobs, while 78% felt there was ‘a lack of skilled people to fill new skilled positions in Northern Ireland’. 80% of chartered accountants surveyed are expecting a fall in wages in real terms, with 25% expecting no change in wages or a pay cut this year. The survey shows that most chartered accountants expect hybrid working to continue in the year ahead. Emma Murray, Chairperson of Chartered Accountants Ulster Society which represents over 5,300 Chartered Accountants in Northern Ireland said:  “The survey results highlight that chartered accountants are seeing some significant warning signs for the local economy with a period of stagnation and fairly poor prospects ahead. “They are pointing to a long list of negative influences including the current political impasse in Northern Ireland, the squeeze on living standards, cuts in government spending, and the increased cost of doing business, plus the impact of the UK’s exit from the European Union. “Our members want the Executive to be restored so that we can begin to work together to address these issues for the benefit of everyone in Northern Ireland. “Our survey shows that a majority of businesses believe that the NI Protocol, now the Windsor Framework, with access to both the British and EU markets, presents a significant opportunity for Northern Ireland. “They believe it is vital that we have leadership taking key decisions, encouraging business investment and better public services. The longer that political instability continues, the more difficult it is for local business to contribute to growth, jobs and a better quality of life in Northern Ireland.” Independent economist Maureen O’Reilly, who formulated and analysed the survey of Northern Ireland’s Chartered Accountants said: “These findings provide a very valuable insight into the underlying challenges and opportunities for the NI economy from the perspective of chartered accountants at the cold face of doing business across the private, public and third sectors here.  “Their main focus is on the financial health of the businesses and organisations they represent and it is concerning that the share of members who believe that financial distress among businesses is on the increase (77%).  This is the highest share recorded over the last 7 years by a considerable margin.  “Businesses are trying to deal with rising costs by absorbing and/or passing them on through increasing prices while at the same time trying to hold on to staff, a difficult balancing act to juggle that can only last for so long if those inflationary pressures persist.    “The current political and economic environment is extremely difficult which unsurprisingly is dampening the mood around prospects for the year ahead.  However, members do see opportunities going forward and the NI Protocol (and now Windsor Framework) is certainly viewed as the main catalyst to support the region to move on to a stronger growth path.  “Members believe economic success should be measured in terms of higher productivity and higher wage jobs sending a clear message around where policy focus should sit. However, they are largely split on whether the devolution of tax varying powers to Northern Ireland should be pursued, the main concern being the need for much greater political stability before this should be pursued further. It is noteworthy that corporation tax remains the most popular tax to devolve here.”  A summary of key findings: 23% felt that the economy was growing; 33% of local Chartered Accountants feel that the local economy is stagnant; 43% believe that the economy is contracting. 77% say that the number of businesses in financial distress is increasing. 2% say the number is falling. 16% say the number is unchanged. 7% feel the outlook for the NI economy in the year ahead is ‘Good’ or ‘Very Good’; 40% feel the outlook is ‘Fair’; 54% say ‘Poor’ or ‘Very Poor’. Rising inflation and squeeze on living standards (96%), Cutbacks in Government spending (95%) and current political conditions in Northern Ireland (93%) are seen as the most negative issues for the economy. 72% of those surveyed believe that the NI Protocol presents an opportunity for Northern Ireland. 76% believe that the NI Protocol challenges can be addressed. 85% say their business or organisation is experiencing skills shortages (up from 62% in 2022) 82% want the NI Executive to be restored. 69% feel that more powers should be given to Permanent Secretaries within government departments until the Executive is restored. 254 Chartered Accountants took part in the survey. ENDS 

Brid Heffernan, Tax and Public Policy Lead, Chartered Accountants Ireland said “The TBESS amendments announced today are an encouraging example of government taking business feedback on board and responding proactively.   “Businesses will benefit from the increased level of relief which moves from 40% to 50% of eligible costs, and businesses with unmetered energy sources will be eligible to apply for a new grant outside of TBESS. These measures along with the reduced qualification threshold of 30%, and the extension of the scheme to 31 May, should allow it to reach its potential.  “Crucially, the reduced threshold will be back dated to September 2022, when the scheme was introduced, meaning that qualifying businesses should be able to make claims for the costs incurred during the winter months. “When first announced, TBESS represented a potential lifeline for businesses, but in practice it fell short, something that we highlighted to government on behalf of our members. Simple and speedy implementation of the measures announced today are key to its success in the coming weeks and months.”

Members will be aware that President Paul Henry, accompanied by Council member, Pamela McCreedy as chair of our Advocacy and Representations Board, and Institute Directors Dr Brian Keegan and Brendan O’Hora have concluded outreach events in the US cities of New York, San Francisco, Washington DC, and Boston.    Attending 12 events; meeting over 100 members; engaging with three senior Ministers and opposition leaders from the island of Ireland; Congressmen and women; envoys from this island to the US; and businesses eager to foster new connections, a lot was achieved in a packed schedule.    The trip had three primary objectives;    First and foremost, the Institute wanted to reconnect in person with, and represent, the 700 members based in the US at a time of year when the eyes of many in the US turn to the island of Ireland. The shift online over the last two years had the positive effect for this Institute of creating a greater sense of belonging among members around the world, and the team wants to harness that and preserve it in the face-to-face environment. On arrival in New York, approximately 70 members gathered at Ireland’s Consulate General, and this strong turnout was replicated in other locations. We were delighted to meet member and Minister, Michael McGrath T.D., along with other members during his time in San Francisco.    Second, the Institute wanted to showcase the strength of the profession in the US, and the economic and social contribution that Chartered Accountants Ireland’s members make in the country. The range of industries represented among this cohort is a superb example of the many directions that members can go with their qualification. The achievements among our membership at some of the highest levels of American business, social, and cultural life are a source of great pride for the Institute.   Third, as an all-island organisation, the Institute worked closely in the lead up to, and during the trip with businesses, industry groups and state agencies, including Enterprise Ireland and Invest NI; and the diplomatic community from right across the island of Ireland so that our presence could be as impactful and productive as possible for members and the profession. In so doing, we leveraged the collective power of Irish America, growing existing relationships, and seeding new ones, with a view to supporting growth and prosperity on the island of Ireland.  Photographs from the trip can be viewed here.