Policy paper

Northern Ireland Enhanced Investment Zone: Policy prospectus

Published 26 March 2024

Applies to Northern Ireland

Introduction

The Windsor Framework presents a unique opportunity to build on Northern Ireland’s emerging innovation and sectoral strengths, supporting key industries to grow and leverage inward investment. In seeking to boost productivity and growth, the Investment Zone and Freeport programmes must be part of the efforts to maximise Northern Ireland’s economic potential.

Given the alignment between Freeport and Investment Zone objectives and to ensure that Northern Ireland can reap the benefits of both, the UK government is combining both programmes into a Northern Ireland Enhanced Investment Zone. This will bring together the overall funding envelopes and objectives of Freeports and Investment Zones in a bespoke offer for Northern Ireland, reflecting its unique economy, sectoral strengths and opportunities. Northern Ireland’s combined pot of approximately £150m could be open to flexible use between tax incentives and spend.

The Enhanced Investment Zone will give Northern Ireland the levers to build on its cost competitiveness and first-class reputation for innovation. Co-developing the Enhanced Investment Zone with the Northern Ireland Executive and its departments will be at the heart of the UK government’s approach. By working in partnership, we want to harness Northern Ireland’s supportive business environment by focusing on high-potential areas of the economy to foster new opportunities. This work goes hand-in-hand with the economic priorities outlined by the Minister for the Economy.

This prospectus outlines the bespoke funding and programme-level offer in Northern Ireland. The UK government is committed to working collaboratively with the Northern Ireland Executive, tailoring policies to meet Northern Ireland’s needs and opportunities. On this basis, the UK government intends to deliver an Enhanced Investment Zone according to the following principles:

• partnership: the UK government and Northern Ireland Executive will play a joint role in co-design, decision-making and overseeing the delivery of the programme
• parity: we will work with the Northern Ireland Executive to deliver an offer for the Enhanced Investment Zone that is similar to the Investment Zone and Freeport offers across the rest of the UK
• strategic fit: the programme will align with the Northern Ireland Executive and UK government’s policy frameworks, including the Economy Minister’s four priorities for the economy, be a good fit for the regional economic and governance landscape and reflect the Northern Ireland devolution settlement

Objectives and policy framework

Priority sectors

In keeping with the approach set out by the UK government for Investment Zones, the Enhanced Investment Zone has the opportunity to focus on one of the five wide-ranging priority sectors in which the UK is well-positioned to play a leading role globally – digital and technology; green industries; life sciences; advanced manufacturing; and creative industries.

Our approach recognises that the barriers to the growth of emerging clusters of activity will look different between sectors and across different parts of the UK. We will therefore tailor design and implementation to meet Northern Ireland’s needs and opportunities, recognising that there is no one-size-fits-all model, as each area will require different interventions depending on what is already in place and the drivers of growth for specific clusters. Where possible, and reflecting Northern Ireland’s high levels of economic inactivity, we would also be supportive of efforts that have a positive impact on economic participation. 

For example, we will ensure that we can be responsive to, and account for, considerations specific to Northern Ireland, such as differences in the governance landscape, industrial and innovation distribution, and Northern Ireland’s overall size and scale. As a result, analysis to determine the Enhanced Investment Zone’s focus will start by looking at the strengths and opportunities of the Chancellor’s five sectors within the NI context. This sector-led approach to programme development will consider the potential of the entirety of Northern Ireland, allowing us to then consider the appropriateness of place-based interventions to support the chosen sector.

This sector-led approach is supported by the alignment between the UK government and Northern Ireland on the priority sectors to drive innovation and growth, including those previously consulted on by the Department for the Economy:

• agri-tech
• life and health sciences
• advanced manufacturing, materials and engineering
• fintech / financial services
• software
• screen industries
• low carbon (including green hydrogen)

Our engagement to date via early policy sprints with the Northern Ireland Civil Service has identified the scale of opportunities for an Enhanced Investment Zone focussed on the green industries sector. There is a strong strategic basis for this focus, including Northern Ireland’s Green Growth Strategy. Crucially, there is the strong potential for growth, with over 450 companies working in the sector. This builds on Northern Ireland’s long-established expertise in engineering and technology, which are established skills that are being utilised in Northern Ireland for companies to diversify into low carbon and renewable energies. Green opportunities will impact all of Northern Ireland’s priority sectors, and the anticipated rapid growth of the industry presents real opportunities to leverage private investment and growth.

We will continue to work with Northern Ireland stakeholders on the potential for a green-industries sector, though this does not preclude further consideration of other industries – especially where these sectors are cross-cutting and can support mutual economic aims. Any decision on a chosen sector will be subject to consultation with the NI Executive.

Funding envelope

The Enhanced Investment Zone offer from UKG includes levers across spend, tax, planning and skills. The offer (outlined below) is subject to compliance with the relevant rules on subsidies.

The total funding envelope for the Enhanced Investment Zone is approximately £150 million, which could be used flexibly between spend and a range of tax levers. The key elements on offer are:

• tax incentives. Any uptake of the tax offer would be delivered in defined tax sites, scalable based on the number and size of those sites. If the tax offer is not used to its fullest extent, a larger spend envelope will be available. The precise costs of any tax sites would vary by site
• a flexible spend package to use across a portfolio of interventions based on the opportunities and needs of the Enhanced Investment Zone and the chosen sector(s). This could be used for, for example, Research and Innovation, Skills, Infrastructure, Regional Enterprise and Business Support, and Planning and Development. The minimum available spend will be calculated once the uptake of any tax sites has been determined

Northern Ireland holds a unique position whereby its place within the UK internal market is protected whilst also allowing full access to the EU single market. Given this dual market access, and customs special procedures that are already available in NI as with the rest of the UK to facilitate movement of goods from the rest of the world, there is no need for an additional customs offer to be included in the Enhanced Investment Zone package. The principle of flexibility is woven throughout the policy offer and it is designed to respond to evidenced priorities, in recognition that partners in Northern Ireland know their economy best.

Fiscal Incentives

Targeted reliefs for the following taxes could be available in any tax sites that are designated within the Enhanced Investment Zone, subject to compliance with the relevant rules on subsidies and affordability, and recognising that NI currently has uniquely generous bespoke industrial derating relief that applies to all relevant businesses across Northern Ireland:

• Stamp Duty Land Tax
• enhanced capital allowance
• enhanced structures and buildings allowance
• employer National Insurance contributions

The NI Executive will have a choice to make on the extent to which to it wishes to take up the tax offer, taking into account the specific geography and economic needs of NI, and subject to compliance with the relevant rules on subsidies. Proposals for tax sites will be considered on a case-by-case basis. Sites must be tightly defined and located on underdeveloped land. Examples of ‘underdeveloped’ sites include sites containing empty land, brownfield land, or underutilised land.

Gateway process

The co-development process will be structured around a set of thematic gateways that will cover the core components of an IZ proposal. The gateways will focus on five themes:

• vision setting – covering the overall vision for the proposal
• sector and economic geography – agreeing a sector focus and spatial focus for the IZ, understanding the broad approach to tax and flexible spend interventions, and reviewing evidence that the criteria have been met
• governance – agreeing the governance structure and assurance processes for the design, approval, and delivery of the IZ and reviewing evidence that the criteria have been met
• interventions – agreeing the specific mix of interventions and levers to be deployed and where, ensuring a logical link from the vision to the key opportunities and challenges identified, the portfolio of interventions selected and outputs, intermediary and overall outcomes for interventions and reviewing evidence that the criteria have been met
• delivery – agreeing the delivery model or models, including any delivery vehicles for planning interventions, register of interdependencies and risks, finalising timelines and plans, and reviewing evidence that the criteria have been met

Governance

The UK government will work collaboratively with the NI Executive and its departments to co-develop proposals for the Enhanced Investment Zone, offering support and advice throughout the process. The Enhanced Investment Zone must be founded on long-term partnership and collaboration – between regional partners across the private and public sectors, and between all levels of government – to maximise the impact of co-ordinated investment and intervention.

It is with this principle in mind that we will co-develop appropriate and robust governance arrangements. Such arrangements will reflect the specific requirements of the chosen sector.