NI needs to stop prioritising low-value business sectors

There is currently a vociferous and well organised lobby to reduce VAT for the hospitality sector in Northern Ireland. There has even been an Assembly motion, which in fairness was reasonably designed to suggest the idea should be looked at. Yet the whole prioritisation of the hospitality sector demonstrates all that is wrong with Northern Ireland’s economy policy prioritisation – for it is actually low value, and hence low paid.

Where are the most successful economies and most prosperous societies in the European Union? Perhaps Scandinavia, Benelux and parts of Germany? Tell me, how much do they prioritise their hospitality sector?

Not a lot, actually. Denmark, which has typically had the highest GDP/capita in the EU (excluding tiny Luxembourg) since it joined in 1973, does not attempt to prioritise it at all. Its VAT rate, already a hefty 25%, applies equally across the entire hospitality sector. Others make some effort, but it is relatively insignificant and, where any reductions apply, they are often made up for by additional municipal taxes (or are designed not to help the hospitality sector itself but to help encourage other business). None of those countries – Denmark, Sweden, Finland, Belgium, Netherlands or Germany – is renowned for its tourist or dining industry (with the arguable temporary exception of Denmark in the latter case, and even then only at the very high end of fine dining), nor particularly for great leisure opportunities. In other words, a strong hospitality sector does not a functioning economy make – indeed, it is not even necessary.

This is because hospitality is low value. There is very little real money to be made out of it. It relies often on one-off visitors paying a slight premium for something in which there are few margins to start with. As a consequence, it is extremely low paid. Even in Belfast, it is noteworthy that most waiters and receptionists in hotels and restaurants are foreign, prepared to accept lower wages than the locals. There is of course no harm in promoting Northern Ireland as a golf mecca, or a conflict resolution conference host, or the home of film tourism – but we need not rely on this to deliver high-paid employment and exciting careers in business.

Denmark, Sweden, Finland, Belgium, the Netherlands and Germany are trading nations; they export real goods and real services of real value. That is how they make their money – not hospitality. The hospitality sector likes to promote itself as “bringing in” millions to the economy, but actually most of this is merely circulating; it is only when you begin exporting high-value products and services – like cars, or wind turbines, or shipping services, or medicines, or engineering equipment and know-how – that you bring in real money and thus create well paid employment. With that trade will, of course, arise hospitality opportunities – but we need to be clear it is that way around. The odd tourist will not create the type of employment skilled graduates want; but the odd trader in high-end knowledge and equipment will.

Focusing on hospitality, therefore, is like focusing on call centres. Those types of starter jobs have their place, of course, and they are not to be knocked – but after the starter, there has to be a main course…

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One thought on “NI needs to stop prioritising low-value business sectors

  1. martyneill says:

    Ian if you have the time and volition there’s long been the need to do a study into the supports put in place for native technology businesses post ceasefire as they are among the largest employers on the highest wages. The suspicion is that they actually achieve the lowest level of support but there are no solid proof points for this. The existing data is sketchy at best, a real data set wound need to include those who took no support whatsoever for example.

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