Professor Mark Durkin
Our top firms are growing profits and many traditional industries continue to thrive and expand
It’s been a good year for Northern Ireland’s top 100 most profitable companies with earnings up by 25% from the previous 12 months. This reflects patterns we see in corporate reporting more broadly as large firms continue to increase profits despite challenging global economic conditions. The strong financial performance of the Top 100 is also a very useful barometer for the health of the economy more generally and particularly in terms of job creation and capacity building.
Our top 100 companies employ more than 80,000 people, that is over 13% of total private sector employment in Northern Ireland. Since the fall-out from the financial crisis, job creation has been almost entirely reliant on the private sector and despite there being no growth in public sector employment over the last decade, there have never been more people in work in Northern Ireland than there are today.
That is a real testament to the strength of our local companies and their ability to innovate and create jobs.
The importance of a relatively small number of large firms to an economy cannot be overstated. Notwithstanding the fact that SMES constitute the vast majority of NI businesses research shows that large companies contribute disproportionately more to a country’s economic performance than these smaller ones. Larger companies have greater capacity to innovate, are more productive, more export focused and they pay higher wages.
The Top 100 companies had a wage bill in excess of £2.6bn last year, that is an average salary of over £32,000 (compared to the NI average of just over £27,000).
Arising from this juxtaposition of large and small there are some important issues emerging. One is the argument that much can be learned about growth and scaling from these larger companies to the benefit of the SME community.
The second is the fact that most larger companies have supply chains involving many SMES. This is a fact well understood in the local aerospace industry following the Bombardier announcement to sell its Northern Ireland operations.
The Federation of Small Businesses (FSB) indicates that Bombardier has over 200 NI SMES in its supply chain. So, the potential loss of a large company in a local area has a much greater impact than just those working for that large firm.
That said, a strong local supply chain
increases the attractiveness of any large company to international investors and one can be hopeful and confident that a successful outcome is achieved in that instance.
Large firms can do this because they have advantages over small firms. Their economies of scale result in reduced production costs, they have greater bargaining power with suppliers and may be perceived to be of lower risk and therefore have easier and lower cost access to finance.
This allows for higher potential profitability which in turn facilitates much greater levels of investment in capital and R&D and increases innovation.
While much is made as to the opportunities that reside in new sectors like fintech, AI and robotics, reviewing this Belfast Telegraph list shows the strength of businesses from traditional industries. The four big banks locally are all in the top 10, again underlining the recent strength of the economy and power/ utility companies also feature strongly at the top of the list. Looking further down the list, agri-food, construction and engineering businesses are very well represented. Although a diversity in sectoral terms has its advantages, a small economy cannot be world-class at everything and Northern Ireland has developed a very strong international reputation in these sectors.
Successful companies also tend not to emerge in isolation. As this list shows, groups or clusters of companies develop which can be successful both locally as well as internationally.
This raises an important point for Government regarding the need to focus limited resources on supporting sectors and developing clusters which are most likely to succeed in the competitive global economy of the 21st century.
In relation to competitiveness within Northern Ireland, an increased and more targeted approach to investment within higher education is critical as we currently remain the only UK region disinvesting in higher education. This would create a win-win scenario where larger companies would benefit through access to fresh talent that can make an immediate impact and SMES would gain graduates who have the flexibility, agility and innovation insight needed to enable their company to grow globally.
Ulster University Business School is currently taking a highly progressive approach, through a focus on entrepreneurial education, through well-established international and business partnerships. We are presenting an education offer that has been co-created with premier partners in the US and China and a new single ‘front door’ through which all businesses can come to draw value from that education offer.
This global footprint and local access to the value it presents is created through a partnership-driven and networked model with a focus on co-creation. It is all about inclusivity and modernity, not exclusivity and tradition. This networked philosophy of doing business is reflected in many of the Top 100 companies listed here – indeed one would expect that a regionally engaged business school operating across Northern Ireland would reflect its market but we, as a university, must do more than mirror the market in which we operate – we must and do bring global perspectives to bear and introduce ways of finding value for companies through that global network. This helps ensure a highly responsive and relevant strategy to NI companies.
The recently launched MSC Strategic Growth programme, developed in collaboration with Babson College, Boston is one such example of how relevant business education can work alongside business to ensure optimum business growth and profitability. Such an approach is critical in my view for all companies given the need to future-proof our businesses in the face of unprecedented and technologically-enabled change.
See page 6 for a round-up of the Belfast Telegraph Business Awards in partnership with Ulster Bank
SUCCESSFUL FIRMS DON’T EMERGE IN ISOLATION BUT CAN DEVELOP IN CLUSTERS THOUGH THAT FORM OF DEVELOPMENT REQUIRES SUPPORT FROM GOVERNMENT