A new report from the Ulster University Economic Policy Centre (UUEPC), 'Business Investment in Northern Ireland', highlights how underinvestment and gaps in financial capability are constraining business growth in Northern Ireland.
Drawing from firm-level data and direct engagement with local businesses, the report examines how and where firms are investing, the structural and financial barriers they face, and the critical role of public policy in addressing these challenges.
One of the key findings of the report is that, while investment is a consistent aspect of business activity in Northern Ireland, it is predominantly funded through internal resources, particularly among SMEs. Almost 90% of SMEs in Northern Ireland said their business plans are based entirely on what they can afford to fund themselves, and over 80% would prefer to grow slowly using internal resources rather than borrow.
The prevalence of this trend limits the scale and ambition of investment decisions, restricting growth opportunities to what businesses can afford in the short term.
Building on this, the report shows that external finance remains underutilised, with traditional bank loans and credit cards the most common forms after internal funds. This highlights a critical need for improved financial literacy and greater awareness of alternative funding routes.
Dr Karen Bonner, Principal Economist at Ulster University and co-author of the report, said:
“Many firms are making investment decisions based on what they can afford, rather than on the opportunities available. This is holding back the bold, forward-looking investments - particularly in digitalisation, research and development, and skills - that are essential for driving productivity.”
Compared to the UK as a whole, Northern Ireland continues to lag behind in innovation activity. While there has been modest growth in investment in intangible assets such as software, branding, and research and development (R&D), tangible investment in property and machinery still dominates. In 2023, Northern Ireland’s R&D spending accounted for 1.8% share of the UK business expenditure on R&D, and the region accounted for only 1% of all UK patents granted. The figures underscore a lag in innovation activity compared to other regions such as London, the East and South East.
These gaps are less about cash availability and more about what the report describes as a broader "capabilities gap" - including leadership, strategic planning, and awareness of support mechanisms.
In response to the findings, the report sets out a series of policy recommendations designed to inform and shape future interventions aimed at enhancing business investment:
- A shift in emphasis from job creation to productivity gains
- The potential to broaden access to finance through more diverse funding options
- The value of improving financial literacy and confidence in navigating funding
- The role of leadership and management skills in enabling investment decisions
- Simplification of the current investment support landscape
- The importance of policy consistency and clarity to support long-term planning
Gareth Hetherington, Director of the Ulster University Economic Policy Centre, commented:
“Investment underpins future economic performance. If we want a more productive and innovative economy, we need to tackle the barriers - especially around finance, capability, and policy clarity - that are preventing businesses from taking the next step.”
The report also highlights how rising employment costs, changes to R&D tax credits, and lingering post-pandemic uncertainty are contributing to business caution, particularly for smaller firms.
The full Business Investment in Northern Ireland report is available at: ulster.ac.uk/epc
