The dominant international image of Northern Ireland during the last 30 years has been one of burning vehicles, explosions and military vehicles patrolling the streets. While almost everyone in Northern Ireland has been impacted in some way by the Troubles, the vast majority of the population continue to get on with their lives.
It is a great surprise to many people to learn that the Northern Irish economy actually outperformed the rest of the UK for most of the last decade, even if it was as a result of starting from a weaker position. This performance is, however, put in the shade by the ‘tiger economy’ in the Republic of Ireland which has experienced a period of unprecedented growth since 1990.
Northern Ireland is the smallest region of the UK with a land area roughly the same size as the West Midlands. The population is approximately 1.7 million and young, with a higher birth rate and fewer pensioners than any other region of the UK.
The quality of the education system is justifiably renowned and the exam performances of the brightest pupils have tended to be better than in the rest of the UK. This continues to be the case today – a higher percentage of pupils in Northern Ireland leave school with two or more A-levels compared with Scotland and England & Wales.
Conversely, the number of Northern Irish pupils leaving school with no qualifications also tended to be higher than in the rest of the UK. This situation has improved substantially and the percentage of pupils leaving school with no qualifications has decreased from 21.5% in 1987 to 5.3% in 1998, slightly less than the comparable figure for England.
It has been customary for a large number of Northern Irish students to enter tertiary education at colleges and universities in Great Britain. Some 35% of full-time undergraduates in 1998-99 domiciled in Northern Ireland were studying outside the province. However, in the past, and particularly during the 1970s and ’80s a substantial proportion of these students did not return after graduation, representing skills and opportunities lost to the province.
Emigration was also a significant problem during the 1950s, ’60s and ’70s when the net loss to the general population averaged 8,000 per year. This position turned around during the 1990s, thanks to the improved economic and political situation, resulting in a net total gain of 16,000 between 1991 and 1998.
Northern Ireland’s gross domestic product (GDP) in 1997 was £15.5bn, or 2.3% of the UK total. Given that a single monetary and fiscal regime extends over the whole of the UK, there are many similarities between the structure and performance of the economy of Northern Ireland and the rest of the UK. However, there are also some important differences due to economic history and geography.
Agriculture is more important to the Northern Irish economy than it is to any other region within the UK. In 1997, it contributed 4.7% to local GDP and 6% of total employment, compared with 1.9% and 1.8% for the UK. It was confirmed in January that agricultural income had fallen 22% in 1999, bringing the total reduction since 1995 to 79% in real terms.
The main contributors to this fall were the export ban imposed on beef as a result of the BSE scare, weak global commodity prices and the strength of the sterling, especially against the euro. The strength of the sterling is also having an adverse impact on manufacturing. Approximately 50% of manufacturing output is sold to Great Britain and ‘traditional industries’ such as textiles, clothing, food, drink and tobacco still account for 39% of manufacturing employment. These industries are being undercut by imports priced in weaker foreign currencies and the transfer of purchasing by UK buyers to low cost production centres in the Middle and Far East.
Northern Ireland is the only part of the UK that shares a land border with another sovereign state. As a result of this, the local economy and in particular the economies of border towns such as Newry, Armagh, Enniskillen, Strabane and Derry are particularly vulnerable to changes in the exchange rate and relative taxation regimes between the UK and the Republic of Ireland.
When the sterling has been weak and purchase taxes in Northern Ireland lower than in the Republic, even during the worst civil unrest, shoppers flocked over the border to buy their white and brown goods and fill their petrol tanks. The strength of the sterling during the past few years combined with substantial increases in taxes on petrol and diesel in the UK have resulted in the traffic going the other way to the Republic. Modern ICTs have added to the outflow as the internet makes it easy to buy holidays departing from Dublin priced in Irish punts without UK airport taxes.
Despite the disappointing developments in the industries for which Northern Ireland has been known, many of the economic indicators point to an economy that has made a number of significant steps forward. Employment has reached an all-time high at almost 620,000 and unemployment has fallen to 45,000. Northern Ireland had the highest unemployment rate in the UK as recently as 1994, and it is now fifth from the bottom of the UK regional unemployment table. New car registrations in January to September 1999 were 6% higher than the previous year, house prices increased by 11% in 1999 and business and consumer confidence is strong.
There can be no doubt that the improvement in the general political situation during the past five years has had a positive impact on the economy. Retailers such as Tesco and Sainsbury have had the confidence to follow the path trodden many years ago by Marks & Spencer and set up operations in NI.
House prices, which were subdued, have appreciated significantly as a result of increased confidence, returning emigrants and speculative investors from Great Britain and the Republic of Ireland who believed the assets were underpriced (the first wave were right). When foreign investors overcame the barriers caused by years of media coverage they discovered a skilled, flexible and educated workforce located in a region with a cost of living that was 10% lower than the UK average.
The one area that has not performed as well as expected is tourism. During the first years of the ceasefire there was a large influx of visitors particularly from the Republic of Ireland that was not repeated. Again the strength of the sterling is off-putting for visitors from the Republic of Ireland, but general unrest and some well-publicised incidents of public disorder do not help.
The substantial improvement in the levels of unemployment masks the fact that long-term unemployment is a greater problem here than in other UK regions. In April 1999, 53% of long-term unemployed (those out of work for more than one year), had been unemployed for more than three years and 39% had been unemployed for more than five years. The comparable UK figure for long-term unemployment of more than five years’ duration was 20%.
The changes that are happening in agriculture and manufacturing represent that part of the economy that is being forced to go through structural change. It is unlikely agricultural incomes will ever return to the levels attained four years ago even if global commodity prices improve. Multi-locational industries will seek to minimise the cost of production within the context of a global economy bringing Northern Ireland into direct competition with Taiwan.
To combat the decline in the output and employment of traditional industries NI will have to generate business and employment in the new knowledge-based industries.
NI has a young, well-educated population and this demographic profile is ideal to support the needs of knowledge-based industries such as information and communication technologies. In 1998 the Government commissioned an Economic Development Strategy Review that reported in March 1999 under the title ‘Strategy 2010′. The report identified industry sectors with potential that could, in conjunction with the implementation of a number of recommendations, create ‘a fast growing, competitive, innovative, knowledge-based economy where there are plentiful opportunities and a population equipped to grasp them’. Government development agencies have taken up this mission with zeal.
The US has always been an important source of foreign direct investment for the province and the success of the Industrial Development Board (IDB) can be gauged from the fact that almost 50% of US software development investment in the UK during 1998-99 came to Northern Ireland.
Call centres are also an increasingly important source of employment in urban and rural areas and the IDB is persuading increasing numbers of companies to invest in Northern Ireland and establish call centres serving markets in the UK and beyond.
Small businesses are being encouraged to explore the opportunities provided by the internet via the Local Enterprise Development Unit’s (Ledu’s) ‘Get Connected’ programme’ under which Ledu’s top 1,000 client companies will be provided with connectivity and training.
The success of the economy in the Republic of Ireland is also beginning to spill over. The spiralling costs of housing and labour have encouraged employers to adopt alternative employment and investment strategies that include recruiting from Northern Ireland, expanding into it or even switching investment to it.
The Good Friday Agreement was voted for by a substantial majority of the population. The establishment of the Assembly and the Executive resulted in a boost of confidence that was reinforced by the positive manner in which the ministers and Assembly members carried out their roles and responsibilities. While the administration existed for only 11 weeks, its suspension has left an even larger void than was there previously, as the current position is very much a holding pattern.
We can only hope that the political representatives can overcome the impasse as soon as possible so attention can revert to creating jobs and improving the prospects for everyone.
Joe McKnight is a senior manager in commercial banking at First Trust Bank.
This content has been archived. It is available through our partners, LexisNexis® and Bloomberg Law.
To view this content, please continue to their sites.
Not a Lexis Subscriber?
Subscribe Now
Not a Bloomberg Law Subscriber?
Subscribe Now
LexisNexis® and Bloomberg Law are third party online distributors of the broad collection of current and archived versions of ALM's legal news publications. LexisNexis® and Bloomberg Law customers are able to access and use ALM's content, including content from the National Law Journal, The American Lawyer, Legaltech News, The New York Law Journal, and Corporate Counsel, as well as other sources of legal information.
For questions call 1-877-256-2472 or contact us at [email protected]