Northern Ireland is struggling to reverse decades of economic underperformance, due to political uncertainty, fallout from Brexit and civic unrest are heaping new challenges on the region in its centenary.
Leaders of Northern Ireland’s three largest political parties have said the region created following the partition of Ireland on May 3, 1921 could now boost prosperity through initiatives such as the takeover of its infrastructure investment tax rate.
In almost all respects Northern Ireland is starting from a low base. A research paper published by economists at Trinity College Dublin in 2019 took stock of decades of inadequate spending on education and infrastructure, the inability to attract foreign investment, and a largely one-way flow of talent. of the region.
The result was an economic underperformance relative to the UK and the Republic of Ireland for much of Northern Ireland’s first century, despite massive subsidies from the UK government and an increase in jobs in the State in areas such as defense and security.
These expenses were necessitated by the unrest: sectarian violence spanning more than 30 years that largely pitted Catholic nationalists who wanted a united Ireland against predominantly Protestant trade unionists who aimed to keep the region in the UK. More than 3,500 people lost their lives until the 1998 Good Friday Agreement brought peace to Northern Ireland.
“We had.. Years of violence, a campaign of terrorism, which of course was going to have an impact on infrastructure… But despite all of that, we are a very resilient group,” said Arlene Foster, Premier of Northern Ireland and leader of the Democratic Unionist Party, to the Financial Times, speaking shortly before announcing his intention to step down last week.
Although terrorism weighed on Northern Ireland’s economy, its decline was most pronounced in relative terms between 2010 and 2016, when growth in gross domestic product per capita averaged 0.6% each. year, compared to 1.3% in the UK as a whole and 3.2% in the Republic, according to data cited in the Trinity document.
In 2018-19, the region’s spending exceeded its tax revenue by £ 9.4bn, a gap equivalent to 19% of GDP and offset by the UK government.
Foster’s departure, largely driven by his handling of Brexit, comes less than 18 months after the reestablishment of decentralized government in Stormont and threatens to intensify the political and economic uncertainty generated by the UK’s departure from the EU.
But Ulster Unionist Party leader Steve Aiken said Northern Ireland’s legacy of underperformance amplified future opportunities. “There is such a thirst for improvement and success,” he added.
High levels of public sector employment in Northern Ireland have cushioned the blow the coronavirus pandemic has dealt to its economy compared to the rest of the UK, and Irish Taoiseach Micheál Martin is excited about the potential for increased north-south cooperation in several areas, including research.
Yet Northern Ireland operates under great constraints. Conor Murphy, Minister of Finance and senior member of Sinn Féin, said he and his counterparts in Scotland and Wales had been pushing for the UK government to make multi-year regulations in 2020. “Then you receive sudden notice that it’s only a year[of spending]. . . so under these circumstances, you can’t really operate strategically in the long term, ”he added.
Brexit unleashes headwinds. Many businesses are grappling with rising costs and friction as a result of new trade deals between Northern Ireland and Great Britain as part of the UK’s Withdrawal Treaty with the EU. Fierce trade union opposition to the cadre spread through the streets of the region during eight nights of unrest in April, and footage of police deploying water cannons against protesters was broadcast around the world.
“I think [Northern Ireland] will likely continue to underperform, ”said John FitzGerald, co-author of the Trinity paper and former chief economist at the Irish Institute for Economic and Social Research, a think tank.
His research and that of others found that education was the biggest obstacle to Northern Ireland’s prosperity: the result of policies separating Catholics and Protestants in school as well as falling spending, because the funding was consumed by defense and housing.
Aiken said he expects education from the two communities to be combined within a decade, which would dramatically improve efficiency. Foster wants the same, but said the timing could be difficult as there were “a lot of vested interests” in keeping them separate.
Either way, educational reform and the integration of these children into the labor market will be slow. FitzGerald’s most immediate solution is to woo people who have left Northern Ireland, including students chased by college caps that can only leave 60 places for every 100 domestic applicants, according to Queen’s University of Belfast. Two-thirds of those who leave Northern Ireland to study elsewhere do not return, according to a recent study by Pivotal, a think tank.
FitzGerald thinks there is even less chance of the emigrants coming back now. “Who would want to go back to a Northern Ireland which is unstable, who does not know where it is going?” He asked, saying society was “more divided” amid a polarized debate over whether the future of Northern Ireland lay in the UK. Brexit fueled calls for a border poll to achieve a united Ireland.
Others said Northern Ireland had been much more volatile and polarized in the past.
When Newry & Morne Enterprise Agency established a business park 50 meters inside the Northern Irish border, almost all of its expenses were covered by an EU grant because it was considered a ‘bandit country. Said General Manager Conor Patterson.
But 20 years later, the business park is full. “The place is busy and businesses don’t seem to be encumbered by the pandemic or Brexit,” Patterson said.
Paddy Hughes, who runs the Horse First equine products business at the business park, said it had been busier than ever last year, although he faced additional costs including leasing more warehouse space as he had to order supplies in larger batches due to post-Brexit trade deals.
Business leaders north and south of the Irish border have said Northern Ireland could gain business by taking on its unique position of actually being in domestic goods markets in the UK and in the EU.
Stephen Kelly, head of the Manufacturing Northern Ireland trade body, said this year he had been contacted by five companies considering investing in Northern Ireland, including one that could create 500 jobs. “I had spoken to about four companies in the previous eight years,” he added. “Clearly [Northern Ireland is] be noticed.
But a senior executive at a large multinational that has spent billions in Ireland and who could see benefits in Northern Ireland’s post-Brexit status, said the relentless negativity of Stormont’s messages surrounding the new trade deals was one of the reasons the region was not investable.
The recent move by the UK government to increase its corporate tax rate from 21% to 25% by 2023 is another challenge for Northern Ireland, as it competes with the 12.5% proposed by the Republic.
Foster said it was time to “revisit” the takeover of the corporate tax rate in Northern Ireland, and suggested a figure below 20 percent. Murphy is less enthusiastic and saw more potential from long-term infrastructure projects that could be funded with grants from Westminster.
Progress can be fiercely fought in Northern Ireland, where political leaders could not even come to an agreement on commissioning a stone in the form of the region to commemorate the centenary of Monday. “We are in a binding coalition,” Foster said. “And we recognize it. . . there are huge challenges to overcome. ”
