NI to 'lose jobs' after Brexit, while the Republic creates them
A report on the economic impact of an all-island economy points out that Brexit could damage the Northern Ireland economy in ways that reduce wages and jobs.
Accountancy firm EY has predicted that Northern Ireland will lose 3,500 jobs by 2020 compared to 2016, while the Republic will gain 91,000 jobs over the same period.
The intention of the report is to consider what would happen if the economies of Northern Ireland and the Republic of Ireland were to integrate and how Brexit will affect the north and south.
“Part of the reason for a widening gap in economic performance between the north and south has been poor policy decisions in Northern Ireland over many decades,” says report author Paul Gosling.
“The north’s economy failed to adjust from manufacturing dependence and politicians failed to provide the skills base needed here by employers and investors.
"Since the Good Friday Agreement the gap between the employment rate in the UK and that in Northern Ireland has actually grown – we have gone backwards in terms of economic performance compared to Great Britain.
"And that has not been helped by Invest NI not having the same success as the Republic’s IDA.”
Paul Gosling is a writer, public speaker, broadcaster and researcher. He specialises in the economy, accountancy, government and the public sector, the co-operative sector and personal finances.
_“The Republic of Ireland sits atop the European growth charts, while Northern Ireland is closer to the bottom.” EY’s Economic Eye, Winter 2017_
In 1920, 80% of Irish industrial output was in and around Belfast, with Belfast the largest city in the island of Ireland.
The economy of the Republic is now four times larger than that of Northern Ireland, with industrial output ten times larger than that of Northern Ireland.
Average full time income per head in the Republic in 2016 was £40,403, compared to £25,999 in Northern Ireland. In other words, a worker in the Republic is typically paid half as much again as someone working in Northern Ireland.
How RoI created its vibrant economy
The European Commission explained:
“As a small open economy Ireland’s financial fortunes are dependent on international trade and influenced by global markets. That means it’s important for the country to build overseas partnerships and being part of the European Union enables us to do just that in solidarity with other nations.
“Before joining the EU in 1973, Ireland’s largely agricultural based economy was choked by its dependence on the UK market. At that time, industrial trade and international co-operation were becoming the norm and EU membership helped Ireland move towards a modern, free market economy.
“The EU’s Single Market environment, together with decisions to introduce low corporate taxes and develop an Industrial Development Agency (IDA Ireland) to promote Ireland abroad, eventually enabled the new Irish economy to flourish.
“One of the difficulties with small open economies like Ireland’s is that they can be vulnerable to global factors and Ireland’s strongest period of economic growth, from the mid ‘90s to the mid ‘00s, was followed by a spectacular crash sparked off by a worldwide financial meltdown.
“After several difficult years, Ireland’s economy is now growing again and the European Union has introduced several new, powerful measures to better protect the economies of Ireland and all Member States in the future.”
Productivity
According to PwC, the Republic of Ireland is around 60% more productive than is Northern Ireland, while the UK average is 15% above the level of Northern Ireland
The report says the potential impact of Brexit could be devastating to the Northern Ireland economy and serious consideration needs to be given to what political strategies could mitigate the damage.
It claims North-south economic integration would generate substantial benefits for all of the island.
It concludes that there is a significant positive potential economic benefit from Irish reunification, particularly for the citizens of Northern Ireland.
It is recommended that preparations begin now in accordance with Article 3 of the Irish constitution, as amended following the Good Friday Agreement. Progress towards achieving an all island economy should be reviewed annually by the Oireachtas.
A ten point plan for how Irish reunification might be achieved was also set out in the report :
Ten Point Plan
- The UK government agrees to continue its subvention to Northern Ireland (currently operating through the Barnett formula) but on an annually tapering basis, with the UK subvention removed entirely within a negotiated period beyond reunification. UK support might be needed until 2050, supporting pension liabilities for civil servants, etc, under an arrangement similar to that with EU withdrawal. Over the long term this would produce a significant fiscal gain for the UK, which is likely to be welcomed by taxpayers in GB. For Northern Ireland, the subsidy would be replaced by higher tax revenues as Northern Ireland benefits from the economic impact of reunification and the Republic’s economic policies. Sovereignty might also transfer on a gradual basis. Stormont might continue to operate as a devolved assembly, but of Ireland rather than of the UK. There could also be a graduated move towards a truly all-island economy, with both sterling and the euro accepted by businesses during the transition process. Substantial efforts must be made to accommodate the fears and concerns of those who have a British or Ulster Scots identity throughout the island of Ireland in order that a successful unified economy is achieved.
- Increased spending on capital projects is required to bring infrastructure up to modern European standards. The infrastructure deficit that was carried forward from the period of direct rule needs to be addressed, which means that the UK government has an obligation to help meet the cost of correcting the infrastructure deficit. A UK government investment of £10bn would assist significantly with this, towards the cost of roads, health reform, education facilities and water and sewage systems. A bridge or tunnel connection with Scotland could provide reassurance to unionists that economic, social and political connections with Great Britain could actually be strengthened through new arrangements.
- A reduction in the number of civil servants in Northern Ireland to the same level as the Republic would assist in making Northern Ireland financially self-sufficient. This would take place on a gradual basis to reduce the impact on individuals and on the wider economy. Ideally the impact would be spread over several years, achieved as much as possible by natural wastage. All redundancy, pension and restructuring costs would be paid for by UK. This restructuring would assist in boosting Northern Ireland productivity.
- The European Union would be asked to assist in the reunification of Ireland, which would address the problems caused by the Irish border post-Brexit. A new 32 county administration should be empowered to borrow cheaply to invest in the economy and all-island infrastructure. The European Investment Bank would play a key role in this.
- A political agreement on a new all island basis, inside the EU, would attract increased EU funding through Interreg, including financial assistance in restructuring Northern Ireland’s infrastructure to improve its competitive position and integrated all-island economy.
- IDA Ireland would promote all of the island on the world stage. This would produce benefits for all. Given its track record in attracting FDI worldwide it should prove to be a major player in turning the Northern Ireland economy into a world class competitor with the added benefit for the Republic that the two agencies would no longer be in competition but would be working together to produce economic growth.
- Improved direct links between education and industry in Northern Ireland as per the Republic would lead to a more competitive market-oriented economy, over time producing improvements in living and working environments. While Northern Ireland needs to learn from the Republic with regards to elements of its education and skills system, the Republic needs to learn from Northern Ireland in terms of the cost and efficiency of its health system. Neither system is adequate at present. The Bengoa reforms need to be implemented in Northern Ireland as at present it has too many general hospitals, without sufficient specialist expertise.
- A harmonised corporation tax would make all the island more attractive to foreign direct investment and lead to domestic companies throughout the island being more competitive, thus leading to economic growth for all.
- As part of the post-Brexit response from the European Union, a special case should be presented to the European Union for assistance with the cost and social pressures involved with Irish reunification. This might be structured in ways that learn from the Marshall Plan and the experience of German reunification.
- A single and integrated Ireland would create economies of scale and a more competitive economy. A single Ireland would be a world leader in the fields of research and development (eg Trinity College, UCD and Queen’s, all in the same country), higher education, pharmaceuticals and new technologies.