The State of Britain

Economic growth in Northern Ireland is the lowest in the UK but labour, earnings and house price data more encouraging, optimism at Harland and Wolff

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Growth in Northern Ireland was 1.0% in the year to June 2019, which ranked the country bottom in the UK according to estimates from ESCoE. The previous quarter’s growth was also around 1.0% which suggests the Northern Ireland economy is stalling at best. Of the twelve ‘regions’ of the UK, London had the best performance nationally at 2.3%; the national growth rate for the same period was 1.5%. With the UK economy contracting by 0.2% in the quarter, stalling growth in Northern Ireland suggests it is possible that over the quarter, the Province has outperformed other regional economies which have shrunk.

Unemployment in Northern Ireland increased by 2,000 to 28,000 between April and June, an uplift of 0.2% to 3.1%. The South West had the lowest unemployment rate at 2.7%, the North East had the highest at 5.3%, with the UK rate at 3.9%. The South West also had the highest employment rate at 80.5%, which compared with 72.2% in Northern Ireland; the UK rate at 76.1% is the joint highest since comparative records began in 1971.

In June, Northern Ireland’s average earnings increased from £513 to £545 per week. London had the highest average earnings of £831; the North East had the lowest at £537. In the UK average earnings grew by 3.7% or by 1.8% after inflation.

Northern Ireland’s average property price increased during the month, the 0.8% rise to £136,767 meant annually prices increased by 3.5%, the second best price growth in the UK. In comparison, UK prices grew by 0.7% to £230,292 during June, which left the annual growth rate unchanged at 0.9%.

Some interesting analysis by Northern Ireland’s Department for the Economy has suggested cutting air passenger duty (APD) would not deliver value for money. APD does not apply on long haul flights from NI but the DUP and airports have lobbied for it to be abolished altogether or at least cut on short haul. Civil servants and their consultants acknowledged that cutting the tax could help develop new air routes, but Northern Ireland’s block grant would be cut to reflect the reduced revenue going to the Treasury. An implicit subsidy to already commercially viable routes might also raise state aid problems. The report also recommended that the zero APD rate on long haul flights – initially aimed at supporting a direct service between Belfast and New York – be retained as an inducement to airlines, after United Airlines and Norwegian withdrew the only services on that route. Scotland and Wales use co-operative marketing arrangements – provided to Northern Ireland’s airports through Tourism Ireland – to attract long-haul services. The report suggests more investment in co-operative marketing via economic development and tourism agencies, airlines and airports jointly to promote and market new routes. Across the water, the Scottish Government has recently declined to abolish APD on environmental grounds, although Inverness airport remains exempt.

Net migration to Northern Ireland increased for the fifth year in a row and reached its highest level in 10 years last year according to the NI Statistics and Research Agency. The number of people coming to live in Northern Ireland was 23,000, while 19,000 people left, resulting in a net gain of 4,000. Belfast had the highest level of net international inward migration.

On jobs, Connex Offsite is to create 140 jobs over the next five years. The firm manufactures modular bathrooms which are installed in commercial developments like hotels and student accommodation. Also Chargifi, a provider of cloud-connected wireless charging technology, is to set up a hub in Belfast. The £3.6m investment will create 41 jobs. And Newry-based sandwich company Around Noon is creating 94 jobs in a £7m investment. The last two projects are being supported by c£1m of public funding via Invest NI. At Harland and Wolff, administrators say they have received a number of non-binding offers to buy the business as a going concern. The Belfast yard – which built the Titanic – employs c120 and was placed into administration earlier in the month.

A report by an All-Party Parliamentary Group (‘APPG’) of MPs which looks at Post-Brexit Funding for the nations and regions has found that the UK would receive additional EU funding in the 2021-27 spending round. Three additional sub-regions are likely to slip below the threshold of 75% EU average GDP per head that would qualify them for ‘less developed region’ status, but no part of Northern Ireland has yet fallen below this level.

Additionally, the EU has proposed that ‘transition region’ status should be extended to cover all regions with a GDP per head between 75 and 100 per cent of the EU average. Northern Ireland is classified as a transition region under the current 75-90 per cent rule. Seven additional sub-regions are likely to slip below the threshold of 100% EU average GDP per head, qualifying them for ‘transition region’ status. They are East Anglia, East Wales, Greater Manchester, Leicestershire, Rutland & Northamptonshire, Outer London South, North Yorkshire and South Western Scotland. It is not clear how much extra funding these areas would have received from the EU, but €50 per head over the next EU spending round would equate to c£560m.

The UK government has promised to replace EU funding to the regions with a new UK Shared Prosperity Fund. If the new sub regions are added, the APPG calculates this amounts to c£1.8bn pa, on top of the c£2.2bn pa already committed as part of Local Growth Funds (in England). Integrating the Local Growth Fund into the UK Shared Prosperity Fund could be problematic. The Local Growth Fund allocates funding to LEPs via competitive bidding whereas the allocation of EU funds uses a fixed formula. How the Shared Prosperity Fund will be allocated to Northern Ireland and the other devolved nations and mesh with other pots like the City Deals is yet to be determined.