There are two Northern Irelands

Posted on September 18, 2014 · Posted in Business Month

Northern Ireland is experiencing a new division – but this is not a division based on religion. Instead the new division separates the parts that are benefiting from the early stages of economic recovery from those that are not.  Examination of the most recent employment statistics are instructive.

 

Over the last year there has been a substantial improvement in the unemployment situation in much of Northern Ireland. Unemployment rates have fallen by 20% or more In Carrickfergus, Banbridge and Larne – all parts of the East of Northern Ireland with comparatively low levels of poverty.  It has also fallen by 20% on the north coast in Coleraine – but this trend may be reversed as the impact is felt of the job losses from the Driver and Vehicle Agency.

 

Elsewhere, though, the situation is very different. Across Northern Ireland as a whole, the fall in the number of claimants of unemployment-related benefits was 12.8% – compared to a fall of 26.4% across the UK.  In Belfast, unemployment has fallen by 10%, with the city remaining one of the highest areas of unemployment in Northern Ireland.

 

Elsewhere the situation is significantly worse. While Antrim, Castlereagh, Banbridge and North Down all have claimant count rates of 3%, the UK’s highest level of claimant count unemployment is in Londonderry at 8.3% – the only rate above 8% in the whole of the UK.  Over the last year, despite City of Culture designation, claimant count unemployment fell by a mere 1.4% in Derry.  In next door Strabane, it dropped by just 0.4%.

 

Nor are the signs good that there will be a turnaround. There has been a surge in job announcements in recent weeks that will do much to bring down unemployment.  The good news has included 1,000 jobs at Concentrix in Belfast, 486 at accountancy firm EY in Belfast, 400 at Capita at Newtownabbey, 333 at Convergys in Derry, 130 with Wrightbus in Ballymena and 100 with Delta in Belfast.

 

In total there have been 2,831 jobs announced in just two months with the support of Invest NI. But it is significant to note where those jobs are located.  Some 85% are in a ‘golden circle’ based on Greater Belfast, Antrim and Ballymena.  This is very substantially greater than the area’s share of population.

 

There are strong grounds for believing that even in Belfast, many of the jobs are being taken by people from outside the city. Unemployment is falling by a higher rate in the city’s commuter territory than in the most deprived areas of the city.  Moreover, official figures for economic activity in the south of Belfast show it to be one of the most financially productive areas in the UK – which is clearly at odds with incomes in the area.  This clearly suggests that much of the benefit is derived from commuters, rather than those who live in the area.

 

Figures published earlier this year by the New Policy Institute for the Joseph Rowntree Foundation demonstrate two trends. Northern Ireland has suffered much more than the rest of the UK in terms of loss of income during the recession, with the least well-off households losing disproportionately.

 

Average incomes in Northern Ireland between 2006/7 and 2012/13 fell by 7% in the UK, but by 10% in Northern Ireland, according to the Rowntree report. More starkly, amongst the poorest 20%, incomes dropped by just over 4% in the UK as a whole, but by 16% in Northern Ireland.  The disparity between Northern Ireland and Great Britain narrowed significantly higher up the income scale.  There is also a noticeable geographic split, according to the report’s authors.  “Within NI, the proportion of people living in poverty is highest in Belfast, followed by the west and then the east,” they note.

 

Part of the explanation for the contrasting economic fortunes across Northern Ireland is the differing nature of economic activity, suggests Richard Ramsey, chief economist at Ulster Bank. “One of the reasons is in the West and Mid-Ulster the higher concentration of construction employment, which has been hit hardest in terms of the housing downturn,” explains Ramsey.  “Similarly in terms of capital investment cuts.

 

“Lots more areas to the west of the Bann would have benefited from the Celtic Tiger property boom than elsewhere. Lots of people were working in the construction industry in the South, while working in the North.”

 

Peter Bunting, assistant general secretary of the Irish Congress of Trade Unions, is scathing on the growing divisions in Northern Ireland and the impact on areas at a distance from Belfast. “To me it’s where Invest NI should be targeting the jobs,” he argues.  “At one stage they were targeting social need.  Investors should be encouraged to invest, but they should do so in areas where there is greatest social need.

 

“The jobs should not all gravitate to Belfast, or south Belfast. You are going to have serious economic problems if you can’t get any decent jobs outside of Belfast.  This is the issue with welfare reform – people are being forced to get jobs, but there are no jobs.  And because of the political impasse we have lost jobs that would have been created at the Maze development and the Warrenpoint bridge.”

 

But Esmond Birnie, chief economist with PwC, takes a different view. ”How new is this?,” he asks.  “Maybe this is a reversion to older patterns.  A lot of this is reflecting – in particular for inward investors – the importance of clusters.  There are advantages in being in an area close to a fairly large urban, or semi-urban, area, with a large labour market, skills, university research, airports, high speed internet connectivity and so on.  Some of that is new, but some of that is old economics as well.

 

“That the Belfast metropolitan area is doing well compared to the rest of Northern Ireland doesn’t really surprise me. I think on balance it is better to try to improve the connectivity, transport and infrastructure to the rest of the province, rather than subsidise jobs directly in those other areas.  The evidence is that if you try to do the latter, the jobs don’t stay.

 

“If you improve infrastructure, in particular the roads, you are probably encouraging more commuting. Now is that good or bad?  That all depends on where you compare us to.  People in Northern Ireland will feel they will engage in a huge commute.  But by North American terms, these are small distances.  And some commuting can be by public transport.

 

“I would say that is the way to handle it. Bringing jobs to people is very expensive and doesn’t really work in the long term.”

 

This is a debate likely to grow in the coming years if the latest trends continue. And there are two fundamental challenges to overcome if Northern Ireland is to avoid exacerbating divisions.  Unless there is greater investment in infrastructure connecting east and west areas of Northern Ireland, it is probably inevitable that most new jobs will go to the east, to be filled by people living in the east.

 

But even within the east, it is evident that those new jobs benefit people living in the most affluent areas, rather than those living in the poorer ones. The solution to that will have to be based on raising skills.  Without greater investment in skills and infrastructure, Northern Ireland’s new divisions will surely widen.