Interesting times

Whether you are a unionist, republican, or neither, there is near universal recognition that Queen Elizabeth helped bind the United Kingdom. The challenge for King Charles will be to achieve a similar role. If he doesn’t – and it will be tough for a man often regarded as remote – the prospects for Irish reunification and Scottish independence will grow.

That constitutional uncertainty will play on investors’ minds. Demographic trends have already shifted Protestant unionism away from being our majority culture. The change in monarch will stimulate even more questioning of the constitutional future of the North and what that means for our economy.

The context for that uncertainty is Brexit – even the word left out consideration of Northern Ireland. It created a trade border in the Irish Sea, while providing an impetus for stronger trading relations North-South. Despite inevitable Protocol amendments, the constitutional genie cannot be forced back into the bottle.

One of the most significant impacts of Brexit (plus Covid) has been that on the labour market, in terms of skills shortages. This is causing significant difficulty in Northern Ireland, including in the hospitality, retail and caring sectors. While new Prime Minister Liz Truss talks up the need to raise productivity, the required associated skills revolution can barely begin in the two years to the next General Election.

Brexit was promoted as an opportunity to deregulate the UK economy. We are beginning to see the signs of this, in ways that particularly and negatively affect people here: new roaming charges on some mobile phone networks and big reductions in airline compensation for cancelled and late flights. It is also proposed to allow banks to substantially raise pay for their senior staff. As yet, there is little indication that deregulation will assist most consumers. This will all play into unhappiness here with the London government.

The Boris Johnson promise was that Brexit would be accompanied by the levelling-up of areas, such as Northern Ireland, that have been left behind by the South East of England. Under Johnson, that gap actually widened. And Iain Duncan-Smith – regarded by some as the power behind the leadership of Liz Truss – has indicated that the levelling-up agenda will itself now be left behind.

Indeed, the massive sums to be spent addressing the energy crisis are likely to lead to a new generation of unpopular public sector austerity cuts. That could lead to reductions not only in levelling-up, but also to the funding of the three devolved governments. The signs are that the new Cabinet is not that committed to devolution anyway.

The Truss government intends to carry out massive economic transformation before the next General Election. The about-turn on energy policy is an example, which might see Westminster approve fracking in Northern Ireland in the absence of a functioning Stormont Executive.

Addressing the energy crisis here will be a major challenge for the UK government, given how different our environment is from that in Britain. We have an integrated North-South electricity market; high dependence on home heating oil; poorly insulated housing stock; lower wages and a lower employment rate than GB; a colder and wetter climate; and no government.

If the Truss administration can deal effectively with that challenge, it could reduce the calls for political and economic reunification. If, however, the very different approach taken by the European Union is seen as more effective, this could accelerate demands for constitutional change.

In this context, image matters almost as much as substance. Just as King Charles will have to adjust his manner to appear less aloof, so too will the Cabinet. Liz Truss can seem stiff and wooden, while the ultra-toff Jacob Rees-Mogg has become one of the most powerful ministers. He has already abandoned policies intended to address climate change.

Meanwhile, the new secretary of state for Northern Ireland, Chris Heaton-Harris, is a former chairman of the European Research Group – hard right, Brexit fundamentalists. The minister of state, Steve Baker, is another ERG former chair. Their appointments could be a stroke of genius, in that if they are content with the outcome of Protocol negotiations, they could carry the rest of the Conservative Party with them. But failed negotiations would further damage relationships with the EU and the Irish government, threatening North-South trade and investment.

The Protocol provides the North with a massive economic opportunity. But it is too early to tell if that opportunity will be fully realised and sustained. The cost of living crisis is being felt worse here than elsewhere because of our high fuel poverty levels, leading to signs already of significant damage to our retail sector. And our public sector may not have the funds to do much to mitigate the situation.

These are interesting times. But, as the Chinese will tell you, that is a curse.

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