NI's curate egg economy…

The Observer notes that low unemployment, high consumer spending and rising house prices have all brought a feeling of well being to the NI economy. However, in the FT, John Murray Brown looks at some of the a underlying structural problems that remain to be tackled:

Pat McArdle, chief economist at Ulster Bank, now part of Royal Bank of Scotland, told this year’s annual CBI Northern Ireland lunch that the region looked set to underperform the UK as a whole for the first time for several years, growing at rates closer to the eurozone.

According to some measures, the Northern Ireland economy faces considerable structural issues. The public sector still accounts for close to 30 per cent of employment, a much larger proportion than other UK regions. On the other hand, statistics suggest Northern Ireland consumers spend more on entertainment than most other regions, apart from London and the south-east.

The economy is £22bn in size, only £14bn of which is raised locally by taxes. The government’s budgetary subvention is currently worth around £8bn, which is more than any other region receives. The economy has changed dramatically in recent years. Unemployment is at record lows at 4.7 per cent, although it is likely to edge up with redundancies announced at Adria, a lingerie manufacturer.

  • Michael MC

    In my opinion, the lack of small business in NI is caused more by the mindset than the troubles.

    People in the UK and especially in NI seem incapable of taking small risks such as setting up business’. The claims culture doesn’t help either.

    Even if there is civil unrest, people still need to spend their money, the market is there no matter what terrorists do to try to crush our spirit.
    The IRA suceeded in that, it seems to me. I hope future violence won’t do the same.

  • Michael MC

    In my opinion, the lack of small business in NI is caused more by the mindset than the troubles.

    People in the UK and especially in NI seem incapable of taking small risks such as setting up business’. The claims culture doesn’t help either.

    Even if there is civil unrest, people still need to spend their money, the market is there no matter what terrorists do to try to crush our spirit.
    The IRA suceeded in that, it seems to me. I hope future violence won’t do the same.

  • IJP

    Michael

    On the contrary, the UK has the most entrepreneurial culture in Europe, with more business start-ups (mainly because it’s so much easier to start up) and far more millionaires per capita than western Continental Europe.

    You are entirely correct that it’s about mindset, but this mindset – not just lack of risk but also lack of confidence – has been caused by the conflict and the resultant economic (and even social) ‘dependency culture’.

    On a broader point, the growth of retail in Greater Belfast is taken by the articles to be a good thing. I fear it is quite the opposite. That retail in itself depends on people earning public money spending it. Two months ago we had our first retail redundancies for decades, yet still our ‘regeneration’ plans centre on yet more retail facilities. In fact we’ve already reached capacity and as the public money is (rightly) withdrawn as part of economic ‘normalization’ (i.e. the withdrawal of half the subvention), people may live to regret going over-capacity. Industry and services produce the real wealth creation.

  • A.W.

    IJP

    Like yourself I am very worried about the concept of retail led growth and believe higher taxes aimed specifically at retail are needed both to reduce appending and reduce imports and increase tax take to cover the chancellor’s over spending.

    High house prices are of little benefit to most and can be a burden on economic growth but house prices will rise as long as demand out strips supply. House prices can also reduce mobility of labour.

    With regards business growth there is a real need to look at
    1 getting rid of unnecessary legislation and well meaning but ill considered legislation.
    2 A fairer tax structure based on ability to pay. (rate reform etc)
    3 Greater tax take based on consumption of unessential items.
    4 Reducing government departments to the minimum. In many aspects we need to ask is this department necessary or could this be amalgamated with another department or Council Service. We are over governed, there are too many departments and many of the tasks could be carried out by giving greater powers to local councils.
    5 Give senior Civil Servants real authority and real incentives to encourage efficient administration.
    6 Identify and support possible growth sectors such as tourism and renewable energy production. (not just wind farms hydro etc etc.) Strategically we should aim to have surplus energy production.

    On a minor point there needs to be a rate charged on the car parking space in out of town shopping centres to neutralise the cost benefit of such locations over town centre locations.

    Basically we need to promote and support local business instead of legislating and taxing it out of existence. Lets face it the real economy here is very weak.

  • fair_deal

    “statistics suggest Northern Ireland consumers spend more on entertainment than most other regions”

    Is entertainment a euphemism for our drinking culutre?

  • idunnomeself

    Fair Deal

    I’d be surprised, people drink a lot more elsewhere in the UK than they do here in my experience.

    I thought it was weekend breaks!

  • fair_deal

    IDM

    Thanks

  • looking in

    With some irony … maybe even a 1st year economic resit question

    Reconcile “underlying structural problems” in local economy with the DUP’s recent “stipulations” (more public cash for our lot). [1 Mark]

    Model answer: They are clearly in never-never land or yanking our chain.