Will the City Deal provide a “fresh start” for Derry?

The current global pandemic has put Northern Ireland’s long-standing problems firmly into context – with Coronavirus claiming more lives across the UK in a few days last month than thirty years of the Troubles did. Fortunately post-conflict NI is a very different place these days, with change perhaps nowhere more prevalent than in our economy. Current pandemic woes aside, NI entered the current decade in a much better economic condition than it has any other decade since at least the 1960s.

Unfortunately, that rising tide has not lifted all boats together. Whilst every other city on the island has prospered or boomed this century, one has remained consistently at the wrong end of the economic rankings. More than two decades on from the Good Friday Agreement, Derry (and the neighbouring town of Strabane) still awaits its long-promised peace dividend. Visitors to Derry are often baffled by the city’s sluggish economy.

It is a genuinely attractive place – rich in history and handsome buildings, with a beautiful riverside setting along the majestic River Foyle. Derry exudes a cultural vibrancy and energy, and its youthful population has the pick of some highly-rated schools. The city sits at the crossroads of the Causeway Coast and the Wild Atlantic Way and has a fast-growing tourism sector.

And with a coastline and superb inland scenery on its doorstep, and the lowest house prices in the UK, quality of life is high there whilst the cost of living is low.

So why is Derry not reaching the potential that these raw ingredients would suggest it should? In short – decades of chronic underinvestment have left the city with NI’s highest levels of unemployment and economic inactivity, its lowest provision of skills and third-level education and the worst infrastructure on the island.

1. Unemployment and inactivity

Derry has had NI’s highest unemployment for years. Standing at 4.8% in April 2020, its claimant count has benefited from an impressive 13% year-on-year decline – but is still 70% above the NI average (2.8%), and 15% above the second-highest location (Belfast North, 4.2%). And that headline rate masks a significant inactivity problem. The Derry and Strabane District has the highest percentage of economically inactive people in the UK (37%, vs an NI average of 27%), with a third of those due to disability or long-term illness.

2. Infrastructure

Derry is the only city on the island not connected to any other by a motorway or dual carriageway. And it has a significantly lower quality and frequency of rail service than every station east of the River Bann receives on the same Derry-Belfast rail line. All of which gives the city unnecessarily long travel times and a peripheral feeling.

3. Skills and Higher Education

Of the fifteen towns and cities across the island with degree-granting institutions, Derry has the lowest Higher Education provision. Ulster University’s Magee facility in Derry is the fourth priority campus of Belfast’s second-ranked university, with barely 3,000 full-time students (compared to 15,000 at UU’s new Belfast campus). Ulster has been busily diverting staff, students and courses away from Magee over the last decade – whilst also claiming it is serious about creating a 10,000 full-time student campus that it clearly has neither the resources nor inclination to deliver. Its numbers at Magee continue to fall – down by 100 students for 2019-20 – whilst growing at their other campuses. Meanwhile, 1 in 3 adults in Derry have no qualifications at all, whilst the figure for Strabane is 40% – both significantly higher than the NI average (24%).

4. Ageing and declining population

Derry is currently one of Europe’s youngest city regions, with 34% of its population under 25 and 22% under 16. Yet with limited educational and employment opportunities to retain its young or attract new residents, Derry and Strabane is predicted to be the only district in NI facing population decline over the next twenty years (albeit a modest fall).

More worryingly is the shift of the age profile within that population. The proportion of those over 65 in Derry (i.e. adults of retirement age) is predicted to soar by 63%, whilst each age group below that will decline by 11-17%. All of which will reduce the city’s working-age population and create further economic pressure – thanks to net migration (i.e. people leaving).

And all whilst NI’s population as a whole is expected to rise by 6%. In a Northern Ireland already heavily skewed towards Belfast and the east, it should be a cause of genuine concern that our second city – and the only urban centre in the west – is expected to shrink whilst the east expands rapidly.

It should, therefore, come as no surprise that potential employers are often deterred from locating in Derry, or that its most talented young people leave in their droves after school and rarely move back. For those who do remain in the city, well-paid jobs are limited – particularly beyond the public sector, which accounts for a third of all employment.

So whilst Derry has many of the natural ingredients often found in prosperous cities, it has been denied the basic elements needed to catalyse those into a healthy economy. And when residents or politicians from the city highlight that fact, they are instantly dismissed as ‘whingers’.

City Deal to the Rescue?

The good news is that Derry is finally on the cusp of receiving significant public investment. In an era of devolution, however, it is note-worthy that the catalyst for this is the UK Government’s ‘City Deals’ programme rather than any Stormont initiative to improve its most disadvantaged area. Stormont has failed Derry since the GFA, and it is ironic that London is the lead source of the only specific attempt to address that.

City Deals are designed to kick-start and boost regional urban areas, and as far back as 2014 Derry was quick to spot the opportunity they presented – and was significantly ahead of Belfast in developing its proposal when the initiative was extended to NI.

The Derry-Strabane City Deal agreement was signed off by Westminster in May 2019, with £105m made available for projects identified by the council and its partners as having transformative potential. Last week Stormont agreed to deliver on its side of the deal through the mandatory match-funding – creating a combined public sector pot of £210m (expected to increase to £300m through private sector involvement).

All of which should easily add up to the largest investment for a single NI location outside of Belfast since the 1960’s Craigavon project.

So what’s the big idea?

So what does the North-West plan to do with this investment? And will it kick-start the island’s most sluggish economy?

Although one of Derry’s biggest barriers to economic growth is poor transport links it’s important to acknowledge that regional infrastructure is the responsibility of Stormont, and beyond the remit or budget of a City Deal.

Thankfully the argument for improving transport to the north-west was won long ago and is already being partly addressed by Stormont (albeit at a glacial pace). The A6 Derry-Belfast road is being upgraded, though will still not be dualled across its entire length.

The currently stalled A5 dualling has been beset by administrative blunders, legal challenges and delays for over a decade now. And the required £30m to make the only rail line in the west of NI fit for purpose was unilaterally scrapped by DFI last year – despite being signed off by a Minister in 2011 and scheduled to happen in 2021. So whilst Derry’s City Deal references these key regional infrastructural requirements, the focus within the document is on “catalyst investment priorities” of a more localised nature. These can be grouped together under three main themes :

1) Tech: Innovation and Digital infrastructure/assets

Derry has lacked a clear economic niche since its days as the planet’s biggest shirt-maker. With the world on the cusp of a new industrial revolution in digitalisation and automation, the City Deal aims to ensure that Derry and Strabane are better placed to take advantage of the opportunities (and weather the challenges) that will create.

The plan proposes a series of research centres and innovation assets covering industrial/commercial sectors with strong future growth potential – i.e. robotics; artificial intelligence and cognitive analytics; virtual and augmented reality; personalised and precision medicine; health and life sciences; and advanced manufacturing. Ulster University has been selected as the council’s delivery partner for these, and the initial stage will be the long-awaited opening of a Graduate Entry Medical School in Derry (first promised by UU in 2003, now confirmed for 2021 entry).

2) Skills and employability

This aspect of the proposal aims to widen employment access by addressing the relatively low level of skills and productivity within the city’s workforce. It includes an Apprenticeship and Skills Hub focused on training for key sectors (e.g. digital, IT, advanced manufacturing); an Intermediate Labour Market programme designed to equip the long-term jobless to enter employment; a Youth Investment Programme targetted at areas of high deprivation; and a Workforce Development Fund to upskill those already in employment. The proposal also seeks ‘UNESCO Learning City’ status for the region.

3) Regeneration

This seeks to develop publicly-owned sites whilst also stimulating new private sector development. Perceived barriers to investment will be tackled – e.g. the traffic-laden Buncrana Road will be widened to a dual carriageway; the poor aesthetics and layout of the city’s Quayside will be addressed; the long-idle Fort George site will finally be redeveloped; and a new c.£20m signature tourism destination will be created.

Will this city deal deliver for Derry?

A £300m gross investment equates to £2,500 per head of population across Derry and Strabane, and expenditure of that level will obviously have a positive impact upon such a small area. The council asserts that the projects within its City Deal were chosen to maximise their impact on job and wealth creation – and Westminster was sufficiently persuaded to provide £105m funding.

But a lot of the document feels buzzword heavy, and you sense that some of the ideas have been spoon-fed to the council by external partners/interests – possibly without the details being entirely thrashed out (Belfast’s City Deal document does seem heavier on detail).

Only time will tell re the actual impact of Derry plan, and we will never genuinely know if alternative strategies could have achieved more. But it is still possible to critique what we do know of the proposals.

The City Deal document outlines the following expected impacts by 2032 :

  • 15,100 additional jobs. Unemployment and inactivity reduced to below the NI average.
  •  £203m additional wages in the local economy, and a total Gross Value Add (GVA) of £1.16bn.
  • £96m in additional tax revenue.
  • 6,800 – 10,000 more people living in the city.

It also calculates that improving Derry’s unemployment and economic activity to just the NI average would deliver a £26m saving in annual public spending, whilst also contributing £43m more in Tax and PAYE – a net annual boost of almost £70m to the UK’s public purse. If achieved, that step alone would repay Westminster’s £105m investment within just 18 months.

You would naturally expect the figures within a City Deal proposal to lean towards optimism though – and a further cautionary note is required by the fact its calculations were done by Ulster University’s Economic Policy Centre (UUEPC). UU stands to be by far the single biggest beneficiary within Derry’s City Deal proposal.

It will receive a minimum of £85m (or 40% of the £210m public pot) as the delivery partner for the digital, technology and research aspects in the plan, as well as the new Medical School. Every economic strategy for Derry over the last two decades has hinged heavily upon UU’s unfulfilled pledge to deliver a 10,000 full-time student campus.

A Council-commissioned review into the impact of significant university expansion on comparable cities concluded that this step alone would have the potential to place Derry at or below the NI average for unemployment and inactivity. So Ulster University could have single-handedly transformed Derry’s economic fortunes over the last 20 years, just by delivering what it said it would – yet repeatedly failed to do so.

The council, therefore, stands accused of using City Deal funding to effectively bribe Ulster into an expansion that should have happened years ago. Contrasts are made with the situation in Belfast, where UU is creating a new £350m campus without any contribution from the City Deal there.

When that project floundered earlier this year and required a £126m bailout, it was Stormont that Ulster sought assistance from rather than the Belfast City Deal in which it is a partner. With UU exhibiting a growing tendency to use other people’s money to untangle itself from poor business decisions, there are fears it could over time relocate elements paid for by Derry’s City Deal away from the north-west – as it has done continually with Magee.

All of which is fuelling demands for a new stand-alone cross-border university to be created in UU’s place, to meet the needs first and foremost of the city region. Derry’s City Deal proposal is extraordinarily generous towards a university which has repeatedly failed the city for decades. If it doesn’t result in the eventual major campus expansion that has long been promised, it could well force the conclusion of Ulster’s presence within the city.

One of the key economic challenges facing Derry is its lack of a clear niche in sectors with strong future growth and employment prospects. By focusing on areas like robotics, Artificial Intelligence and personalised medicine, Derry’s City Deal appears intent to address this.

There is a risk, however, of potential overlap with aspects of the Belfast City Deal – with both targeting sectors like advanced manufacturing and clinical healthcare. Having complementary areas of focus and strength NI-wide would make sense in positioning the overall jurisdiction for external investment – and one can only presume that Westminster and Stormont are ensuring no conflict will occur here.

However – whilst the Republic of Ireland’s economic strategy involves consciously carving up key future sectors and allocating them around its regional cities (with further and higher education instructed to deliver the required workforce), Northern Ireland has never used economic development as a tool for genuine regional balance.

Invest NI has a poor record of attracting companies beyond Belfast and claims to passively let potential investors chose locations for themselves. Without central coordination, there is, therefore, a risk that Derry and Belfast could end up competing for similar opportunities – with Belfast the likely victor due to its superior infrastructure, workforce and universities.

On demography – the extra students delivered by the new Medical School and other university elements alone would reverse the small predicted decline in the city’s population and working-age cohort. As will the additional employment created by the overall plan.

Without significant intervention at a Stormont level, however, the broader issue of a Northern Ireland ever-more skewed towards the east will persist. The various City Deal projects are also likely to create a better environment for Derry’s private sector to grow, further boosting employment and Gross Value Added as a result.

Finally – even though it has been overshadowed somewhat by Covid, the ever-present elephant in the room for the North-west’s future is the economic risk posed by Brexit. As the UK’s only genuine cross-border city region, the north-west will be uniquely impacted by whatever agreement is reached between Brussels and London.

Inaction in the face of this perhaps carries the greatest risk for Derry – so the City Deal is almost certain to leave the region better equipped to weather any Brexit storms.

Conclusion

History has made it clear that there will be no knight on a white horse riding to Derry’s economic rescue. The city has had to continually fight for even the most basic assets that are taken for granted elsewhere in NI (e.g. decent roads and rail). And it has been left behind whilst every other key city on the island has been equipped to grow and prosper.

A £210m City Deal is therefore as close to knightly intervention as Derry is ever likely to receive. Only time will reveal the true impact that this investment plan will have, and we will never know if alternative priorities could have delivered greater benefit.

But the scale and nature of the expenditure within the proposal are likely to go at least some way towards addressing many of the key barriers holding Derry back. It, therefore, stands a good chance of helping to finally get the proverbial boulder rolling on the island’s most under-performing economy – after which Derry’s numerous inherent assets should hopefully help keep that initial momentum going.

The City Deal is, without doubt, a positive economic and social news story for a city that has long grown accustomed to being overlooked. But it will also require Stormont to take more seriously the escalating east-west imbalance that exists within NI and to ensure that no part of its jurisdiction is ever left so far behind again.

It is as-yet unclear whether this point is even acknowledged within Stormont.

Steve Bradley is a native of Derry and works as a regeneration consultant in London.
Twitter: @Bradley_Steve