Fears for Northern Ireland’s economy as welfare row continues

Northern Ireland is set for years of 'intensified austerity'


Northern Ireland’s economy continues to lag behind that of the rest of the United Kingdom, despite the number of people unemployed having fallen by around 10,000 since June 2014.

That’s the assessment contained within PwC’s latest economic outlook for Northern Ireland (NI) published today.

According to the accountancy firm, NI looks set to achieve growth of around 1.8 per cent in 2015, down from 2.2 per cent in 2014, making it the poorest performing of all the UK’s 12 regions. In comparison, UK economic growth was 3 per cent in 2014 and is projected to be 2.6 per cent in 2015.

The report warns that the current impasse at Stormont over the implementation of welfare reforms and the subsequent difficulties this is causing for the budget in Northern Ireland, is ‘delivering reputational damage and may be harming investment prospects especially at a time when devolution is proceeding elsewhere.’

Whilst PwC notes that Northern Ireland has a ‘long-standing and serious productivity shortfall’, it continues:

“The outcome of the General Election and subsequent Summer Budget confirmed that welfare reform and austerity will continue, UK-wide. Consequently, NI probably faces four years of intensified austerity given the sluggish pace of reform and modernisation during 2010-15.”

Commenting on the analysis, Dr Esmond Birnie, PwC’s chief economist in Northern Ireland, has said:

“Over the past seven months business confidence has been mixed, sometimes negative but always lagging the GB regions.

“There have also been recent mixed messages around consumer confidence, with June 2015 seeing the first rise in unemployment for more than two years; this may simply be a blip – or it may be indicative of a deeper malaise.

“Currently, Northern Ireland’s output is still 8 per cent below the pre-crisis peak of 2008 and is something of a 2-speed economy with employment contracting in public sector and financial services but growing fairly rapidly in advanced manufacturing, pharma, food processing and tourism.”

He continued:

“Northern Ireland’s poor productivity is one reason why average wages and household incomes are below other UK regions – hence the region’s disproportionate reliance on benefits and working tax credits.

“The chancellor’s proposals now mean that companies paying on or around the minimum wage faces an across-the-board increase in wage costs because of the mandatory National Living Wage.

“Their choice will be to increase productivity to cover the increased wages bill, absorb the cost entirely at the expense of profit or arrive at a combination of both.

“For many organisations already operating in low value industries this will be a struggle, but Westminster is both determined to drive up the nation’s productivity and to make business responsible for delivering it.”

Ed Jacobs is a contributing editor at Left Foot Forward. Follow him on Twitter

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