How to make Northern Ireland’s economy work

In the run-up to Brexit, economic research by respected United Kingdom economists indicated that the loss of easy access to the European Union market would have a serious negative impact on the UK standard of living. It also showed that the harder the Brexit, the worse the effects. Thus, it comes as no surprise that the UK economy has seriously underperformed since leaving the EU in 2020.

The decision of a majority to vote to leave showed that these economic warnings were not the foremost consideration in the eyes of the UK electorate. In making major decisions on constitutional issues, voters may see economic factors as secondary to other objectives. Similarly, if a Border poll were to be held at some stage, the economics of unity may not be the major deciding factor for many voters. Nonetheless, as indicated by the Irish Times ARINS poll, the possible costs and benefits of unification would still be important in informing voters’ decisions North and South of the Border.

Before the Scottish referendum on independence, there was extensive research done on the implications, including the likely economic impact. While the research findings were not as definitive as in the case of Brexit, nonetheless there was a clear acceptance that leaving the unitary UK state and losing easy access to the English market would have very significant economic costs. The likelihood of such costs being outweighed by other benefits was not clear-cut.

Compared to the extensive work before the Scottish independence referendum, there has been little research to date on the wider economic implications of a united Ireland

Now that the UK has left the EU, the disruption independence would bring to Scotland–England trade would be much greater, as single market rules between states would no longer apply. Of course, there would also be offsetting benefits if an independent Scotland were readmitted to the EU. In the post-Brexit world, the balance of economic advantage would need to be considered anew.

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Compared to the extensive work before the Scottish independence referendum, there has been little research to date on the wider economic implications of a united Ireland. One study by Hübner–KLC in 2015 asserted that unification would be good for the economies North and South. However, as several subsequent academic studies have noted, including Esmond Birnie’s paper last month in Irish Studies in International Affairs, this analysis had a number of important shortcomings.

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The North’s main trading partner is Britain — 60 per cent of all external sales go there, and many of the big retailers in the North are branches of British chains, sourcing their stock mainly from Britain. The Hübner–KLC study, which was conducted prior to Brexit, ignored the costs for Northern Ireland of disruption to trade with its major trading partner. We now know, post-Brexit, that such disruption to trade would likely be immediate, negatively affecting the North’s already difficult budgetary position. Supply lines for many businesses would also be hugely disrupted. The effect on trade in services might be even more serious over the medium term.

Rejoining the EU through unification would, of course, have some offsetting benefits in the longer term. However, unlike Scotland, Northern Ireland, under the Windsor Framework, still enjoys many of the benefits of both worlds — EU membership and membership of the UK.

Addressing the structural weaknesses of its economy is in the interests of all the North’s people

Another big problem with the Hübner–KLC study was it assumed that unification would mean the North’s low level of productivity rapidly converged on the Republic’s. However, there is ample evidence that Northern Ireland’s low productivity is due to low levels of educational qualifications, weak infrastructure and very low investment, all of which will take many years to address. Recent publications by teams from the Economic and Social Research Institute and the University of Ulster-DCU underlined that low educational attainment is a key factor in the North’s low productivity. As we know, it took decades for the Republic to translate its accelerated investment in education, from the 1960s on, into economic success.

Addressing the structural weaknesses of its economy is in the interests of all the North’s people. While this is a long-term project, it would strengthen the North’s economy if it chooses to remain in the UK. It would also build resilience to cope with the economic shocks of reunification, if that road was chosen. Finally, a strong Northern Ireland economy would benefit the rest of the island, whether remaining as part of the UK or joining the Republic.

There are hard choices to be made to tackle the North’s education shortcomings and deal with the inadequate infrastructure and low investment. This would pay off in the long term by raising productivity. But to take difficult decisions, the North needs a functioning Executive and a working Assembly.