The UTV Podcast: Dissecting the problems behind Northern Ireland's stagnant economy

When the Good Friday Agreement was signed in 1998, many suspected that Northern Ireland's economy would experience a 'peace dividend'.

The thought was that the end of the Troubles would bring an influx of economic growth as resources were diverted from security to more profitable sectors such as technology and innovation.

However, 25 years after the agreement and Northern Ireland's economy still lags behind the UK average.

On the latest edition of the UTV Podcast we sit down with Dr Graham Brownlow, a senior lecturer in economics at Queen's University and Dr Karen Bonner, principal economist at the Ulster University Economic Policy Centre to discuss why.

Graham Brownlow recently co-authored a paper looking into the lack of a peace dividend in Northern Ireland.

He says productivity, more than anything else, has remained 'stubbornly low'.

Productivity as Graham puts it is about having 'the same number of inputs giving a higher number of outputs'. In other words, getting more out for what you put in.

In terms of why productivity has remained so low, Dr Brownlow said: "I think there are factors in the Northern Ireland economy of low productivity that long predate the Troubles, that are engrained.

"We can see deficiencies particularly in the areas of labour, which is a fancy way of saying skills and education and entrepreneurship, which is a fancy way of saying I think there is managerial problems in Northern Ireland."

Although Graham does not think there is one single source of our low productivity he does single out poor management in Northern Ireland as a key driver of poor economic growth.

"I think there is overwhelming statistical studies over the last 20 years, 30 years and further back, showing again and again and again that management quality in Northern Ireland is not as good as it could be..."The problem with productivity is that it is not amenable to a silver bullet.

"It is an artifact, a consequence of so many interactions in an economy, but if I could round it up into one thing I would identify, I would put a lot of emphasis on management."

Dr Karen Bonner's whose research focuses on entrepreneurship and innovation agreed with Graham's assessment.

"I know Graham mentioned management, in terms of the quality of management. I would totally agree with that.

"We recently looked at the issue of management and leadership skills in Northern Ireland and what we found was that particularly around training for staff and management it was actually micro-firms and family owned firms who are least likely to undertake that managerial training and they make up the vast majority of businesses in Northern Ireland."

Karen felt the lack of new businesses opening and old businesses closing in Northern Ireland was another way to explain our stubborn economy.

"We have lower business birthrates than other parts of the UK.

"We actually also have lower death rates and that is important too because of this issue of renewal in the economy.

"So we need both business births and deaths to have those kind of more inefficient and outdated businesses being replaced or superseded by the more innovative, more productive new entrants.

"If you have a lower death rate in conjunction with a lower birth rate you risk having a very stagnant economy and if our existing firms are not very productive then you have a low productivity, stagnant economy and you are not getting those new ideas through and the inefficient firms pushed out of the market and replaced by the more innovative, more efficient ones.

"Northern Ireland is the least dynamic part of the UK when it comes to that renewal of businesses."

Karen also pointed out that the majority of the new businesses that set up in NI, do so in the least productive sectors while existing firms lack innovation.

"What we do know is that where innovation is taking place it is mostly ideas and products that are new to the local market and not necessarily new to the world, which we would have had in the past in Northern Ireland.

"Some really big innovations came indeed from Belfast and other parts of Northern Ireland but we just seem to have lost that."

Dr Bonner argued how a lack of risk-taking among the population is stunting growth: "Culturally we are not really in that space where entrepreneurship and starting a business is regarded on the same level as going to get a job or going to work for someone else.

"Even as you go through university it is very much about employability skills.

"I think more widely as a people we are quite risk adverse and that ties into the innovation.

"We are not prepared to go and take those risky opportunities.

Dr Bonner and Dr Brownlow also discuss the impacts of Foreign Direct Investment (FDI) in Northern Ireland and how it compares to the Republic's recent success along with the impact that a stable and functioning executive has on the decisions of foreign firms to pump money into the economy.

Despite the inability of Northern Ireland's economy to catch up with the rest of the UK, both Karen and Graham see reasons to be optimistic on its future.

Karen believes opportunities are still out their, particularly in relation to the Windsor Framework

"I think if we do have this dual access and we put in policy measures to really harness that I do think there is good potential there.

"We do have recently an increase in the number of graduates. So at that top end we do have skilled people if we can address the challenges around skills at the other end."

Graham argues there is 'scope for optimism' but only if politicians make the economy a key priority.

"One caveat is that politicians when they do come back have to be serious about putting right what is wrong and not simply taking the easy political step of doing things based on popularity.

"Some things may not be popular, but they are necessary."

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