Northern Ireland can expect economic growth of 1% in 2017, falling to around 0.9% in 2018, according to the latest Northern Ireland Economic Outlook (NIEO) from PwC.
PwC also says that while the ‘confidence and supply’ arrangement between the DUP and Conservatives, brings a welcome £1bn of new money to the region, it will not fundamentally alter the structural challenges that face any new Executive.
The absence (at the time of publication) of any certainty around the restoration of the Stormont institutions, means that the strategies and policies essential to regenerate the economy over the medium-to-long term, remain elusive, with agri-food particularly at risk.
PwC partner, Dr David Armstrong, says that the additional money will alleviate some immediate problems, but issues like productivity, reform of agri-food and scaling-up the private sector remain unresolved:
The NIEO’s recovery index measures how much ground the local economy has made up as compared to the region’s peak economic performance, which occurred before banking crisis and housing slump that began in mid-2007.
The recovery index suggests that, while employment has not passed the pre-crisis peak, real wages are still only 94% of their 2005 levels and real household disposable incomes are only 89% of their 2005 levels – that’s equivelant to an annual income cut of around £1,810. Job creation is not being accompanied by a proportionate increase in wealth-creation, so further economic recovery will rely on an increase in productivity and knock-on increases in real wages and household incomes. The NIEO concludes that continuing to measure Northern Ireland’s economic recovery solely by employment levels, would be misleading.
The NIEO takes an in-depth look at the Northern Ireland agri-food sector, its importance to the economy and its prospects post-Brexit.
Currently agri-food employs around 5.5% of the NI workforce, more than double the overall UK agri-food’s 2.4% share of total UK employment. Locally, that breaks down to around 75,000 local jobs, comprising around 50,000 farmers and farm-workers and 25,000 jobs in the food and drink processing sector. In total, that amounts to an industry GVA of £1.1bn - around 3.2% of NI total GVA as compared to only 2.3% across the UK.
NI farmers currently receive EU support in the form of payments from the Common Agricultural Policy (CAP) where NI received £2.5bn by way of CAP Single Farm Payments between 2005 and 2014. Around 87% of NI farm incomes are made up of CAP payments, a significantly higher proportion than the UK average where 53% of annual farm incomes come from CAP support.
Assuming no change to the status-quo, CAP payments to NI farmers will total around €2.5bn between 2014-2020. However, given the current reliance of NI farming on direct subsidies, the industry will need a package of support from the NI and UK governments to enable it to transition successfully to the post-Brexit world, where three possible options are immediately apparent:
David Armstrong says that, post-Brexit, the apparent options are between maintaining - and someone paying for - the status quo, or reform:
A copy of the report can be downloaded below.
NIEO - July 2017
Corporate Affairs, Northern Ireland and Deputy Head of UK Media Relations
Tel: +44(0)7799 346 925