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The die is cast, now the work of reshaping economy must begin

By John Simpson

Published 25/06/2016

Brexit is an unwelcome shock. It will not necessarily cause immediate major economic damage but will, over a period of years, change many aspects of the Northern Ireland economy.

The perception of too much governance from Brussels has outweighed the merits of opportunities for greater trade and investment prospects.

Invest NI has legitimately emphasised that most of the features that make Northern Ireland an attractive location for inward investment remain in place and must be maintained.

The negotiations consequent on implementing the Brexit now will become critical.

Some of the fears that trading across the EU might be disrupted by new tariff barriers or other trading barriers will be shown to be excessively pessimistic.

The real fears will focus on emerging non-trading barriers eroding confidence in maintaining supply chain relationships, living with more volatile currency markets and a divergence in trading patterns as the UK develops outside the co-operative arrangements built within (and on behalf of) the remaining 27 members of the EU.

Northern Ireland offers many attractions to external investors as well as domestic businesses. However, that falls well short of satisfactory assurance that, standing outside the EU, Northern Ireland has a fully cost competitive offering or a well-established productivity record.

Ministerial advisers have recently updated the wide-ranging assessment of Northern Ireland's costs and productivity features, and they know that there are conspicuous adverse differences which await resolution.

Attracting inward investment to the region and incentivising the growth of domestic businesses remain the keys to economic recovery.

There is a recognition that the planned change in corporation tax rates can be a helpful development for businesses. But not on its own!

Brexit will be a negative influence for investors seeking full free access to international market places.

The die is cast. Northern Ireland must now adjust to the changed business environment. That is not an insuperable difficulty, but it is an unwelcome change.

The scare predictions of economic gloom and loss of jobs have been overdone.

However, avoiding job losses and revitalising the local economy have become more challenging tasks. The next Programme for Government is now harder to compile. That means making difficult decisions and carefully targeting the decisions and incentives.

  • John Simpson is an economist

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