Belfast Telegraph

Home Business Brexit

Neil Gibson: Disconnect between public and politics is a worry during this time

Economy Watch by Neil Gibson, chief economist, EY Ireland

Maps featuring the European Union without Britain were printed by French publishing house Aedis in March
Maps featuring the European Union without Britain were printed by French publishing house Aedis in March

Given the publication date of this article, it seems unthinkable that this column should not be about Brexit, and yet it is hard to add much economic insight to the debate - most of what economists can contribute has already been published and discussed.

The recent publication of detailed analysis of the impact of a no-deal outcome on the Irish economy from the ESRI made the front pages.

It added to the overwhelming weight of evidence that the Brexit outcome will not be positive for the island, regardless of the final deal.

The estimates of the impact on Ireland for an 'orderly' no-deal were of a roughly similar magnitude to our EY modelled estimates, though the timing differs.

The EY modelling suggested a similar scale of impact by 2020 that takes five years to materialise in the ESRI work.

The ESRI modelling is careful and detailed but, like all economic modelling, it has assumptions at its heart and there are many other economic winds blowing that will make disentangling Brexit effects difficult.

The outcome may yet surprise, just as the steady increase in job levels since the referendum in the UK and NI has surprised many experts.

Sign In

I am always worried about comparisons to a very steady 'no change' baseline which history tells us is highly unlikely in any case.

Across the UK and Ireland there are disconnects between the headline economic trends, public sentiment and political events. Despite the chaos of the divorce there is limited evidence of a significant change in mood among Brexiteers.

There are parallels in Northern Ireland where the level of frustration at a lack of an Executive is palpable among the business community but the public do not seem very exercised about it.

We will see if it impacts voting patterns, but I detect very little public reaction to a lack of an Executive beyond a mildly frustrated shrug.

In the Irish economy, the decline in the Taoiseach's popularity in recently published polls could also be considered a surprise - after all, the economy is hardly struggling, sitting as it does in the Champions League of places with the fastest growing developed economies.

These apparent disconnects between public mood, economic performance and political events are extremely important to consider and understand.

Not recognising such patterns led to surprise at President Trump's ascent to the White House and the Brexit referendum result back in 2016.

At the risk of sounding like a broken record, it is important we heed this message. We are not always reading the correct signals and sometimes not hitting the right note as businesses. We need to articulate the possibilities - what benefits can the right deals and public policy choices deliver? A constant refrain of how terrible the future looks begins to wear people out.

In addition, if an individual does not feel that the previous decade has been particularly joyous and their personal circumstances have not improved, or weakened relative to others, then it should not be a surprise that the status quo does not feel like something which they are eager to maintain.

If we had paid more attention to hospital waiting times, crime levels, commuting times, access to/satisfaction with schools and real wage growth, we would have better understood how the public felt and, consequently, would have been less surprised by the choices made.

When I am presenting on the economy, I spend a lot of time talking through the circular flow of income and the interconnected nature of the economy. Understanding how business growth allows for increased salaries to be paid and for tax receipts to rise and, ultimately, public services to be funded is critical to building a solid basis upon which to discuss economic matters and policy choices. In each of the three economies I track most closely, we can see a disconnect between what we might have expected to happen based on the headline economic data and what is happening politically.

It is very important that we recognise these patterns and try to understand them, lest we exist only in an echo chamber and remain surprised by the choices society makes.

To end on a more upbeat note, in a previous article I mentioned that one (small) upside of the Brexit uncertainty has been how it has led to new research and analysis and, consequently, capacity-building among research and policy officials.

In addition to the ESRI work, this week I have also been enjoying reading new reports commissioned by the Department of the Economy on FDI attractiveness and retail sales patterns. Perhaps these are reports to which to return in future Economy Watch articles.

It always cheers up an economist when there are new reports to read and analyses to study, regardless of the circumstance that led to the commissioning of the work.

Belfast Telegraph

Popular