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Esmond Birnie

Devil is in the detail regarding how we'll fare when the UK goes it alone after Brexit

Esmond Birnie


Edward Heath signs the treaty for Britain to join the European Economic Community at the Palais d’Egmont in Brussels, Belgium, in 1973

Edward Heath signs the treaty for Britain to join the European Economic Community at the Palais d’Egmont in Brussels, Belgium, in 1973

Edward Heath signs the treaty for Britain to join the European Economic Community at the Palais d’Egmont in Brussels, Belgium, in 1973

At the stroke of the midnight hour, when the world sleeps, India will awake to life and freedom. So Jawaharlal Nehru - the first Prime Minister of his country - said about independence in 1947.

Many commentators take a more downbeat view of the UK's "independence day" at 11pm tonight.

Pessimism is based on a belief that the UK economy benefited a lot during the years of membership.

The evidence as to how far Northern Ireland benefited is rather mixed.

Northern Ireland's economy grew substantially during 47 years of EU membership.

Employment increased by about 280,000 to about 780,000 in 2019.

Back in 1973 only a third of households owned a TV and one-quarter a telephone.

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Today, almost every household has at least one TV and more than three-quarters of individuals have a smartphone.

Northern Ireland's population grew from about 1.5m to almost 1.9m.

But how far can all that be attributed to EU membership?

Just as important were the growth of public spending, the Troubles and then the ceasefires, and the state of the world economy.

Many of the changes during 1973-2020 were less obviously benign. The share of manufacturing in the total number of employees has shrunk from 33% to about 11%.

The public sector increased its share of employees: from about one-quarter to about one-third.

In 1973, the crucially important tradeable economic activities, manufacturing and business services, which sell outside of the region and UK, represented 35% of all employees.

By 2017 that share had declined to only 15%.

Northern Ireland became more dependent on a subsidy from the rest of the UK during 1973-2019, and the net fiscal transfer from HM Treasury increased from about 15% of Northern Ireland's GDP to about 20% currently (money coming from the UK Exchequer always dwarfed the combined total of all the various EU funds).

To the extent that there were benefits from membership, these were not large enough to prevent these structural weaknesses becoming more pronounced.

It has often been claimed that the UK in general and Northern Ireland in particular will take a big economic hit if Brexit means being shut out of the EU's large single market.

In fact, the positive effects of membership of that market were probably quite small. Other factors had a much more important role in determining Northern Ireland's performance and throughout 1973-2020, its comparative productivity remained stubbornly low.

Grounds for doubting the scale of impact of membership, particularly of the single market, is provided by looking at the level of output (GDP) in Northern Ireland per head of the population compared to other countries and egions.

Tonight, the EU will have 27 members.

If one compares Northern Ireland to 24 of these (excluding the three micro-states, Luxembourg, Malta and Cyprus) it is notable that in 1973, 10 of those members had levels of GDP per head which were higher than Northern Ireland's.

But by 2020, some 15 had moved above Northern Ireland.

One particular question is why other EU members - notably the Republic of Ireland and some former Eastern bloc countries - have performed much better in this regard.

Partly, the explanation may be in how these countries invested in human capital, or the way their training systems operated.

The Republic of Ireland expanded the number of graduates in work.

Even under communism, the Czech Republic, Slovakia and Hungary retained enough of a German-style apprenticeship system to stand them in good stead post-1989.

In fact, many of the former Eastern bloc economies have either overtaken Northern Ireland or are rapidly catching up.

More important than EU membership are the policies and institutions which are used by a country.

So, I am relatively optimistic about the economic impact of Brexit on the UK, though for Northern Ireland a lot will depend on the precise details of the trade arrangements (and any frictions) which will come to place east-west with GB and north-south with the Republic of Ireland.

  • Dr Esmond Birnie is a senior economist at Ulster University
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