Belfast Telegraph

Unionists facing a perfect storm of Brexit and demographic shift

The case for the province remaining part of the UK is largely about politics  and identity - the economic argument runs the other way

By Paul Gosling

In June last year, the respected economist David McWilliams wrote in the Belfast Telegraph how the changing demographics of Northern Ireland create the likelihood of a united Ireland. Those from a Protestant/unionist background are now less than half the population and people from a Catholic background will probably be in the majority within a decade.

Equally significantly, McWilliams wrote about the comparative strengths and weaknesses of the economies of the north and the south. Before partition, Belfast and its surrounding area produced around 80% of industrial output of the island of Ireland. Today Dublin is the powerhouse of the island and the Republic's industrial output is 10 times that of Northern Ireland.

In a report - The Economic Impact of an All-island Economy - published for consultation, I have considered what other evidence exists to indicate whether Northern Ireland would be better-off, economically, in the UK or the Republic.

It would take a very optimistic Brexit supporter to believe leaving the EU will be good for Northern Ireland.

Accountancy firm EY last year predicted that while the Republic will generate an additional 91,000 jobs in the period 2016 to 2020, Northern Ireland will lose 3,500.

UK government officials have predicted an even worse outcome from Brexit, with the Northern Ireland economy 2.5%, 8% or even 12% smaller than it otherwise would be - all depending on the type of Brexit we end up with. A 12% hit would make the economy £4.5bn smaller.

That is equivalent to £2,500 per person.

Northern Ireland faces our version of the perfect storm: a bad Brexit with a hard border if the negotiations go wrong, in addition to the political impasse at Stormont.

For unionists the added disaster is a demography that could turn the political shape of Northern Ireland upside down. Meanwhile, the Republic's economy is motoring ahead.

Average income per full-time worker in the Republic in 2016 was £40,403 (€45,611), compared to £25,999 in Northern Ireland. In other words, a worker in the Republic was typically paid half as much again as someone working in Northern Ireland.

There are several explanations for why the Republic has a far more successful economy than does Northern Ireland - notwithstanding the crisis of a decade ago which devastated both territories.

The lower tax rate of the Republic is just one factor. It is also about a much higher rate of productivity in the south, which is the result of investment in skills and infrastructure. Similarly, while the government in the south moved its focus away from agriculture to growth sectors such as IT and pharmaceuticals, political decision-makers in the north (under both Stormont and direct rule) have never taken the necessary steps to replace the shipbuilding and shirt making industries with a vibrant new economic base. And, of course, we had the Troubles.

A reunified Ireland should provide Northern Ireland with our share of the Republic's economic success. That assumes the same policies are adopted in the north that have been used so successfully in the south - which means stronger skills, more focus on higher education and R&D, better infrastructure and the same corporate tax rate.

But Northern Ireland would not need to separate itself from its British traditions - many people in Donegal continue to identify themselves as unionists. This could be supported by Stormont remaining a devolved assembly, representing Northern Ireland within a new Ireland.

Close trading arrangements could continue, protecting existing levels of exports to Britain.

And the recently discussed bridge or tunnel link to Scotland could be built to actually strengthen the connections with Great Britain.

A continued, but steadily declining, annual subvention from the UK government could support the constitutional change over a period of years. According to analysis by the Nevin Economic Research Institute, the level of subvention by the UK government is just over £5bn a year once the cost of non-Northern Ireland spending is stripped out of the official figures.

That cost would reduce significantly as the tax take increased within an all-island economy.

And if the size of the public sector was to fall to the level of that in the Republic, that could save around £1.7bn a year in wages and national insurance costs.

Of course, there are political arguments about identity that for many people will mean they reject any proposal for the reunification of Ireland.

But the case for Northern Ireland remaining part of the UK is about politics and identity - the economic argument leans the other way.

Opinion polls indicate that for the present, most people in Northern Ireland want to stay in the UK.

Economic logic as well as demographics mean that more people will question the nature of the connection.

Brexit doesn't change everything - but it does change a lot.

The Economic Impact of an All-Island Economy is published at www.paulgosling.net

Belfast Telegraph

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