£1bn windfall not enough to fix North’s economic problems

Northern Ireland’s economic growth rate will slump to 1 per cent this year despite the prospect of an extra £1 billion in funding from the Conservative/DUP pact, which offers no “silver bullet for an underperforming economy,” a new report highlights today.

The Northern Ireland Economic Outlook from PwC also forecasts that the North's economy will slow further next year, with growth rates dropping to 0.9 per cent – significantly below the UK average.

The North currently has no budget in place for this year or next as a result of the ongoing political stalemate, which has prompted Northern Ireland Secretary of State James Brokenshire to warn that it may be set by Westminster.

According to PwC, while the confidence and supply pact between the DUP and Conservatives will deliver a financial to for the North, it will not address underlying structural issues, which is needed to regenerate the local economy over the medium to long term.

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Unresolved problems

PwC partner Dr David Armstrong, says the new money will help address some immediate problems, but he believes that key problem areas such as productivity, reform of agri-food and scaling up the private sector "remain unresolved".

“The financial deal brings £200 million a year for two years for infrastructure, with the £150 million York Street Interchange project specifically mentioned as a priority. The balance of the fund could help complete vital schemes like the A5 or A6, and that would be a welcome boost to infrastructure and connectivity.

“Additional cash for health, education and to stimulate social investment will also make for real short-term improvements. With one in seven people in Northern Ireland waiting for an outpatient appointment, the gap between demand for services and funded capacity means health service transformation is vital and urgent.

“And affording flexibility to the previously agreed £500 million for shared education and housing projects will also offer the potential to some creative ways of stimulating investment in social housing,” Mr Armstrong said.

But he has also warned that the investment boost is “is not the silver bullet that will regenerate an underperforming economy”.

Savings at 1960s levels

PwC outlines that while employment levels have bounced back to pre-crash levels, nearly all recovery measures are lagging behind 2007 levels – wage growth is negative while household savings levels are at their lowest since the early 1960s.

This latest Northern Ireland Economic Outlook also examines the North’s agri-food sector and its importance to the economy and its prospects post-Brexit.

PwC outlines that agri-food currently employs about 5.5 per cent of the North’s workforce, which equates to 75,000 jobs.

It highlights that Northern Ireland received £2.5 billion worth of CAP Single Farm Payments between 2005 and 2014 and that about 87 per cent of local farm incomes are made up of CAP payments, a significantly higher proportion than the UK average.

PwC believes that given the reliance of local 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”.