Ciarán Hancock: Brexit shines harsh light on North’s economy

In one of his last acts as a politician, Martin McGuinness resigned as deputy first minister of Northern Ireland in January, resulting in the subsequent collapse of the Stormont administration.

It was a decision born out of frustration at the intransigence of first minister Arlene Foster and the DUP to deal with allegations relating to the cash-for-ash scandal.

McGuinness’s resignation triggered another assembly election, with Sinn Féin bolstering its position in Stormont, finishing just one seat behind the DUP.

But it also created a political vacuum at the precise time when strong leadership was required to deal with the many challenges posed to the North from the UK's decision to exit the European Union.

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There is still no sign of a new executive being formed and there could yet be direct rule from Westminster for a prolonged period.

Meanwhile, Theresa May will trigger article 50 on March 29th, starting negotiations on the UK's exit from the EU.

Many threats

In purely economic terms, Brexit holds many threats for the North. Everything from a hard Border with the Republic and the imposition of tariffs on goods travelling between north and south, the potential loss of foreign direct investment that might otherwise have used the North for access to the EU’s single market, and the danger that EU farming and other payments won’t be backfilled by Westminster.

McGuinness would not have wanted this situation to arise. He and Sinn Féin campaigned for a Remain vote in the referendum last June, unlike the DUP. Their campaign was successful, with 56 per cent of voters in Northern Ireland choosing to retain EU membership. Scotland and London were the only other regions of the UK to vote to remain.

McGuinness spent much of his time following the referendum vote warning about the implications for the peace process and the North’s economy. “As things sit at the moment we are going to suffer big time,” he told the Guardian newspaper in October. “Theresa May says: ‘Brexit means Brexit’; but so far as we are concerned Brexit means disaster for the people of Ireland.

“Any removal from the customs union effectively means we are cut out of a market of 500 million people, yet half an hour down the road they will be able to trade freely with the EU. It would be a devastating blow.”

Dysfunctional

Brexit has shone an uncomfortable light on the North’s economy and reminded us that, almost two decades on from the Belfast Agreement, it continues to be highly dysfunctional.

Last September, the fourth iteration of the Northern Ireland Peace Monitoring Report was published by the Community Relations Council. It summed up the North's economy thus: "The regional economy remains heavily sustained by the Westminster subvention [about €10 billion], stuck on a low-employment, low-income, low-productivity, low-investment path."

It described the North as a “regional laggard” with the slowest recovery from recession on record for the UK as a whole.

“The main [political] parties have placed all economic bets on a cut in corporation tax [in 2018 to 12.5 per cent] but, even leaving aside its fiscal implications, expert opinion indicates that a much wider policy portfolio is required to address high economic activity, relatively low skills, modest innovation and underdeveloped infrastructure.”

The employment rate at 68.4 per cent lagged the UK-wide one of more than 74 per cent. The peace dividend hasn’t quite manifested itself as an economic one.

It's hard to imagine that this picture will improve following Brexit. In fact, in a piece published in The Irish Times last week, Edgar Morgenroth, an associate research professor at the ESRI, warned that Northern Ireland was likely to suffer the greatest negative economic impact from Brexit, given its closer economic relationship with the EU and Ireland, compared with other parts of the UK.

About 60 per cent of Northern Ireland’s exports are to the EU, and of that more than half go to Ireland, he noted.

One way for the North to avoid losing its membership of the EU would be via a united Ireland, although, as Morgenroth has pointed out, the numbers don’t exactly stack up there either.

It would certainly be ironic if a united Ireland, McGuinness’s life goal, was to come about as a by-product of Brexit, something the Derryman had campaigned to avoid.

It would also be somewhat apt given that his life was so full of contradictions.

Twitter: @CiaranHancock1