Original publication: March 2018
Author: Diána Haase, Research Administrator, with the contribution of Veronika Gálová (intern)
Short link to this post: http://bit.ly/2sfdlIW
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The economic, social and territorial situation of Northern Ireland

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This briefing was prepared to provide information for the visit to Northern Ireland from 21 to 23 March 2018 of a delegation of the European Parliament’s Committee on Regional Development (REGI).

  1. Introduction to the political-administrative system of the United Kingdom and Northern Ireland

The United Kingdom (UK) is located off the north-western coast of continental Europe, between the North Atlantic and the North Sea. The UK is made up of four countries: England, Scotland, Wales and Northern Ireland, and has 14 overseas territories which are not formally part of the UK proper or (except Gibraltar) of the EU (it also has links with 3 Crown dependencies, namely the Isle of Man, Guernsey and Jersey, which are not part of the UK). The official language is English, and the currency in use is the pound sterling (GBP).

Map 1. Northern Ireland

Northern Ireland is the smallest of the four subdivisions of the UK; it is located in the north-east corner of the island of Ireland, and is thus separated thus from the rest of the UK by the Irish Sea while sharing a land border with another EU Member State (Ireland).

Table 1. Key data

There is no written constitution in the UK: instead, the constitution is formed by the Acts and Bills passed by the Houses of Parliament. The UK is a parliamentary constitutional monarchy; the head of government is the Prime Minister and the head of state is the Monarch. The Parliament is bicameral and composed of the House of Commons and the House of Lords. The UK Parliament retains absolute sovereignty; the Scottish Parliament, the Northern Ireland Assembly and the National Assembly for Wales have differing degrees of legislative powers.

In Northern Ireland the devolved institutions are constituted under the so called Northern Ireland Act of 1998 (although several institutional reforms have taken place since then).The Northern Ireland Assembly (hereinafter also referred to as the ‘Assembly’) is the devolved legislature: it has 90 members and sits in Belfast. The Assembly have full legislative power over so-called ‘transferred matters’ covering areas such as education, employment, agriculture, social security, housing, economic development, local government, the environment, transport and policing. The Assembly does not have competence over ‘excepted matters’ of national importance (e.g. the constitution, UK-wide taxation, immigration and asylum, etc). It can legislate over ‘reserved matters’ (e.g. broadcasting, telecommunications, consumer safety, etc), but with the consent of the Secretary of State (who is a minister in the UK government holding overall responsibility for both advancing UK government interests in Northern Ireland and representing Northern Ireland interests in the Cabinet). The Assembly is chaired by a Speaker and three deputy Speakers, with the Speaker acting as its representative. The Northern Ireland Executive is chaired by a First Minister and deputy First Minister (who hold office jointly and are required to act jointly). It includes 10 other ministers (two Junior Ministers and others, appointed by the d’Hondt rule in proportion to the parties’ strength in the Assembly). Ministers head a ‘department’ with responsibility for specific areas. Regional development falls under the remit of the Department for Infrastructure (previously called the Department for Regional Development).

Administratively, Northern Ireland is divided into 11 ‘local government districts’ (this regime replaced the previous one of 26 ‘‘district council areas’ following a consolidation process between 2005 and 2015). The capital is Belfast. Local government districts are unitary administrations responsible for all areas of local government. The six counties (Antrim, Armagh, Down, Fermanagh, Londonderry, and Tyrone) do not constitute a level of administration any more. Each local government district is run by a Local Council, consisting of elected Councillors. Councils are independent of central government and are accountable to their local electorate. All councils in Northern Ireland have the same basic legislative powers, but they can place a different emphasis on the services delivered, and they differ from those in the rest of the UK: for example they are not responsible for education, road-building or housing. Councils’ responsibilities include planning, roads, local economic development and local tourism, heritage and a range of service areas such as waste collection and recycling, environmental protection, food safety, cultural facilities, sport, etc The REGI delegation will visit locations in the Belfast City Council and the Derry City and Strabane District Council.

Map 2. Administrative geography of Northern Ireland

Finally, the UK is divided into 40 NUTS 2 level regions. Northern Ireland is a NUTS 1 and 2 category area, with groups of local government district areas corresponding to the five NUTS 3 level regions. Northern Ireland belongs to the ‘transition region’ category under the European Structural and Investment Funds (ESI Funds), and it is not eligible for the Cohesion Fund.

Table 2. Political summary

  1. Socio-economic situation of the United Kingdom and Northern Ireland

The key findings of the Country Report United Kingdom 2017 show that economic growth remained robust in 2016 in the UK, but the report expects it to weaken in 2017 and 2018. Inflation rose steadily in 2016 and is expected to exceed 2 % in 2017 and 2018. There is untapped potential in the otherwise strong labour market: employment continues to grow and unemployment remains low, but some groups face challenges. In the same report, the UK is found to have made some progress in addressing the 2016 country-specific recommendations: there has been some progress on infrastructure and housing investment, but (1) the new housing supply is still not keeping up with the growth in demand, (2) both investment and productivity remain relatively weak and (3) there are significant shortcomings in the capacity and quality of infrastructure networks. The high general government debt level (close to 90 %) constitutes a vulnerability.

According to the latest economic briefing (2017-18, Winter), by the Department for the Economy of the Northern Ireland government, the economy of Northern Ireland has been growing steadily, although growth has slowed more recently. Results vary across sectors but goods and services exported from Northern Ireland continue to be in demand. In terms of trade, the Ireland remains Northern Ireland’s largest trading partner, accounting for over a third of exports. In 2017 there was significant growth of output in the construction sector (8.3 %, reaching the highest level in five years); growth was also solid in the services sector (by 2.5 % in real terms), but output in the manufacturing sector fell (by 6.5%). Tourism has grown and the local economy continues to see increased visitor expenditure. Inflation rose steadily in 2017, reaching 3.1 %, which is above the Bank of England’s 2 % target. Labour market statistics continue to show a mixed picture: there are falls in both unemployment and employment, coupled with a rise in inactivity. Employment growth is primarily led by the services sector. The long-term unemployment rate remains markedly high in 2017, at 48.0 % compared to the UK average rate of 25.1 %, while the employment rate is below the UK average. The number of people claiming unemployment benefits has steadily fallen since its peak in February 2013.

Table 3. Key socio-economic data

According to the analysis included in the UK’s Partnership Agreement, Northern Ireland faces a range of structural challenges that hamper economic performance:

  • lagging living standards due mainly to lower levels of employment and productivity;
  • growth in output and jobs in relatively low value-added areas, resulting in average wages remaining significantly below the UK average, with under-representation of higher value-added sectors such as finance and business services in the economy;
  • over-reliance on the public sector as a driver of economic growth, also contributing to the fiscal deficit;
  • a high proportion of economically inactive population: although overall unemployment levels are below the EU average, long-term unemployment (12 months or more) is high, with social exclusion levels higher than in other parts of the UK;
  • the share of people of working age with no qualifications is almost twice the UK average and the highest of all UK regions;
  • low levels of innovation, patents and absorptive capacity, in both SMEs and large firms; dependency on a relatively small number of large companies for a significant proportion of R&D expenditure;
  • persisting or increasing market failure in the provision of risk capital (ranging from GBP 50k (EUR 63k) to GBP 2 million (EUR 2.5 million).

Strengths identified in the region include the following:

  • a strong local research base supporting agriculture and food processing, enhanced by significant industry engagement and an established technology exchange infrastructure;
  • SMEs are more significant as regards their employment contribution than in other parts of the UK; however, the crisis has had a much stronger impact on SMEs in Northern Ireland than elsewhere in the UK (employment fell by 10 % in 2010-13 while it rose by 6 % in the UK);
  • Belfast and Derry/Londonderry are recognised as key drivers of regional growth;
  • performance in generating electricity from renewable energy sources is better than the UK average (although it lags behind that of the rest of Europe); the region is regarded as having one of the highest levels of wind energy resources in Europe;
  • there is a wide range of habitats such as woodland, bog and grasslands, which are important for biodiversity and ecosystem services.

The latest Regional Competitiveness Index Scoreboard ranks Northern Ireland 145th out of 263 regions and reveals the following details:

Table 4. RCI 2016 - Northern Ireland

The Scoreboard shows a deterioration of competitiveness in 2013 compared to 2010 and limited change in 2016 compared to previous years. Comparison relative to those regions with most similar GDP per capita reveals that Northern Ireland has advantages as regards innovation and technological readiness, and weaknesses in the field of infrastructure.

Link to the full publication: http://bit.ly/617-459

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