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Productivity and the Northern Ireland Economy presented by Paul Mac Flynn, Senior Economist, NERI
Productivity in many western economies has been stagnant in the years following the 2008 financial crash. The UK has been among the worst performing economies and within it, Northern Ireland has been a consistent laggard. Many have attributed Northern Ireland’s comparatively weak productivity performance to differences in the industrial make-up of the region. However, headline sectoral figures do not bear this out. The productivity gap between Northern Ireland and the rest of the UK lies within industries and sectors. This paper seeks to highlight the sectors and industries where Northern Ireland falls behind and to consider why they fall behind.
Manufacturing and Public Services are sectors where Northern Ireland performs well while Agriculture and most of the Services Sector drag overall productivity down. In many cases Northern Ireland’s firms lack the scale of their counterparts in Great Britain, but even adjusting for this many firms still fall behind. To compound the problem, in many cases activity is concentrated in areas where Northern Ireland has a productivity deficit and less concentrated in areas where it is more productive.
There are economy wide productivity issues relating to skills and physical capital investment where Northern Ireland has structural challenges to overcome. In addition to tackling sectoral issues, enterprise policy also need to focus on stimulating demand for skills among employers and employees while encouraging a culture of innovation among firms that lack the market incentive to do so.