‘Peace Dividend’ for Northern Ireland Economy?

On 15 August 1998, a car filled with a 500 pounds of fertiliser explosive was left outside S.D. Kells’ clothes shop in Lower Market Street in Omagh. At ten past three on a busy Saturday the bomb detonated. Around 220 people were injured and 29 killed in the blast, the heaviest death toll of any single terrorist atrocity during the Troubles.

Fifteen years on from the Omagh bomb, Northern Ireland looks like a very different place. Republicans and loyalists now share power in a devolved government at Stormont. The violence and terror that characterised life in the North for 30 years prior to the Omagh bomb has largely disappeared.

But as Northern Ireland edges towards normality, how has its economy changed? Is business in Northern Ireland in 2013 in better shape than it was in August 1998?

The answer is not as clearcut as Belfast’s glass-and-steel skyline might suggest.

Titanic-Belfast-Operator-2Back in 1998 the unemployment rate in the North stood at 5.1 per cent. During the boom years of the early 2000s it went as low as 3.1 per cent. But according to figures released this week, joblessness in Northern Ireland is currently 7.5 per cent.

‘To an extent not much has changed economically in Northern Ireland,’ says Paul McFlynn, an economic specialist at the Nevin Economic Institute. However, while the dole queues have lengthened, the number of jobs and people in work has grown significantly too.

The numbers of economically inactive in Northern Ireland has fallen from 34.4 per cent in 1998 to around 30 per not. Nevertheless, Northern Ireland still has higher levels of benefits claimants than other regions of the UK. Youth unemployment remains a serious problem, with around one in five young people not in education, employment or training (NEET). Real hourly earnings are today back to their 2003 level.

Like in the rest of Ireland, the north’s housing market witnessed a huge boom and bust in the years following 1998. Between 1997 and 2007, average house prices in Northern Ireland grew by 250 per cent. Since then house prices have fallen by 53 per cent, far outstripping the average 18 per cent drop recorded across the rest of the UK.

Economists at PwC in Belfast warn that it could take a decade for house prices in Northern Ireland to return to their 2007 peak. ‘While some types of property in popular areas of Northern Ireland are demonstrating real recovery, average property prices have some way to go before they are clearly on the turn,’ says PwC Northern Ireland chief economist Dr Esmond Birnie

‘That means real recovery in the property market will be long, difficult and wholly dependent on factors ranging from reduced household debt to more liberal lending policies’.

Dr Birnie, however, does see reasons to be cheerful. Northern Ireland’s manufacturing and construction sectors are reporting increased demand and orders and exports have risen. The latest Northern Ireland Economic Outlook, published by PwC this week, forecasts economic growth of around 0.5 per cent in 2013, possibly rising to 1.5 per cent in 2014, assuming continued steady recovery in the UK and Republic of Ireland.

However, in terms of job creation, exports and forecast economic growth, Northern Ireland is demonstrating the slowest recovery amongst the 12 UK regions, well behind London and the South East, which are expected to grow in 2013 by 1.2% and 1.5%, respectively.

Tourism is one area that has improved considerably since the Good Friday Agreement was signed. Back in 1998, 1.4 million people visited Northern Ireland, spending £217m. In 2012, almost 4 million people spent a night in Northern Ireland, contributing an estimated £683 m to the local economy. Titanic Belfast, which opened last year, had 800,000 visitors in its first twelve months.

Business leaders are hopeful than events such as this summer’s G8 meeting at Lough Erne will encourage investment in Northern Ireland. However, many remain sceptical about this prospect, especially given escalating unrest on the ground, first over the flying of the Union flag over Belfast city hall and, more recently, parading routes.

Northern Ireland remains a very testing retail environment, with around one in four units in Belfast empty, the highest rate in the UK.

‘Fifteen years ago everyone was talking about the ‘peace dividend’, that really hasn’t emerged in any great form,’ says economist Paul McFlynn.

The challenge now, as the block grant from Westminster is reduced annually amid spending cuts in London, is to find a political and economic solution that will work for all of Northern Ireland. ‘You have a situation where you have a political settlement reached in the good times. Now it’s coming into its more mature phase and the money has dried up and you are seeing every crack and fissure starting to emerge,’ McFlynn said.

‘What we need now is a genuine attempt to have some kind of local ownership of the direction of Northern Ireland’s economy.’

A Co-operative Alternative

Despite the successes of the last fifteen years, Northern Ireland remains a deeply divided society. As recent unrest attested, sectarianism is still a major problem, especially in and around the ‘peace walls’ that separate nationalist and unionists communities. These interface areas are characterised by social problems, high unemployment and low levels of economic activity.

An imposing, 800-metre long multi-level corrugated iron barrier divides the loyalist Shankill road and the republican Falls road at Cupar Way, in West Belfast. Tensions often run high, particularly during the summer marching season, but a new initiative is attempting to promote reconciliation and economic growth on both sides of the interface.

Three years ago, Trademark, the anti-sectarian unit of the Irish Congress of Trade Unions, helped to establish the Belfast Cleaning Society, a worker’s co-operative based on the interface at Cuper Way. The co-operative has grown steadily. It won the contract for this month’s Tennent’s Vital concerts in Belfast. Not having an owner taking a profit has allowed the business to undercut competitors while also paying a fair wage. Union Taxis, a cross-community co-operative taxi company, based on the interface is due to open later this year.

The Belfast Cleaning Company is owned and run by eight women who live on both sides of the interface. Cross-community enterprises have proven difficult to sustain but a co-operative is well-placed to manage workplace challenges posed by external political events such as the recent clashes over parading.

‘There have been tensions in the co-op as we have workers from republican and loyalist backgrounds. But the co-op is different because the relationships are vital to its success, and because you don’t want them to break down you have to face up and talk about problems,’ says Stephen Nolan, co-director of Trademark.

‘In most workplaces in Northern Ireland people are taught not to talk about these things.’ A study conducted by Trademark last year found that 44 per cent of private sector employees had experienced sectarian harassment.