A unified Irish Economy

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The very different structures of the two economies in Ireland necessarily generate a combination of shared challenges, discrepancies and complementary differences. Essentially, the NI economy has highly developed, although somewhat distorted public sector combined with the vestiges of indigenous industrial capacity. The RoI economy has a vibrant private sector which is overly reliant on finance and dominated by MNCs alongside stunted public services. At the same time, both economies suffer from underdevelopment of key sectors. These include agriculture, leisure and tourism, and ICT. In addition, education is slightly under the OECD average as a proportion of the economy and could be improved, not least because of the relative youth of both societies.iii

1.It is widely asserted that the NI economy is overly dependent on the public sectoriv without examining the composition of that output. The categories, civil service (including police) and defence, education and health account for 25.5% of NI’s economy. On a comparable basis, they account for 16.9% of RoI’s economy, of which somewhat more is private sector activity.

But 5% of that NI total is the excess level of civil service and defence jobs in NI. At 10% of total output it is approximately double the proportion of the RoI economy. (This excessive civil service/defence spending equivalent to 5% of output also almost entirely accounts for the subvention from Westminster). Education output is broadly comparable, although it should be improved. It is health output as a proportion of the economy which mainly accounts for the remaining discrepancy.

Yet at 9.5% of the economy, the NI economy’s output of health services is only in line with the OECD average. It is the RoI’s 6.3% health output which is way below the OECD average. It is not simply that RoI would benefit from a health service more like that of NI. There is a body of expertise and capacity which has been accumulated and managed through the Northern Ireland executive and Health and Social Care (HSC) which can be expanded across the island.

In addition, there are clear synergies with the burgeoning medical supplies business in Ireland. This is primarily private sector, but could be integrated with publicly directed health services and supplemented with public R&D and education investment to become a key sector in the unified economy.

2.The NI economy is home to a series of large firms operating in sectors which are, or have the potential to be complementary to enterprises operating in RoIv. These include but are not confined to food processing, aerospace, building machinery, pharma, telecoms and IT.

First, in certain sectors (food processing, pharma, etc), reunification would provide a competitive boost and diversification away from over-reliance on single very large firms in RoI. Secondly, other established sectors are complementary and would benefit from integration in a unified economy. This is especially true in the aerospace sector, where the RoI has well-established financial engineering and other services related to leasing and other areas, whereas NI has significant aerospace industrial capacity. Thirdly, public sector output and integration is key to economic development across a range of services, including road and rail services, postal, telecoms, water and energy and so on. These are some of the largest firms operating in both jurisdictions in workforce and/or output terms. They are channels for development and economic integration, and could facilitate a large increase in productivity and hence prosperity.

3. A degree of economic integration is taking place in any event, with many very large and some small firms operating on a cross-border basis. But this is haphazard, subject to the hurdles and outlined above and frequently initiated to overcome economic or financial failure. The public sector lags this private sector trend, constrained by the political and economic settlement.

In addition, a certain element of integration is frequently initiated to overcome economic or financial failure. In these categories could be placed the former ownership by NAMA of large-scale property holdings in NI, the takeover by ESB of NIE being two examples. The rationalisation and integration process is taking place. The question is whether this can be utilised for the benefit of the entire economy and the population as whole.

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