Tue 14th Aug 2018
August 2018: NI’s low level of productivity, which is among the worst in Europe and the lowest across the UK regions, is a barrier to economic growth – and that is a major concern.
Northern Ireland’s low level of productivity, which is among the worst in Europe and the lowest across the UK regions, is a barrier to economic growth – and that is a major concern.
Labour productivity is 17% below the UK average which in itself is also in the bottom league across the EU member states. The issue has been the subject of significant concern to policy makers in Northern Ireland and attempts have been made to address it through a number of strategies. Yet despite this, the region has made little inroads into closing the significant and persistent productivity gap that is now a structural feature of our local economy.
Research by Northern Ireland’s Economic Advisory Group (EAG) points out that low productivity is a factor of both what Northern Ireland does (its sectoral structure) and how well it does it (productivity within sectors). As a region we rely heavily on low wage, low productivity sectors and that explains a large proportion of the productivity gap. The research highlights that Northern Ireland would have to make a significant change to what it does to close the productivity gap with the UK. However, there is also an issue within sectors in that most sectors here have lower productivity than equivalent sectors within GB (sectors that trade internationally such as manufacturing being the exception).
The Northern Ireland Programme for Government has made a welcomed commitment to ‘have more people working in better jobs’. However, while the current low levels of unemployment are welcome this should not be at the expense of creating a skilled workforce in the local economy that supports businesses to improve productivity and grow. There is evidence that reliance on unskilled and temporary contract workers does dampen productivity and every effort should be made to drive up job quality within and between every sector of the economy.
To address this challenge in the long-term, Government must do everything it can to improve the areas that are in its control, such as skills, training and infrastructure, to help increase business productivity. Incentives for investment, such as an increase in investment allowances, should also be considered.
Furthermore, NI Chamber believes that reducing the rate of corporation tax will increase the propensity of firms to invest and show that the UK is a business friendly economy.
Our concerns have been detailed in a response to the Department for Business, Energy and Industrial Strategy’s call for evidence on the Business Productivity Review and we look forward to the liaising with the department and our members on this important issue over the coming months.