Economic impact of COVID-19

Ulster University Economic Policy Centre has revised upwards its estimate of the potential impact the COVID-19 outbreak could have on the Northern Ireland economy.

By Claire Cartmill
Tuesday, 2nd June 2020, 6:00 am
Updated Tuesday, 2nd June 2020, 10:12 am
Ulster University Economic Policy Centre
Ulster University Economic Policy Centre

It is estimated that the local economy could contract by 12.7% in 2020 with approximately 249k workers placed on furlough or temporarily laid-off.

Dr Eoin Magennis, Senior Economist of the UUEPC, referring to the research, said: “We remain in a unique situation in our economic history where we are going through a public health crisis and the necessary response has been for governments across the world to ask large parts of their population to stay at home and, in effect, have closed down a significant part of local economies.

“This has meant large parts of our economic activity has stopped and significant proportions of the workforce have been placed on furlough or laid off on a temporary basis. We are now looking at how quickly and safely economic and social activity can restart and what this may mean in the longer term for businesses, employees and communities. Though we have seen economic recovery in recent years it is still not known what shape the next one may take or when it might start.”

Dr Eoin Magennis, Senior Economist

The UUEPC believe - on the basis of the evidence now emerging about the potential effects on economic output, a doubling of unemployment to 6.1% by the beginning of April and the signals of business and consumer confidence – that the Northern Ireland economy could contract by 12.7% in 2020, an impact unprecedented in the region’s recent history.

The estimates of impacts at a Council level also make the 2008-2009 recession seem less significant. All Council areas will be impacted at levels above the financial crash but four Council areas – Mid Ulster, Causeway Coast & Glens, Mid & East Antrim and Newry, Mourne & Down – may see the worst relative impacts.

Dr Magennis said: “At this point the NI Executive has focused on minimising the human cost of this crisis by prioritising public health needs. Measures have also been taken to mitigate the worst impacts of the restrictions, including wage subsidies, business rate holidays, grant schemes and assistance for many self-employed.

“However, we are now entering a different phase where the focus moves to re-opening the economy and society. This might be called the ‘living with Covid’ period of continuing social distancing. The hope will be that we avoid becoming merely a ‘90% economy’, where consumer demand and business investment stay well below previous levels.”

In an earlier report in April 2020, the UUEPC team identified a number of ‘recovery’ phase policy responses. These included fast-tracking investment plans, looking at opportunities the re-skill employees during the pandemic period and exploring opportunities to bring supply chains closer to home.

In this paper the report asks what can local Councils do to assist such a recovery. Dr Magennis added: “Our paper shows that while all places are impacted, not all are affected equally. Thus, we believe any potential policy considerations to mitigate against the worst of the impacts should not be blind to local variations and

that Councils can help inform these responses. First, we argue that the essential economic development work – including the City and Growth Deals plans – should continue and perhaps accelerate.

“We also argue that any local response will have to equally take into account existing sectoral strengths and new opportunities to re-purpose into new sectors. The tourism sector is a case in point and promotion of this to staycations or other replacements for international visitors will have to tap into local attractions. In a similar fashion we would argue that regeneration plans for town centres and re-skilling work should also draw on local assets to make these most appropriate to the different Council areas. Finally, the partnership approach seen in Community Plans provides a good basis on which to build local policy response that can best reach those businesses, households and communities most in need of assistance at this time.”

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