PwC NI report: Long term productivity growth highest in Northern Ireland

Growth in productivity has accelerated at its fastest rate in Northern Ireland, but the region’s overall productivity levels remain the lowest across the UK, according to new analysis by PwC UK.

The findings have been published in PwC’s Industrial Manufacturing and Services Productivity Tracker, which analyses productivity progress across the UK, with a focus on the key sectors that contribute to UK growth including manufacturing, construction, and services.

The tracker shows Northern Ireland has experienced the highest productivity growth rate in the UK, with the region's output per hour growing by 13.5% between 2011 and 2021.

The PwC research highlights that Northern Ireland’s high productivity growth rates can be attributed in part to the region receiving some of the largest amounts of investment (measured by Gross Fixed Capital Formation as a share of gross value added [GVA] in 2020).

PwC predicts that if Northern Ireland continues to prioritise investment and is successful in translating this funding into improved efficiency, it could see further significant boosts to long-term productivity rates.

The productive potential of Northern Ireland has also been buoyed by the economic performance of Belfast, which has helped to drive growth across Northern Ireland as a whole. Recent research from PwC found that Belfast ranks as one of the leading cities in the devolved nations based on measures including jobs, skills and business start-ups. The Belfast Region City Deal has also been identified as a catalyst for business growth in the region through its focus on research and development.

Caitroina McCusker, PwC regional market leader, Northern Ireland, said: “Whilst any growth in productivity is to be welcomed, Northern Ireland still has the lowest productivity of any UK region, around 17% below the national average.

“This is due, in part, to Northern Ireland having fewer jobs in high-productivity sectors such as financial services. But even outside of this, Northern Ireland has a significant productivity gap in both the production sector - primarily manufacturing - and the services sector.

“It is important to recognise that the 2021 data is likely to be affected by the pandemic so it is too soon to draw clear policy conclusions. However, we do know that one of the most effective ways to accelerate future productivity growth is through investment in a broad range of skills, and in particular to target funding towards skills that will be of increasing importance in the years to come. That includes the priority clusters outlined in the ‘10x Economy’ vision. We continue to recommend increased investment in business-led reskilling initiatives to raise skills levels in NI, in the areas which have the greatest long term impact and contribute to productivity-led economic growth.”

“Getting this right could have huge economic benefits for the region. If Northern Ireland productivity was to catch up to the UK-wide sectoral medians, it could add £7bn to the local economy here.”

Professor John Turner, Northern Ireland productivity forum lead, added: “It is welcome news that Northern Ireland has begun to close its productivity gap to the UK. However, even if it maintains this performance, it will take around 15 years before it surpasses the UK average. We must also wait to see whether this growth can be maintained, or if it simply reflects temporary changes to working hours and output that resulted from the Covid-19 pandemic. This underlines the importance of addressing the underlying drivers of productivity, where Northern Ireland often lags behind its peers across the UK’s regions."