Esmond Birnie: It is wrong to say that the Northern Ireland economy is outgrowing the UK average

On 1 September 2023 the UK statistical body (ONS) published revised and improved UK GDP growth figures for 2020 and 2021. These revised figures reinforce the result that during the period since January 2021, ie when the Protocol Brexit trading arrangements for NI began, NI’s economic growth has actually been lower than that in the rest of the UK.

If the entire period Quarter 4 2019 through to Quarter 1 2023 is considered then NI growth does indeed exceed the UK average but what this is showing us is that NI had a much less severe Covid-recession in 2020. This isn’t telling us much about NI’s underlying growth potential or the impact of Brexit and/or the Protocol.

Using more up-to-date and hence more reliable estimates of economic activity across a range of sectors ONS concluded that UK GDP at the end of 2021 was roughly £40bn, or close to 2%, larger than had previously been thought. By implication UK economic growth during 2021 was rather more impressive than had previously been thought.

Most commentators have focused on what these revisions imply for the comparison of UK growth to Western Europe and the other G7, major, Western economies. Instead of the UK being Europe’s laggard it has been about middle of the pack. Instead of UK GDP in Quarter 2 2023 being 0.2% less than the pre-Covid peak (ie Quarter 4 2019) that level is now 1.6% up the highest level prior to the pandemic.

However, there is an additional, NI-specific cause for interest given that we can use the revised ONS figures to trace NI’s comparative growth performance. An important point about method is this, the ONS data for the UK have only been revised as far as the end of 2021. We link the UK (revised) growth figures to unrevised ones for 2022 and early 2023. When the ONS comes to revise the UK growth figures for 2022 and 2023 it is possible these will also be revised upwards which would reinforce the conclusion that recent NI growth has been lagging the UK average.

Taking this longer period since just before Covid, ie Quarter 4 2019-Quarter 1 2023, we can see that NI growth has exceeded the UK average. NI output in Quarter 1 2023 (the most recent figure) was 6.3% higher than Quarter 4 2019. In the case of UK GDP the growth was only 1.3%. However, closer inspection of the quarter-by-quarter data shows that this better performance in NI was really concentrated in mid 2020. NI had a relatively milder Covid-recession and a comparatively rapid bounce back in the rest of 2020. From the start of 2021 NI growth looks hardly any more impressive than the UK average and may have been lagging (something which the figures confirm).

Over the more recent two+ years, those coinciding with NI’s unique post-Brexit trading arrangements (January 2021+), NI growth has lagged the UK average. In Quarter 1 2023 the volume of output was 8.7% higher than at the start of 2021 but UK GDP was 11% higher. The further post-Covid recovery in NI during 2021 was much less pronounced than was the case in terms of the UK average. Since the start of 2022 growth has been limited in both NI and the UK.

The National Institute (NIESR) would be regarded as one of the UK’s leading economic think tanks and, indeed, economic forecasters. NIESR’s most recent National Institute UK Economic Outlook Summer 2023 publication continues a narrative whereby they stress that the NI economy may have been out-growing the UK average and some of this may be attributable to the Protocol:

l “The Northern Irish economy has witnessed some resilience through the cost-of-living crisis perhaps aided by to some extent the Northern Ireland Protocol ...”

l “Northern Ireland economic output as measured by GVA is above UK levels and exceeds pre-Covid levels …”

There are a few differences between the approach taken by the National Institute compared to my approach. The National Institute use GVA rather than GDP data and their data for the UK comes before the recent data revision. Probably even more importantly, the National Institute compare the level of NI output in early 2023 to that in late 2019 but this obscures the fact that all or most of Northern Ireland’s “growth advantage” was concentrated during the worst of the Covid recession and the immediate recovery in 2020. When the National Institute have noted an NI growth advantage they have sometimes qualified this by saying the growth is “slightly better” than the UK average and have sometimes argued any advantage from the Protocol arrangements would be once-off and would fade over time.

l Dr Esmond Birnie is senior economist at Ulster University Business School. To read the full version of the above article, with diagrams, please click here.