Graham Gudgin: President Biden's claims on the growth of the Northern Ireland economy after 1998 were garbage

President Biden’s visit to Belfast was mercifully short, and with Downing Street’s fingers crossed, he managed to do little damage to the softly-softly approach of Rishi Sunak in getting the assembly up and running once more.

As he rushed into the Catholic Ireland with which he strongly and sentimentally identifies, all we are left with is that great friend of Northern Ireland, Joe Kennedy. Joe is Joe’s ‘Special Envoy in Northern Ireland of Economic Affairs’. He is apparently going to ‘supercharge the work to build the Northern Ireland economy by bringing more businesses, more investment, more opportunity and to help realise the enormous economic potential of this region’. Funny how this enormous potential is still waiting to be realised after the last great American-backed initiative 25 years ago.

Joe K is to lead a trade delegation of American companies to NI. The trade delegation is a staple of American presidential political initiatives and accompanied the Good Friday Agreement (GFA). Civil servants have to scuttle about to find American companies already planning to invest here so that their plans can be announced at the conference. Favours are pulled in or offered, so that company bosses agree to join the delegation. Some of these may actually invest more in Northern Ireland than they had previously intended, but the evidence suggests that the impact is small. Companies locate where they can get well-qualified labour at low cost, if possible with low taxes, government grants and access to markets. Their shareholders would not thank them for bending to political pressures to locate in less profitable places.

We can look at what actually happened to the economy after the GFA in 1998. Firstly, the data shows that employment growth did not improve due to the GFA. More jobs were created but this was because the national UK economy was doing particularly well at job creation. NI’s rate of job creation matched the UK but did no better. It was actually worse relative to Great Britain than it had been during 30 years of the Troubles. Over the whole period of the Troubles, Northern Ireland’s employment growth was surprisingly good. In fact, employment increased from 2.2% of the UK total in 1971 up to 2.6% in 1998. This was a gain of 130,000 more jobs than would have occurred if NI had grown at the UK average rate. Since 1998 in contrast, our share of national employment has been unchanged at 2.6% and productivity has slumped to 16% below the average UK level.

Lots of jobs have of course been created since 1998, some of them by US-owned firms. It is claimed that 15,000 new jobs have been created here over the last decade. This is helpful but accounts for only 10% of additional jobs. There is no evidence however that they were created because of the GFA, ‘peace’ or due to any political pressure. In fact, the impact of peace is wildly exaggerated. Politicians, journalists and others just assume that the Troubles gravely damaged our economy and that any expansion since 1998 would not have occurred without peace. There is little evidence for this belief.

In fact, employment expanded at a faster rate than in GB in most of the years of the Troubles. In the early years, during the worst of the violence in the early 1970s, growth was due to the UK government pouring in money and creating jobs throughout the public sector. Many of these jobs, for instance in health and education, went to females providing second incomes for families. One result was a surge in house prices which in 1977 reached levels close to those in South-East England for the only time in recent history. Later on in the 1980s and 1990s, much of the growth was in the private sector. Foreign-owned firms were attracted to Northern Ireland by a well-educated, low-cost, labour force, by generous grants and by the hard work of the Industrial Development Board (now InvestNI). By the 1990s growth accelerated so much so that large new hotels, including the Hilton, were beginning to be built in Belfast. Little of this is now remembered and many journalists and the BBC seem to assume it was not possible.

Enter Joe Biden with his outlandish claim that “over the last 25 years Gross domestic product in Northern Ireland has literally doubled. Doubled. And I predict to you, if things continue to move in the right direction it will more than triple”. This is garbage, and his speech-writers should be ashamed. Output in Northern Ireland actually increased by 42% since the GFA, less than half Biden’s claim, and was in the bottom half of UK regions. Only if inflation is included can one see a doubling of the value of output but no sensible person would include inflation. As for his insane forecast of a future tripling of output, most economists would put UK economic growth over the next decade at around 10% with little reason to expect Northern Ireland to do better than this. At current rates of growth, it would take a century or more to realise Biden’s absurd expectation.

Biden is counting on the people of Northern Ireland being a gullible lot and no doubt some are. Unfortunately, the normally cautious Rishi Sunak has been tempted into similar hyperbole, notably at his recent speech at the Coca Cola bottling plant in Lisburn. Despite these rushes to the head, there is actually little reason to expect any version of the Protocol to accelerate economic growth. An absence of customs barriers into the EU is the same as before Brexit. All that has changed is new customs costs for imports into NI from GB. The Windsor details may reduce the additional customs costs a little, but business life will go on much as it did before Brexit, whatever the delusional Joe Biden believes.

• Dr Graham Gudgin CBE was special advisor to First Minister David Trimble 1998-2002