Exploring the causes of Northern Ireland’s productivity gap
Collaborative research conducted at Queen’s Business School and The Productivity Institute reveals critical factors such as sector disparities, skill shortages, and political instability lie at the heart of Northern Ireland’s productivity growth.
Northern Ireland has had longstanding issues with productivity, even prior to the partition of Ireland. It is one of the worst performing regions of the United Kingdom: around 20 per cent below the UK level, and is only 75 per cent of the average level in the European Union. A project funded by the Economic and Social Research Council, and led by Professor John Turner, a Professor of Finance and Financial History, and Dr David Jordan, a Lecturer in Economics, has sought to explore the challenges and issues around the continuing low levels of productivity in Northern Ireland.
The research was conducted in collaboration with The Productivity Institute, a University of Manchester-based research organisation investigating issues affecting productivity for businesses, workers, and communities. Their focus lies in understanding how to measure productivity and how it may impact living standards and wellbeing. The Productivity Institute launched eight productivity forums across the UK, including the Northern Ireland Productivity Forum, based at Queen’s.
What is productivity and why does low productivity matter?
Productivity is a measure of the total value of output produced for a given amount of work. It is vital for the local economy, as higher productivity leads to higher wages, an improved standard of living, and increased funding for essential public services like education, healthcare, and infrastructure. Overall, productivity plays a crucial role in enhancing society's wellbeing and the efficient functioning of public services.
Low productivity in a society leads to slow economic growth, declining living standards, and increased unemployment or underemployment. It can also result in reduced competitiveness, limited investment and innovation, and can exacerbate social and economic inequality.
Research outputs and findings
Dr Jordan and Professor Turner published an insights paper titled ‘Northern Ireland’s Productivity Challenge: Exploring the issues' and an executive summary for The Productivity Institute. Through an analysis of existing literature, the report found that Northern Ireland’s persistently low productivity was not only due to its economic structure – since the region tends to have more low productivity industries such as agriculture and retail – but also because of Northern Ireland’s geographical peripherality. However, the report concluded that the causes behind Northern Ireland's low productivity levels are complex and cannot be attributed solely to these factors.
The researchers found that Northern Ireland has a low educational attainment level, with 16 per cent of the population having low or no skills, double the UK average. A large proportion of those with graduate education also leave Northern Ireland and fail to return, a ‘brain drain’. Additionally, there is a shortage of managerial skills in Northern Ireland, and the internal transport infrastructure could also be improved. Similarly, the region’s rate of business start-ups is below the UK average.
Dr Jordan and Professor Turner found that policy interventions have been ineffective at closing the productivity gap, with higher productivity often an aspiration of policymakers, but rarely a metric used to assess policy success. A key reason for the persistence of the productivity gap is the enduring political instability of the region, recently exacerbated by Brexit.
They identify an opportunity for policy interventions to address past shortcomings, in terms of foreign direct investment, human capital, and infrastructure in Northern Ireland. Capitalising on the region's strengths, such as FinTech and advanced manufacturing, can enhance its export potential. Northern Ireland's relatively young population presents a chance to tackle the issues of educational attainment and the managerial skills gap, and offer a competitive advantage relative to the rest of the UK. Policies can be designed to encourage the retention of Northern Ireland graduates, curbing the brain drain, and fostering local talent to contribute to the region's development and growth.
Publications and outputs
More information and publications can be found here.
- ‘Northern Ireland’s Productivity Problem’, National Institute UK Economic Outlook – Summer
- Northern Ireland Productivity Dashboard 2022
- Response to ‘Modelling productivity levels in Ireland and Northern Ireland’
Academic and Professional engagement
The research has been presented in a wide range of conferences, lectures and events such as;
TPI Business Conference, QUB Economics Society, Nevin Economic Research Institute (NERI), Ulster University, Chief Executives’ Club, QUB Leadership Institute / Innovation Boost programme, ESRI, Northern Ireland Civil Service Economist Profession
David Jordan and John Turner have written several public engagement articles and opinion pieces about the project as a whole in for example; Economics Observatory, The Belfast Telegraph, The Nevin Economic Research Institute Blog and Agenda NI.
On behalf of the Northern Ireland Productivity Forum, Dr Jordan and Professor Turner have engaged with a number of different stakeholders, including organisations such as NISRA, Be the Business, NI Audit Office, the Resolution Foundation, Department for the Economy NI, Department for Infrastructure NI, Northern Ireland Office, and Four Nations College Alliance.
References in Government reports
The intended impact of the research is to help Northern Ireland raise its productivity. This is a long-term goal, and will take several years before measurement is possible. However, key points from the research have been referenced in government reports by the NI Fiscal Commission in their 2021 and 2022 ‘More Devolution for Northern Ireland?’ Interim Report, as well as in the 2023 Independent Review of Invest Northern Ireland, which identified productivity as a key metric to measure the success of future policies.
Northern Ireland Productivity Forum leading the way
The Northern Ireland Productivity Forum was the first of the Institute’s eight forums to produce its regional insights paper, titled Northern Ireland’s Productivity Challenge: Exploring the issues. They also pioneered the Northern Ireland Productivity Dashboard 2022, a dashboard concept which provides an overview of the drivers of NI’s productivity. This has now been replicated for all eight regional forums, through The Productivity Institute’s ‘Productivity Lab’, which provides data-based insights for researchers, policymakers and business strategists. Dr Jordan was the first researcher employed to support the work of a regional forum within The Productivity Institute, and the output from his work led the way for a Research Associate to be employed for each of the eight regional productivity forums.
Further research building upon the findings from the insights paper
One of the main findings from the insights paper was that the quality of management contributes to Northern Ireland’s productivity gap. However; the extent of the problem is unknown because of a lack of empirical evidence. Based on this, Dr Jordan and Prof Turner, along with PhD student Sweta Pramanick, conducted a survey collecting data on managerial skills and management practices in firms across Northern Ireland.
By linking the survey results to firm performance, they will be producing a series of policy briefs on how to improve management practices in the local economy. These briefs will be written for businesses, local business organisations and local policymakers. They are in process of writing a paper based on this research, titled ‘Northern Ireland’s Productivity Gap: A Survey of Managerial Skills and Practices'. Their management survey has already received media coverage, and you can read more about the survey in this Irish News article.