This document analyzes productivity issues in Northern Ireland by examining strengths and weaknesses at the regional, sectoral, and economy-wide levels. Key points include: - Northern Ireland has lower productivity than the UK average, due in part to its regional concentration outside Belfast and sectoral specialization in agriculture and public administration. - Sectors like agriculture, construction, and administration have significant productivity gaps compared to the UK. - Northern Ireland also struggles with skills mismatches, having both a low skills supply and low skills demand. - Improving productivity will require boosting high-productivity sectors while also improving underperforming sectors by addressing skills shortages, lack of firm ambition and investment, and insufficient competition.

1. Productivity in NI:
Strengths and Weaknesses
PAU L M AC F LY N N
N E R I ( N E V I N E C O N O M I C R E S E A RC H I N S T I T U T E )
B E L FA S T
PAU L . M AC F LY N N @ N E R I N ST I T U T E . N E T
W W W. N E R I N ST I T U T E . N E T
NERI Monthly Seminar
13.12.17

2. Outline
1. The Problem
2. Regional Issues
3. Vulnerable Sectors
4. Economy wide issues
5. Solutions?

3. The Problem
66
68
70
72
74
76
78
80
82
84
0
5,000
10,000
15,000
20,000
25,000
30,000
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
NI UK NI/UK

4. The Problem
70
72
74
76
78
80
82
84
86
88
90
92
94
96
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Per Hour (UK) Per Job (UK) Per Head (UK) Per Head (EU)

5. The Problem
0
10
20
30
40
50
60
Regional GDP

6. The Problem – Regional?
73.3
140
58
68
55
64
0
20
40
60
80
100
120
140
160
NI Belfast Outer Belfast East of Northern Ireland North of Northern
Ireland
West and South of
Northern Ireland

7. The Problem – Regional?
0
20
40
60
80
100
120
140
160
NI Belfast Outer Belfast East of Northern Ireland North of Northern
Ireland
West and South of
Northern Ireland
GVA per capita as % of UK total
1997 2015

8. The Problem – Regional?
0
5000
10000
15000
20000
25000
30000
35000
40000
Belfast Glasgow City Edinburgh, City
of
Cardiff and Vale
of Glamorgan
Bristol, City of Birmingham Leeds Liverpool Manchester
GVA per Capita as % of UK total

9. The Problem – Regional?
42000
43000
44000
45000
46000
47000
48000
49000
50000
51000
52000
Belfast Outer Belfast East of Northern Ireland North of Northern Ireland West and South of Northern
Ireland
GVA per job

10. The Problem - Sectoral
25 26
8 11
7
8
6 4
64 60
83 82
5 6 2 3
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
UK 1978 NI 1978 UK 2014 NI 2014
Sectoral Employment UK & Northern Ireland 1978 & 2014
Manufacturing Construction Services Other Production

11. The Problem – Sectoral Mix
Sector NI Emp Mix GB Emp Mix
Agriculture 353 110
Mining 124 100
Manufacturing 5027 3813
Electricity & gas 405 480
Water 603 582
Construction 1966 1971
Retail 4761 4249
Transportation 1367 1749
Accommodation & food 963 1024
Info & Communication 1089 1764
Finance 1360 1781
Real estate 2842 5770
Professional & scientific 1316 2509
Administration 1198 1616
Public Administration 3625 2322
Education 2441 2412
Health 3818 3012
Arts 372 505
Other 699 789
Total 34410 36558

12. The Problem
Industry % Productivity Gap
Agriculture -62.1
Mining -74.8
Manufacturing -4.0
Electricity & gas -12.1
Water 24.5
Construction -28.2
Retail -4.2
Transportation -12.7
Accommodation & food -14.5
Info & communication -30.2
Finance -37.0
Real estate -4.9
Professional & scientific -19.4
Administration -20.3
Public Administration 20.8
Education -3.4
Health -6.7
Arts -11.1
Other -17.2

13. Agriculture
0
5
10
15
20
25
30
35
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Agriculture NI Agriculture UK

14. Agriculture – Farm Size
76.4
33.4
12.3
25.7
5.0
14.6
34.8 26.3
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
NI England
Large
Medium
Small
Part-time

15. Agriculture – Farm Income
0
20000
40000
60000
80000
100000
120000
Part-time Small Medium Large
NI England

16. Construction
0
5
10
15
20
25
30
35
40
45
50
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
UK NI

17. Construction
25% 22%
18%
11%
19%
8%
3%
3%
8%
19%
26%
37%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
NI GB
Construction Output in NI and GB by sector
All Repair & Maintenance
Private Commercial
Private Industrial
Non-housing Public
Infrastructure
Housing

18. Administration
15
17
19
21
23
25
27
29
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
NI UK

19. Administration
0.00%
0.50%
1.00%
1.50%
2.00%
2.50%
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
NI Employment and Output in Administration as % of UK
Employment Output

20. Economy-wide Issues - Skills
60
65
70
75
80
85
90
95
100
105
110
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Number of 16-64 with no skills by region (2004=100)
England Wales Scotland Northern Ireland

21. Economy-wide Issues - Skills
• High Skills Supply
from Workers
• Low Skills Demand
from Firms
• Low Skills Supply
from Workers
• Low Skills Demand
from Firms
• Low Skills Supply
from Workers
• High Skills Demand
from Firms
• High Skills Supply
from Workers
• High Skills Demand
from Firms
Skills Surplus
Skills Deficit
HSEq
LSEq

22. Economy-wide Issues - Skills

23. Solutions?
Need to boost sectors with high productivity – Manufacturing
Need to boost productivity within under-performing sectors (the harder
part)
◦ Boost supply AND DEMAND for skills
◦ Need to tackle a lack of ambition, firm-size, investment, innovation. Possibly
a lack of competition.
No silver bullet solution, sector by sector, region by region.