How can Northern Ireland close its productivity gap by 2040?
Northern Ireland has long struggled to close the productivity gap with the UK. At the Northern Ireland Productivity Forum we published a new report, NI Productivity 2040: Addressing Northern Ireland’s productivity gap for greater prosperity.
We identified not only the challenges faced, but the relationship between these challenges, and provided a roadmap for how the Northern Ireland Executive can close the gap by 2040 through greater joined–up policymaking.
Since 1998, Northern Ireland’s productivity gap has averaged 17.7%, below the UK. Recently, there has been a slight improvement, with Northern Ireland only 13.2% below the UK average in 2022. However, Northern Ireland remains one of the worst performing UK regions, ahead of only the East Midlands and Wales.
Productivity is a fairly broad term, but in its simplest form it measures the outputs produced from inputs. Low productivity highlights that Northern Ireland is falling short of its full potential, which can have a negative effect right across the economy, from government to personal wellbeing.
Within our report, we identified challenges to improving productivity for policy. To do this we used the 5 categories from the Northern Ireland Productivity Dashboard. Each category is related to a different stakeholder:
- Business performance and characteristics – Firm level performance
- Skills and training – Individuals in the workforce
- Policy and institutions – Government and policy
- Health and wellbeing – Individuals in society and their personal wellbeing
- Investment, infrastructure and connectivity – The wider business environment
Within these 5 categories we identified 18 key challenges to improving productivity in Northern Ireland. From this analysis we identified the objectives for improving these challenges, and the main policy stakeholders, including the Northern Ireland Executive departments and their delivery partners.
Improving productivity is a complex issue that requires many changes if we are to see a tangible improvement by 2040. These challenges are wide ranging, from the qualifications gap to an underinvestment in utilities infrastructure.
Looking at the example of policy and institutions, it is clear Northern Ireland has the policy levers needed to close the productivity gap, with the most devolved powers in terms of policy in comparison to Scotland and Wales. Instead, we identified the reasons why policy may not be as effective as we would like, such as the previous misdiagnosis of problems and siloed policymaking.
In the report, we mapped the interactions between the policies. To do this we looked at 3 types of interactions:
- Precondition – Policy A will be more successful if Policy B is implemented first
- Facilitation – Implementing Policy A first will help to implement policy B
- Synergy – Both Policy A and Policy B work best when the other is implemented
We categorised each policy challenge by its interactions with the other policy challenges (as shown in Table 1). Innovation and R&D and Entrepreneurship have the most preconditions. This means that addressing these policy areas works best when their preconditions have been implemented first. The policy areas that facilitate the greatest number of other policy challenges include public finances, data gaps and limitations, and devolved policy. These 3 policy challenges have the most total connections, demonstrating their central importance to improving productivity in Northern Ireland. Investment has the highest number of synergies. This means that policy improvements between it and the four other policy challenges are mutually beneficial.
Mapping the connections between the policy challenges and their stakeholders, the Department for the Economy was linked to the most policy challenges, highlighting its central importance to improving productivity. It is important to note that all government departments and their delivery partners play an important part, with the success of policy reliant on the interactions between policies.
Note: See page 65 of the report
To improve productivity in Northern Ireland will require a cross–departmental approach to be deeply embedded in the policymaking process. This can be achieved through the Northern Ireland Executive creating a pro–productivity institution, namely a Productivity and Growth Board. This will help to address previous issues of short–termism and siloed policymaking.
A Productivity and Growth Board would have 3 major roles:
- Help government design policies to meet long–term policy objectives
- Aid joined–up policymaking and implementation
- Monitor and report on a country’s performance in terms of productivity and its drivers
The Productivity and Growth Board should focus on analysing the drivers of productivity highlighted in our report, with an annual report on the state of productivity in Northern Ireland. This report would provide short– and long–term policy recommendations for the Northern Ireland Executive. Indeed, the Productivity and Growth Board would have to work closely with the Northern Ireland Executive departments to implement and evaluate pro–productivity policies.
The success of a Productivity and Growth Board will depend ultimately on its structure, requiring both the autonomy to work independently of government influence, and being supported with the necessary funding and resources.
Low productivity is a long–standing issue for Northern Ireland. One that is unlikely to be resolved within a single Executive term but rather will need to be a long–term policy objective. Sequencing of policy is essential to maximise its effectiveness, with the previous 25 years of stop–go government hurting the Northern Ireland economy.
Despite the systemic challenges, the focus on productivity by government has been minimal until recently. Improving productivity was included as an aspiration within the new Programme for Government 2024–27, however, more should be done. For example, the Scottish government has put productivity at the heart of their economic strategy. Northern Ireland would certainly benefit from following suit.
From our research it is clear that low productivity in Northern Ireland is not inevitable, but that there is no ‘silver bullet’. Our analysis demonstrates that many of the policy challenges and objectives are interconnected, requiring cohesive policymaking. Closing the productivity gap should be the collective responsibility of the whole Northern Ireland Executive. It will require a joined–up approach to policymaking, with much closer working across the departments and their delivery partners.
Ruth Donaldson is a Research Associate at Queen’s Business School, and the Northern Ireland Productivity Forum.
