Driving economic growth in the North West

North West-based financial journalist Paul Gosling believes that if recognised, the benefits of a proposed City Deal for Derry could help address some of the underlying problems of the region’s economy, including productivity.

Highlighting the potential for the North West region to capitalise on investment and support for this key economic area, Gosling sets out a context of what he believes are the underlying factors in relatively poor economic performance.

One issue he points to is around demographics. Analysis of the current population within Derry City and Strabane District Council highlights a dominance of both young and old citizens, which he explains is a result of a high contingent of higher-skilled adults leaving the region during their working years. This occurrence can also be offered as the main reason behind a level of strong exam performance but low retention of graduates.

The result of this, he adds, is the existence of a positive labour market capacity; but high levels of unemployment and high levels of economic inactivity.

UIster University Magee campus. Credit: Nigel McDowell/Ulster University.

Another issue is around support infrastructure. While the region boasts a strong digital infrastructure, with digital businesses being a key strength of the area, surrounding transport infrastructure is relatively weak.

Tourism is another key economic sector of the region, however, while existing tourism assets are of high quality, recognised growth in the sector is from a relatively low base. Outlining that the sector needs expanded, Gosling adds a cautionary note that the sector is one with often poor quality of employment, underpinned by things like low-pay, casual contracts and seasonal work.

While a large public sector in the region is seen as a strength, providing a level of economic stability, in contrast, the private sector is small, as are levels of pay.

Gosling outlines that the results of this economic context are that unemployment in Derry and Strabane (4.7 per cent) is almost four times greater than in Northern Ireland’s best performing council area, Lisburn and Castlereagh (1.4 per cent). It’s also close to double the Northern Ireland average of 2.4 per cent.

However, the financial journalist believes that unemployment figures sometimes overshadow an underlying problem of low economic activity. “The most unproductive thing you can do is not work and not earn an income,” he states, adding: “It creates not just an individual problem but a problem for society as a whole because it creates welfare dependency and means the tax system is propping up people who aren’t in work.”

This problem, he highlights, can be better viewed in the context of employment rates, rather than unemployment rates. It’s also a Northern Ireland-wide problem. Currently Northern Ireland’s employment rate of 69.2 per cent is the lowest in the UK and well below the UK average of 75.7 per cent. The problem becomes even more acute in Derry and Strabane where the employment rate is 56.8 per cent. “In Derry City and Strabane, just over half the population have a job. That’s not good and it’s probably the worst rate anywhere in the UK,” Gosling analyses.

Degree level qualification rates.

He believes that the heart of the employment problem can be viewed through an analysis of degree level qualifications in the council area, observing that while the area has a large contingent of people leaving education with very high qualifications, there is equally a contingent of school-leavers with very low or no qualifications. Again, this is a problem not unique to Derry and Strabane but it is where it is at its most severe across Northern Ireland. Currently, Derry City and Strabane’s 35 per cent rate of population with no qualifications is Northern Ireland’s highest, while it also has the lowest number of the population with degree level qualifications.

Quoting economist Paul Krugman, Gosling says: “A country’s ability to improve its standard of living over time depends almost entirely on its ability to raise its output per worker.” All of the issues outlined above relate directly to a productivity problem. Again, poor productivity is not just an issue isolated to Derry City and Strabane. In fact, the UK’s productivity is the sixth lowest of the G7 but the problem becomes more acute as the statistics become more localised. Belfast ranks at 12 per cent below the UK average but west of Northern Ireland falls 20 per cent below that average and north of Northern Ireland is 23 per cent below the UK average.

Weak productivity, Gosling establishes, is a culmination of a number of factors, including a lack of investment, innovation and skills, as well as weaknesses in enterprise and innovation. However, he believes that two key themes are affecting productivity in Derry City and Strabane in the form of infrastructure and skills.

On infrastructure, he believes poor “resilience” is an ongoing problem, particularly around transport infrastructure. Adding: “This is why these key themes are a focus of the city deal bid.”

During his Budget 2018 announcement, Chancellor of the Exchequer Philip Hammond stated that he would begin formal talks for the Derry city region deal, of which proposals include a focus on three key areas, namely investing in innovation and digital, enabling infrastructure and regeneration and growing the private sector.

Gosling believes that a key feature of achieving the ambitions of the City Deal will be to increase the size of the current university offering, outlining that currently the Magee campus of Ulster University incorporates around 4,000 students, many of whom commute into Derry.

“A university presence of around 10,000 students would drive the wider economy, as well as create graduate skills to be retained within the city. The basis of the City Deal is to increase the skill level in the relevant sectors, focussed on the strength of the digital infrastructure of the North West. That includes the likes of data analytics, stratified medicine and other areas supporting these, such as AI and robotics. All of these areas are current strengths of Magee but just not currently big enough. Building on the innovative strengths of Magee will be very important to fulfilling the potential a City Deal offers. As will strengthening the further education-based vocational training and also developing the tourism assets, both in Derry but also in Strabane.”

Gosling believes that university-based research and development and innovation promotions should focus on: health and life sciences; personalised medicine; cognitive analytics and artificial intelligence; robotics; advanced manufacturing; virtual and augmented reality, immersive tourism; and hybrid learning.

Outlining that the City Deal bid has been designed to complement rather than compete with the Belfast Region City Deal, he adds: “Whereas the focus for Belfast’s deal is about the factory of the future, the North West’s is centred on stratified medicine and developing research skills.”

He concludes: “From a City D­­eal we would hope to see not only investment in infrastructure and education/training but also the creation of jobs, with a higher average pay. This would facilitate higher tax revenues and lower welfare costs. It will also lead to lower health costs as a result of improved health outcomes and an overall enhanced quality of life. It’s important that as a result of investment, Derry City and Strabane can utilise this to get a return.   

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