The end of the year is traditionally a time for reflection, renewal, and resolutions. This tradition feels all the more relevant this December, as we look back on a year dominated by a global pandemic and look ahead to the widespread roll-out of a COVID-19 vaccine. But a newfound sense of optimism has been tempered by the introduction of fresh Coronavirus restrictions, with economic fears resurfacing over the impending end to the Brexit transition period.

Indeed, life in 2020 has felt akin to purgatory; a persistent feeling of isolation, job insecurity, cancelled plans and stagnation has gripped the world, with government support adding to the strange feeling of underlying normality. 2021 is now finely balanced to deliver us from purgatory, but where we end up is far from certain. 

In the rush to return to some semblance of normality, Northern Ireland risks sleepwalking into a new crisis, while missing opportunities for fresh, prosperous renewal. 

A unique crisis with a nasty whiplash?

The nature of this crisis is unique, and won’t do anything to halt a disconnect between economic indicators and the quality of people’s lives. In Northern Ireland unemployment has increased, but only to 3.7%; consumer spending is still high when the supply of open shops and restaurants allows; and public spending is approximately £4 billion higher than last year. The only current indicator of a crisis is gross value added (GVA), which is anticipated to contract by at least 10.9% in 2020.

But that number is significant. It is by far the biggest drop in output in Northern Ireland’s history, and it might take years for that lost growth to be recovered. Studies have shown it is those at the bottom of pay, age and qualification scales that have suffered the most from this crisis, and with expectations of a K-shaped recovery, any growth that does return risks leaving behind those most vulnerable.  

What has prevented that gap from unfolding more quickly is unprecedented government intervention. UK government debt is now higher than the size of its economy, a trend familiar to policymakers of Northern Ireland, where spending regularly exceeds income by about £10 billion each year. This gap is made up by the UK Treasury. Dependency on the Treasury has proven a bonus for Northern Ireland: the region has higher public spending per head than anywhere else in the UK. However, it leaves it open to heavy losses when the government decides to address the largest deficit since the end of the Second World War. 

Public finances, Brexit, and preparing for disruption

Addressing this deficit might accordingly hurt Northern Ireland more than elsewhere. Higher taxes – depending on where they are administered – may increase poverty, while reductions to Universal Credit certainly will. Public sector pay freezes will disproportionately hurt Northern Ireland, increasing the strain in a country where average wages are barely above 2010 levels in real terms. Northern Ireland’s economy is more reliant on consumer spending for growth than the UK, yet its residents have a precariously small amount of disposable income to play with.

Northern Ireland suffered a great deal in the last recession, seeing GVA fall by 4%, and the ensuing measures of austerity were highly detrimental to a country barely 10 years into its post-Troubles era at the time, contributing to stunted productivity growth exacerbated by a poor culture of innovation. While austerity may not be on the cards this time, increasing the heavy lifting of the private sector through any of the aforementioned measures will garner less results in Northern Ireland, who may bear the brunt in the medium-term. 

A return to stagnation would hurt Northern Ireland, whose status since the Good Friday Agreement has felt shaky at the best of times; a poor response from the UK Government and the NI Executive would make its position increasingly untenable. These questions come as Northern Ireland appears to be leaving one storm and entering another. As we officially break away from the EU at the end of the year, Brexit becomes an encroaching reality for which we remain unprepared. 

The question of Northern Ireland’s place in the UK will likely re-emerge, certainly as Scotland ramps up efforts for a second independence referendum, and more so given the region will remain part of the EU’s customs union and some of its single market while the rest of the UK withdraws. As that question festers, Northern Ireland’s poor public finances will once again rear their head. 

This should be a priority for both unionists and nationalists. Prosperity and sustainable growth strengthen unionists’ case to remain in the UK, and convinces an increasingly isolationist Great Britain to maintain interest in the region remaining. For nationalists, subverting the perception that standards of living will fall and taxes will rise in the case of reunification is vital for garnering cross-border support. 

Despite growing talk of Northern Ireland’s future status, there remains limited preparation for how to deal with the economic and civil upheaval if it ever changes. Brexit, growing support for a Border Poll and IndyRef2 all directly impact the issue of preparation; failure to adequately prepare for a public ready to explore this idea risks compounding an economic crisis with a social one. 

Prepare for the worst, expect better

These are daunting times for Northern Ireland, but here lies an opportunity for renewal. COVID-19 has shed light on longer-term dangers to society – most pertinently climate change, a mental health crisis, and widening inequality. In periods of economic recovery, those problems can be exacerbated as they are sidelined for economic growth, usually at the expense of both. 

Northern Ireland and the UK have stuttered economically since the last recession, but on inequality and carbon emissions they are heading in the right direction, and commitment to economic growth by any means necessary is unlikely to work anymore. In a region as idiosyncratic, and with as much of its potential untapped as Northern Ireland, that is especially true.

Before its ultimate future is settled, the region should embrace these idiosyncrasies, taking advantage of its small geography to build out and level up, engage more proactively in pilot schemes that reflect largely homogenous demographics, and lead the way in green energy aided by short commuting distances and condensed populations. 

Northern Ireland will probably benefit from increased, rather than diminished, diplomacy, outreach and funding in the case of a No Deal.  Northern Ireland could be a leader, rather than a follower, for the decade ahead. If it can gain a stronger footing in sustainable growth, future questions will begin to feel less daunting.