Challenge The Ecosystem To Drive NI’s Productivity

Challenge The Ecosystem To Drive NI’s Productivity

Andrew Kelly Corporate

Northern Ireland’s low productivity could see significant improvement if education is aligned more closely with the jobs being created and some business incentives are linked to jobs with long-term economic value, according to a new report by Deloitte.

The Power Up Report is a UK-wide Deloitte report focused on how to improve productivity in the economy, which incorporates views and opinions from high level individuals across the public sector, government, education and business.

The report notes that the economic output gap between Northern Ireland and the rest of the UK has widened in the past 20 years with gross value added (GVA) per hour worked recently at 85.1% of the UK average, below where it was in 1997.

Peter Allen, partner at Deloitte, said: “We have a wealth of talent and a strong track record of innovation in Northern Ireland, and by working collaboratively we can create an ecosystem which harnesses this effectively.

“The public and private sector leaders who were interviewed emphasised that greater coordination between the education sector, business and government will be needed to optimise growth and overcome the problem of low productivity growth.”

A number of provocative and interesting ideas were put forward, including adapting the way Invest NI is asked to measure success. Currently, Invest NI looks to support jobs that will last for more than two years and pay above the average wage. However, there was some support for changing the metric to take into account the net present value of each newly created job – for example if it lasts for 20 years it will be of greater value than if it lasts for two – and apply a multiplier to give weight to particular sectors where NI can grow swiftly and sustainably.

It also highlights that Northern Ireland is recognised as having market-leading skills in ICT and financial services, but interviewees said more could be done to align education with the needs of business to ensure a stronger pipeline of labour with the required skills.

Peter Allen added: “Among our interviewees, there was a consensus that the dominance of the public sector in driving the NI economy was slowly diminshing, but that much more can be done to boost growth in key sectors.  There is a clear frustration expressed across all sectors that Northern Ireland does not have a coherent definition of what it wants to be as an economy of the future.  NI needs to focus on what is does well on a global stage to fulfil its potential.

“There was optimism that the productivity challenge can be met and economic performance can be raised, but to do that incentives to improve education and support job creation and investment must all work in the same direction.”

Other key points made by some of the interviewees for the Power Up report included:

  • A well-planned series of investments in infrastructure would have the biggest impact on future growth, rather than any further general increase in cash for current spending from central governments.
  • In education, tuition fees could be used as incentive to target sector growth, either by subsidising fees in particular areas or by combining with business to effectively pay off fees in key growth areas. Both of these would incentivise the development of essential skills by reducing student debt.
  • The block grant requires review. The lack of substantial reform in the public sector in the past ten years has been made easier by an increasing amount of subvention. There needs to be an incentive to reform and become more efficient.  One idea proffered was to propose a steady reduction in the block grant over the next decade as the catalyst for such reform.
  • Public sector procurement needs reform as it is cumbersome and dominates the economy. By making public sector procurement more efficient productivity would be materially improved across the entire economy.

The full Power Up report can be downloaded here.

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