Economic recovery 'largely jobless'

By Eddie O'Gorman
BBC NI business reporter

image captionThe recovery will initially be largely jobless, the report says

The economic recovery in both Northern Ireland and the Republic will be very gradual, with a number of factors likely to slow it even further.

That is the conclusion of the latest report on the economies north and south of the border, to be published on Wednesday by the accountancy firm Ernst and Young.

The report paints a picture of two economies struggling to come back from a deep recession, but the recovery, it says, is "tentative and largely jobless", and could be derailed by concerns over the extent of the debt in some Eurozone countries.

Cuts in public sector spending are adding to the downbeat mood.

The report says that the Republic, where GDP has declined by 10% since 2008, faces a further 1% fall this year, before returning to 2.8% growth next year.

It estimates that the Northern Ireland economy will expand by 0.8% this year, and by 2.2% in 2011.

The special advisor to the Ernst and Young Economic Eye, Neil Gibson, says that the most serious risk in Northern Ireland lies in the cutbacks to public spending proposed by the UK coalition government.

He says that given the economy's dependence on the public sector (it accounts for a third of all jobs), these cutbacks will have a significant effect on Northern Ireland's economic recovery.

But he says this must not be seen as an insurmountable problem, and that it will ultimately lead to a more efficient and dynamic sector.

He said that he was predicting cuts in Northern Ireland's public sector of between £750m and £1bn.

"There will be tough choices," Mr Gibson said, "but the cuts must be seen against the backdrop of the significant spending rises of recent years.

"There is also a wide range of choices in how these cuts may be implemented, most of which will not lead to a deterioration in front-line services."

Young people

The report confirms that the recession has been disproportionately severe on the young on both sides of the border.

It says that in the Republic, between the start of 2008 and the end of 2009, there was an increase of nearly 160,000 in the number out of work.

Of those, 56% are in the "prime working age" category of 25-44. For Northern Ireland, the increase in the numbers out of work was 28,000, of whom 48% were between the ages 25-44.

Mr Gibson says that the business services sector, which includes software, consultancy, and accountancy, will be critical to the economic recovery in both Northern Ireland and the Republic.

"We believe that between now and 2020," he said, "this sector will create 100,000 net jobs across the all-island economy, compared to just 27,000 in the construction sector.

"In Northern Ireland we believe that over the next 10 years, they will account for more than 60% of all net new jobs."