It's all about skills - but we're falling short

Northern Ireland is currently experiencing an acute shortage of skilled workers in a number of sectors

THE economic gains attained since the onset of peace back in 1998 are hugely significant and the potential for further improvements should not be ignored. All-island economic gains have been derived from achieving economies of scale and scope in an otherwise small peripheral island.

For example, many Northern Ireland businesses operate on an all-island basis with their supply chains, the organisation of production, the distribution of workers, the purchasing of inputs and the selling of final products stretching from Coleraine to Cork.

Because of this deep integration and collaboration, firms are more productive, competitive, and economically successful – this has led to more and better jobs for citizens across the island. Underpinning these all-island economic gains is the free movement of goods, services, capital and people.

Yet Brexit now presents businesses across the island with a huge array of uncertainty. Worries for local chief executives range from future access to markets, potential tariffs, rising input costs, supply chains as well as the implications for both the border and the peace process.

But one of the most pressing issues which comes up in nearly every conversation I have with business leaders in Northern Ireland today is their inability to access workers. For this reason, the CBI submitted evidence last month to the UK's Migration Advisory Committee, where we clearly set out the reasons why the Northern Ireland economy must not face future labour restrictions.

Northern Ireland is currently experiencing an acute shortage of skilled workers, particularly in rural areas. Local unemployment levels (4.7 per cent) are slightly higher than the UK average, but at a sub-regional level Northern Ireland can experience extremely low rates of unemployment. For example, the average claimant count unemployment level is below 2 per cent in many Council areas such as mid-Ulster (1.6 per cent), Lisburn and Castlereagh (1.5 per cent), Armagh City, Banbridge & Craigavon (1.8 per cent).

Labour shortages are now reported in key sectors such as ICT, medical technologies, food science, engineering, agri-food, construction and hospitality.

While unemployment levels are low, EU workers are also leaving the region. Companies cite the Brexit-related depreciation of sterling, faster growing eastern European economic growth and a “chill factor” as the main reasons for EU migrants choosing to abandon their Northern Ireland jobs.

Several firms have recently reported that they are now forced to turn away new orders and are struggling to fulfil their existing order book. Other businesses have shared concerns that they are currently tendering for new business without being confident that they will have the workforce needed to fulfil the contract.

With a small population of only 1.8 million, there is no doubt that Northern Ireland's future economic success will be dependent upon the private sector's ability to access international workers.

Recent statistics from the NI Statistics Research Agency (NISRA) reveal that the economy will not be able to rely on an adequate supply of indigenous workers to offset any future limitations on migrant workers. Northern Ireland's rate of population growth over the next 25-year period is projected to be significantly lower than in the rest of the UK (7.6 per cent compared with 11.2 per cent). At the same time, our population is also projected to age at a much faster rate.

The population aged 65 and over in Northern Ireland is expected to increase by a staggering 65.1 per cent to 491,700 people from mid-2016 to mid-2041, with the result that almost one in four people (24.5 per cent) will be in this age category. Such demographic changes will serve to put much more pressure on the dependency rate in Northern Ireland.

Locally, the proportion of child dependents has been falling while simultaneously, the dependency ratio for people of pensionable age has been rising and is expected to increase from 271 per 1,000 people of working age to 377. For Northern Ireland, these population statistics are a stark reminder that employers will need to access young international workers as the local pool of working-age people diminishes.

Inability to access skills has prompted some companies to consider investing in automation where possible. However, this option requires significant time and substantial capital expenditure. Given the current uncertainty around Brexit, the business case for technology investment does not stack up for many companies.

For example, it would be irrational for an indigenous large meat processor to invest more in automation in a local plant when the threat of no EU trade deal and potential WTO arrangements still hang over the firm. Decisions to invest in automation involve much more than mere feasibility.

In many services sectors the opportunity to substitute labour with technology is simply not possible. This limitation applies to both low-skilled and highly skilled jobs. For example, technology cannot replace a friendly waiter or a cleaner for hotel rooms in the hospitality and tourism sector.

Similarly, large accountancy companies who regularly move teams of accountants, auditors and consultants across the all-island economy to work on projects know that these jobs cannot be easily replaced with technology.

Given that the services sector accounts for over 70 per cent of the local economy, the opportunity to close the skills gap with technology would require a quantum leap in terms the technical capability for replacing certain jobs.

So, from a macroeconomic perspective, the message is clear. Northern Ireland needs to be able to attract workers with a full range of skills into this region if the economy is to succeed.

Any restrictions on this region's ability to access people in the future will have huge ramifications for investment levels, company growth, export levels, overall competitiveness and even our ability to deliver public services.

:: Angela McGowan is regional director of CBI NI. Follow her on Twitter @angela_mcgowan

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