ECONOMICS was afforded a place in the sun this past week as Ireland’s economic superstar, David McWilliams, delivered a keynote address at the InterTradeIreland Conference.
I wasn’t able to be there as I had headed south to present the latest findings from the Dublin Economic Monitor that we in Grant Thornton produce on behalf of the four Dublin councils.
Based on all the tweets I saw, it seems like Mr McWilliams was in top form. One particularly effusive online compliment asked if he is comedian or economist. At least I think that was a compliment.
The hook for the talk, based on my reading of subsequent media coverage was that the south has too much demand and not enough supply and that the north has too much supply and not enough demand.
The idea of this contrasting supply and demand is interesting, and one that is worth unpicking a little to see where the north has too much supply and not enough demand. For now, I am focussing on two key themes – skills and commercial property.
Northern Ireland’s labour market has been a bright spot amongst lots of economic uncertainty over the past few years. Just this past week, total employment and the employment rate have reached pre-pandemic levels.
With an unemployment rate of 2.4 per cent, lower than all other UK regions, and with economic inactivity rates falling by about 20,000 people over the past year, our labour market story is one of success but it is getting increasingly tight – not a case of too much supply here - and demand remains strong.
The Open University’s Business Barometer 2022 report with the British Chambers of Commerce noted that the skills shortage has seen a significant increase over the past year with more than three quarters (83 per cent) of businesses in the Northern Ireland sample reporting a shortage.
Obviously, attracting people back to the labour market from economic inactivity is one potential way to reduce skills shortages but this is not often a quick or easy fix.
Many people that make up our economic inactivity numbers will be a considerable distance from being able to take part in work, if at all.
Barriers such as a lack of available childcare, poor or no transport options and severe ill-health or disability are significant. Despite the obvious difficulties in addressing economic inactivity the strategy that was developed to do this has never been funded – it was published in 2015.
Adding to a lack of supply in our labour force is what is commonly referred to as the ‘brain drain’. I still contend that all the best ones stay but you get the point - because there are significantly more students than there are university places, many people leave here for further education.
Although education is not the sole reason for people wanting to leave, it is a significant factor – for every 100 home applicants, there are typically 60 places according to research from QUB.
Once we lose these people, not enough come back. Of the 17,000 young people from Northern Ireland studying in Great Britain in 2019, two-thirds decided not to return to Northern Ireland after graduation.
One area of our skills make-up where we do have too much supply is people with low or no formal skills. Nearly a quarter of people aged over 16 in Northern Ireland have no qualifications, according to the latest census figures.
Of 1.5 million people aged 16 and over, 361,000 (24 per cent), were recorded as having no qualifications - academic or professional. On a brighter note, this was down from 29 per cent in the previous census of 2011.
So, we definitely aren’t suffering from an oversupply of the skills that are in demand, but do have an oversupply of people with no or low skills.
Turning to commercial property, we do indeed seem to have too much supply and not enough demand. CBRE’s recent market report notes that there was 1.24 million square feet of empty office space on the market in Northern Ireland at the end of 2022, and that the availability of office space is five times that of 2018.
Obviously the Covid-19 pandemic and the widespread adoption of remote working has transformed the office market. CBRE estimates around 400,000 sq ft is needed to meet the current demand. As a result, quite a few of the major schemes that have been approved appear to have either been put on hold or abandoned.
Tribeca, which is meant to regenerate a massive area of the city centre around St Anne’s Cathedral, is possibly the highest profile scheme to have stalled and the developers continue to seek a commercially viable development.
This is quite the conundrum – we have an undersupply of people to service the needs of many of our sectors and an oversupply of premises to host these non-existent people in!
If only we could muster some joined up thinking in how we plan and where we invest.
Andrew Webb is chief economist at Grant Thornton