Westminster: Most Similar Country Ireland? – A new EU Regional Productivity Analysis

Introduction

An interesting paper “The big European sort? The diverging fortunes of Europe’s regions” has been published by the Centre for European Reform (CER). Such papers are of great interest at PP. The paper analyses regional productivity. As a single metric productivity is one of the best, but as Charles Adams says, in order to get a clearer picture multiple metrics must be used.

Different metrics will paint different pictures and the productivity metric flatters Ireland (because of the high multinational footprint and profits being repatriated overseas) and is considered to overstate the real position by about 20%.

The paper has more granular detail (NUTS3 level) than many papers which just drill down to the NUTS2 level. This is very useful comparing regions within the UK and beyond.

As Irish, I had to smile when I looked at the richest boroughs of London. The interactive map gives the country which the region most resembles in terms of productivity. The 930% of the European average was extraordinary though.

Fig. 1 A screenshot from the interactive mapping tool from the CER paper focusing on Westminster, click on picture to open link.

I would highly recommend clicking on the link and exploring the interactive map, which does not just cover Britain and Ireland, but also the rest of the EU.

The main findings are given in the paper but this one is particularly important:

The most important question is: what makes a successful region? With a new regression analysis, we show that high productivity levels in regions are associated with three factors: they are part of – or geographically close to – successful cities; a larger proportion of their workforce are graduates; and their populations are younger. The association of a high share of graduates with productivity levels is also rising over time. This will, in turn, encourage more young graduates to move to places that are already successful.

In the analysis below the percentage figure is that of the EU average.

The productivity of the four countries in these islands will now be analysed. Ireland will be treated as a whole as the comparison between Northern Ireland and the Republic of Ireland is revealing.

England

There have been a lot of studies on regional disparity in England. This generally gives very similar results, with major disparities between the richest and poorest parts of England. In general London and the SE are the richest and peripheral areas such as Cornwall and the NE poorest.   Even within London there are major disparities, with Westminster (930%) and the region with Kensington and Chelsea(234%) both resembling Ireland but Croydon (80%) resembling Greece and Redbridge & Waltham Forest (72%) resembling Malta.

The poorest regions are similar to other studies including: Northumberland (70% -Cyprus), Durham (72% -Malta) and Cornwall (75% – Greece).  The granular detail, however, reveals other deprived areas such as Greater Manchester NW (69% – Cyprus ) and Dudley (70% Cyprus).

Inequality within England is a disgrace.

Ireland

Two main findings jump out of the Irish data.

The disparity between Ireland and Northern Ireland is stark with Ireland dramatically better than NI in terms of productivity.  The Irish SW region is similar in size to NI. The Irish SW region (225% -Ireland) is far more productive than the richest region Belfast (163%-Denmark) or North of NI for example, including Derry, (69%-Cyprus). It is a shame the granularity is not better in the Irish data as Cork City pulls the entire region up. The Dublin region (266% – Ireland)  is more likely to be similar to Cork City.

Northern Ireland sufferers from regional inequality far more than Ireland. A good comparator is the contrast between Belfast and outer Belfast and Dublin and Mid East (which is the Dublin commuter belt – essentially outer Dublin). Belfast (163%-Denmark) is far more productive than Outer Belfast (65% -Slovenia): very problematic. Dublin (266% – Ireland) is more productive than “outer Dublin” (179%-Luxembourg): quite acceptable. There are however areas of Ireland the Border region (120%-Austria) and the Midlands (124%-Finland) which are falling behind. These regions are most likely to be affected adversely by Brexit.

Scotland

The Scottish data is broadly in line with other studies, with Aberdeen, Edinburgh and Glasgow being the most productive regions. The order Glasgow (150%-Denmark) Edinburgh (145% -Denmark) and Aberdeen (140%-Belgium) is interesting, as previous studies, I have seen rank them in the opposite order.  Aberdeen has of course been pulled up in the past by oil revenue and Edinburgh by its large banking sector. Possibly these are not as profitable as they once were?

The other surprise is the “Lochaber, Skye & Lochalsh, Arran & Cumbrae and Argyll & Bute” region (115% -Germany) is considerably more productive than the Scottish Borders (70%-Cyprus) or “East Ayrshire and North Ayrshire mainland” (67%-Slovenia).  Possibly a Scottish reader would care to speculate as I’m not sure why this should be the case.

In terms of regional inequality, Scotland is doing a better job than England, but probably not quite so well as Ireland.

Wales

The Welsh figures make depressing reading. Even the richest region Cardiff and Vale of Glamorgan (98%-Spain) is below the EU average, if only just. The poorest region – the Isle of Anglesey (61%-Portugal) is the poorest region in these islands.

On the positive side, Wales is the most equal country in terms of the difference between rich and poor regions on this granular level.

Summary

An interesting study. The regional disparity in the UK is depressing and the current centralised Westminster policies are not working. Ireland may not be as far ahead as the data may suggest, but is clearly doing much better than the UK as a whole.  My own view is that far more needs to be done to fight regional inequality.

I would go as far as to say that regional inequality causes an existential threat to the survival of the UK as a unit. I think there is a high probability than neither Northern Ireland or Scotland will be under Westminster control in a decade’s time. Unless, somehow there is a dramatic change, which is difficult to see, as Brexit is taking up the entire bandwidth at Westminster and almost none of the other problems are being addressed.

Footnote

23/09/19

Since the article was published, for some reason, apart from Central Belfast all the NI regions have disappeared from the interactive map. This is suspicious as a) it seems to be the only region for which data has been removed and b) the only region that remains, Belfast, is the only one with decent productivity. Fortunately, Damien Mullan, a regular reader of PP had taken some screenshots.

Fig. 2 North of Northern Ireland
Fig. 3 West and South of Northern Ireland

Comments

  1. Sam Johnson -

    Irish economist Dan O’Brien is worth a follow if you aren’t following already (on Twitter). He shares a lot of analysis of regional data for Ireland. The picture is consistently one of pretty balanced development.

    Recently there were claims that investment in rural broadband (justifiably controversial) was a waste of money because people were moving to cities. Dan responded by sharing data showing that every county in the country has experienced significant population growth.

    When it comes to metrics like income, equality and social mobility it turns out no part of the country is left behind. Yes, there are geographic factors affecting them (proximity to the border is one) but overall no part is left behind. This is a result of both long standing policy by organisations like the Industrial Development Authority which helps bring foreign investment to places it might not otherwise reach, and proportional representation.

    I moved from Marylebone to rural Ireland. In London my neighbours included many who owned their properties via British Virgin Island shell companies. The pollution, both noise and air, were dire (I lived on the most polluted block on the most polluted street in the most polluted borough in Western Europe). Homeless people, many with mental health problems, were numerous. One was aware that people doing poorly paid jobs had to commute long distances to work on public transport that, in the case of the tube, was reported a few summers back to be “legally unfit for transport of animals”. I could go on. Yes, there was all that life could afford, if you had the money and could look the other way past those who didn’t. But not much in the way of birdsong, fresh air, forest walks, friendly neighbours who are not passing through. The thing I miss most about London is Daunt’s Bookshop in the Marylebone High Street. But it turns out our local bookshop in the nearest town is remarkably good — stocks much of what one would read about in the London Review of Books and swift and efficient to get anything not in stock (I v rarely order online, and use Book Depository if I can).

    There’s an environmental cost to living in the countryside. My wife and I have two cars though we need only one and a half, so to speak. The next to be replaced, possibly soon (after 20 years), will be electric. Coming back to Ireland after 30+ years away the changes to the roads and vehicles were striking. As a long-resident Swedish woman said to me once “I’m here long enough to remember when the cars were held together with sellotape and string” (the country I grew up in). As you know, any Irish person old enough to remember will give the same answer to “What happened?” We joined the EU and then the single market.

    1. Sean Danaher -

      Sam

      Thanks. Yes I do follow Dan O’Brien and there are massive fiscal transfers from rich to poor so in practice the disparity between regions in Ireland is less than painted by the productivity figure.

      I think however that the border region and midland region are indeed behind the rest.

      The paper is interesting in that it it is very good at predicting why Ireland is successful: “they are part of – or geographically close to – successful cities; a larger proportion of their workforce are graduates; and their populations are younger.”

      There are five strategic cities in Ireland, Dublin, Cork, Limerick, Galway and Waterford. The two regions without a major city are indeed the borders and midlands region. The border region is likely to be also depressed because of NI.

      The rural broadband plan https://www.independent.ie/business/technology/rural-homes-to-get-better-broadband-than-cities-38090677.html is highly ambitious and given I get 2Mbps in Northumberland – I am envious of the 500Mbps target speed (ramped up over a number of years).

      In my earlier post http://www.progressivepulse.org/brexit/why-is-ireland-so-pro-eu the most important factor for Ireland’s success is the Single Market. Who was it who said “only a madman would actually leave the single market?”

  2. Simon Proctor -

    I think the answer to the “Lochaber, Skye & Lochalsh, Arran & Cumbrae and Argyll & Bute” question is quite simple.

    Single Malt Whisky.

    A lot of it is made in that region and sold all over the world. That’s got to count for something right?

    1. Sean Danaher -

      Thanks and very good Whisky it is too. The history of Irish Whiskey and Scots Whisky is fascinating. I think tourism might also play a part – its a very beautiful part of the world. I always try to spend the last week of May there when possible.

  3. Charles Adams -

    Thanks Sean. Very interesting data. I do think governments should use regional metrics to guide investment in infrastructure. We know that one of the biggest drags on productivity is poor transport and network infrastructure. London is productive because it get the largest share of state spending.

    Whisky of course is very special, a great and unique product!

    1. Sean Danaher -

      Charles

      thanks. One striking thing about Ireland is how much better the road system is than the UK. This is a complete reversal from 25 years ago, when the road infrastructure was dreadful.

      Far more needs to be spent in the NE. The A1 from Newcastle to Edinburgh is single carriageway for long stretches. My 2Mbaud internet connection is totally inadequate. London does indeed get the lions share of funding.

      A major rethink on how to do things is needed in the UK. I have always favoured some form of federalism. It may be too little too late, especially if Brexit goes ahead.

  4. Graham -

    I regard this report as indicative rather than definitive. I’m not sure we should be worshipping at the altar of productivity or GDP. Maybe we should be spreading employment, income and wealth around a bit better, which might lower productivity but improve lives. For example, I believe Richard Murphy has said that Ireland’s success is largely due to it’s “tax haven” style policies. In 2018 a report was published arguing that the City of London, far from being a net contributor, was a drag on the economy to the tune of several trillion. https://www.taxjustice.net/2018/10/05/press-release-city-of-london-costs-uk-4-5tn-in-lost-economic-growth/

    I moved to the Scottish Borders just a few years ago. It once had a very successful textile industry – now gone. Town Centres have been hollowed out by the Council allowing mega supermarkets in to destroy the “High Streets”. But it’s still a lovely place to live.

    We go to the south of Spain each winter for 3 months. The road system, not just the motorways which are outstanding, is incredible and well maintained. Almost every small village has a bank, not open every day, but a bank nonetheless. Every village has a weekly market where fruit, veg, cheese, clothes are very cheap. Goatherds still take their flocks onto the hills to graze most days – no quad bikes here. In a village or town there are pedestrian crossings galore, unlike here where pedestrians are just a nuisance to vehicle drivers, and drivers have to stop if someone wants to cross. Drivers give cyclists room. You see families out walking on the many signed walking routes which are well maintained, or harvesting the olives from their small plantations, or eating together in restaurants or at BBQ’s. Vineyards, planted on what look like 45deg slopes are worked by hand. I’m told the health service is very good.

    Like us they have a pretty right-wing government and plenty of other problems. But there are things we could learn from other countries – if we weren’t so insular.

    1. Sean Danaher -

      Graham, thanks I agree with a lot of this. I’m not happy about Ireland’s tax haven status and certainly a lot needs to be done, but the problem may not be as bad as it seems https://www.independent.ie/opinion/comment/dan-obrien-figures-do-not-lie-and-our-tax-regime-is-not-bleeding-eu-38035400.html .

      Things certainly need to improve in that regard in Ireland, but Brexit has created great uncertainty and could be very bad for the Irish economy so probably not a lot of will to make major changes at present.

      I’m not sure that tax is the silver bullet it is supposed to be. A proper joined up industrial strategy and a young and highly educated workforce is equally if nor more important. The power of the Irish American lobby has also been instrumental in attracting very high end FDI and a lot of it.

      I’m very Green in my outlook and agree completely that GDP is a very bad measure.

      Setting aside the overall level, what impresses me most about Ireland is the spread of prosperity throughout the country. I spent some weeks in the West of Ireland last summer after passing through Northern Ireland. NI outside Belfast can be very grim – real John Harris territory of boarded up shops and lack of hope.

      I wrote about the contrast between Ballina (Mayo IE) and Dungannon (Tyrone NI) in an earlier post. Two towns about the same size. Ballina was vibrant, clean, buzzing, full or colour and hope. Dungannon was drab, dreary and lifeless.

      Ireland more and more resembles continental Europe than the UK. Sadly many in Westminster still believe in British exceptionalism.

      I’m not surprise so many people ate fed up in the UK

  5. Graham -

    Thanks, Sean and for the link. While criticising Ireland we should also state that a lot of research shows the UK and it’s various dependencies to be the biggest tax haven of all and probably involved in other even less acceptable activities. One thing that concerns me is the way the tax burden overall seems to have shifted from business to individuals.

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