‘Northern Slant Hosts’ is our new series of interviews with people in public life on key issues affecting Northern Ireland. In this episode Roger Greer speaks with Richard Johnston. Richard is an economist at Ulster University, where he is Assistant Director of Economic Policy Centre.

At a time when the economic fallout from COVID-19 and Brexit are in sharp focus, it was incredibly interesting to listen to Richard’s analysis of the impact we’ve felt in 2020 and are likely to feel in 2021; what the Executive could do to support economic development; the economics of healthcare across NI; and tackling the challenges to communicating economics effectively. 

You can watch our full conversation below, or listen on Spotify if you’re on the go. You can also read some highlights from the Q&A below.

At the time of interview, the UK and the EU were still negotiating before the end of the Transition Period.

I started by asking Richard about the impact of COVID-19 on the Northern Ireland economy, and what we could hope for in 2021.

We are now beginning to get data that can actually illustrate the impact on the economy. We’re getting actual data for unemployment, employment and economic inactivity.

What we would estimate is that output, the size of the economy, contracted by say 10-12%. The definition of a depression is -10% from peak to trough, so there is certainly the potential the Northern Ireland has entered its first depression. A very rapid and very deep recession. Much more rapid and deeper than the 2008 recession. That [the 2008 shock] took about 5 financial quarters to unfold, and was about 5% in terms of the full contraction. This stage [post-COVID] we reckon it’s 10-12% and really did unfold over a few weeks. 

So far there’s maybe 20,000 fewer people employed. Unemployment has doubled and there is about 15,000 economically inactive. Now what’s actually really good is that the labour market has held up much better than we thought at the outset, so that’s primarily due to likes of the coronavirus job retention scheme and the self-employed income support scheme. Those schemes have actually kept people with their employers, and the labour market impact has been much better than we thought.

In terms of vulnerability, that’s something we’ve focused on in the Economic Policy Centre. Certain sectors have become much more vulnerable – those which require lots of face-to-face engagement and socialisation – so arts, entertainment, tourism, leisure, restaurants and hotels have all been hit quite hard. And certain geographies as well: the centres of our towns and cities have been hit quite hard. Young people who are starting out in jobs – starting jobs in restaurants, or retail – those jobs will no longer be available to them. Older workers who are not as digitally enabled have also suffered, as have those with low formal qualifications and consequently lower incomes than average. 

So geography, age group and by sector and occupation there are a lot of quite different impacts across society. If you’re an IT programmer, COVID has probably been quite good for you. However, if you work in retail or a hotel, obviously COVID has been a huge challenge. 

Yes, and you mention the job retention schemes and the various support offerings which the government has put forward and how that has impacted on the job market. Has that masked a problem which might unleash itself next year?

In terms of ‘masking’ a problem, it is a very real problem which we have to face. It is important that we keep people as close to employers as possible at this stage. Those schemes will come to an end or will come to an end for certain sectors at some stage, and what we would expect is that we will begin to see a feed on to unemployment and inactivity. Perhaps it will be tapered out, perhaps tapered out for certain sectors. 

These are huge policy interventions at a UK level, between job retention scheme, self-employment scheme and the business intervention loans. Of course, we have our own interventions here in Northern Ireland, with rates relief, hardship payments and digital training courses and things like that. The policy framework so far has really spared nothing in terms of its response to COVID. It’s been pretty remarkable, and a lot of things have been done on policy terms we thought wouldn’t have had a chance in the past. 

What I think in the future is that a lot of these will have to wind down due to the public expenditure and taxation implications of those programmes. But again, what the government has shown, is that it is willing to help those who are in most need, so there will be other forms of programmes brought in over the next year to try to help those who continue to see serious vulnerabilities as a result of COVID.

How much can we separate the impact of COVID-19 from the potential impact of Brexit?

It will be incredibly challenging to disentangle the two. What you have here are two massive disruptions. COVID is the largest disruption faced by the economy in Northern Ireland in its history. Brexit is an additional disruption, and a lot of forecasts and estimates would have been for a contraction of around 4-5% percent. So when you add that to COVID, it is obviously a significant challenge.

What we have got going on in the background are other megatrends which were already happening. We have an ageing population, the climate emergency, the fourth industrial revolution. All of these things have had an impact on Northern Ireland’s competitiveness and economy prior to COVID, and have been accelerated because of COVID. We are in a situation now where disruptions have been cubed.

What we’ll see undoubtably that there are frictions and costs that will increase some prices of goods coming in from GB. There will be some substitution effects – some consumers will buy goods and services from the south that they would have got from GB in the past. Then in terms of trade diversion as well, so it may be easier for some companies to export to Germany by going through the south, rather than using the UK land bridge.

From the health of the economy to the economy of health, Ulster University published a report entitled Health, Equality and the Economy a couple of weeks ago. Could you run through the key points in the report and your chapter particularly?

It was a great report to work on with a range of colleagues from across the University of Ulster, in terms of mental health and all the other elements of care which takes place in NI. What we found from the cost of delivering healthcare is that we generally spend more than most other parts of the UK delivering healthcare on a per capita basis. So we’re not necessarily under-funded. We have much longer waiting lists. We have serious issues with capital interest from backlogs, and realistically more money will help solve a few ills, but realistically if you look at the Bengoa Report and other publications, there are so many elements which need to come together now for healthcare. 

Some of those are quite difficult decisions, quite locally and politically challenging as well. So where, for example, would a cancer or a heart disease centre of excellent be located, where you would deliver very high-quality services on a very specialised basis in one or two locations across Northern Ireland. That means more travelling for people. It means fewer very local hospitals. It also means a lot more care in the community and people residing at home. A lot of those decisions need to be taken, because we cannot continue spending more and having worse healthcare outcomes.

It seems to be a political issue, rather than a policy or even a funding issue. Prior to COVID-19, the Health Minister was making a speech, and Christopher Stalford the DUP MLA said that we need to provide cover for the Minister in delivering healthcare reforms because it is not sustainable at the minute, and it does become difficult for each MLA in each area.

It is absolutely a political hot potato, so I do feel for anyone who represents a constituency where they have local healthcare services moved or removed. Those are huge challenges, and certainly I wouldn’t want to be an MLA or a councillor who is taking away some of those services, or being involved in those decisions or votes, because obviously they matter an awful lot to people, especially in a covid environment, where the capability and capacity of the entire system has come under scrutiny in recent months. So I wouldn’t underestimate the challenge of making those hard decisions, and I do feel for the people who are tasked with making them. 

But when we look into the future of healthcare in Northern Ireland, it needs to be different. Minister Swann was already faced with a healthcare system that was creaking, and needing significant reform, and then covid hit. It wasn’t the place you would have wanted to start from when taking the job on. 

There are significant bandwidth issues at the minute dealing with the impact of Brexit and Covid, if we could put those aside just for a second, what could the Executive do in broad terms to boost economic development in NI? Is it things like investing in skills or providing infrastructure development? What could really give the NI economy a shot in the arm?

That’s absolutely key at the minute that a) we deal with COVID; and b) look at all the other plates that the Executive has to spin in the air at the same time. COVID has taken over a lot of the civil service time, and a lot of the emotional bandwidth and logistical bandwidth of those dealing with the decisions 

The Executive can do a range of things. We just published a competitive report a week or so ago, and what that found was that we have an education system that has improved over the past two decades, but other competitor nations have improved more rapidly. And what that means is that NI is slipping further behind. We would say quite often that we have a world class education system in Northern Ireland. That is probably no longer the case. We have lower levels of literacy, scientific and numeracy ability than other competitor nations across Europe. 

That is going to be a challenge for bringing in FDI [Foreign Direct Investment] in the future; for getting jobs in a more digital environment. We also have low levels of innovation. We have really really high childcare costs, so it is more expensive to work and look after your children in NI than any other part of the UK. We are top of the table in many of those things we don’t want to top the table in.

What can the Executive do? It could invest quite heavily in terms of the education system, looking at the curriculum and working within the fourth industrial revolution, making it a more digitised curriculum; looking at skills that are not easily automatable, so the more human skills like strategy, empathy, leaderships – those soft/human skills; and then the technical/hard skills like coding, data analytics, cyber. 

Looking at the green revolution – how can we support a much greener society in the future. We import an awful lot of heavy oils for heating and transport. Those are two areas where NI is really really poor, and if there is a significant oil price hike, it means that society suffers quite a bit in Northern Ireland in terms of fuel poverty. 

But that needs a concerted energy strategy that is properly thought out and costed. Again, I feel for the officials working in this area, because with the history of RHI, it is going to be a challenging and slow process.

Economics is hard and it is complex, and it is gloomy at times. We’ve had Michael Gove saying, “we’ve had enough of experts,” and some of the gloom we’ve talked about in relation to Brexit will be met with a shrug by great swathes of the population. How do we overcome the challenges to communicating economics effectively?

It is certainly a challenge. We are trying to communicate a large amount of data, and data-driven analysis and making it concise and quick.

If you take the likes of the competitiveness report, there are over 100,000 data points in that research. My job is to distil that down to 5, 6 or 7 charts which are relevant and interesting to the audience. It is making sure that I know the audience and that I can appreciate their perspective and what they need to get out of that information. It is infographics, it’s podcasts, it’s chats like this, TV programmes, and making economics more accessible. We don’t need to be using jargon or complicated terms. If we can get our thoughts across in a straightforward way, it’s better that people get 5 or 6 of those points rather than sort of dazzled by all of the science.

This interview is available as a podcast on Spotify.