Pathways to recovery for the Northern Ireland economy from COVID-19

5 August 2020

Pathways to recovery for the Northern Ireland economy from COVID-19
Pathways to recovery for the Northern Ireland economy from COVID-19

The Ulster University Economic Policy Centre (UUEPC) have just published their third paper on the economic consequences of COVID-19 on the Northern Ireland economy. The first two papers assessed the scale of the impact in 2020 but this third paper considers the timeline for recovery.

The UUEPC estimates that it will likely take four to five years to reach pre- COVID levels of economic activity and possibly more than 10 years before unemployment falls to previous lows.

Gareth Hetherington, Director of the UUEPC, referring to the research, said,

“Although this current economic contraction is much more severe than the recession following the financial crisis, the period of recovery is likely to be shorter. The economy took seven years to recover its lost economic output last time but will probably take four to five years this time around.

This is primarily explained by the much shorter contraction period in the current recession and the economy entering the recovery phase much more quickly.”

The key challenge for Government is to minimise job losses

The sectors most impacted by the COVID-19 pandemic are Retail, Accommodation (Hospitality) and Arts & Entertainment and they collectively employed 220k people or 24% of total employment prior to lockdown.

Mr Hetherington said,

“The hospitality, leisure and non-food retail sectors have been the most impacted because their businesses require staff and customers to be in close physical proximity to each other. These sectors have been slow to see restrictions lifted and are also most susceptible to any future lockdowns.

Given the number of jobs in these sectors, the key challenge for Government is to minimise the number of job losses. Furthermore, these sectors tend to employ a lower age demographic and people with lower levels of qualifications. Consequently, this group could find it more challenging to move into other higher skilled employment.”

Commenting on the significant length of time that it may take the labour market to recover one of the authors, Dr. Eoin Magennis said,

“We are likely to be looking at unprecedented numbers of people becoming unemployed with all the challenges this causes for personal lives and household incomes. The decisions taken over the length of time that the furlough scheme continues is likely to be a critical factor in numbers coming into Job Centres. The full resourcing of Job Centres and adopting methods to assess the future risk of long-term unemployment will be just as important to ensure that the labour market recovery is as fast as possible and that the level of scarring is minimised.”

Approximately half those on furlough have returned to work

There has been significant discussion on the total number of people placed on furlough but little debate on the number who have returned to work. Mr. Hetherington said,

“In total, approximately 240k people in Northern Ireland were placed on furlough, but if the local labour market is broadly consistent with the UK trend, it is likely that approximately half those placed on the scheme have returned to work. In addition, some employers will have taken advantage of the flexible nature of the scheme and will have returned some staff on reduced hours, whilst also remaining on the Job Retention Scheme on a part-time basis.”

Read the full report


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