Minister Chambers welcomes research on all-island economy

The Department of Finance has today (Thursday) published a research paper on the all-island economy titled “Shared Island, Shared Economy: Comparison of economic structures and linkages between Ireland and Northern Ireland".

The research provides economic background to the increased focus on all-island linkages and the co-funding of investments with Northern Ireland partners in the context of the Government’s Shared Island Initiative. This initiative was established in 2020 to enhance cooperation, connection and mutual understanding across the island of Ireland, underpinned by the Good Friday Agreement.

The report examines the similarities and differences in economic structures in Ireland and Northern Ireland and cross-border flows of trade, tourism and commuting patterns.

One of the key findings of the research include:

• Ireland’s economic activity is approximately 25% greater than that of Northern Ireland. When comparing productivity per worker, aggregate productivity measures in Ireland incorporate the contribution of the substantial multinational presence in Ireland. The research shows that when domestically-owned firms in Ireland are compared to firms in Northern Ireland, there is a higher productivity level in Ireland but the gap between the two economies is considerably smaller than shown by the aggregate data.
• In the period since the COVID-19 pandemic, labour force participation has increased strongly in Ireland but not in Northern Ireland, leading to a reasonably substantial gap in labour force participation opening between the two economies. This is primarily driven by lower labour force participation rates in those aged over 55 in Northern Ireland when compared to Ireland, potentially linked to higher reported rates of disability and limiting health conditions.
• The structure of public finances is quite different in the two economies. Corporation tax accounts for around 5% of Northern Ireland’s tax revenues while 9% comes from domestic and non-domestic rates (the main tax for which the Northern Ireland Executive has control). In contrast, corporation tax is a much more substantial proportion of revenues for the Irish government. Income tax, PRSI/national insurance and VAT are significant components of public revenues in both economies.
• Public spending on a per person basis is higher in Ireland in health, education and housing whereas Northern Ireland has significantly higher expenditure per person on social welfare.
• Although Ireland is the more open economy on aggregate, trade flows from Northern Ireland to Ireland are consistently higher than those from Ireland to Northern Ireland. Between 2011 and 2020, there was some moderate growth in trade in both directions. Post-Brexit, trade flows have increased sharply, particularly in goods trade with 2021 showing increases of approximately 30% for cross-border goods flows.
• Alongside trade flows, cross-border connections in terms of commuter flows and household visits can also indicate the level of interaction between Ireland and Northern Ireland.

Comment from Minister: