NI's economic future 'fragile'

James Kerr BBC Northern Ireland business editor

Two reports published recently have highlighted potentially serious economic problems that lie ahead for Northern Ireland.

Put together they send out worrying signals about an economy that at first glance looks to be in reasonably good shape.

Invest Northern Ireland has had a mixed start to life.

In its latest economic review, the business advisers PricewaterhouseCoopers says serious economic weakness is being hidden by a "veneer of economic prosperity".

At the same time, the First Trust Bank economic outlook and business review says that Northern Ireland is facing a situation where "there are no more free lunches".

What both reports conclude is that, even after one of the best decades that Northern Ireland has ever enjoyed economically, local industry is in a fragile condition, and not well placed to take best advantage of any upturn.

They argue that what is maintaining that veneer is the continued growth of government spending.

This has provided jobs and incomes, which in turn have helped keep the retail sector booming at a time of low interest rates; when there's little incentive to save and borrowing money is cheap.

The problem is that while this may keep unemployment at record lows, it is not sustainable and has masked the problems currently being faced by industry.

Large sections of industry in Northern Ireland are vulnerable to further erosion from overseas competition

Put together, the technology recession of the past two years, the continual pressures from low cost competition faced by sectors such as textiles, and a drought in the market for inward investment; then the size of the challenge facing industry becomes clearer.

The expectation would be that with unemployment at record lows, any global industrial upturn might sweep a rising tide around the local economy.

The real worry is that this may not happen.

Large sections of industry in Northern Ireland are vulnerable to further erosion from overseas competition - and not just in textiles.

At the same time, the knowledge-driven technology sector, which has the potential to be the engine of growth, has yet to achieve the scale to replace clothing and food processing as the main employers.

Perhaps most worrying is what has happened to foreign investment.

In the 90s, Northern Ireland benefited from an improving political climate, and a desire by investors to establish a relatively low cost base inside the European Union.

Those same investors are now looking increasingly to the EU accession countries of eastern Europe, and also China.

Radical approach

In its report, PwC says that part of the answer has to be a much more radical approach to economic development; more risks must be taken by the private sector, and civil servants must be willing to experiment with more imaginative policies.

Like the First Trust review it recognises that the broad thrust of policy is right, in seeking more entrepreneurship and a concentration on knowledge based employment.

After a period of several years of ongoing review there may be little appetite among civil servants for more change, particularly as the main vehicle for delivering policy - Invest Northern Ireland - has had a mixed start to life.

But the authors of these well respected reports are clearly looking to prompt a debate they feel is important.

They feel that to ignore their warnings would smack of complacency.