Return to violence will hit recovery

The Northern Ireland economy will suffer badly if the ceasefire breaks down for good, a leading regional economic forecaster has warned. The peace dividend was set to make the province the top performing region in the UK for the rest of the 1990s. Without it, Northern Ireland will end up in the bottom half of the regional league table.

Before the IRA called off the ceasefire, the regional forecaster, Business Strategies, had worked out that Northern Ireland would sustain its achievement last year of outpacing the rest of the UK over the next five years. In 1995, output grew by 1 per cent more than the rest of the UK.

However, this optimistic forecast was based on a big increase in inward investment and tourism. In the two weeks before President Clinton's visit in December, 12 major investments - worth pounds 200m - were announced, bringing 2,600 jobs. The numbers of tourists visiting Northern Ireland rose by a fifth in 1995, bringing new life to hotels and restaurants.

Business Strategies calculates that if this lift to the economy is removed, total production in Northern Ireland will be almost 2 per cent less by the year 2000. Around 14,000 jobs will be lost, leaving the unemployment rate 1 per cent higher.

"Northern Ireland shifts from being the star performer, in terms of growth between now and 2000, to a lacklustre position in the bottom half of the regional growth table," concludes Neil Blake, research director.

The resumption of the IRA campaign disrupted both economic planning and the hopes of transforming a security economy, heavily dependent on public spending, into an era of new growth.

Business sources were among the first, following the Canary Wharf bombing, to express shock and dismay at the prospect of an end to hopes of attracting new international investment and of developing the tourist industry.

Northern Ireland's potential to beat the rest of the UK is just the most striking evidence of the demise of the North-South divide. In the consumer-driven economy of the 1980s, a huge gap opened up between an ever-more prosperous south and the less buoyant economies of northern regions. This closed substantially in the recession and subsequent export-led recovery. Now that the recovery is set to become consumer-led again, there are fears that the divide will reopen.

According to Mr Blake, these concerns are unfounded. "The increasing mobility of service industries will mean that sizeable imbalances are much less likely to build up this time. Changes in technology mean that in the 1990s new financial services jobs, in particular, are as likely to appear in Leeds or Cheshire as they are in the more traditional centres."

Apart from Northern Ireland the fastest-growing regions in the years 1996-2000 are expected to be the East Midlands, the South-west and East Anglia. These areas are set to benefit from the overspill of service sector growth from the South-east and from their more dynamic manufacturing industries.

Although Scotland grew more slowly than the rest of the UK in 1995 it is expected to expand faster between 1997 and 2000. Strength in manufacturing will underpin this, with output growing by almost 1 per cent a year more than in the UK.