Northern Ireland: Ulster set to reshape economy after loss of security subsidies

THE ENDING of violence will have profound implications for the Northern Ireland economy, which has never been strong and which has been severely battered by a quarter of a century of disturbance and terrorism.

The economy is characterised by high unemployment, a huge public sector which employs almost 40 per cent of those in work, and a high level of subsidy from the British exchequer, currently more than pounds 3bn annually.

The task ahead will be to transform a security economy into a more conventional one. Among the key questions are whether the British subvention will remain high and how well, and how quickly, the economy can be rebuilt.

Some fear that Northern Ireland's large public sector, high unemployment and unusually high level of subsidies to manufacturing industry and agriculture have created a culture of dependency which will stunt individual enterprise. Others argue that the ending of violence could mean a new release of energy and talent.

While there will clearly be some kind of peace dividend from the ending of violence, it is not clear whether Northern Ireland or the exchequer will feel the benefit. The Treasury may not share the assumption abroad in Belfast that money saved from the huge security budget will automatically be spent in other areas in Ulster.

One difficulty in the transition ahead lies in the fact that many well-paid security jobs are going to disappear. The average Royal Ulster Constabulary constable takes home pounds 31,000 a year, while more money washes through the economy from the military establishment. Northern Ireland missed most of the ravages of the last recession partly because of its large public sector: it may now suffer as the troops go home and many of the police are no longer needed.

The hope is that such job losses can be made up by new business confidence, an influx of investment from abroad, and an expansion of industries such as tourism. There may also be economic advantages from improved cross-border co-operation, while efforts are already under way to secure additional funding from the United States and the European Union.

There is also the problem of the economic imbalance between the two communities. Male Catholic unemployment is by far the highest of any region in the United Kingdom, standing last year at 24 per cent, while male Protestant unemployment was, at 10 per cent, almost the lowest in the UK.

According to the Government's analysis, Catholics are worse off than Protestants on all the major social and economic indicators. Government policy is already officially to benefit disadvantaged areas, most of which are Catholic; a key question is whether this trend will be accentuated once republican violence has stopped.

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