Post by dangeresque on Oct 29, 2008 20:34:31 GMT
Does the border matter in a time of recession?
[This is taken from A Note from the
Next Door Neighbours, the monthly e-bulletin of Andy Pollak, Director of the Centre
for Cross Border Studies in Armagh and Dublin]
One just can’t avoid the economy
these days. By now it is old news that at the end of September and in early October
the world was on the edge of a financial precipice not seen since the Wall Street
Crash in 1929. The government of the Republic, whose banks and building societies
were among the most exposed because of excessive and foolish lending to property
developers, was forced to step in to provide an unprecedented blanket guarantee to
protect their deposits and loans. Two weeks later the British government introduced
a more measured package which involved taking a significant equity stake in the
major UK banks. Similar government interventions all over Europe had the temporary
effect of calming the markets. But as Britain’s ‘real’ economy follows Ireland’s
into recession, the only question now being debated is how long will it last, with
pessimists predicting as long as four years before any significant recovery. In the
aftermath of the dreaded ‘hard landing’, does the border matter any more? In Belfast
it might appear that the answer is ‘yes, thank you’. There is a strong temptation
for Northerners to gloat quietly (and not so quietly) about the Celtic Tiger coming
to a bad end, with the much maligned Northern public sector looking less like an
albatross and more like a safety cushion every day. There is a widespread belief
that things won’t be as bad in our highly-subsidised little province as in the
South, with its huge exposure to the now harsh vagaries of the international
economic climate. Indeed the border is providing something of an opportunity for the
North at the moment, especially for its retail sector in the wake of the strong euro
of the past 18 months. Recent news stories have pointed to the number of shoppers
crossing the border and benefiting local retailers. This is particularly the case in
Newry, where Southern shoppers are up 40% in 2008, and in Derry, where the rise is
35% (1). Inevitably the losers here are the Southern border towns. The success of
Newry and Derry (and Belfast and Banbridge) means large losses for retailers in
places like Letterkenny, Dundalk and Monaghan (and Dublin and Drogheda). A lack of
comparable statistics means that we don’t know exactly what the losses are. However
unemployment figures in early 2009 from the Southern border counties could make for
grim reading. It needs to be forcibly pointed out, however, that it is not only the
South that is now much more open to the global economy. The closure of a dominant
employer like Seagate is considerably more damaging to the North than the departure
of one major foreign firm in a more developed and diversified economy like the
Republic’s. In terms of future prospects for both foreign direct investment (FDI)
into and exports out of Ireland, it is unfortunately very easy to see a worldwide
sneeze causing an extremely unpleasant cold all over the island. Another point which
is usually ignored is that the inter-connections between North and South, generally
welcomed, could make recession in one jurisdiction largely unavoidable in the other.
Official figures show that levels of cross-border trade in 2006-07 rose again by 8%
to over €3 billion. Such trade might only account for 2% of total exports from the
Republic (given the influence of FDI), but in sharp contrast 30% of Northern exports
go to the South (2). Other surveys show that 40% of firms across the island do some
trade with the other jurisdiction. For two out of five of these companies, less than
5% of their turnover is tied up in this trade, though for 11% of Northern firms it
accounts for more than half their business(3). This is where the recession may
really start to bite for Northern Ireland’s small and medium firms in particular.
And this is without mentioning the close and varied connections between the
construction and property development sectors across the island – witness the
collapse of the Belfast-based Taggart brothers’ property empire in late October. So
what can be done to make cross-border cooperation work for the two Irish economies
during these hard new times? InterTradeIreland’s initiatives to promote cross-border
trade (such as Acumen or MicroTrade) will become more significant as firms look
closer to home to find new markets. Making the €15 billion all-island public
procurement market more open to SMEs would help. Companies will also want to be able
to offer new products when the upturn eventually comes around, helped by schemes
like the Innova cross-border collaborative R&D programme. At a time of hatches being
battened down everywhere, continuing to think globally and acting locally –
including across the local border – is as good a business slogan as any. Andy Pollak
1 See ‘Fleeced shoppers break for the border’, Irish Independent, 7 August; ‘Strong
euro ensures Newry escapes downward trend’, Irish News, 24 September. 2 Figures
taken from InterTradeIreland’s statistical website and DETI’s Manufacturing Sales
and Export Survey 2006-07 3 North/South Business Monitor, September 2008
[This is taken from A Note from the
Next Door Neighbours, the monthly e-bulletin of Andy Pollak, Director of the Centre
for Cross Border Studies in Armagh and Dublin]
One just can’t avoid the economy
these days. By now it is old news that at the end of September and in early October
the world was on the edge of a financial precipice not seen since the Wall Street
Crash in 1929. The government of the Republic, whose banks and building societies
were among the most exposed because of excessive and foolish lending to property
developers, was forced to step in to provide an unprecedented blanket guarantee to
protect their deposits and loans. Two weeks later the British government introduced
a more measured package which involved taking a significant equity stake in the
major UK banks. Similar government interventions all over Europe had the temporary
effect of calming the markets. But as Britain’s ‘real’ economy follows Ireland’s
into recession, the only question now being debated is how long will it last, with
pessimists predicting as long as four years before any significant recovery. In the
aftermath of the dreaded ‘hard landing’, does the border matter any more? In Belfast
it might appear that the answer is ‘yes, thank you’. There is a strong temptation
for Northerners to gloat quietly (and not so quietly) about the Celtic Tiger coming
to a bad end, with the much maligned Northern public sector looking less like an
albatross and more like a safety cushion every day. There is a widespread belief
that things won’t be as bad in our highly-subsidised little province as in the
South, with its huge exposure to the now harsh vagaries of the international
economic climate. Indeed the border is providing something of an opportunity for the
North at the moment, especially for its retail sector in the wake of the strong euro
of the past 18 months. Recent news stories have pointed to the number of shoppers
crossing the border and benefiting local retailers. This is particularly the case in
Newry, where Southern shoppers are up 40% in 2008, and in Derry, where the rise is
35% (1). Inevitably the losers here are the Southern border towns. The success of
Newry and Derry (and Belfast and Banbridge) means large losses for retailers in
places like Letterkenny, Dundalk and Monaghan (and Dublin and Drogheda). A lack of
comparable statistics means that we don’t know exactly what the losses are. However
unemployment figures in early 2009 from the Southern border counties could make for
grim reading. It needs to be forcibly pointed out, however, that it is not only the
South that is now much more open to the global economy. The closure of a dominant
employer like Seagate is considerably more damaging to the North than the departure
of one major foreign firm in a more developed and diversified economy like the
Republic’s. In terms of future prospects for both foreign direct investment (FDI)
into and exports out of Ireland, it is unfortunately very easy to see a worldwide
sneeze causing an extremely unpleasant cold all over the island. Another point which
is usually ignored is that the inter-connections between North and South, generally
welcomed, could make recession in one jurisdiction largely unavoidable in the other.
Official figures show that levels of cross-border trade in 2006-07 rose again by 8%
to over €3 billion. Such trade might only account for 2% of total exports from the
Republic (given the influence of FDI), but in sharp contrast 30% of Northern exports
go to the South (2). Other surveys show that 40% of firms across the island do some
trade with the other jurisdiction. For two out of five of these companies, less than
5% of their turnover is tied up in this trade, though for 11% of Northern firms it
accounts for more than half their business(3). This is where the recession may
really start to bite for Northern Ireland’s small and medium firms in particular.
And this is without mentioning the close and varied connections between the
construction and property development sectors across the island – witness the
collapse of the Belfast-based Taggart brothers’ property empire in late October. So
what can be done to make cross-border cooperation work for the two Irish economies
during these hard new times? InterTradeIreland’s initiatives to promote cross-border
trade (such as Acumen or MicroTrade) will become more significant as firms look
closer to home to find new markets. Making the €15 billion all-island public
procurement market more open to SMEs would help. Companies will also want to be able
to offer new products when the upturn eventually comes around, helped by schemes
like the Innova cross-border collaborative R&D programme. At a time of hatches being
battened down everywhere, continuing to think globally and acting locally –
including across the local border – is as good a business slogan as any. Andy Pollak
1 See ‘Fleeced shoppers break for the border’, Irish Independent, 7 August; ‘Strong
euro ensures Newry escapes downward trend’, Irish News, 24 September. 2 Figures
taken from InterTradeIreland’s statistical website and DETI’s Manufacturing Sales
and Export Survey 2006-07 3 North/South Business Monitor, September 2008