Mr. Gareth Hetherington:

I thank the Cathaoirleach for the invitation to provide evidence to the committee this afternoon. I thank members for facilitating my contribution via Microsoft Teams. It is very much appreciated. As the Cathaoirleach outlined, I am director of the Ulster University economic policy centre, which is an independent economic research centre based in Belfast. We conduct a wide range of research across several workstreams, one of which is focused on the Northern Ireland labour market. I will restrict my opening comments to providing the committee with a brief overview of the current position in that respect.

Overall, the local Northern Ireland labour market continues to hold up reasonably well despite the wider economic headwinds. We are now back to pre-Covid levels of employment. However, below that headline, a number of significant changes and new trends have emerged. The first is in respect of payrolled employees, the number of whom continues to grow strongly. It quickly returned to its pre-pandemic peak of 750,000 and is now on its pre-pandemic trendline. The number currently sits at 790,000, which is at or near all-time highs. In addition, the growth in employees in Northern Ireland relative to March 2020, just before the pandemic hit, is among the highest across all UK regions. It is not often that Northern Ireland tops UK regional economic league tables but it does in this case.

In contrast, the self-employed numbers are still significantly below their pre-pandemic levels, falling from approximately 135,000 before the pandemic to just over 100,000 now. That contraction in self-employment is one of the largest contractions across all UK regions. There are reasons for this trend across the UK but it is not clear why it is so exaggerated in Northern Ireland. The first factor in the general trend is, as generally recognised, that the UK furlough scheme was much more effective at protecting employees than were the supports given to the self-employed. In addition, there were changes to the tax rules before the pandemic in the UK that were targeted at and impacted the self-employed, particularly those with no staff, who chose self-employment specifically for tax purposes. This would certainly have been a strong factor in transitioning people from self-employed status into employed status.

There are also significant differences in performance across sectors in the local economy. Job numbers in most parts of the private sector are still below pre-pandemic levels or are only marginally higher than in late 2019. The big outlier is professional services, which have grown very strongly, and the public sector, especially in health and education. In contrast, sectors such as retail and construction remain well below their pre-Covid levels.

The final labour market issue I want to talk about is one of the biggest challenges businesses continue to face, namely, filling vacancies. Vacancies reached record levels as the economy recovered from lockdown. With rising interest rates over the past year, those vacancy numbers have come down but they remain at elevated levels compared with historic averages. Why are businesses struggling to find staff? First, there is the demographic challenge. Between 1980 and 2010, our working age population grew by approximately 270,000, or 90,000 per decade. However, it grew by only 15,000 between 2010 and 2020 and growth is forecast to plateau this decade before going into decline after 2030. This raises big policy issues, particularly in terms of re-engaging our economically inactive group, with a focus on skills programmes to encourage people back into the labour market. It also puts an even greater emphasis on the need to ensure all young people leave the education system with the skills both they and the economy need.

The second big policy area is in respect of immigration. There are some interesting findings in this regard from the latest national insurance number, NINo, registrations for Northern Ireland. From 2010 to 2020, Northern Ireland typically had 6,000 to 8,000 NINo registrations per annum from EU nationals, excluding Ireland. In 2022-23, that fell to just 1,000. NINo registrations from Ireland have historically been consistent at 1,000 per annum. In the past two years, the number has doubled, although it is still very low at 2,000. The big increase in registrations is from Asia, at almost 7,000, in addition to non-EU Europe and the rest of the world. In 2022-23, NINo registrations totalled 14,000, which is the highest level since 2007-08.

There may be a general view that Brexit has caused a reduction in immigration. That is incorrect but it has contributed to a change in immigration patterns, with a collapse in the numbers from the continental EU, who are typically lower skilled, but big increases from the rest of the world, typically made up of more highly skilled workers. That is consistent with bigger growth in sectors such as professional services and across the health service, where higher level skills are required, but it has created greater challenges in sectors that would previously have relied on easy access to European migrants.

I again thank the Cathaoirleach and members. I will conclude my opening comments at this point. I am happy to take questions from members in due course.