Slides 1-10 Michael Gallagher Derry City and Strabane District - - PowerPoint PPT Presentation

Slides 1-10 Michael Gallagher Derry City and Strabane District Council Slides 11-25 Loretta McNicholas Donegal County Council Slides 26-38 Michael Gallagher Derry City and Strabane District Council Slides 39-56

• Prof. Frances Ruane

Trinity College Dublin Slides 57-69

• Dr. Katy Hayward

Queen’s University Belfast Slides 70-95

• Dr. Eoin Magennis

Ulster University

1

Driving Growth in the North West with the Challenges and Opportunities of Brexit

Michael Gallagher Strategy Manager, Derry City & Strabane District Council Tuesday, 6th December, 2016 An Grianán Hotel

2

EU Exit

DCSDC & DCC Scoping Study Challenges and Opportunities Update on Progress

3

NW Region is unique in nature – its complex and interconnected relationship requires specific analysis in the emergent context of Britain’s decision to exit the EU

Rationale for the Study Why?

4

What?

• To take a first look at the key issues

that need consideration within this region

• To devise an appropriate response

that mitigates the impact while maximising the opportunity for growth

5

Purpose

• To assist local authorities to develop an informed

strategy in this new context which is capable of modification and adaptation as time goes on

• To provide ongoing guidance to local government

within the region enabling them to input into the policy making process at local and national level based on an objective robust evidence base in consultation with stakeholders

6

Strengths

• Existing collaborative relationship

between Councils provides us with strong foundation to tackle the challenge and maximise growth

• pportunities

7

Scoping Study Team – Stage 1

Trinity College Dublin – Department of Economics Research Unit DCC Economic and Statistical Support Team DCSDC Ulster University Economic Policy Centre Queen’s University Belfast – Social Science

8

Work to Date

DCSDC and DCC have assembled a strong in-house team including specialist researchers and statisticians to support external expert group comprising economists and social scientists to provide ‘early view’ of Brexit impact

9

10

Driving Growth in the North West with the Challenges and Opportunities of Brexit

Loretta Mc Nicholas Research and Policy Manager, Donegal County Council Tuesday, 6th December, 2016 An Grianán Hotel

11

Key Demogra

• graphics

hics

Land boundary = 109.6 km ( 68 miles)

12

Key Demographics

• Total Population

308,228 + 5.3%

• Total Land Area

6,110 Km2

• Significant Critical Mass

400,000

• Population under 30 years

128,148 or 42% Complementary Regions

• Derry / Strabane LGD

71% Urban | 29% Rural

• Donegal LA

27% Urban | 73% Rural

13

14

Access cess Educa ucational ional Services rvices

15

Implications for Free Movement of People:

• Work
• Education
• Health Care
• Retail

16

Physical and Virtual Boundaries

17

18

Fisheri heries es Zones s

19

Agricul iculture ture Donegal Derry /Strabane Agricultural Area 3307.7 sq km 948 sq km Agricultural Labour 15,503 3,341 No of Farms 9,240 1,735 Hectares Standard Labour Unit Very Small 2,444 ( < 10 HA) 1,271 ( less than 1) Small 2,373 ( 10-20HA) 2,51 ( 1<2) Medium 3,241 (20 – 50 HA) 82 ( 2<3) Large 1,182 (>50 HA) 131 ( 5 or more)

20

21

29% 44% 19% 8%

Overseas Tourism Donegal 2015

Britain Mainland Europe North America Other Areas 39% 29% 26% 6%

Overseas Revenue Donegal 2015

Britain Mainland Europe North America Other Areas

38% 37% 9% 7% 10%

Origin of Overnight Trips to DCSDC 2013 - 2015

Northern Ireland Great Britain Other European North America Other

Key Demographics

• 375,000 RoI residents took an overnight trip in NI in the twelve months to June 2016.
• These accounted for 970,000 nights and £56.9 m NISRA, Tourism Statistics.

24

25

Strategic Model for Regional Development & Growth

• New Working Arrangements
• North West Strategic Growth Partnership
• North West Region Development Group
• North West Data & GIS Strategy

26

• Agriculture/Fishing/Aquaculture
• Construction
• Manufacturing
• Retail
• Traded Services
• Tourism/Culture/Accommodation
• Banking
• Logistics

Stakeholder Consultation North and South

27

• Retail
• Exchange rate volatility has made

business planning extremely difficult investment decisions are on hold – zero sum game within North West

• Any return to border controls/tariffs

detrimental to sector

28

• Tourism/Culture/Accommodation
• While there have been increased rates of

growth both North and South – high dependence on home markets results in extreme sensitivity

• Any perception that Donegal is difficult to

access through NI needs to be eliminated

• Restrictions on labour mobility would

impact in NI but visa requirements benefit increase in GB visitors to NI

29

• Agriculture/Fishing/Aquaculture NI
• Loss of access to markets within EU
• Possible high tariffs on some products
• Loss of EU support payments post 2020
• Access to seasonal labour
• Competition from extra-EU countries in UK

market

• Product surplus – dairy
• Fishing industry may benefit significantly

30

• Agriculture/Fishing/Aquaculture RoI
• Loss of access to markets within UK
• Possible high tariffs on some products
• Competition from extra-EU countries in UK

market

• Product surplus – beef
• Lack of input for milk processing
• Trans-national barriers – Donegal/NI/Dublin
• Fishing industry may face significant

challenges

31

• Education/Training
• Ability to access R+D funding/partners
• Replacement of existing EU funding post 2020
• Existing staff mobility – cross border workers
• Student mobility – recognition of qualifications

– student loans NI

• Access to Erasmus by NI students
• Replacement of EU ESF with UK funding

stream

32

• Health
• Existing initiatives in health constrained – little

further collaboration? Cath Lab (PPCI), CAWT

• C-TRIC – funding – recruitment of partners
• Existing staff mobility – cross border workers
• Access to locum staff/recruitment of nurses NI
• Access to health services by cross-border

workers

33

• Manufacturing
• Lack of detail on Corporation Tax – NI
• Divergence in standards over time
• Staff mobility non- EU staff MNC

Dublin/Donegal traversing NI – visa requirement

• Tariffs/Bureaucracy/eForms
• Cross-border trade zone
• Special status NI/RoI
• Common Trade Area
• Relaxation of procurement

34

• Traded Services/Business
• Legal requirement to have presence on both

sides of frontier EU/Non – EU

• Market diversification
• Connectivity – broadband
• Accelerated capital allowances
• Cross-border enterprise zone
• Joint marketing strategy – retail, tourism,

business

• Offer space to London based

Financial Services

35

• Construction NI
• EU Funding - risk
• Access to single market critical
• Joint ventures – EU less likely
• Skills shortage – labour
• Reduction in EU regulation (smaller firms

especially)

• Relaxation of procurement

36

Scoping Study Outcomes

To provide DCSDC/DCC and other key stakeholders with robust evidence base comprising

• Baseline socio-economic report on region
• Outline of macro-economic environment – NW’s experience

to date

• Examine the changing relationships and potential cross

border models

• Economic quantification of forecast alternative scenarios
• Sectoral analysis and exploration of stakeholder consultation

feedback

37

38

BREXIT in the North West: Challenges and Opportunities

Professor Frances Ruane

Trinity College, Dublin Economic and Social Research Institute, Dublin

39

BREXIT IN CONTEXT

GLOBALISATION

40

BREXIT IN CONTEXT

ROW EUROPEANISATION GLOBALISATION

41

BREXIT IN CONTEXT

ROW REGIONALISATION UK and ROI EUROPEANISATION GLOBALISATION

42

BREXIT IN CONTEXT

ROW REGIONALISATION UK and ROI

NW

EUROPEANISATION GLOBALISATION

43

ECONOMIC POLICY IN CONTEXT

• Macro events dominate public discourse
• Macro policy is typically ‘whole country’ BUT
• Macro events have regional consequences

– Regions differ by income and social structure – Regions differ by economic activity – Regions differ by potential opportunity sets

• Impact of Brexit will not be uniform across UK
• r Irish regions – what of the NW?

44

SPECIFIC CHALLENGES/OPPORTUNITIES

The likely range of possible Brexit options

– UK with WTO relations with EU (hard) – UK with EEA-type relations with EU (soft)

Look at four issues

• 1. Uncertainty – only challenges!
• 2. Impact on trade – on and off the island
• 3. Impact on investment – local and foreign
• 4. Impact on Human Mobility

45

1.1 Uncertainty

• Uncertainty – always present but scale exceptional
• Issue of measuring impact of Brexit on UK
• Current (SR) Uncertainty impacts on

– exchange rates – volatility burden – overall impact depends on composition of exports/imports – border trade acutely – consumers can arbitrage in response to changes => business challenges – growth projections – feed into business expectations

• £ reduction: NI exporters to EU more competitive;

ROI exporters to UK less competitive

• Stronger immediate impact for business in ROI?

46

1.2 Uncertainty and Expectations

• National: In short run, reduced expectations

will dampen demand/growth in UK & Ireland

• Regional: Impact of fall in consumer

sentiment on local retail sales? Growth?

• Regional: Impact of fall in business sentiment
• n local investment decisions? Innovation?
• Challenge: NW is a small area – interests may

coincide with national but will struggle for attention if they don’t.

47

1.3 Uncertainty and the Longer Run

• Wide range of possible outturns from negotiations –

estimates important for scoping, so

– prepare for the worst, – work out what you want (vision?), – hope for the best!

• Economic Decision Making:

– Need for knowledge about geography of global value chains (GVCs) in manufacturing, and about service activities

• Political Decision Making:

– future and reform of EU; position of the island economy

• Uncertainty impacts can be much greater for regions

48

1.4 Managing Uncertainty

• For any region, policies and strategies which enhance

productivity, innovation and internationalisation, will help mitigate downsides and gain benefit from upsides

• In uncertain times, the public sector should work to

minimise uncertainty where it can

• The alignment of public and private sectors can have

a more sustained positive impact on building or maintaining confidence, which is essential for growth

• This alignment can be particularly fruitful at the city-

regional level

49

2.1 Impact on Trade

• Gravity model of trade – Most trade starts

with near neighbours, e.g., ROI-UK.

– NW is remote within Europe – NW is relatively remote within these islands – NW needs transport links: road, sea, air

• A hard Brexit would increase trade costs,

reducing levels of trade relative to status quo

• Barriers could also create opportunities for

those in border areas to engage in ‘arbitrage activities’ if there are profits to be earned.

50

2.2 Brexit and Trade - Complications

• Global Value Chains: significant part of cross-

border trade inside EU

• Logistics: Routes for trade between jurisdictions;

e.g., ROI - Mainland EU imports/exports may travel via UK; NI exports/imports may go via the ROI – change in transport patterns?

• NI - EU - rUK trade will depend critically on precise

UK-EU deal.

• ROI trade patterns will be affected also –as well as

location of mobile business

51

2.3 Impact on NW Trade

• Impact on NW depends on relative shares of NI trade

with EU, and ROI trade with UK.

• Key information requirements:

– Response of businesses to current uncertainty, eg, investment / international marketing decisions. – how trade moves between countries (GVCs/logistics) and – patterns of enterprise engagement in trade (% of exports by destination)

• Different issues for trade in goods and services

52

• 3. Impact on investment
• Local Private Investment in NW – will depend

market focus (domestic sales or exports) and

• verall growth
• Local Public Investment in NW – will depend on

available funds and local planning – vital that it is strategically focused

• Foreign Investment – challenging period – policy

certainty should be maximised – competition may be between city regions > countries

• Hard Brexit – dual-market focus for investors ?

53

• 4. Impact on Human Mobility
• Concept of the Island Economy (Quigley)
• Realisation of potential benefits requires

– Mobility within the Island of Ireland – All island networks – Coordinated spatial planning

• Will Brexit reduce ‘normal mobility’?
• Impact on mobility onto the Island of Ireland
• Impact on Image of Ireland

54

Final Thoughts and Questions

• Value of having a clear vision for the NW
• How much impact will BREXIT have on vision?
• Value of adopting a no-regrets approach
• How much account will central governments

take of regional differences? Influence of

– Brexit Vote – US Election

• Mixed history of operating regional policy –

need for a comprehensive economic/social/spatial framework

55

56

Brexit & the Irish Border

Managing the UK/Ireland Impact

Driving Growth in the NW with the Challenges and Opportunities

• f Brexit

6th December 2016

Katy Hayward

Queen’s University Belfast

57

Referendum

• Effects of globalisation
• Immigration priority
• NI results:
• Strong ethno-national basis

to voting

• Leave voters more likely to

have fewer qualifications, low skill jobs, anti- immigration sentiments, socially conservative views, alienated from politics

EU Context

• "Tolerance cannot

come at the price of

• ur security.
• We need to know who

is crossing our borders.

• ... We will defend our

borders with strict controls on everyone crossing them."

• President Juncker, State of

the Union address, 2016

59

The Irish border: Key points

• Political and symbolic significance
• Future of the border is not a unilateral decision of the UK
• EU aware of this
• The Irish border has undergone several iterations
• Possible to have hard borders and soft borders at the same time
• Multilevel cooperation and models
• (Beware of potentially centralising trends in UK)

60

Irish border as EU external border

• EU would require entry/exit

checks on third country nationals

• + freedom of movement for EU

citizens in the Republic

• Ergo: border checks would have

to happen… How and Where?

61

How do checks happen?

Before arrival

• Pre-Entry
• Borders Security Package
• Databases (Schengen Information

System, Passenger name Record)

• Juxtaposed controls

62

How do checks happen?

On arrival

• Point of Entry
• Ports/airports
• Which ones?
• By whom?
• Land border as a point of entry, but from one to

another

• British/Irish Context
• If no land border checkpoints, either need same

regime (post-Brexit, unlikely) or means of checking within jurisdiction

63

How do checks happen?

After arrival

• Point of contact
• Restrictions on access to services,

residency, employment etc.

• Much broader significance in terms of

roles of individual citizens and employers as ‘border guards’

• Ethical as well as practical problems
• Home Secretary comments on ID cards
• (Role of Border Force?)

64

Bespoke arrangements possible For free movement of persons

• Common Travel Area
• Issue for treatment of British citizens in ROI
• Visa-free travel
• What happens after 90 days? Still checks needed
• Travel without ID checks
• E.g. Nordic passport union
• Citizenship beyond boundaries of the state
• E.g. Moldovans with EU citizenship
• Local border traffic zone
• E.g. Polish Russian Border Travel Zone

65

Local border traffic zone

• Advantages:
• Economic growth (ref. Kalingrad)
• Applies to third country nationals
• Enables employment rights
• The apparent disadvantages include:
• the need for registration by beneficiaries,
• the need for renewal of the permit
• the fact it is not intended to apply to those travelling from
• utside the border region (what happens to wider NI/ROI?)
• it requires implementation (i.e. formal and evident distinction

between those who have the permit and those who do not).

66

Border Security Technology

• Two types:
• Closed-set, e.g.
• Open-set, e.g. India/Pakistan
• Limitations
• This requires is full disclosure of information about

travellers before they depart

• Requires ‘canalisation’ of passengers if effective
• What happens in case of breach detection?
• UK currently collects less biometric data on citizens

than Schengen

• Will not address problems of cross border crime

67

Conclusions: What happens next?

• The EU external border regime is characterised by exceptions
• Much depends on position taken by UK
• Prior to negotiations
• UK needs to put its own house in order first
• Im5portance of close contact between Britain and Ireland
• NI politicians tending to follow British or Irish leads
• Opportunity as well as problems (ref. 1998 Agreement)
• Article 50
• Role of Parliament?
• Negotiations
• EU membership has to matter for the EU

68

ulster.ac.uk

What impact could Brexit have on the North West and what might be the next steps? Professor Neil Gibson & Dr Eoin Magennis Director & Senior Economist Ulster University Economic Policy Centre

December 2016

Agenda

• Measurement or speculation?
• Areas of potential impact
• Areas for consideration
• Possible outcomes
• Summary – all scenarios at this point
• Next steps for the North West

Measurement or speculation?

Long and short term estimates of the impact of Brexit are negative for the UK…

• 1.5
• 1
• 0.5

0.5 1 1.5 2 2.5 3

1 2 3 4 5 6 7 8 9 10 11 12

Forecasts for 2017 GDP growth in the UK, before and after the Referendum

Series1 Series2

… and while forecasters believe Northern Ireland will avoid recession the risks are on the downside…

Source: UUEPC Winter 2016 Outlook Ulster Bank (August 2016) Oxford Economics (November 2016) Dankse Bank/Oxford Economics Quarterly Sectoral Forecasts Q3 2016 PwC NI Economic Outlook 2016 (Nov 2016)

…while in the Republic strong growth continues but tapering off

Source: Dept of Finance Monthly Bulletin (Nov 2016) ESRI Economic Outlook (dec 2016) Oxford Economics (Nov2016) Davy Stockbrokers Economic Monthly (Oct 2016) OECD Economic Forecast (Nov 2016)

The ‘leave’ map of the UK reflects deep concerns…

Source: BBC

…with a lack of belief in politicians…

Source: Ipsos Mori

…and unconvincing economic arguments

Source: Oxford Economics

…and globally the real income debate is driving major change

Since the referendum the early data shows business continues…

Source: FTSE 100: London Stock Exchange (14/11/2016) Exchange rate: Bank of England (14/11/2016) Retail sales: ONS Consumer confidence: GfK Economic Surprise Index: Ulster Bank on behalf of Bloomberg Claimant Unemployment: ONS New car sales: SMMT PMI: Ulster Bank (September vs. June 2016)

Indicator Change since Brexit vote FTSE 100 (13%) Sterling into USD (18%) Sterling into Euro DOWN (13%) Retail sales (Jun vs. Oct) Consumer confidence (Jun vs. Sept) Economic Surprise Index (Jun vs. Sept) Claimant unemployment (Jun vs. Oct) New car sales (YoY to Aug 2016) PMI: Output/Business activity (Jun vs. Oct) PMI: New business (Jun vs. Oct) PMI: Backlogs (Jun vs. Oct) PMI: Employment (Jun vs. Oct) PMI: Input costs (Jun vs. Oct) PMI: Price charged (Jun vs. Oct) PMI: New export business (Jun vs. Oct)

And while firms on the island are worried, they are not making plans…

Weaker Make no difference Stronger All-island 57% 30% 13% Manufacturing 53% 40% 7% Business Services 64% 25% 11% Construction 53% 28% 19% Retail 64% 22% 14% Hospitality 45% 41% 14% Micro 56% 31% 13% Small 63% 27% 10% Medium-sized 66% 26% 8%

What difference will leaving the EU have on the UK economy?

Source: InterTradeIreland Business Monitor Q3 2016 Yes No All-island 3% 97% Manufacturing 3% 97% Business Services 3% 97% Construction 3% 97% Retail 3% 97% Hospitality 2% 98% Micro 3% 97% Small 4% 96% Medium-sized 9% 91%

Have you made plans to deal with a Brexit?

And notably more pronounced worries in the Republic …

• 62
• 45
• 57

10 20 13

• 100
• 80
• 60
• 40
• 20

20 40

Northern Ireland

Base: 377/226

Ireland

Base: 377/528

Overall

Base: 754/754

Source: InterTradeIreland Business Monitor Q3 2016

…perhaps because the exchange rate the most striking short term impact

Source: BoE (15/11/2016)

Areas of potential impact

Areas in which Brexit might impact

BREXIT

Trade Agri and Fisheries Sectors Investment (inward and existing) Funding (various EU streams) Tourism Consumer spending and shopping Migration (cross- border and inward) Political economy

• f the

Border

Some initial thoughts on the North West…

• Asymmetry of concerns in Donegal and Derry City & Strabane
• Plummeting Sterling down almost 20% against the Euro and

at its lowest level for 31 years against the dollar at the end of October – by end of November rallied but OBR expectation of long term devaluation

• Question of access to the UK/GB market and what that

means to firms

• Different perspectives by sector, size and ownership of

businesses

• North West faces an internal and an external Brexit issue –

cross-border and off-island flows

Possible outcomes

How do the baseline forecasts look?

Source: UUEPC Note: Forecasts are provisional

Source: UUEPC/ D&SDC inputs 50,000 55,000 60,000 65,000 70,000 75,000 80,000

Donegal, baseline employment, 2002 - 2030

50,000 55,000 60,000 65,000 70,000 75,000 80,000

Derry & Strabane DC, baseline employment, 2002 - 2030

Series1 Series2

UUEPC forecasts are at the modest end – could it be worse?

54,000 56,000 58,000 60,000 62,000 64,000 66,000

Derry & Strabane, baseline vs lower, 2002 - 2030

Series1 Series2

Source: UUEPC Note: Forecasts are provisional

Source: UUEPC 50,000 55,000 60,000 65,000 70,000 75,000 80,000

Donegal, baseline vs lower, 2002 - 2030

Series1 Series2

All scenario at this point but what

• f next steps for the North West

Admit that you can’t know what comes next…and that events may dictate

• Admitting uncertainty
• “The truth about the impact of Brexit is that it is uncertain, beyond the

ability of any human being to forecast and almost entirely dependent

• n how the process will be managed. ‘Don’t know’ is the technically

correct answer.” (Wolfgang Munchau, 28/11/2016)

• Is this an occasion when avoiding ‘set in stone’ action plans might be

the best option?

• Dictated by events…?
• The next few years will be the classic machine of moving parts –

some of these shaped by election results, who is in the EU presidency at any time, and what happens in the global economy.

• The call to be ‘close to the negotiations’ needs to be taken seriously

but the question for Councils and other stakeholders in the North West will be how…

Plan…Monitor…Seek Opportunities

• Plan
• Two Councils and other stakeholders should avoid the temptation to

(re)act in haste. Without good information, poor decisions could result.

• The focus should be on jointly understanding the specific detailed

issues that may affect locally based businesses (especially exporters

• r those dependent on foreign skilled labour). And to understand how

these issues will differ across sectors (eg: agri-food, fisheries, etc).

• To understand the Councils will need to continue consulting – in

particular with central governments but not ignoring the local base

• Monitor and communicate
• Close attention to the UK’s exit negotiations (and the EU response)

will be critical in shaping Council’s future strategies.

• Need to communicate coordinated ‘Brexit updates’ to

stakeholders

Plan…Monitor…Seek Opportunities

• Seek Opportunity
• Can the border become a bridge to EU funding opportunities for the

two Council areas – is there an opportunity for a continuing EU Support Programme backed by the Irish and NI governments?

• Again can the border be a bridge to FDI opportunities based

within the North West with market access to the EU and drawing on a commuting labour pool?

Contact details

Dr Eoin Magennis Senior Economist, Ulster University Economic Policy Centre Email: e.magennis@ulster.ac.uk Telephone: 07825 140 326 Professor Neil Gibson Director: Ulster University Economic Policy Centre Email: n.gibson@ulster.ac.uk Telephone: 02890 366 561

95