When the Good Friday Agreement (GFA) – Northern Ireland’s peace treaty – was signed on 10 April 1998, there was a general view that a border poll on Irish reunification would be a very long time away. The GFA signalled the end of three decades of violence known as the Troubles. A key issue of the brutal thirty-year conflict was the status of Northern Ireland with the nationalist/republican community, who were mainly Catholic, wanting a united Ireland, and the loyalist/unionist community, who were generally Protestant, wanting Northern Ireland to remain part of the UK.
However, changing demographics, the fallout of Brexit and the possibility of Scottish independence have raised interest in a united Ireland and made the prospect of a border poll more likely than previously thought.
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Investment Monitor examines the reasons behind this increased appetite for a border poll and the potential economic benefits and difficulties associated with a united Ireland.
Catholics now outnumber Protestants in Northern Ireland
Results from the 2021 census conducted by the Northern Ireland Statistics and Research Agency (NISRA) showed that there are more people from a Catholic background in Northern Ireland than Protestant for the first time in the country’s 101-year history. While neither group holds a majority, it marks a demographic milestone for a state that was founded in 1921 to have a permanent Protestant majority.
The NISRA figures show that 45.7% of the population are Catholic or are from a Catholic background compared with 43.5% from Protestant or other Christian backgrounds. In contrast, the 2011 census found that 48.4% of Northern Ireland’s inhabitants were from a Protestant background and 45.1% Catholic.
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By GlobalDataUnder the GFA, those born in Northern Ireland can identify as either Irish, British or both and carry either or both Irish and UK passports. In terms of national identity, 31.9% of the Northern Irish population said they had a British-only identity in the 2021 census, down from 38% in 2011. In comparison, the number of people that identify as Irish-only rose from 24% in 2011 to 29.1% in 2021. Approximately 20% of the population consider themselves Northern Irish-only – the same share recorded in the 2011 study.
The percentage of people holding only a British passport fell from 54.4% to 46.6% between the 2011 and 2021 censuses, while the numbers holding only an Irish passport rose from 18% to 26.5%. The number of people with both passports also increased from 1.6% in 2011 to 5.5% in 2021.
However, the growing number of Irish passport holders may have less to do with nationalism and more to do with practicality. Post-Brexit, British passport holders face more red tape when travelling, while those with Irish passports hold on to their rights to work, travel and retire anywhere in the European Union (EU).
It should also be noted that a rise in the number of Northern Irish Catholics does not automatically correlate to increased support for nationalism. Instead, this can only be viewed as a general indicator of political preference, as there are both Protestant nationalists and Catholic unionists.
In addition, this change in demographics will have virtually zero impact on foreign direct investment (FDI). Instead, investors are more concerned with having access to a pool of diverse, foreign-born talent, which Northern Ireland lacks. According to the 2021 census, 6.5% of the Northern Irish population is born outside of the UK and Ireland – below the UK average, which could hamper its investment attractiveness.
What would trigger a border poll?
Under the GFA, the Secretary of State for Northern Ireland may call a border poll if it seems likely that the voting majority want Northern Ireland to leave the UK and form part of a united Ireland. However, the agreement does not specify how the Secretary of State should assess public opinion. Some have suggested a series of opinion polls to gauge the public’s feeling, while others insist that a nationalist majority in the Northern Ireland Assembly is enough to warrant a vote. The GFA also doesn’t outline how a united Ireland should be negotiated.
Sinn Fein – Northern Ireland’s largest republican political party – have called for urgent plans for a border poll but others have argued that it isn’t the right time. Tánaiste (Irish Deputy Prime Minister) Leo Varadkar reasoned that a border poll would be too divisive and defeated at this time. There is also the risk of rushing into an Irish unity vote without first settling key questions, as some say happened before the Brexit referendum in June 2016.
Cross-community party success in 2022 election
In the May 2022 election, Sinn Fein won 27 seats and became the largest party in the Northern Ireland Assembly, making it the first nationalist party to do so in the country’s history. The Democratic Unionist Party (DUP), Northern Ireland’s largest unionist party, won 25 seats, losing three in comparison to the 2017 election.
The May 2022 election also saw a surge in support for the cross-community Alliance Party, which won 17 seats, up from eight in 2017. The Alliance Party originally represented moderate and non-sectarian unionism but has since designated itself as ‘Other,’ neither unionist nor nationalist. In the event of a border poll, the party states that it will decide on its position when one is called.
The Northern Irish executive collapsed in February 2022 when the DUP pulled its then first minister Paul Givan over the Northern Ireland protocol, which the party views as divisive to Northern Ireland's union with the UK. Due to the power sharing nature of the Northern Irish government, then deputy first minister, Michelle O'Neill of Sinn Fein, lost her position too. Unless power sharing is quickly restored, the second election of the year is expected before Christmas 2022.
How much would a united Ireland cost?
When it comes to the economics behind a united Ireland, it’s difficult to find an accurate cost with numbers ranging from €4bn ($3.9bn) to €30bn ($29.2bn) per year.
A report by Trinity College Dublin in 2019 claims that reunification in the next five to ten years would cost the Republic of Ireland as much as €30bn per year. Based on the €10bn ($9.7bn) subsidy that Northern Ireland receives from the UK, the report states that more would have to be done in order to raise taxes to fund this amount, particularly if some of this figure comes from spending cuts.
Conversely, a report by Ireland’s Future estimates the cost to be much lower at around €4bn annually. The group claim that Northern Ireland’s contribution to the UK's defence spending, debt servicing costs and international services would not continue in a united Ireland – and that the true cost of Northern Ireland’s €10bn ($9.7bn) subvention payment is 25% less. They also trust that the UK government would continue to make state pension payments in Northern Ireland for a period, reducing annual costs by a further €3.6bn ($3.5bn).
Moreover, the group believes that Northern Ireland would receive financial aid from the EU and the US in the event of a united Ireland, as well as some support from the outgoing UK government.
In addition, nationalists argue that these figures overlook the economic growth potential of the north in a united Ireland.
Would a united Ireland be more attractive for investors?
Ireland is known for punching well above its weight when it comes to FDI. According to the Global FDI Annual Report 2022, Ireland was the second most popular FDI destination globally on a per capita basis, with 62.1 FDI projects per one million people. In addition to its business-friendly environment and lack of formal FDI regulations, Ireland offers an internationally competitive corporate tax rate of 12.5%.
In the event of a united Ireland, economists argue that the adoption of the Irish tax system, reduced red tape and a greater openness to FDI would boost the north’s business attractiveness and encourage greater investment.
While the Northern Ireland protocol allows the country to remain part of the single market for trading goods, services are not covered. Post-Brexit, Northern Irish companies no longer benefit from the free movement of travel that allowed them to hire workers from other EU countries, reducing the size of the labour pool, increasing hiring costs and further widening the country’s productivity gap. Campaigners argue that Irish unity would see the north re-enter the EU and bolster access to skilled labour.
However, there is concern that Belfast may lose out to Dublin and other Irish cities in a united Ireland. One of Belfast’s main selling points for investors is its lower operating costs compared to the rest of the UK. With a united Ireland expected to drive up business costs including salaries, this could hinder Northern Ireland’s investment attractiveness. A departure from the UK will also restrict access to the Great British (England, Scotland and Wales) market.
Great Britain is Northern Ireland’s largest trading partner
In terms of trade, Great Britain is Northern Ireland’s largest partner by far. According to figures from the Northern Ireland Department for the Economy, sales of goods and services to Great Britain made up 16.3% of total sales in 2020. In comparison, trade with Ireland made up 6.1% of total sales while trade with the rest of EU accounted by 3.3%. Sales of goods and services to the rest of world made up 6% of total sales.
When it came to purchases, Great Britain accounted for an even larger share. Purchases of goods and services from Great Britain made up 30.4% of total purchases, compared to 6.4% for Ireland and 5.3% for the rest of the EU. Purchases of goods and services from the rest of the world represented 4.7%.
Given Northern Ireland’s reliance on trade with Great Britain – it trades more with Great Britain than it does with Ireland and the EU combined – the prospect of a united Ireland and increased red tape between the two locations is likely to heavily impede trade.
The Republic of Ireland is much less reliant on trade with Great Britain, with exports and imports from other EU countries, the US, and the rest of the world exceeding Great British levels.
In terms of the relationship between Ireland and Great Britain, both imports and exports have remained relatively consistent in the fallout of Brexit. There was some volatility from month-to-month, particularly at the beginning of 2021 when Great Britain’s transition period from the EU single market ended and checks on goods began to be enforced, but the overall trend line shows a slight increase in trade between 2015 and 2022.
In contrast, trade between the Republic of Ireland and Northern Ireland has surged following Great Britain’s exit from the EU single market on 31 December 2020. This growth suggests that traders are diverting more goods through Northern Ireland’s ports to benefit from fewer post-Brexit checks.
Could a united Ireland boost productivity?
Northern Ireland has long struggled with low productivity – the total value of output produced for a given amount of work. Since the global recession of 2008, the UK’s productivity growth has failed to recover, increasing by just 5% between 2008 and 2021. Of the UK regions, Northern Ireland consistently ranks as one of the worst with productivity 17% below the UK average.
In contrast, Ireland has been ranked as one of the world’s most productive countries. According to research by the Organisation for Economic Co-operation and Development, Irish workers add an average of $109.6 (€92.4) to the value of the economy every hour they work. This is considerably more than the UK’s average of £38.9 ($43.4) in 2020.
However, there are concerns that this growth in Ireland is driven by a small number of highly productive overseas companies, with domestic companies far less productive and the economy extremely reliant on foreign multinationals.
In the event of a united Ireland, it is unclear if the north would be able to unleash its productivity growth potential or find itself in a similar situation to the UK.
What would a united Ireland mean for Great British businesses?
The prospect of a united Ireland creates a range of complex issues for Great British-owned businesses operating in Northern Ireland. In the event of Irish reunification, British businesses may be happy to maintain a base in Ireland – which is one of the UK’s key trading partners – or they may wish to move to another low-cost UK location such as the north of England.
This decision is likely to be significantly impacted by the change in employee salaries. Research from NISRA shows that the average annual wage in Northern Ireland in 2021 was €32,125 ($31,516) compared to €44,513 ($43,669) in the Republic of Ireland. With average annual wages 38.6% higher in the south than the north, companies would have to adjust their employee wages to match the increased cost of living – and those that can’t afford to do so may relocate elsewhere.
Northern Ireland also has a large public service sector, which accounts for 27% of the country’s employee jobs, compared to 18% in the UK overall. This figure would almost certainly reduce if Ireland was united and cut off from the UK.
The potential impact of both may result in increased unemployment.
Major socio-economic factors have yet to be addressed
The possibility of Irish unity has also raised several significant socio-economic questions that have yet to be addressed. A key issue is what would happen to the National Health Service (NHS) in Northern Ireland, which employs approximately 73,000 staff as of June 2022. The Northern Irish health service was already in crisis pre-Covid-19, with the longest wait times in the UK. This problem has been exacerbated in the wake of the pandemic, with significant concern over severe staff shortages.
However, despite its faults, there are reservations over how NHS access would differ to Ireland’s Health Service Executive (HSE) – a publicly funded healthcare system that requires fees for some services, including up to €65 ($64) for a GP appointment. It also raises the question of how the Republic of Ireland would deal with an additional 1.9 million people to care for, tens of thousands of healthcare staff and an ever-growing waiting list of patients.
Economic inactivity – the proportion of people aged 16 to 64 who are not working and not seeking or available to work – is also extremely high in Northern Ireland. Figures from the Office of National Statistics show that the economic inactivity rate for Q2 2022 was 28.3%, exceeding the UK average of 21.4%. With the prospect of a border poll becoming more likely, voters may need reassurance that the Republic of Ireland would be able to accommodate the north’s sizeable economically inactive population.
Other factors including the change in social contributions between the north and south and the impact of Irish unification on the south’s ongoing housing crisis would also need to be examined in detail before voters go to the polls.
In the wake of Brexit, disputes over the Northern Irish Protocol and declining support for unionist parties, it seems like a border poll on Irish unity is closer now than ever. For hardliners on both sides of the community, economics will always come second to political aspirations, but for those unsure – there are still vast economic and social complexities around a united Ireland that leaders in Belfast, London and Dublin will need to address before a vote is announced.
