Northern Ireland experienced a big spike in economic inactivity due to long-term sickness or disability as a result of the pandemic. But in the aftermath of Covid-19, the headline rate has been falling and converging with the historically lower rates in the rest of the UK.
Northern Ireland has historically had the highest economic inactivity of the four constituent nations of the UK. This has been driven by particularly high rates of economic inactivity due to long-term sickness or disability.
In a previous Economics Observatory article, we detailed how inactivity in Northern Ireland had increased year-on-year in 2021 despite previously being on a downward trend. That reversal is likely to have been a result of the Covid-19 pandemic.
Here, we update our 2021 reporting with the most recent data available and provide insights on the effects of the pandemic, plus the cost of living crisis and longer-term trends post-Brexit.
What do we know now?
During the pandemic, there was a year-on-year spike in economic inactivity in Northern Ireland, which was a cause for concern. Recent data indicate that the 2021 spike was a short, sharp shock. The headline rate of economic inactivity has since fallen rapidly back to pre-pandemic levels (see Figure 1).
Northern Ireland had the highest rate of inactivity in the UK in 2019 at 26%. The level peaked in 2021 at 28.7%, before falling to 27.1% in 2023. This is in contrast to the rest of the UK, which has seen slow and steady increases in inactivity over the last four years.
Wales has seen particularly big increases in economic inactivity. In the first quarter of 2024, headline inactivity in Wales became the highest of all four UK nations at 28.1%. This compared with 26.5% in Northern Ireland and was considerably higher than in England and Scotland.
There was much ado in the Northern Irish media when these data were released, but behind the scenes, there have been issues with the Labour Force Survey (LFS) data for Wales mainly due to falling response rates (Office for National Statistics, ONS, 2023). As a result, the increases reported for Wales should be treated with caution.
Figure 1: Economic inactivity over time, UK nations and the UK as a whole, 2005-23
Source: UK LFS data
Note: Annual rate generated using four quarters for each year, 2005-23; 16-64 year-olds.
Examination of LFS data over time shows that the 2021 shock in Northern Ireland was particularly among the youngest age group (16-34 years) and among men.
The jump in inactivity is clear for the youngest group in Northern Ireland, but there was no similar trend in the UK as a whole (see Figure 2).
Figure 2: Economic inactivity by age group, Northern Ireland and the UK as a whole, 2005-23
Source: UK LFS data
Similarly, as Figure 3 shows, in 2021, there was a rise in inactivity among men, but this had fallen again by 2023. This trend is not seen for Northern Irish women. In the UK as a whole, economic inactivity among women is steady over the same period, while for men, it has ticked up steadily since 2020.
Figure 3: Economic inactivity by gender, Northern Ireland and the UK as a whole, 2005-23
Source: UK LFS data
People may be economically inactive for a variety of reasons. It is therefore important to examine the various components that make up the headline aggregate rates, as these can inform different policy solutions that may be needed.
Some types of inactivity are less concerning than others. For example, students are typically seen as a positive form of inactivity as they are investing in their human capital with a view to future participation in the labour market.
Figure 4 highlights the compositional differences in inactivity between Northern Ireland and the UK as a whole in recent years.
Figure 4: Make-up of economic inactivity in Northern Ireland and the UK as a whole
Source: UK LFS data
Northern Ireland has much higher rates of sickness/disability than the rest of the UK. The proportion of the working age population who are inactive due to sickness/disability has increased somewhat since 2020 both in Northern Ireland and across the UK.
This rise may be due to the health effects of Covid-19. Older working age people leaving the labour market early – due to disruption caused by the pandemic and being relatively near to retirement age anyway – may also be contributing.
The proportion of students also grew in 2021 and 2022. Again, this may be for a number of reasons, such as a reluctance to enter employment amid significant turmoil and uncertainty, the increased provision of remote and entry-level courses available at some universities during the pandemic, and some young people continuing their education (for example to Masters level) to regain some of their lost ‘university experience’.
What explains the improvements in Northern Ireland?
While Northern Ireland has seen increased rates of inactivity due to long-term sickness/disability, the overall, or headline, rate has been falling and converging with the historically lower rates in the rest of the UK.
Northern Ireland has also been performing comparatively well on other economic indicators. The number of full-time jobs is growing faster than in the other UK nations.
Indeed, fewer full-time jobs were affected by the pandemic in Northern Ireland compared with England, Scotland and Wales. This may be due to the increased prevalence of public sector employment in Northern Ireland relative to the rest of the UK or to other structural factors such as the sectoral make-up of the economy. Nominal wages have also risen more in Northern Ireland than the UK average.
Comparing the spike-and-recovery trend in inactivity in Northern Ireland with the slower but more persistent upward trend in the UK as a whole will be important for policy-makers. But it is difficult to distinguish exactly what has happened since Covid-19, the cost of living crisis and Brexit (and the Windsor Framework) have all had a role to play.
For example, it has been tentatively suggested that Brexit may have disproportionately benefitted the Northern Irish economy via the Windsor Framework and shifting trade patterns.
Recent work on the impact of Brexit across the UK finds that Northern Ireland was affected the least as it remains in the European Union’s common market and it has experienced trade shifting away from with the rest of the UK and towards the Republic of Ireland (Alabrese et al, 2024). This has particularly been the case for areas of Northern Ireland that are closer to the porous border with the Republic.
The higher share of workers employed in the public sector, the industrial make-up of the Northern Irish economy or the fact that Northern Ireland has historically been comparatively weaker may also be contributing to this trend. More specifically, given that economic inactivity was already comparatively high, there may not have been as much room for increases.
While once an economic powerhouse, Northern Ireland has persistently lagged behind the UK economy for many years. Many considered this to be the definitive state of the Northern Irish economy. This makes its comparatively faster economic recovery unprecedented.
While it is unwise to place too much stock in specific economic metrics, this could signal an economic turning point and it remains to be seen whether Northern Ireland’s economy will continue to outperform the UK average, or whether this is a short-term trend. It must also be noted that this is more to do with poor performance of the UK economy rather than a huge improvement in Northern Ireland.
Where can I find out more?
- Ulster University’s Labour Market Intelligence Portal provides up-to-date data on the health of Northern Ireland’s economy.
- Anne Devlin and Tom Hastings (Queen’s University Belfast) conducted research on behalf of the Department for Economy on economic inactivity in Northern Ireland in late 2023, undertaking quantitative and qualitative research.
