Major economic report shows regional inequalities persist with Derry still lagging

The ‘Delivering Balanced Regional Economic Growth’ study warns that without a decisive shift toward long-term, locally led investment strategies, economic disparity will continue to undermine the region’s prosperity and social cohesion.

The report, which examines historical and current policy responses to regional imbalance, offers a sweeping analysis of the economic performance of all 11 council areas in the North. It finds that while headline gaps in employment and skills indicators have improved in recent years, core disparities in productivity, wages, and job quality endure.

Dr. Eoin Magennis, Principal Economist at Ulster University Economic Policy Centre and lead author of the report said: “While we’ve seen pockets of progress, the economic gap between different parts of NI is wide – and in some cases, widening. One-size-fits-all solutions haven’t worked. Place-based policy – designed with and for local communities – is the way forward.”

Productivity gaps persist, with Belfast and Mid Ulster outperforming, while Derry lags behind.

On productivity the report states that Belfast and Mid Ulster are the top performing LGDs with little between them, while ‘Derry City & Strabane is the lowest rank by Gross Value Added (GVA) per job filled measure’.

The authors note regional imbalance in GVA per capita – economic output per person – goes back at least two decades.

Belfast boasts a GVA per capita ‘almost 42 per cent above the NI average going back to 1998’.

"Given its annual growth rate since has been 0.4 percentage points faster than the second fastest-growing Council area, Derry City & Strabane, Belfast has ended the period almost 80 per cent above the NI average. In the case of Derry City & Strabane, it began the period 77 per cent of the NI average and ended it closer (at 85 per cent) but still well behind top performing Council areas,” according to the report.

One of the starkest statistics is the concentration of Foreign Direct Investment jobs in Belfast.

“Belfast accounts for 78 per cent of new [FDI] jobs between 2015 and 2022, with Derry City & Strabane a distant second (at 11 per cent) and nine other LGDs sharing just over 10 per cent of new jobs between them. This level of concentration is much higher than many regions across GB, one explanation for this being that places such as Scotland or Wales have more than one large city to choose from, Scotland has three cities within the UK top 20 locations in 2023 and Wales two (EY, 2024),” the authors state.

Employment is another area where Derry is at the wrong end of the tables.

“To assess ‘regional balance’ [Stormont’s 2024] Sub-Regional Economic Plan has adopted a headline indicator which combines those in employment with those in further or higher education to acquire qualifications for use in employment.

"This combined ‘sub-regional employment rate’ shows a 10-percentage-points gap between the top (Mid Ulster) and bottom Council areas (Derry City & Strabane).

"This gap has closed significantly over time (based on a 2017-2022 data series) from 19- percentage-points, encouragingly driven by improved performance in the poorer performing LGDs,” the report explains.

Between 2009 and 2023 an ‘impressive 8-percentage-point rise’ in employment was recorded in Derry City & Strabane.

In terms of economic inactivity Derry was an underperformer.

Both Belfast and Derry City & Strabane have ‘more than twice the rate of inactivity due to health reasons than Lisburn & Castlereagh’.

Derry also recorded the largest range of inactivity rates within the council area: “Derry City and Strabane’s DEAs show the widest range in economic inactivity rates, reflecting a substantial disparity between the highest (Faughan, 43 per cent) and lowest (The Moor, 27 per cent) levels of inactivity in the subregion, well spread around the Council area average rate (34 per cent)."

A skills-gap also persists locally. Whilst the number of people with third level qualifications has increased it is not increasing fast enough.

“Council areas such as Belfast and Derry City & Strabane have seen an increase in the proportion of residents with Regulated Qualifications Framework Level 4+ qualifications but with a below average change resulting in a lower stock of qualifications and skills than other LGDs.

"The extent to which local residents, rather than in-bound commuters, can take advantage of higher skill employment opportunities is an important factor in this pattern,” according to the study.

Households in Derry are poorer in terms of Gross Disposable Household Income than their eastern counterparts.

“In 2022, income per head in Lisburn & Castlereagh was 1.17 times that of the lowest ranking Council, Derry City & Strabane.

"This is a very similar level to the 1.18 times differential in the North East of England but much lower than the 2.15 times differential in the South East. The GDHI indicator has identified a persistent income gap between the NI sub-regions since 1998, when the differential between top and bottom (between Ards & North Down and Derry City & Strabane) was 1.22,” the report concludes.

A larger proportion of pre-tax income in Derry comes from benefits and pensions showing that ‘there remain population concentrations of older people and those supported by social security’.

There were positives. While Belfast led the 2022 rankings for business birth rates Derry & Strabane followed closely.

And between 2001 and 2022 Derry & Strabane was among six areas were employment grew at a faster rate than elsewhere.

There was, however, a ‘relatively low concentration in high growth sectors such as Professional Services and Administration & Support’.

"In this LGD, the industry-place interaction effect exerted a greater negative impact on employment. This is primarily due to the poorer local contribution of the Retail, Professional and ICT sectors.

"This means that while firms in the LGD benefitted from local competitiveness effects, the Retail, Professional Services and ICT sectors under-performed within the local economy,” the report states.