Data Insight: Characteristics of exporting firms in Northern Ireland

This project uses novel datasets and input-output (IO) modelling to investigate the differences between exporting and non-exporting firms in Northern Ireland, and to understand the scale of employment supported by exporting in Northern Ireland. In particular, we sought to answer two questions:

• What is the scale of employment supported by exporting in Northern Ireland, and what is the nature of this employment, particularly with regards to gender?
• What is the nature of exporting versus non-exporting firms in Northern Ireland, at a detailed sectoral level?

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In order to answer these questions, we used IO tables for Northern Ireland and the UK, published by Northern Ireland Statistics and Research Agency (NISRA) and the Office for National Statistics (ONS) respectively. IO tables show purchasing and sales volume between industries, households, and abroad. These tables can be used to model how various aspects of the economy, such as the labour market, interact with the supply chain.

Past work on understanding the impact of exports on the labour market in the UK is sparse. A recent publication did estimate this, but relied upon a simple regionalisation of the UK IO table to estimate results in Northern Ireland. It also did not use detailed microdata and so assumed that exporters have the same characteristics as industry averages.

We expand on this research by using detailed microdata on the Northern Ireland economy, the Northern Ireland IO table, and industry averages to estimate the impact of exporting on the Northern Ireland labour market and explore how exporter firm characteristics differ from non-exporters. Utilising local data, rather than regionalising national data, can help improve the robustness of these results, and perhaps shed greater insight into Northern Ireland’s exporting sectors.

In 2018, Northern Ireland sold £17.7 billion in goods and services to Great Britain and internationally . Producing these exports requires the use of products from supply chains across Northern Ireland. Including these supply chain impacts, we estimate that Northern Ireland’s exports supported £27.5 billion in output, £11.8 billion in Gross Value Added (GVA), and nearly 170,000 full-time equivalent (FTE) jobs . This means that one out of every four jobs in Northern Ireland is either directly related to or supported by exporting.

Examining gender effects, we find that only 29% of the jobs that are either directly or indirectly supported by exports are held by women. By comparison, 47% of jobs are held by women across Northern Ireland’s economy.
The estimates above rely on industry averages and do not explore the impact of differences in the characteristics of exporting and non-exporting firms. For this reason, we have used microdata to explore these differences.

Examining the nature of exporting and non-exporting firms in Northern Ireland, we found that exporting firms account for 54% of all business turnover in Northern Ireland while employing only 35% of workers. Exporting firms furthermore account for 55% of all purchases and 50% of GVA. Employee costs per employee are nearly double for exporters compared to non-exporters, indicating significantly higher wages. 78% of all imports go to exporting firms. In total, productivity – here measured by GVA per employee – is around £58,000 in exporting firms, compared to £32,000 in non-exporting firms. Higher labour productivity means our estimates of the jobs supported by exports are likely biased upwards.

In order to demonstrate how Northern Ireland-specific data can improve results, we compared our results to the Northern Ireland input-output model, and to a model that uses a UK IO table regionalised to Northern Ireland. We find that regional survey data directly attributed over 200,000 full time-equivalent jobs to exporting firms. This is nearly double the number of FTE jobs that our Northern Ireland IO model estimated. Our regionalised UK IO model underestimated the volume of employment even further, attributing only 70,000 FTE jobs to exporting. This demonstrates the importance of using Northern Ireland-specific data when attempting to understand the impact of trade on Northern Ireland.

Why it matters

A recent report from the Centre for Inclusive Trade Policy used citizen’s juries to analyse the importance of trade policy to UK participants. These juries demonstrated that participants in Northern Ireland care deeply about the societal impact of trade policy, value the economic growth derived from trade, and believe strongly that trade should achieve non-economic benefits, such as overseas human rights. In particular, they found that while  trade following the UK’s exit from the EU was a concern for all participants, the Northern Ireland participants were more concerned about delays in trade than other nations. The report furthermore showed that people expect the government to address trade policy and work towards socioeconomic growth.

Comparing our region-specific results to the regionalised results demonstrates how important timely region-specific data is. Given that exports account for a higher proportion of Northern Ireland’s employment and output compared to the UK, it is unsurprising that trade would be a high priority for the Northern Ireland economy. Northern Ireland in particular demonstrates a unique trading landscape due to the land border with the Republic of Ireland and changing trade policy between the UK and the EU. Better understanding and identification of exporting firms can help inform policymakers as the trade landscape changes.

Exporting firms also support domestic supply chains. However, some groups in the labour market are less likely to benefit from trade, which has important implications when dealing with future trade and domestic policy. Notably, women are underrepresented in exporting industries, and are likely to benefit less from trade expansion. Analysing supply chain integration more fully can help firms and policymakers understand how changes to trade policy can affect not only individual firms, but the entire socioeconomic system in Northern Ireland.