Data Insight: Exporting, importing and Northern Ireland firm performance: Which pathway to internationalisation?

The Business Data for Research (BDR) dataset has been created by the Northern Ireland Statistics & Research Agency (NISRA). It links business characteristics from the Northern Ireland Annual Business Inquiry (NIABI) with sales and purchases data from Broad Economy Sales and Exports Statistics (BESES) for the years 2014 to 2020.  

The wider context suggests that Northern Ireland (NI)’s export performance has remained poor (following trends relative to other parts of the UK since the early 2000s) and its value peaked in 2018 in some markets, long before any pandemic effects.  

This Data Insight seeks to further explore firm-level characteristics underlying these wider trends. Using BDR data we offer both a descriptive analysis and a series of regressions to detail Northern Ireland’s export and import performance by markets, business size, sector and sub-regional geography. The analysis also explores questions such as which firms are more or less likely to be exporters, importers, or both, and the characteristics of businesses by the intensity of their exporting performance. The relationships between exporting and productivity and exporting and wages are also analysed. 

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Background

There has been a greater level of attention paid to Northern Ireland’s trade patterns and export performance in recent years. This has been sparked both by targets set in successive Programmes for Government since 2011, and then in the wake of the EU Exit vote in 2016.  

This project aims to use data from the Business Data for Research initiative to offer a more detailed descriptive analysis of NI export and import performance – by market, sector and geography – over the 2014-2020 period. Importing is included as an important, but often overlooked, area of internationalisation. 

The project also aims to analyse the relationship between business characteristics and exporting or importing, and to separately identify whether there is an export premium on business performance. 

What we found 

• Sectoral analysis: The majority of sales in NI are not from 10X sectors but they constitute 80% of external sales in 2020 
• Size analysis: The largest firms make the biggest individual contribution to sales but micro-firms account for the highest share of purchases 
• Geographic analysis: The Belfast City region alone accounts for one quarter of all NI sales and 37% of purchases 
• Export intensity: The majority of firms sell less than 30% of sales in export markets. Less than 1% of firms sell £100 million or more to export markets 
• Exporting: Smaller firms more likely to export in general but the largest firms are associated with high intensity exporting 
• Importing: Lower productivity firms and those in Wholesale and Retail more likely to import 
• Exporting and importing: Differences observed depending on whether exporting was undertaken on its own or combined with importing  
• Sales intensity: Smaller firms and publicly-owned selling to local NI market; Agri-tech associated strongly with exports to the ROI  
• Exporting, productivity and wages: Higher productivity associated with larger firms and also linked to high export intensity.  

Why it matters 

The type of sales and purchases data offered by the BDR initiative is significant for NI economic policymakers, who have a broad strategic goal to improve the export performance of the local economy. This goes back to the pre-EU exit Exports Matters action plan of 2016 (DETI, 2016). This plan identified little change in the relative performance of the NI economy in goods exporting compared to the other UK devolved regions for 2004-2008, with a subsequent declining performance in 2008-2014. This was attributed to the deep recession in the Republic of Ireland, which is the key export market for NI firms. 

Figure 14 shows the total value of exports and external sales as a percentage of GVA for 2011-2020. The total value of export sales (which includes services as well as goods) has increased by £1.2 billion in this period to £10.3 billion. However, this value as a share of GVA has declined by four percentage points to 24%, suggesting growth in exports has fallen behind economic growth more generally. This trend is even more striking for external sales, where the total value has grown from £0.7 billion to £21.2 billion but the share of GVA has fallen by 14 percentage points. This sharper decline, particularly since 2016, highlights difficulties in sales to GB which have fallen by more than £3 billion since 2016. 

Better data resulting from the linking of the NIABI and BESES datasets on external sales and purchases by NI firms matters: this will allow an improved understanding and monitoring of performance by policymakers. At present, doing so is difficult below the aggregate levels of total values and total numbers of firms exporting. Using the BDR initiative, there is potential for understanding what makes a business more likely to export, how this impacts their performance over time, and what pathways might be taken to enhance this performance and persuade others to take similar steps into internationalisation.