Structural north-south economic gaps persist
A new ESRI report has found that while Northern Ireland’s economy is growing and outperforming the UK average, deep structural gaps with the Republic persist across income, employment, demographics, and education.
Assessing economic trends in Ireland and Northern Ireland, published in December 2025, is the first in a planned annual series examining economic performance across the island. Drawing together comparable data from both jurisdictions, it presents a picture of two economies moving in the same direction, but at very different speeds.
On headline growth, the findings offer some encouragement for Northern Ireland. In the year to Q2 2025, output grew by 2.8 per cent, driven primarily by services and construction. This compares favourably with the UK as a whole and with Scotland. However, the Republic remains the fastest-growing economy across the UK and Ireland, with modified domestic demand increasing by 3.2 per cent over the same period.
Forecasts cited in the report suggest this divergence is likely to continue. Private-sector forecasts expect Northern Ireland’s gross value added to grow at just over 1 per cent in both 2025 and 2026, while forecasts in the South anticipate stronger domestic growth and continued job creation, albeit at a slower pace than in recent years.
Employment trends
Both jurisdictions recorded similar year-on-year employment growth in 2025, the long-term picture is markedly different. Since 2010, employment in Ireland has grown by 45.5 per cent, compared to 19.1 per cent in Northern Ireland.
The ESRI says that the Republic’s post-pandemic labour market expansion has been particularly strong, with female employment rising sharply. Northern Ireland’s labour market, by contrast, continues to be characterised by higher inactivity and weaker participation.
Although Northern Ireland’s unemployment rate stood at just 1.8 per cent in 2024, compared to 4.4 per cent in Ireland, the report cautions against interpreting this as a sign of stronger labour market performance. Instead, it reflects a larger share of the working age population being economically inactive. Almost one-quarter of people aged between 15 and 64 in Northern Ireland are not in the labour market, compared to just over one-fifth in the Republic.
Demographics
Between 2015 and 2024, the Republic’s population grew by 14.8 per cent, driven largely by strong net migration. Northern Ireland’s population grew by just 3.9 per cent over the same period.
The Republic’s population is younger, with a lower old age dependency ratio, while Northern Ireland is further along the ageing curve. The ESRI highlights this as a key long-term challenge, particularly for labour supply and public services. Migration has become a significant driving force of economic growth in the Republic, while Northern Ireland’s more modest migration flows limit its growth potential.
Living standards gap
The most pronounced differences emerge in measures of living standards. In 2023, the Republic’s GNI* per capita stood at €63,500, compared to GDP per capita of €34,500 in Northern Ireland, which is an 84 per cent gap. While the South’s GDP is known to be distorted by multinational activity, the ESRI emphasises that alternative measures still show a substantial and widening divergence.
After adjusting for purchasing power, hourly earnings in the Republic were 29 per cent higher than in Northern Ireland in 2024. Household disposable income is closer but still favours the South by around 10 per cent.
Life expectancy, which the ESRI describes as a robust indicator of overall wellbeing, also highlights persistent inequality. In 2022, people in the Republic lived longer on average than those in Northern Ireland, with a two-year gap for men and a 1.5-year gap for women. The gap has widened over time, suggesting structural differences in income, education, and access to services.
Education and skills
The Republic consistently outperforms Northern Ireland in post-compulsory education participation, with higher retention rates beyond age 16 and lower levels of early school leaving. NEET rates remain higher in Northern Ireland, at 10.6 per cent compared to 8.6 per cent in the South.
The report warns that weaker engagement with education and training risks reinforcing productivity gaps and limiting future growth, particularly as both jurisdictions face tightening labour supply due to ageing populations.
Public finances and policy
The ESRI also points to fundamental differences in policy capacity. The Republic, as a sovereign state, controls taxation and spending and has used this autonomy to support growth, though the report cautions about rising public expenditure and reliance on volatile corporation tax revenues.
Northern Ireland, by contrast, operates within a constrained fiscal framework. The Executive has limited revenue-raising powers and depends heavily on the block grant determined by the Barnett formula. While funding increased in 2025/26, pressures remain acute, particularly in health, which accounts for more than half of departmental spending.
Data gaps
A recurring theme throughout the report is the lack of timely, comparable data for Northern Ireland. Gaps in household income, skills, and trade in services data limit the ability to assess policy effectiveness and track convergence or divergence over time.
The ESRI argues that improving all-island data cooperation should be a strategic priority, supporting more informed policymaking and shared responses to common challenges.
The report concludes that while Northern Ireland’s recent growth performance is relatively strong within the UK context, it continues to lag significantly behind Ireland on income, employment, education, and living standards. Addressing these gaps will require sustained policy focus, improved data, and a realistic assessment of the structural constraints facing the Northern Ireland economy.
