Nov. 3 (Bloomberg) -- Two years ago, Northern Ireland pinned its hopes on attracting thousands of banking jobs to Belfast from London and Dublin, a reward for cementing peace in a region ravaged by paramilitary violence.
Not only did the jobs fail to arrive because of the global financial crisis, the U.K. province now is bracing itself for government spending cuts of about 4 billion pounds ($6.4 billion) in four years, part of British Prime Minister David Cameron’s austerity measures detailed on Oct. 20.
“Public sector cuts will have a massive negative impact on the economy,” said Richard Ramsey, chief economist at Belfast-based Ulster Bank Ltd, a unit of Royal Bank of Scotland Group Plc. “We are still in the midst of a recession.”
Northern Ireland is more dependent on state jobs than anywhere else in the U.K. Unemployment already has doubled over the past three years, house prices have sunk by more than 40 percent and bombings and shootings by dissident terrorists are back to their worst in a decade.
In 2008, Northern Ireland’s then minister for finance, Peter Robinson, said he had forged a “landmark” agreement with his Irish counterpart, Brian Cowen, to bring financial services jobs to Belfast from Dublin. Robinson now leads the power-sharing assembly in Belfast, while Cowen is premier in Ireland.
“A lot of numbers were bandied about” and no projects have emerged since the pledge, Bill Montgomery, who leads the overseas development unit at Invest NI, a government agency to attract companies to the region, said in an interview. “When the markets plunged, it all changed,” he said.
About 3,500 people died in Northern Ireland since the violence, known locally as the “Troubles,” began in the late 1960s. While bombings, kneecappings and shootings largely ended in 1998 with the Good Friday Agreement, the legacy of a shattered economy remains and the so-called peace dividend isn’t paying out as the politicians expected.
The Emerald Investment Fund, a U.S.-based pool created in 2008 to invest in Northern Ireland, hasn’t deployed any money because of the economic climate, spokesman Tom Vogel said in an e-mailed response to questions.
Titanic Quarter in Belfast, a dockside development named after the ill-fated ship that was built in the city, was supposed to be a magnet for the influx in financial services jobs. In February 2009, the company said it was reviewing its plans in light of the global financial crisis.
“It’s disappointing that the financial jobs haven’t really arrived in Belfast,” said Jim Berrisford, who set up a recruitment company in the city in 2008. “We have to direct people to London. It’s a shame.”
An external spokesman for Titanic Quarter, where New York-based Citigroup Inc. has its offices, said the real-estate developer had no further comment to make.
Citigroup may create 400 new jobs in Belfast, the Sunday Times reported on Oct. 31, without saying where it got the information. A spokesman for Citigroup in Belfast declined to comment on the report and said the company currently employs more than 900 people in the city.
The banking system in Ireland, which won independence from Britain in 1922 while six counties in the north remained part of the U.K., came close to collapse as bad debts surged after a decade-long real estate boomed crashed.
Cowen nationalized Anglo Irish Bank Corp. and took control of EBS Building Society and Irish Nationwide Building Society. The bailout of the Irish financial system may cost the taxpayer as much as 50 billion euros ($70 billion), the government said.
“This sector represents an area where economic co-operation between the two parts of the island can continue to be deepened,” the Finance ministry in Dublin said in an e-mailed statement on Oct. 29.
In 2007, Bank of Ireland Plc said it planned to create 149 new financial services jobs in Belfast through its fund administration unit. Now, the bank is selling businesses after it was forced to turn to the government for a 3.5 billion-euro rescue in March 2009. The bank employs 20 people in its Bank of Ireland Securities Services office in Belfast.
“In light of the changing market conditions, the staffing projections have since changed,” according to an e-mailed statement from Dublin-based Bank of Ireland in September.
The number of unemployed in Northern Ireland has risen by 146 percent over the past three years, Ramsey at RBS said. The number of people claiming benefits is at 1999 levels.
More State Workers
Among those in work, 29.4 percent are employed in public services, compared with 26.1 percent in Wales, 24.8 percent in Scotland and a U.K. average of 20.9 percent, based on data from the Office for National Statistics.
Robinson, the first minister, told reporters on Nov. 1 that a freeze on public-sector pay is needed because about half of spending is related to salaries.
“Prizing the economy away from reliance on public expenditure is now going to happen by brute force,” said Mike Smyth, head of economics at the University of Ulster in Belfast. He forecasts joblessness to rise to 1997 levels.
House prices have plunged 43 percent since peaking in 2007, according to the latest report from Nationwide Building Society, the U.K.’s largest customer-owned bank.
Violence is also emerging again. Gun attacks by dissident terrorists rose 54 percent to 79 in the 12 months through May, according to the Police Service of Northern Ireland. That’s the biggest upsurge in 10 years, the Independent Monitoring Commission, a government-appointed group set up to report on Northern Ireland’s paramilitaries, has said.
The Real Irish Republican Army on Oct. 5 exploded a car bomb outside a branch of Ulster Bank Ltd. in Derry, a city in the north-west of the region. The Real IRA told the Guardian newspaper that it would target banks as part of its terror campaign to re-unite Ireland.
“We are probably going back to 2005, 2006 levels of public expenditure and when you take it in the context of the credit crunch, it is just taking away any prospect of a bounce back or a recovery,” said Smyth. “There is just nothing at all going on that is going to get jobs, growth growing.”
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