Saturday 10 December 2016

What will Ireland look like in 2020?

Flying cars, food that makes you lose weight and robots that do the housework may all be part of the future. In the first part of a two-part series looking at the coming decade, Nick Webb looks foward 10 years

Published 22/08/2010 | 05:00

THE Government's handling of the economic crisis will have the biggest impact on how the country will look in 10 years' time.

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If we get it right, chances are that the women will be prettier, the football team will keep winning and there'll be jobs for everyone in Celtic Tiger version 2.0. Cock it up and we could be facing a lost decade of stagnant growth, crippling unemployment and the return of dufflecoats.

The omens don't look good, particularly as there's no obvious plan to get out of this mess. "If you go back to the 1980s, there was great co-ordination between government, business and education. There was a clear vision for Ireland," according to Accenture boss Mark Ryan. Back then we were moulding ourselves as a hub for pharmaceutical and IT companies and developing the IFSC.

"But there isn't the same co-ordination now," he adds. "But the reality of the economic crisis is that it has raised questions about where Ireland needs to go, what kind of public service we need and where Ireland plays."

Despite the grim economic forecasts, the mood of the public remains reasonably positive, according to trend spotter Gerard O'Neill of Amarach consulting. A recent Amarach survey showed that an increasing number of people were optimistic about the medium- to long-term prospects in Ireland. But what will the country and the economy be like? Will the 18 year olds barfing in the streets after last week's Leaving Cert results have legged it, or will they be fuelling a resurgent economy?

Ireland's population could be "at or about" five million by 2020, according to O'Neill. The emigration trend will have reversed by then, although much of the current spate of emigration is driven by non-nationals, he suggests.

There may be a population bulge, with an awful lot more middle-aged people. "We don't have that many 20-somethings anymore," according to O'Neill. The numbers peaked in 2007. We'll have a lot of 30- and 40-somethings who stayed put and had kids." However, the increasing birthrate bodes well for future activity as it will ultimately create demand for housing and services.

But the major structural problems facing the economy may not have been ironed out in the next 10 years, warns University Of Limerick economist Stephen Kinsella, author of Ireland 2050 -- How we will be living. "I believe we are entering something like the Japanese lost decade." Kinsella sees sluggish growth in the economy over the next decade. "We will have to wait until the kids we have now get into the labour market to grow the economy," he adds.

The hangover from the cheap credit-fuelled spending binge will still be painful. "Our economy is not going to get out of debt. The value of our housing stock will not have returned to boom levels by 2020," he adds. "There are people who bought homes in their 30s who will still be in negative equity in their 40s. They'll be facing middle age with debt and lots of kids."

The fallout from the housing bubble will not have gone away even after a decade. "I don't expect house prices to recover to the peak levels of 2007. Even with modest growth we won't get there. It was a once-in-a-century binge," according to O'Neill.

However, there will be a noticeable "generational shift" from home ownership to renting. "Young people don't want to have the weight of a 25-year mortgage around their neck like their parents," O'Neill predicts. While this switch won't help house prices, it will boost the flexibility of the labour force.

The albatross of our cheeseball banks and the splattered property market will be a dominant theme over the coming decade. Domestic banking "in the absence of an explosion in economic activity faces a challenging time", warns Professor Eamonn Walsh of UCD Smurfit Business School. Some of the banks could be "on life support" for the next decade. After Nama and the fallout from the commercial property bubble, the banks will face a second wave of massive hits to their books as mortgage holders default and personal debt blows up.

Walsh doesn't see much prospect for the so-called "third force" in banking. "It's hard to see anything in banking at the moment having any sort of force," he says.

Last week's news that Bank of Scotland (Ireland) was fleeing the country has made the banking landscape less competitive than ever before. It's likely to stay that way. Attracting big foreign banks or even Richard Branson's Virgin Money or Tesco into the high streets to compete with the domestic banks could face issues with a huge "bubble" of new regulations for the banking sector, Walsh warns. With the Government likely to be a major shareholder in AIB and Bank of Ireland, Walsh also suggests that the state might be "conservative" when it comes to opening the doors to new entrants. Bailout funds need to be protected after all. Nama "is a bet on economic growth", he suggests, all of which means that it is difficult to see it making any money.

"I'd be far more worried about unemployment," says O'Neill. "That could leave a scar that we might not recover from." O'Neill cites statistics that show young people who don't get a job within the first year or two of leaving education suffer badly. The lack of experience counts against them and they don't catapult into better jobs quickly, remaining on the bottom rung for longer.

A major change in energy use will be a feature of the next decade, as the Government chases its ambitious targets for green energy, windfarms and little electric cars.

'People who bought homes in their 30s will still be in negative equity in their 40s. They'll face middle age with debt and lots of kids'

"Embracing green technologies is not really a matter of choice any more, it is a necessity," according to Kingspan boss Gene Murtagh. "Conventional energy generation will decline as a portion, giving way to renewables, mainly wind and solar and to air-to-water heatpumps. These technologies are long proven, and, by the month, are becoming more and more comparable cost-wise against traditional methods." Murtagh also believes that the energy debate will focus on conservation as much as on new forms of energy. This, he believes, will lead to a major upgrade of the country's building stock.

"Energy is our Achilles heel," warns O'Neill. He describes the current targets for renewable and wind power energy as "insane", warning that it could leave us "massively exposed to a serious supply risk". O'Neill suggests that we need appropriate targets and "a prudent mix of the old energy sources" to run alongside the renewable programme. Nuclear power will also be looked at, although it may take 20 years.

It'll be a decade when we become more interlinked and dependent with our neighbours. The whole island of Ireland may be stitched together in a much more effective way over the coming decade, predicts Accenture's Mark Ryan. There will be much more co-ordination and co-operation between the Republic and Northern Ireland, as we compete for opportunities as a single island. He also believes Europe will play a much larger role in supervision of Ireland and its economy.

That'll be the end of bendy bananas then.

One of the biggest changes we'll see over the coming decade will be in how the country is run, the machinery of operating Ireland will change dramatically. As one of the members of the OECD task force that reported on the Irish public service two years ago, Ryan sees major changes ahead in the provision of services for the public. That's everything from the taxman to teachers and the Abbey Theatre to RTE.

"What we need in 2020 is a fit for service public sector," he said. This will be a public sector that is far more mobile and can be adapted to meet demands. Performance management and accountability may become a zen-like pursuit for reformers.

Ryan also expects a far greater use of shared services for the public sector. Instead of each state body having its own legal, accountancy or HR units, it could all be centralised into a single government unit that meets all the accountancy or procurement needs for bodies ranging from the HSE or Fas to the gardai. "Organisations will have to avoid duplication," he added. Technology will play a major role in making the public sector more efficient -- although the government purse strings may have to be loosened first.

Ryan says that when he first sat down to work with the task force on the public sector he was unconvinced as to whether such major change could be introduced. The economic crisis has changed everything. "There's no question it'll happen now," he says.

It seems to be bad news and more bad news, with just a few little sparkles of positivity. While many believe that Ireland is looking down the barrel of 10 years of gloom, like the "lost decade" Japan experienced in the 1990s, Walsh points out that the same thing was predicted in the US in 1991.

Misery, stagnation and depression were widely forecast for the US. But the arrival of Bill 'It's the Economy Stupid' Clinton, coupled with a technology boom, saw the US bounce back to the good times and confound the Cassandras.

All the economic data can point to one path -- but, as Walsh muses, "it's a matter of luck sometimes".

Sunday Independent

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