Economic development in Northern Ireland: current and future priorities for Invest NI

A shorter version of this article was featured in Ulster Business magazine. 

The structure of Northern Ireland’s economy creates both opportunities and challenges for economic development.

In this article, Kieran Donoghue highlights current developments in the global economy and current and future priorities for Invest Northern Ireland. 

Relative to the size of the economy, Northern Ireland’s private sector is smaller than it should be. Around 27 per cent of our workforce is employed by the public sector, compared to 18 per cent in the rest of the UK.  

In terms of industrial structure, our private sector is also dominated by Small and Medium-sized Enterprises (SMEs) with 89 per cent of firms classed as microbusinesses (employing fewer than 10 people). SMEs are the backbone of our economy and are often cited as being engines for innovation and sustainable growth. They bring agility and innovation but tend to have limited resources and less capacity to grow and invest compared to large and multinational companies.  

This means Northern Ireland SMEs often reach a certain level of growth before plateauing, which is why the structure of our economy is sometimes described as “missing a middle”. Only 2 per cent of Northern Ireland’s business base is made up of medium-sized businesses.  

Northern Ireland needs more mid-size businesses. These firms can drive export expansion and are more likely to invest in Research and Development (R&D) and innovation. Micro and small businesses often lack the resources needed to scale, especially in family-owned businesses and start-ups.  

Invest NI wants to help more businesses to scale and access new markets to increase productivity and drive economic growth.By nurturing more of our small firms to become the scaling successes of tomorrow, we will strengthen the private sector’s contribution to both sectoral and regional growth.  

The UK Innovation Survey shows that in recent years only about one-third of NI businesses are innovation active, slightly below the UK-wide average. Moreover, Northern Ireland accounts for just ~2 per cent of total UK R&D expenditure, despite comprising 3 per cent of the population – indicating underinvestment in R&D relative to our size. This innovation gap partly reflects our industrial structure: smaller firms typically invest less in formal R&D and have less capacity to absorb modern technologies.  

By encouraging more businesses to become active in innovation, we can future proof our key sectors and help boost productivity. New ideas and technologies can stimulate wage growth and business profitability, generate knowledge spillovers and diffuse innovation thereby creating benefits that extend beyond individual businesses to sectors, supply chains, and the wider economy.

Last year, we continued to support companies to invest in innovation and R&D, and although the number of supported investments increased, their combined value was lower than in 2024/25. Rising costs and market uncertainty together with tariffs and geopolitical developments clearly made our clients more cautious about their expenditure.  

That said, innovation drives growth and competitiveness, so it is essential to economic growth in Northern Ireland. Therefore, we are actively looking at ways to increase the number of clients that are undertaking product, process, supply chain, and organisational innovation.

As a small, advanced economy, Northern Ireland depends on external sales and exporting to grow. There is much untapped potential for our SMEs in markets overseas and Invest NI’s trade advisors and global markets team are actively supporting our clients to find commercial opportunities in external markets and in some cases to export for the very first time.

Exporting is a powerful driver of economic development. Companies that export tend to be more productive and innovative and can also benefit from larger markets and international competition.

Northern Ireland’s position as a platform from which to access both the UK and EU markets presents a strategic opportunity to be leveraged for trade and investment growth.

In a recent report, 61 per cent of SMEs surveyed expected overseas sales to increase during the coming year. This is higher than the national average, and reflects that, despite global uncertainty, Northern Ireland businesses remain optimistic and engaged internationally  

We want to support more companies to export for the first time, reach new markets, and understand the different opportunities that are open to them.

Encouraging new business formation has many benefits for the economy. Entrepreneurship stimulates competition in the marketplace, contributes to job creation, and can fuel innovation.  

Business creation and entrepreneurship can be measured through Total Early-Stage Entrepreneurial Activity (TEA), which represents the percentage of the population aged 18-64 who are either nascent (in the process of starting a business) or new entrepreneurs (running a business not older than 42 months).  

Northern Ireland’s TEA rate was 9.5 per cent between 2022 and 2024, which is lower than the UK average of 12 per cent. However, there is a variable rate of TEA between council areas. For example, Derry City and Strabane district council area had the highest TEA percentage in Northern Ireland at 12.5 per cent of the adult population, whereas Mid and East Antrim had just 5.7 per cent.  

Starting a new business can be challenging, and entrepreneurs can face barriers, such as lack of funding or resources, and regulatory complexity.

At Invest NI, we are finalising a new strategy to reinvigorate and modernise our approach to encouraging and supporting entrepreneurs. We will support founders to turn their innovative ideas into real and successful businesses in every corner of Northern Ireland. We know that financial support is important, but so too is non-financial support such as mentoring and peer connection. Studies have shown that promoting local entrepreneurial role models and providing access to entrepreneurial skills can help encourage more people to start their own business.

Around the world, businesses are contending with geopolitical uncertainty, shifting trade patterns, technological disruption, and evolving workforce needs.

The good news is that Northern Ireland has significant strengths to build upon. We have globally recognised capabilities in advanced manufacturing, financial services, life and health sciences, agri-food, and clean technologies. We have world-class universities, an entrepreneurial business base, and a unique proposition through market access to both the UK and EU.  

By continuing to work together, across government, industry, and academia, we can face our challenges and capitalise on our opportunities. Invest NI is now in the final year of its three-year strategy and we are optimistic about achieving our targets but also creating a foundation for further development of business enterprises across the Northern Ireland economy.

As we begin work on designing a new strategy to replace Our Future in Focus, we are thinking about many strategic and long-term issues. These include, inter alia, UK industrial strategy, Shared Island, AI, taxation, private finance, sectoral and technology foresight, geopolitical and market fragmentation and the topics addressed in a recent paper by Professors Jodie Carson and Stephen Farry at Ulster University. By considering and integrating these topics into our thinking, we will increase our ability to develop the most appropriate future strategy for the development of the NI economy.