Living standards in UK and Ireland compared in new research

The data suggests that by 2019 the Irish standard of living was 8% above the UK

New research has sought to compare relative standards of living in the Republic of Ireland and the UK.

It finds that economic output per head in Ireland is higher but consumption per head is significantly lower.

Lower consumption in Ireland is partly due to a higher rate of savings but may also reflect difficulties comparing the value of housing in the two countries.

The research by Prof John Fitzgerald has been published by the Economic and Social Research Institute (ESRI).

Cross-country comparisons of economic performance normally use gross domestic product (GDP) per head.

However Irish GDP is heavily distorted by the activities of multinational companies, so an alternative measure known as gross national income (GNI*) is now most commonly used to assess Irish economic output.

Prof Fitzgerald then makes further adjustments for price differences to make Irish GNI* per head broadly comparable with GDP per head in other countries.

Prof Fitzgerald says on this measure the Irish standard of living approached that of Germany, the UK and the EU15 in the early 2000s.

By 2007 the Irish standard of living was up to 10% higher than in those countries but Ireland's banking and property crisis had a dramatic effect.

By 2011 the Irish standard of living was 10% below that of the UK and the EU15, and about 20% below that of Germany.

Ireland's economic recovery since 2012 reversed the effects of that crisis, with the data suggesting that by 2019 the Irish standard of living was 8% above the UK, and by 2021 it had once again reached German levels, though still lower than in the Netherlands.

The paper also looks at consumption per head, with data from 2019, which tells a different story.

When adjusted for relative prices, consumption in Ireland was €24,500 (£21,054) per head while in the UK it was over €27,000 (£23,196).

Prof Fitzgerald also makes an alternative price adjustment using more recent data which suggests, on the basis of final consumption per head, living standards in Ireland in 2019 were below both the UK and the EU average.

He concludes that the high rate of savings in Ireland "holds out the prospect of significant growth in the future, as these savings are suitably invested or even consumed".

He adds: "In the short term, a better measure of living standards is consumption per head (public and private).

"On this measure, Ireland may lie below a number of European neighbours, partly due to our current high level of savings."