Economic outlooks
Four leading commentators share their perspectives on the current and future performance of the Northern Ireland economy. Policy proposals for the Executive cover employment law, public works, the abolition of business rates and grants, and practical delivery on a shared future.
Nigel Smyth · Director · CBI Northern Ireland
What is your assessment of the economy’s current performance?
In recent months, there have been encouraging signs that the economy is on the turn, though the headwinds and risks remain high and uncertainty remains. The optimism is not shared across all sectors, making it particularly difficult to assess the overall direction of travel for the economy.
There has been some increase in confidence, reflected in discussions with companies and in recent survey evidence.
We have seen some notable investment announcements in recent months and many companies in manufacturing, business services and particularly in IT, creative industries, energy and tourism are reporting a more positive outlook and a pick-up in output. This has been reflected by some improvement in the local labour market.
Despite this optimism, the headwinds are strong: constraints in public expenditure and in consumer expenditure, together with the legacy issues from our property boom and bust, will act as a major drag on the economy for the foreseeable future. Many companies are in poor shape after a deep and extended recession, and access to finance remains challenging for these companies. The heavy lifting required to create a sustainable and balanced economy is reliant on a relatively small export-orientated private sector. Growth will almost certainly lag the recovery under way across the rest of the UK which is gaining momentum.
What one economic policy area should the Executive focus on?
In the short term the Executive, and the political parties, must secure a resolution to issues surrounding flags and parades as well as deliver on a shared future – the Haass review has enormous importance and finding a sustainable solution will provide a significant boost to our image and reputation.
What is your medium-term outlook for the economy?
Over the medium term, the Northern Ireland economy is likely to move forward slowly, and without a significant new policy lever (as in a lower corporation tax rate) we will struggle to keep pace with the UK economy and fail to create sufficient quality jobs for our young people.
Wilfred Mitchell · Policy Chairman · FSB
What is your assessment of the economy’s current performance?
There is no single economy; it has many geographic and sectoral variations. However, there are welcome signs of stabilisation and potential recovery, with jobs numbers rising, but we have a long way to go before reaching pre-recession levels. Accessing finance remains a serious challenge to economic recovery and growth, whilst the spiralling cost of energy is one of the biggest and most unpredictable overheads that will continue as a brake on growth.
What one economic policy area should the Executive focus on?
Of all the Executive’s devolved powers, the one which could be used to set Northern Ireland apart as a competitive place to do business is employment law. We are the only UK region where this is devolved, so there is an opportunity to strip away the barriers to employment. Surveys by the Federation of Small Businesses show that one-third of small businesses here wouldn’t consider employing anyone because of fear of tribunals and costs. Until the Executive addresses that issue, it will not have maximised opportunities for growth.
What is your medium-term outlook for the economy?
Looking ahead, if employment law is reformed, energy prices reduced and powers obtained over corporation tax rates, Northern Ireland has the potential to become one of the most vibrant economies in Europe. That is the goal and the challenge.
Paul MacFlynn · Northern Ireland Researcher
Nevin Economic Research Institute
What is your assessment of the economy’s current performance?
The Northern Ireland economy, now five years into an economic slump, is still underperforming. Recent output statistics show the economy has yet to find the floor and activity is still being held back by the construction sector. This sector continues to decline and all indications from the recent chartered surveyors’ survey point to continuing stagnation in that sector. Figures for foreign direct investment released last month by UK Trade and Investment showed a welcome increase for Northern Ireland, but FDI or even exports will not on their own deliver an economic recovery. One only has to examine the situation in the Republic for evidence of this.
What one economic policy area should the Executive focus on?
The Executive needs to take serious action to support the domestic economy through public investment. The NERI has proposed an energy retrofitting scheme funded through leverage from Northern Ireland’s public housing stock. We need a real jobs guarantee if we are to make any kind of inroads into youth unemployment, which is arguably the greatest threat to the economy now and in the future.
What is your medium-term outlook for the economy?
Over the medium term, the greatest threats to Northern Ireland still remain external. Continuing fiscal austerity within the UK and the euro zone has the potential to solidify high unemployment and stagnant growth for many years to come.
Professor Neil Gibson · Director · Northern Ireland Centre for Economic Policy · University of Ulster
What is your assessment of the economy’s current performance?
The economic ‘mood’ has certainly improved in Northern Ireland. Firms and consumers are reporting higher levels of confidence and indicating a willingness to spend. For half a decade now, spending has been depressed. Given that the UK Government’s approach to the lack of demand in the economy has been (bizarrely) to cut spending, it is to the private sector that we must look for signs of economic growth. Business and consumer confidence is slightly surprising given that underlying conditions have changed little.
What one economic policy area should the Executive focus on?
Clearly the focus must be on helping businesses grow so perhaps it is time to listen more carefully to what they are telling us. Survey after survey tell us that rising business costs are the primary issue, much more so than the often-discussed access to finance issue. An urgent review of the way we give money out to firms (grants) and take money off them (tax) might be a useful place to start in seeing if business costs can be reduced.
If we were to stop giving grants to companies, dismantle the expensive apparatus for giving and administering the grants (and the similar apparatus for collecting and policing business rates), this would go a considerable way towards covering the approximate £500 million cost of removing business rates. At the same time, it would be much simpler and would benefit all firms of all sizes and all sectors. Perhaps this is too controversial but what else are we considering as a response to the rising cost of doing business in Northern Ireland?
What is your medium term outlook for the economy?
Economic growth is modest amongst our key trading partners and real incomes are still falling for most consumers. For these reasons, recovery will be at a modest pace and sadly, for many, it will not feel like a recovery at all.
