Business

Northern Ireland still suffering economic hangover - more than a decade after crash

HANGOVER: Northern Ireland is still suffering from the financial crash, more than 10 years on

NORTHERN Ireland continues to suffer a crippling hangover from the financial crisis - more than a decade on.

Where its economy was once the star performer in the UK outside London, the lustre has long gone, according to PwC's latest UK Economic Outlook.

Growth in the north is already at rock bottom this year at a meagre one per cent, according to PwC.

And that is predicted to edge up only marginally to 1.1 per cent in 2019, the lowest of any of the UK's 12 regions, the report says.

Slowing consumer spending and employment prospects are impacting the local economy, which is still operating without any ministers at the helm and where businesses continue to lament the lack of macro decision-making.

PwC regional chairman Paul Terrington said: "Between 1998 and 2007, Northern Ireland was the second fastest-growing region after London, but suffered the greatest reversal in the immediate aftermath of the financial crisis."

"Since then London is the only region to have increased its overall share of gross value added (GVA)."

A detailed comparison in performance over the past two decades indicates that Northern Ireland's manufacturing contribution to the region's GVA increased by around 1.4 per cent between 2009 and 2016, well ahead of the UK average increase of 0.6 per cent and most other regions other than Wales and the Midlands.

But over the same period, the north had the second-lowest increase in professional, technical and scientific services' contribution to GVA, while the regions also experienced the biggest fall in public sector employment.

Mr Terrington added: "Our analysis of Office for National Statistics (ONS) data suggest that there is a positive relationship between relative regional GVA growth rates and education and skills, business formation rates and employment in professional and technical services.

"Regions reliant on public sector employment have grown more slowly, while employment alone is not a proxy for productivity or regional prosperity."

ONS data shows that Northern Ireland's previously improving employment rate fell by about 1.2 per cent in the year to December 2017 - the largest fall among the 12 UK regions.

The UK Economic Outlook says real consumer spending growth is expected to slow from 1.8 per cent in 2017 to 1.1 per cent this year, but is projected to edge up to 1.3 per cent in 2019 and has the potential to return to around 2 per cent in the 2020s assuming a reasonably favourable Brexit outcome and productivity gains from automation.

Housing and utilities will continue to consume a rising share of household budgets according to PwC's analysis, reaching over 30 per cent by 2030 compared to around 27 per cent in 2017.

Financial services and personal care are also likely to take a rising share of people's total spending, though the share going on clothing, food, alcohol and tobacco, and transport will decline in the long run.

PwC's chief economist John Hawksworth said: “Consumer spending accounts for more than two thirds of UK GDP, making it the most important driver of economic growth.

"But it has slowed significantly recently as higher inflation has squeezed consumer spending power and it looks set to remain sluggish in the short term, dampening overall economic growth.”

PwC also says that automation could reduce the number of retail and wholesale jobs in the long term by more than 40 per cent, but also benefit consumers by lowering prices and creating demand for other services and new jobs where tasks are less prone to automation.

Meanwhile despite the pessimistic PwC prognosis for the region's economy, Belfast remains one of the world's leading cities for quality of living (a global study by Mercer which measures 450 cities in areas like access to public transport, sanitation, air quality, traffic congestion and even looking at its hospitality offer).

Belfast came out 68th overall - which was behind Dublin (34th), London (41st), Edinburgh (46th) and Glasgow (50th), but ahead of the likes of Prague, Hong Kong, Seoul and even Dubai.

"Cities like Belfast continue to rank highly for quality of living, and remain attractive destinations for multinationals and their employees," said Kate Fitzpatrick, Mercer's global mobility practice leader for the UK & Ireland.

Enjoy reading the Irish News?

Subscribe from just £1 for the first month to get full access

Today's horoscope

Horoscope


See a different horoscope: