Business

Brexit stockpiling 'will have sting in the tail for economy' - claim

Launching the latest Chamber quarterly barometer are (from left) Chris Morrow (NI Chamber head of policy), Ann McGregor (Chamber chief executive), Maureen O’Reilly (economist for the QES) and Brian Murphy (managing partner at BDO)
Gary McDonald, Business Editor

BUSINESSES in Northern Ireland are stockpiling materials and cash as they bunker down for whatever the Brexit outcome may be - and that has boosted the region's economy.

But when those hoarded goods are eventually traded through it will cause "a major sting in the tail", BDO's regional managing partner Brian Murphy believes.

A surge in manufacturing output in March was linked to manufacturers and firms hoarding goods in the run-up to what was supposed to be Brexit, with companies stepping up production to build inventories in advance of the original March 29 Brexit day, a date since extended.

But speaking at the launch of the NI Chamber of Commerce's latest quarterly economic survey (QES), Mr Murphy fears this understandable degree of caution could have longer-term consequences.

"Businesses have been stockpiling in fear of a hard border, so that if their customers need goods quickly, they'll have them. I can understand why they are doing this, but it is distorting some of the numbers.

"If there's not a cataclysmic Brexit - and I don't think there will be - all those goods will have to be traded through. All of a sudden there will be a glut, which will affect prices.

"All the indications suggest there won't be a hard border, even if it's a crash out and no deal, and there won't be any checks.

"So while stockpiling may be a prudent thing to do, it could cause a sting in the tail."

Mr Murphy said the current lack of investment by business was not as a consequence of a lack of vision, but because of the uncertainty.

"The business plans have been written and firms want to spend. But if you're sitting looking at a major capital expenditure project yet don't know the fundamentals of where your business will be trading in the next few months or years, it's not unreasonable to be cautious," he added.

The latest Chamber QES revealed that key forward-looking indicators for the north's economic health weakened in the first quarter of 2019.

It said that while businesses are trying to grow sales, exports and jobs, they are becoming less confident around prospects for turnover and profitability in the next 12 months, and investment intentions among members are also falling.

Three in five members also believe Brexit is negatively impacting on the ability to attract skilled workers, with a "skills mismatch" being a key concern.

A separate index from AIB said 57 per cent of small businesses in Northern Ireland and 36 per cent in the Republic were now postponing or cancelling their plans because of fears around Brexit, with sentiment dropping across all sectors including tourism, retail and manufacturing.

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