Business

Brexit to blame for north's predicted subdued economic growth in 2019

BREXIT-related uncertainty will see the north's economy grow by just 1 per cent this year, according to Danske Bank.

The bank's latest forecast is a downward revision from its previous growth prediction of 1.2 per cent in 2019. Economic growth of 1.3 per cent is forecast in 2020.

In the quarterly report, Danske Bank has said that the services sectors are likely to continue to underpin growth, with administrative and support services, information and communication and professional services expected to be the fastest growing over the next two years.

Output growth in the wholesale and retail trade sector is forecast at 1.1 per cent in 2019 and 1.5 per cent in the following year.

Manufacturing is expected to grow by a more modest 0.9 per cent this year and increase to 1.3 per cent, based on the assumption that a Brexit deal is eventually agreed.

Danske Bank said it expects growth in the construction sector to reach 1.2 per cent this year and 1.5 per cent in 2020.

Public administration and defence continues to have the weakest outlook of all the sectors of the Northern Ireland economy. Output is expected to contract by 1 per cent in 2019 and by a further 0.8 per cent in 2020.

Danske Bank estimates that employment growth in Northern Ireland will slow to 0.5 per cent in 2019 and to 0.3 per cent in the next 12 months as economic growth remains subdued, spare capacity in the labour market erodes further and firms begin to shift their focus away from recruiting workers and towards improving productivity.

In relation to unemployment, it is forecast that the average annual rate will remain unchanged at 3.6 per cent in 2019 and rise slightly next year to 3.8 per cent.

Danske Bank chief economist, Conor Lambe said Brexit is a key factor in explaining the revision in the growth forecast.

“Inflation is marginally below the Bank of England’s 2 per cent target, and with wage growth coming through at stronger rates, household spending power is expected to continue its recovery in 2019. However, Brexit-related uncertainty looks set to constrain business investment and weaker global growth is expected to lead to some challenges for exporting businesses," he said.

Mr Lambe believes Brexit and local political uncertainty represent the two biggest risks to economic growth in the north and warned a no-deal scenario would have "severe consequences" for both the UK and Northern Ireland economies.

"With high levels of uncertainty continuing to linger, Brexit remains a drag on economic growth and it poses a significant risk to Northern Ireland’s future economic prospects."

“Northern Ireland remains without a Stormont Executive, following the collapse of the power-sharing administration back in January 2017. Businesses and consumers are continuing to express concerns about the lack of political stability in Northern Ireland, with investment decisions and confidence both being negatively affected by the uncertainty," Mr Lambe added.