Business

Signs the north's economy is slipping into recession

L-R: Ann McGregor (NI Chamber); Michael Jennings (BDO); Chris Morrow (NI Chamber) and Maureen O’Reilly (economist for the QES). Picture by Kelvin Boyes
Ryan McAleer

NORTHERN Ireland's economy is in decline with signs it is slipping into recession, a new report suggests.

The quarterly economic survey, conducted by NI Chamber and business advisory firm BDO, indicated that much of the recovery in the economy since the 2007/08 credit crunch has now been eroded.

Some 211 businesses took part in the survey, which covered July to September, the period in which Boris Johnson became British Prime Minister.

Brexit and the lack of an Executive remain major issues for businesses here.

Four-in-five believe a recession is now likely in Northern Ireland in the next six to 12 months.

Almost half of the companies surveyed (46 per cent) said Brexit had negatively impacted its turnover, up from 35 per cent at the start of the year and more than double what firms reported in the months after the EU referendum. In all, two-thirds of businesses said Brexit has had some negative impact.

Almost half (48 per cent of businesses) said they had scaled down or put a freeze on investment plans within the north, while 37 per cent indicated they were rolling back on recruitment plans.

Order books across the manufacturing and services sector are now “very weak” for both UK and export sales, according to the report.

Chief Executive of the Northern Ireland Chamber of Commerce and Industry, Ann McGregor, said economic conditions during the third quarter were arguably the weakest in almost a decade.

“This is clear evidence that the impact of the ongoing Brexit uncertainty is being felt more harshly in Northern Ireland than anywhere else. The lack of a functioning Executive visibly adds to this uncertainty and combined with Brexit, creates an environment where key strategic business decisions are being abandoned or delayed.

“The Northern Ireland economy cannot flourish without investment by our local businesses and they need the support of government to create an environment which is conducive to this,” she said.

“This is not scaremongering – it is a stark reality check for business leaders, employers, politicians and anyone with a vested interest in the Northern Ireland economy. Behind each and every one of these statistics sit thousands of real, local businesses who are feeling the harsh impacts of Brexit uncertainty and the political vacuum at Stormont.”

BDO's Michael Jennings said many of the manufacturing companies that had enacted stockpiling strategies in the lead up to the March 31 2019 Brexit deadline, were now facing significant cashflow problems.

In one response to the survey, an unnamed manufacturing firm said: “Cashflow has been hammered as we've had to build up much larger stocks in case of a no deal Brexit. We have arranged with the bank for a larger overdraft for a brief period whilst we build up stocks. We have our fingers crossed that a downturn doesn't occur. If this happens, we will be under undue financial strain.

"In normal economic conditions, we wouldn't have had to make such provisions and we wouldn't have these pressures affecting our normal business.”

Mr Jennings said many businesses, particularly within manufacturing had put investment plans on hold since the 2016 EU referendum in the hope of obtaining clarity around issues such as tariffs, the border and customs.

"This approach has meant many businesses have been limited in their capacity for growth, which would have in turn had a positive impact on our local economy, employment and product offering," he said.

“Despite this we are continuing to see a positive commitment to recruitment from both manufacturing and services and both are working to almost full capacity, with the services sector in second place across the regions.

“As we approach October 31, it is hoped that clarity is finally provided on the big issues that are impacting the growth of the NI business community.

Our local businesses are not lacking in ambition or indeed entrepreneurship, they are willing to invest to grow their specific sector, but they desperately need decisions to be made on these key issues to allow them to progress their plans.”

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