Innovative solutions needed for economy, energy, environment and how we work
LAST week I attended two events where CBI members had asked me to provide a quick overview on the economy.
Strangely, I found myself being more upbeat that I have been in a long time.
Despite the fact the official economic growth data remains subdued; there are definitely a few chinks of light at the global, the national and the local level that should not be ignored.
At the global level one such chink is the recent thawing in US-China tensions which provides some optimism and suggests that as trade risks diminish the global slowdown may have started to bottom out. There has also been a welcome (although temporary) truce between the US and France around the taxation of the digital economy.
Trade wars and the imposition of tariffs and quotas are not good for economic growth. But economic growth rates influence election results and therefore it is highly likely that the prospect of an upcoming US election has helped to focus political minds in reaching compromise.
In the UK the economic data has been mixed. Despite the very poor GDP data we saw at the end of last year, the labour market has proved to be resilient. Across the UK, most regions and nations have seen an increase in employment, with unemployment broadly remaining unchanged.
Indeed, the UK employment rate stood at a record high, with the unemployment rate remaining close to record low. And there was the strongest employment growth in 10 months with more than two thirds of the growth driven by women.
Creating a labour market that supports more women in jobs is critical to achieving a fairer, thriving economy. The number of self-employed people in the UK has pushed above five million for the first time, showing the increasing importance of different flexible working arrangements.
For this to continue, there must be the right digital infrastructure in place, so the current plans to roll out of superfast broadband infrastructure across all regions (including Northern Ireland) should support continued growth in entrepreneurship.
On Wednesday last the CBI’s Industrial Trends Survey also produced some interesting insights. The survey, which covered around 300 manufacturing companies across the UK, showed that manufacturers have become more optimistic.
The proportion of manufacturers expecting business to improve was 23 per cent larger than the share predicting conditions to worsen in the three months to January - the strongest improvement in optimism since 2014.
The swing in sentiment between this survey and the previous one in October was the biggest recorded by the CBI Industrial Trends Survey, which has been published since 1958.
By Friday there was further evidence that business sentiment was on the rise from a different source as IHS Markit’s Composite PMI survey, a key business activity index, moved from 49.3 (December) to 52.4 (January). Anything over 50 suggests expansion, so this survey also demonstrates that companies are now starting to feel more upbeat.
Closer to home the new year brought with it restored power sharing in Northern Ireland and the Executive is now back in action. We now have an opportunity to repair our international reputation and delivering ambitious solutions to the many challenges that we face.
We also have the opportunity to work towards that vision of a thriving Northern Ireland economy which is outward looking, has high but sustainable levels of economic growth, attracts investment, supports enterprise and builds jobs opportunities for young people. That vision can only be achieved with a new NI Economic Strategy.
Any such strategy must be firmly focused on improving living standards for all, with a vibrant economy and world class public services.
But politicians will face tough choices when it comes to the funding and the transformation of our public services and they cannot shy away from the harsh decisions on revenue raising and focused expenditure.
They must also keep in mind that it is economic activity from business that creates jobs, raises revenues from income tax, corporation tax, business rates, capital gains tax etc.
For the economy to succeed business must thrive and local politicians must consider the creeping costs of running a business in Northern Ireland.
With the Executive back we can now press on with infrastructure investment. Public money will not be available for everything we want to do and therefore we need to develop new ways to fund critical infrastructure projects in a more financially sustainable and long-term way.
It’s no secret that Northern Ireland has a critical funding deficit in many areas, including water and wastewater infrastructure, as well as transport and road maintenance. The private sector wants to be involved in the delivery and financing of new infrastructure investment in Northern Ireland and it will only be when government and the private sector collaborate to bridge that funding gap that real progress will be made.
With the new Executive in office, Northern Ireland can finally deliver that much needed energy strategy to ensure that we have security of supply, a clear path for investors, competitive prices for consumers and a reduced carbon footprint.
And, of course, that strategy must prioritise the development of the north-south interconnector which is a win-win for electricity users in both jurisdictions.
We now also have the opportunity to address Northern Ireland’s skills crisis. That means reforming the Apprenticeship Levy, ensuring we’re able to employ the talent we need at all skill levels and having the training in place to up-skill and re-skill employees as technology rapidly transforms the workplace.
Finally, with the Executive back we should now have a united regional voice feeding into the future UK/EU trade agreement negotiations. We at the CBI will ensure the voice of business in this region continues to be heard, on this as well as on the other issues that matter to our economy.
As Northern Ireland starts this new decade, new innovative solutions will be needed for the economy, for energy, for the environment and for the way we work.
Firms are starting to feel more optimistic about the future and they understand their role in helping to find these solutions. Let’s hope that optimism spreads.