Recovery of sorts for Northern Ireland's economy - but batten down for a difficult winter

Road to economic recovery - business financial concept.
Road to economic recovery - business financial concept.

A RECOVERY of sorts is under way in Northern Ireland's already fragile economy.

But despite huge swathes of the economy reopening over the summer, business conditions remained weak and the region is also facing a sustained cash crunch.

The findings are contained in the latest NI Chamber of Commerce/BDO quarterly economic survey (QES), which revealed that virtually all key business indicators remain negative in July, August and September, with more businesses reporting worsening conditions than those signalling any improvement.

Chamber chief executive Ann McGregor cautioned:?“Business conditions remain hugely fragile in the face of uncertainty, with the prospect of a difficult winter to come. And clearly our economy will need more support.”

Around 250 businesses in the north, between them employing 200,000 staff, contributed to the latest study.

And while conditions continue to worsen, its authors stressed it was important to stress that it is not driven by pure market failure, but instead by the pandemic.

Sectoral analysis of the findings suggests that manufacturing performance is showing tentative signs of improvement, though its order book remains weak, while firms in the service sector remain most negatively impacted, with consumer-facing firms particularly exposed.

While the third quarter pointed to an improvement compared to the unprecedented percentage of firms reporting decreases in sales in quarter two, when the economy was effectively shut down, all key indicators remain significantly weaker than before the pandemic struck.

BDO's regional managing partner Brian Murphy said: “We cannot avoid the cold hard facts of where the economy is right now, but there's a momentum building.

“And deep in the data there are some positives. For instance, in the last survey, 20 per cent of businesses said they feared for their very survival. That has dropped to 3 per cent this time.

“But there's is a long road ahead for many, and as the furlough scheme ends and will be replaced by a less generous successor, many jobs are still at risk, so it's vital the Executive recognises the gaps in support mechanisms for some and addresses these urgently.”

He added: “Although Brexit has taken a back seat, it's still very much a critical consideration given the uncertainty with regards to trading arrangements.

“As we enter this new phase it's important businesses are afforded both flexibility and support to allow them to plan for their long-term sustainability.

“Businesses, in turn, recognise the need for adaptability, rethinking their current position to ensure they are best placed to maximise opportunities in what will be changing markets, trading circumstances and demands.”

Worryingly, the fieldwork for the latest QES took place before the prime minister’s announcement that a ‘second spike’ of coronavirus had hit the UK, and the subsequent introduction of new tighter national and local restrictions are already painting a concerning picture for business conditions in the fourth quarter.