Business

No sign of furlough cliff edge, but Northern Ireland faces new cost of living crisis

A new cost of living crisis could squeeze household incomes and hit businesses reliant on consumer spending.

THERE was little sign of a surge in redundancies in the run up to the end of furlough, but a new ‘cost of living crisis’ could push more people in Northern Ireland into the ‘working poor’ status.

Just shy of 30,000 people were still registered under the Coronavirus Job Retention Scheme at the end of August.

But fears that September 30 could herald a cliff edge for thousands of workers were somewhat allayed by the publication of the latest Northern Ireland labour market report on Tuesday.

Companies are legally required to notify the Department for the Economy (DfE) when planning to lay off more than 20 staff.

Some 130 redundancies were confirmed during the month, but October’s report, compiled by the Northern Ireland Research and Statistics Agency (Nisra), recorded no new cases of employers planning redundancy programmes in response to the end of the government support.

According to the report, the number of HMRC payrolled workers now stands at 765,600, four per cent higher than this time last year and 1.3 per cent higher than at the outset of the pandemic in March 2020.

The north’s total workforce still remains around 19,000 below pre-covid levels, largely the result of the severe impact on the local self-employment sector, which has yet to recover.

Northern Ireland has experienced the steepest fall in self-employment within the UK (-31%). The sharp payroll growth suggests many self-employed workers have moved into payrolled jobs.

Ulster University economist Mark Magill said the latest data does show a welcome change in fortune for younger people.

The 16-24-year-old age bracket had been the worst hit during the pandemic. But he said the latest employment data points to a turning point.

Ulster Bank’s chief economist Richard Ramsey said while the UK government intervention had prevented the Covid-19 pandemic turning into an economic depression, the surging costs for households threatens a new ‘cost of living crisis’.

The economist said Northern Ireland is back to where it was in 2011 to 2014, when UK inflation exceeded average earnings growth.

He warned that the surging cost of energy and goods threatens to put a squeeze on household incomes and businesses reliant on consumer spending.

While unemployment has traditionally been used as the barometer to measure the economic impact of recessions, Mr Ramsey said having a job now doesn’t necessarily protect a household from poverty.

“Despite unemployment remaining at historically low levels, in work poverty is expected to rise in the months ahead.

“For many, an increasing share of the pandemic savings may now be required for utility bills rather than to assist a consumer led recovery," he said.

“Rates of pay and inflation will be the most closely watched statistics over the next six months or so. Whereas focussing solely on the unemployment rate is so last year.”

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