Declan Flynn: Inflation – there's hope on the horizon
DESPITE all the promises from our politicians prior to the local election that they would do things differently, I think we were all aware that little would change in government circles.
The political issues that were pressing prior to the election would still be there when the excitement and fanfare was over. Issues relating to rising inflation and the cost of living have not gone away.
The Bank of England Monetary Policy Report in May reported that inflation was likely to rise to around 10 per cent this year, a level not seen in the last 40 years. The International Monetary Fund (IMF) has also warned that the cost-of-living crisis and Russia’s invasion of Ukraine will slow Britain's economic recovery from the pandemic.
Official figures show UK GDP increased by 0.1 per cent in February, slowing from the 0.8 per cent posted in January and to set this in context the economy grew 7.4 per cent in 2021, having shrunk 10 per cent in 2020 due to the pandemic.
To add to our woes, national insurance contributions are increasing from 12 per cent to 13.5 per cent and corporation tax rates are set to rise to 25 per cent from April 2023, from the current level of 19 per cent.
In combination these increases will undoubtedly make Northern Ireland a less attractive option for footloose international capital than our nearest neighbour, the Republic of Ireland, where corporation tax rates remain at 12.5 per cent.
Yet despite the gloom surrounding the macro-economic climate, transactions are continuing in the commercial property world.
There were numerous bids for the 190,000 sq ft Longwood retail park in Newtownabbey, with the eventual price substantially exceeding the asking price of £22 million. Ross’s Court, the home of Argos in the centre of Belfast, has been snapped up by the Martin Group and the 34,000 sq ft Montgomery House office building is due to complete in the next day or two.
On the retail front, food-to-go chain Pret A Manger has announced its plans to open on the island of Ireland for the first time. The sandwich franchise has confirmed it will open 20 shops in both Northern Ireland and in the Republic over the next decade.
Marks & Spencer has also continued to expand in Northern Ireland with the opening a new food hall at the Bridgewater Retail Park in Banbridge, despite the retailer’s concerns over the Protocol.
Business in general has adapted well to the Protocol and, despite soaring energy prices and issues around recruiting staff, a survey of 130 Northern Ireland firms, conducted by Perceptive Insight for Manufacturing NI and Tughan’s, reported that 67 per cent are experiencing growth/expansion so far this year - up from 59 per cent a year ago.
On a brighter note, the Bank of England expect that inflation will start to fall next year as they don’t expect the causes of the current high rates of inflation to persist. It is the bank’s view that it is unlikely that the prices of energy and imported goods will continue to rise as rapidly as they have done recently, and that some of the production difficulties businesses are facing will ease.
Most importantly they expect Inflation to be close to the 2 per cent target in the next two years. If inflation returns to close to the target rate it will certainly make everyone in the property world sleep easier at night.
:: Declan Flynn is managing director at Belfast commercial property agents Lisney.