The Northern Ireland economy is forecast to grow by 2.2 per cent this year - its best performance since the banking crisis first hit home in 2007, but it is unlikely to achieve the same levels of growth as the rest of the UK according to a new report from PwC.
The latest Northern Ireland economic outlook (NIEO) report suggests that while the local economy is growing the recovery is not widespread.
Dr Esmond Birnie, PwC chief economist in Northern Ireland says some of the high-level indicators like employment are camouflaging other areas where evidence of sustained recovery is less convincing.
Dr Birnie said: “Northern Ireland’s growth rate is the lowest of the 12 UK regions; the hangover of the property crash is evident in property prices and negative equity, while interest rates are anticipated to rise by the early part of 2015.
“Employment is only one measure of economic activity and while the falling jobless total is welcome, it needs to be accompanied by productivity gains, export growth and increased investment from both private and public sectors - and unfortunately that’s not the case.”
According to the latest economic outlook overall employment in the North increased by 20,000 people in the 24 months to March of this year – this increase was the result of new investment in business and financial services and a recovery of jobs previously lost in manufacturing and retail.
But the PwC report also highlights that local unemployment is still twice the level of the pre-recession peak and is falling at only half the pace of the UK average.
According to Dr Birnie the unemployment total in the North fell by 15 per cent in the year to July 2014, but the UK average fell by 30 per cent over the same period.
“Wages are still lagging behind inflation, productivity is broadly static and around a dozen private sector companies account for the bulk of manufacturing exports.
“There is certainly clear evidence of recovery, but that is more about slowly catching up on where we were in 2007, than demonstrating real growth of the kind being achieved by other regions, outside London,” Dr Birnie added.
The PwC report forecasts that the economic growth rate in the North could fall back to 2 per cent next year in line with an anticipated UK-wide slow down in recovery.
In addition to dealing with any potential slowdown the business advisers also warn that Northern Ireland may have to contend with the fall out from the continuing stalemate between local political parties over proposed welfare reforms and a reduction in funding from the UK Government – estimated to be in the region of £150 million in 2015 and another £1 billion over the following three years.
Dr Birnie said the Northern Ireland Executive’s inability to reach agreement on contentious issues from welfare reform to redevelopment proposals for the Maze Prison continues to “impact on business confidence at a time when confidence is essential to persuade the private sector to invest”.
The latest outlook report also considers how the Scottish independence vote on 18 September could impact on the North’s economy.
PwC warns that an independent Scotland could become a major competitor in terms of competition in tax and policy, particularly if the Scottish government were to make good on their commitment to cut 3 percentage points off corporation tax.
