NI econ­omy faces worst con­di­tions for a decade, ex­pert warns

Anal­y­sis fears re­ces­sion and the loss of 18,000 jobs

Belfast Telegraph - Business Telegraph - - FRONT PAGE - BY MAR­GARET CAN­NING

NORTH­ERN Ire­land could slip into re­ces­sion next year with a no-deal Brexit likely to cost 18,000 jobs amid the tough­est con­di­tions for a decade, ac­cord­ing to a re­port.

EY’s Eco­nomic Eye also said it had down­graded its pre­dic­tions for growth in the econ­omy this year from 1.1% to 1.0%, in the event of an or­derly Brexit.

But if there is a no-deal Brexit, EY to­day pre­dicts that the econ­omy would shrink by 0.6% next year, though growth would re­sume the year af­ter. In the sec­ond re­ces­sion warn­ing this week, EY Ire­land chief econ­o­mist Neil Gib­son said: “The ex­ter­nal eco­nomic cli­mate is as chal­leng­ing as it has been for a decade.

“A no-deal Brexit has the po­ten­tial to push North­ern Ire­land into re­ces­sion and lead to a con­trac­tion in the labour mar­ket in North­ern Ire­land, which so far has con­sis­tently proven wrong some of our gloomier pre­dic­tions.”

But he said busi­nesses should take com­fort from the re­silience they have al­ready shown in chal­leng­ing con­di­tions such as the lack of an Ex­ec­u­tive.

EY’s re­port is the sec­ond re­ces­sion warn­ing for the prov­ince this week, af­ter the Ul­ster Bank pur­chas­ing man­agers’ in­dex sur­vey for Au­gust said the prov­ince’s econ­omy may al­ready be in re­ces­sion.

How­ever, EY’s job losses fore­cast is more op­ti­mistic than a Depart­ment for the Econ­omy re­port in July, which pre­dicted that 40,000 jobs would be at risk here in a no-deal Brexit in in­dus­tries with strong ex­po­sure to the EU.

EY said that North­ern Ire­land has now slipped be­hind the UK av­er­age growth rate af­ter a rel­a­tively strong 2018, and con­tin­ues to ex­pe­ri­ence lower lev­els of growth than the Re­pub­lic.

The Irish econ­omy is tipped to grow at 3% in 2020, be­fore slow­ing to 2.8% in 2021.

Pro­fes­sor Neil Gib­son, chief econ­o­mist for EY Ire­land, said: “The ex­ter­nal eco­nomic cli­mate is as chal­leng­ing as it has been for a decade... Although es­ti­mates of a no-deal im­pact vary con­sid­er­ably, they all sug­gest there will be a cost in the form of dis­rup­tion across the is­land.

“There is no doubt that the re­silience and adapt­abil­ity of busi­nesses will be tested, but their re­silience thus far with­out a func­tion­ing Ex­ec­u­tive and in the shadow of Brexit un­cer­tainty of­fers en­cour­age­ment.” But the EY Eco­nomic Eye said that North­ern Ire­land’s econ­omy would re­gain ground in 2021, and ex­pand by 1%. The Re­pub­lic would avoid re­ces­sion but GDP would dip to 1.3%. EY also pre­dicts a no-deal would re­sult in 60,300 fewer jobs across the is­land by 2022, with 41,500 jobs go­ing in the Re­pub­lic and 18,800 here.

Michael Hall, man­ag­ing part­ner at EY NI, added: “Firms must be ready to re­act quickly when clar­ity fi­nally emerges over the na­ture of the UK’s exit from the EU. Low lev­els of pre­pared­ness, par­tic­u­larly among smaller firms, is not sur­pris­ing given the level of un­cer­tainty, but nim­ble­ness and adapt­abil­ity may be the dif­fer­ence be­tween sur­vival and clo­sure for some. Many larger firms have pro­gressed well with ba­sic prepa­ra­tion but more substantia­l struc­tural changes, un­der­stand­ably, re­main largely on hold.

“Look­ing at new ways of work­ing, sourc­ing new mar­kets and de­vel­op­ing new part­ner­ships and re­la­tion­ships is yield­ing re­sults al­ready for many firms in North­ern Ire­land, but not ev­ery busi­ness has the re­sources at its dis­posal to in­vest in new ar­eas.”

Re­silience: econ­o­mist Neil Gib­son

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