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Northern Ireland economy due to grow slower than other UK regions

By John Mulgrew

Published 15/11/2016

John Hawksworth, chief economist at PwC
John Hawksworth, chief economist at PwC

Northern Ireland's economy is predicted to grow at a slower rate than any other UK region next year while the rate of job expansion here will also reduce, according to research today.

And PwC says the UK could face a public borrowing overshoot of over £100bn over the next five years. It's suggesting that Chancellor Philip Hammond's Autumn Statement next week may focus on public investment and infrastructure, with "little opportunity for tax cuts and giveaways".

The economy in Northern Ireland is expected to expand by just 0.6% in 2017, compared with 1.7% this year.

PwC's UK Economic Outlook also predicts that employment growth in Northern Ireland is likely to fall in 2017.

It says that "improved levels of export sales, both from the UK and Northern Ireland, do not reflect sluggish global demand and waning business confidence".

It adds that while the Brexit vote poses clear risks to the UK's trading position with the EU, there are also "opportunities arising" as a result of an exit.

Speaking ahead of next week's Autumn Statement, John Hawksworth, chief economist at PwC, said: "We expect the Chancellor to adopt a pragmatic approach in his Autumn Statement, allowing borrowing to take the strain of slower growth, while adopting revised fiscal rules that give him more flexibility to boost planned public investment in priority areas such as housing and transport infrastructure.

"However, he doesn't appear to have the money for large net tax cuts and is likely to continue to bear down on non-investment spending by both central and local government."

Mr Hammond will deliver the Statement on November 23.

Overall, UK economic growth held up better than expected in the months following the Brexit vote, particularly regarding consumer spending and services.

PwC says a decline in business investment is likely to be the main cause for a slowdown in GDP across the UK, "driven in particular by uncertainty about the UK's future trading relationships with the EU". "But we expect Brexit to exert a long, slow drag on growth, rather than giving the economy a short, sharp shock," Mr Hawksworth said.

Businesses should therefore not be complacent about the impacts of Brexit just because the initial affect has been less negative than some had expected.

"However, this also gives companies more time to adjust their strategies to mitigate the risks associated with leaving the EU, while also seizing the opportunities that exist in the world beyond Europe."

Andrew Sentance, senior economic adviser at PwC, said the challenge for UK policymakers is to "maximise trade opportunities through securing good access to the Single Market, even if it is no longer a member".

"Focusing on trade promotion in key non-EU markets like North America, Asia, the Middle East and Africa, rather than waiting for free trade deals with these regions, will be key, though there is a risk that the world trade environment could be affected by US policy changes under the new presidency.

"Boosting competitiveness by pursuing supply side reform at home linked to increased investment in housing, infrastructure and vocational skills should also help," Mr Sentance added.

Belfast Telegraph

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