Positive signals: Is Northern Ireland witnessing the green shoot of recovery?
After six painful years our economy looks to be on the road to recovery but it’s likely to a long journey, writes John Mulgrew
‘What word? Recession? What should we call it then?” “I don't care. Call it a boat show, or a beer garden, or a bagel.”
It's the cautious reverence used in the often witty and occasionally self-aggrandising US political drama The West Wing in order to avoid using the ‘R' word — a word now in common usage throughout Northern Ireland.
We've come to accept ‘recession' and the slightly more alarmist ‘financial meltdown' as everyday catch-all terms for our severe lack of fiscal buoyancy.
But in the past few weeks and months, a host of what are often termed as ‘business barometers' — including economic activity, house prices, |unemployment and car sales — have pointed to an upturn in the region’s outlook, and for us all to ask, is that it?
Two cautiously optimistic leading economists have said Northern Ireland has both “turned the corner” and “it's just the beginning for us — but we're starting to grow slowly” — only days after the ‘official’ sixth birthday of the downturn.
“The recession was like falling off a cliff, and then walking back up the stairs to the top,” said Neil Gibson, a director at Oxford Economics.
Ulster Bank PMI report for July, the latest, showed the region had witnessed its first rise in business activity since November 2007 — led by the manufacturing industry — despite continuing to lag begin the rest of the UK.
“The PMI is a good way of looking at it. It's saying, up until July you were having some firms reporting growth, some reporting declines, but from July the balance had shifted,” said Ulster Bank’s chief economist Richard Ramsey. “Almost a third of firms reported higher levels of activity, month on month.”
Unemployment levels have also |fallen to below the average for the UK, based on the latest labour force survey.
Yet despite a further 500 less on the dole queues, the number of those classed as economically inactive grew by some 10,000 over the last quarter — significantly higher than that of the UK average.
Northern Ireland also suffers from above average levels of youth unemployment.
One recent initiative, proposed by the Executive, is aiming to rejuvenate what has been one of the worst hit groups of the recession, by introducing 50 new apprenticeships for younger people — bringing an opportunity to those keen to join the ICT (information and communications technology) workforce in Northern Ireland.
It's a sector which, in the past few months and years, has witnessed a tranche of technology companies |dipping their toes in the chilly waters of Northern Ireland, or, in some |cases, further expanding already well-established operations.
US firm Allstate announced in May it was to create up to 650 new posts in Belfast, Londonderry and Strabane — the second largest single tranche of jobs since devolution in 2007, and further bolstering Northern Ireland's position as a tech-hub.
Put simply — Northern Ireland's ever-burgeoning portfolio of top-end tech-savvy firms from across the water is bigger than it was in the most |recent pre-recessionary days.
And according to Neil Gibson, inward investment has an often unintended effect.
“We are a small business economy and there is no doubt that in terms of confidence, as well as the shot in the arm it gives us, it’s very impactful,” he said. “The symbolism, the jobs. People hear about the new posts, suppliers then hear about that.”
But while some areas of the service sector and local manufacturing giants such as Wrightbus continue to fuel a return to growth, the impact of inflation is also a “silent killer”, noted Richard Ramsey.
“The recovery in the economy is taking hold, but the recovery in household standards of living is probably not at that stage yet — that's the difference,” he said.
Northern Ireland faces a more difficult climb out of the doldrums, due to its diminutive private sector.
“Structurally, Northern Ireland is likely to lag somewhat because we have a smaller private sector — we have a very big public sector,” said Mr Gibson.
“However, we have a much greater potential for picking |up in the housing market and construction sector. We should have significantly more demand in property, but not necessarily at the moment.”
As the costs of homes see some form of stabilising, |according to the latest figures, we may not want to see a return the big-ticket prices in the days before the property collapse.
“We would like to get back our transactions. But, we have to very mindful, basing them on a solid foundation, rather than a bed of debt,” said Mr Gibson.
On a wider scale, although Europe — and more specifically the eurozone — has suffered from an often crippling economic situation, last month it managed to pull itself up by the coattails and produce growth — albeit modest.
It's the first time that output in the single-currency bloc has risen since the end of 2011.
So, if we’re on the right track, but haven't yet reached a plateau on which both businesses and consumers can sit back, what indicators should we be looking for? According to the two senior economists, there’s one key |sector which can be used as a litmus test.
“The biggest, single, tangible example of what recovery will look like is the construction |sector,” said Mr Ramsey. “After losing jobs for five or six years, once you get jobs there, that is a key sign to things turning for the better.”
Mr Gibson said “the real |potential will be to get the |construction industry going”.
“The whole thing — it’s the start of a challenging and long journey, but at least we are on it.
“My view is we really have turned the corner, but turning the corner is the start of a longer process. But it is getting better.”