Belfast Telegraph

Thursday 21 August 2014

PwC's note of caution over uneven recovery

The Challenger 605 business jet, one of a range of planes and plane parts manufactured by Bombardier. The aerospace sector has been held up as one of the poster boys of our recovery in the Northern Ireland Economic Outlook report compiled by PwC
The Challenger 605 business jet, one of a range of planes and plane parts manufactured by Bombardier. The aerospace sector has been held up as one of the poster boys of our recovery in the Northern Ireland Economic Outlook report compiled by PwC

Northern Ireland is facing a two-tier economic recovery with unskilled and low-paid workers missing out, warns the latest Northern Ireland Economic Outlook (NIEO) from PwC.

Today's report said key indicators show the economy is "well on its way to recovery" with nine months of continuous improvement in manufacturing and services.

The outlook said one of the main success stories was the Northern Ireland aerospace and defence sector, where 8,000 direct jobs contribute £1bn a year of sales to the economy and four companies in the province are amongst the world's top-100 aerospace and defence contractors.

However, construction and retail remained subdued, with employment falling in both sectors over the last two years.

And PwC warned that the mixed private sector performance, combined with Northern Ireland's claim to the UK's highest levels of negative equity and fuel poverty, suggest that a two-stage recovery is taking place.

That could mean that the unskilled and low-paid may not experience the full benefits of the recovery, with PwC forecasting the Northern Ireland economy would grow by 2% this year and next.

According to PwC, output growth expectations from Northern Ireland's private sector grew faster than a number of other UK regions in the three months to February, and matched the overall UK average growth for the period.

But Dr Esmond Birnie, PwC's chief economist in Northern Ireland, said the future may not be so rosy and that Northern Ireland's forecasts were behind.

"Consumer confidence is at a five-year high and there is a general sense of optimism in the local economy.

"Nevertheless low income households have suffered disproportionally as inflation ran ahead of wages, while fuel poverty is the highest of the 12 UK regions."

Northern Ireland was also at a disadvantage because it was overly reliant on jobs in the public sector, where the austerity programme was due to get even tighter.

Dr Birnie added: "We forecast that the local economy will grow by around 2% in 2014 and 2015, which is less optimistic than some other commentators.

"We remain concerned that external factors could restrain the pace of recovery and that the economic benefits will not be distributed across the region."

Dr Birnie said that services have been the real driver of UK recovery and Northern Ireland employment growth has been boosted by public sector recruitment.

"While job creation in Northern Ireland during 2013 was very encouraging, considerable employment growth came from the public sector, where both the chancellor and assembly finance minister have recently warned that the austerity programme will become even tighter."

That meant the onus for growth was on the private sector rather than the public sector, he said.

However, the month of April alone has seen announcements of around 2,200 jobs in the private sector in a range of industries.

BACKGROUND

PwC today forecast growth of 2% in the economy in Northern Ireland in 2014 and 2015. However, they warn that the benefits may not be universally felt, as Northern Ireland continues to struggle with the UK's highest rates of negative equity and fuel poverty. But the announcement of over 2,000 private sector jobs do set an optimistic background for an admittedly mixed outlook.

Aerospace sector a big driver of growth

By Margaret Canning

PwC'S latest outlook reflects that Northern Ireland's recession was deeper than other UK regions, and that we depend on a smaller private sector for recovery.

And while unemployment is falling, our claimant count is now 6.3%, compared to a UK average of 3.4%. That meant the province is still a long way off the boom times of 2007, when unemployment at 2.6% matched the UK average.

However, today's economic outlook reiterates the good news on jobs -- there were 15,500 more employees at the end of 2013, compared with December 2011

The main job gains over the two years were in financial and business services (2,640), the public sector (2,230), manufacturing (1,080), tourism and leisure (660) and food processing (320).

The outlook considers in detail the aerospace and defence sector which currently has around 17,600 direct and indirect employees and contributes £1bn annually of sales to the economy.

PwC says that Northern Ireland aerospace companies perform well in the global league table with four companies in the global top-100 and a total of around 50 firms involved in sub-supply work. Measured by annual sales, Bombardier ranks 16th, followed by Thales at number 18, with B/E Aerospace and Magellan Aerospace ranked 44th and 80th respectively.

Altogether, PwC says Northern Ireland aerospace companies account for around 4% of the total UK aerospace and defence market by value and contribute around £34m a year to investment in research and development.

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