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Uncertainty over EU vote slows growth in economy

By John Mulgrew

Published 10/05/2016

Danske Bank's Angela McGowan
Danske Bank's Angela McGowan

Northern Ireland's economy will grow at a slower pace this year as investments are put off amid uncertainty heading up to the EU referendum, it's been claimed.

That's according to an economic forecast from Danske Bank today, which has said Northern Ireland's economy will grow at 1.6% in 2016, revised down from 1.8%.

Those figures are based on the UK deciding to vote to remain as part of the UK during the June 23 referendum.

According to Danske Bank, slow quarterly growth in the run up to the June referendum has been caused by "heightened Brexit uncertainty".

However, the report adds that there is "no reason" the private side of the economy should not bounce back post-Brexit vote.

Angela McGowan, chief economist for Danske Bank, said: "We have already seen the economic consequences of heightened uncertainty around Brexit taking its toll on the exchange rate and investment levels.

"For example, UK commercial property transactions were down 40% in quarter one, relative to the same period last year.

"In addition, last month the UK's manufacturing sector experienced its first contraction since 2013 as uncertainty weighs on this sector. The construction sector has also slowed.

"However, it would be reasonable to conclude that a UK vote to remain in the EU will result in any lost or delayed investment being made good in the second half of the year."

Danske Bank predicts Northern Ireland's highest growth companies will be those in administration, the scientific services industry, IT and hospitality.

"We saw in the recent Danske Bank consumer confidence survey that expectations for spending in the local economy are fairly subdued which translates into a challenging few months ahead for local retailers," Ms McGowan continued.

"While it is hoped that low inflation will support household expenditure, slowing economic growth across the UK and Brexit uncertainties are bound to make consumers a little more cautious."

But a number of other sectors are being forecast to grow at below the average pace this year.

That includes manufacturing, construction, agri-business and healthcare.

The four areas make up around a third of the Northern Ireland economy in terms of overall output, and employ around 300,000 people here.

"The message remains that Northern Ireland's economy continues to expand, but the pace of growth is slowing," she said.

"While the continued reduction in the public sector jobs will weigh down overall growth in the short to medium term, by far the biggest risk to growth this year is Brexit which has lowered investment and growth in the first half of this year."

Belfast Telegraph

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