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Survey warns on slowdown to Northern Ireland economy after Brexit vote

By John Mulgrew

Published 08/08/2016

Ulster Bank’s chief economist Richard Ramsey
Ulster Bank’s chief economist Richard Ramsey

Northern Ireland's economy has suffered a decline following the Brexit result, the first major survey post-EU vote has shown.

The Brexit vote appears to have taken its toll on Northern Ireland, and the UK as a whole, after businesses here reported a decrease in activity in July - ending 14 months of expansion.

The latest Ulster Bank purchasing managers' index said July's figures "signalled that the month following the UK's vote to leave the EU saw declines in output and new orders in Northern Ireland".

While Northern Ireland took a post-Brexit hit, it contracted less than other parts of the UK.

Ulster Bank's chief economist Richard Ramsey said while Northern Ireland suffered, the figures showed it was "by no means alone" across the UK as a whole. And while it's "no doubt concerning" for Northern Ireland, "we shouldn't read too much into one month's survey", according to Mr Ramsey.

"After last week's UK PMI data showed falls in activity in each of the manufacturing, services and construction sectors in the month following the EU referendum, it is not a huge surprise to see the Northern Ireland private sector following suit and recording a return to contraction for the first time in 15 months," he said. "Output decreased on the back of a reduction in new orders, itself the first decline since April 2015."

London was worst-hit, while other areas, including the north and south-east of England, also suffered drops. A stark drop in the value of the pound also led to a sharp hike in business costs.

Of the four sectors surveyed, services was the worst performer, as activity decreased at the fastest pace since 2013. On the upside, job numbers continued to rise. But new business suffered its sharpest decline in more than three-and-a-half years.

"Some comfort can perhaps be drawn from the fact that the reductions in output and new orders in Northern Ireland were weaker than the UK average," Mr Ramsey said.

"Another positive aspect of the latest survey was that employment continued to rise, suggesting that firms may not be completely resigned to an extended downturn and hold out hopes that the drop in July will prove transitory."

He said the weakness of the pound "played a key role in certain aspects the economy during the month". And while that means import costs rising sharply, it also means companies saw improved exports. The construction sector contracted once again, but manufacturers were able to raise production on the back of new order growth and rising export demand.

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