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Brexit hits business confidence in Northern Ireland

Published 08/08/2016

The weakness in sterling increased costs
The weakness in sterling increased costs

Northern Ireland business confidence has declined for the first time for more than a year following the Brexit vote.

The number of new orders decreased in July for the first time since April 2015 as the decision to leave the EU rocked local companies, according to a survey from Ulster Bank.

Firms in the service economy had the most difficult month - with activity and new business falling at the sharpest rates since early 2013.

The weakness in sterling also increased costs, as the price of imported items rose.

Richard Ramsey, chief economist in Northern Ireland for Ulster Bank, said the country was following the trend set in the rest of the UK.

He said: "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.

"Output decreased on the back of a reduction in new orders - itself the first decline since April 2015.

"When looking at the UK regional breakdown, it is clear to see that Northern Ireland firms were by no means alone in reporting a more challenging July."

The Purchasing Managers' Index report was produced for Ulster Bank by Markit.

The picture was not of uniform gloom, as employment continued to increase and companies were able to secure greater new export business.

Mr Ramsey added: "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.

"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.

"The weakness of sterling following the referendum played a key role in certain aspects of the local economy during the month.

"T he rate of cost inflation accelerated sharply and was the fastest since March 2012, as the costs of imported items increased. But on the flip side firms were able to take advantage of an improved competitive position to secure growth of new export orders."

The service sector was the only area not to record job creation in July, with staffing levels left unchanged.

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