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Business activity continues to flourish in Northern Ireland

Published 11/07/2016

Tourism at sites like the Giant's Causeway should benefit from Brexit thanks to the lower value of sterling
Tourism at sites like the Giant's Causeway should benefit from Brexit thanks to the lower value of sterling

Business activity in Northern Ireland has increased for the 14th consecutive month, new figures show.

The Ulster Bank Purchasing Managers' Index (PMI) said private sector firms had seen a solid and sharp rise in employment during June - with extra staff being hired to cope with bigger workloads.

The survey also reported a modest pick-up in new orders for manufacturing and service companies, but noted declines in new business for those in construction and retail.

Richard Ramsey, chief economist Northern Ireland, Ulster Bank, said: "This improvement in private sector activity is measured against subdued rates of expansion in May.

"Furthermore, the rates of growth in output and new orders are still much weaker than those recorded earlier in the year and remain well below the long-term average before 2009.

"It is also worth noting that the majority of survey responses were received prior to the UK referendum result. Since then, economists have slashed their growth forecasts for the UK economy.

"The consensus opinion is for marginal rates of growth next year, with an increasing number of economists expecting the UK economy to enter recession. Given its reliance on GB, Northern Ireland would be very likely to follow suit."

One of the most positive aspects of the latest survey concerned employment, with the rate of job creation in Northern Ireland the fastest of any UK region.

All sectors increased their staffing levels in June - with retail continuing to generate the biggest growth, it said.

Manufacturing firms reported a strong rebound in job creation after a sustained period of job losses, while the 20-month high in output was attributed to the exchange rate.

By contrast, there was a slowdown in service sector employment growth - which dropped to a 12-month low.

Meanwhile, despite easing slightly for the second month running, the rate of input cost inflation remained marked in June and was faster than the UK economy average - with higher staff costs and import prices cited as possible causes.

Mr Ramsey added: "Following the referendum result, the business community has entered a new era of uncertainty. This has already had an impact on investment intentions.

Given that Northern Ireland shares a land-border with the EU, the referendum result will most likely have even greater economic significance for us.

"What happens to our Single Market access - both in terms of trade and accessing a pool of skilled and unskilled labour - will be closely watched by our manufacturing, agriculture and hospitality sectors in particular.

"The most notable reaction to date has been the sharp fall in sterling. The pound recently hit a 31-year low against the dollar and has depreciated by 10% against the euro. While this will impact negatively on consumer price inflation and the cost of imports, it also has some advantages.

"Manufacturing export price competitiveness has increased, and so too has the cost competitiveness of US service sector firms operating in Northern Ireland. Our tourism offering is also more attractive in both European and North American markets.

"Meanwhile, our retailers - particularly those in border areas - can expect an influx of shoppers from the Republic of Ireland."

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