Belfast Telegraph

Wednesday 25 May 2016

Northern Ireland firms saw new business expansion speed up in 2015, say analysts

Published 11/01/2016

Northern Ireland saw the expansion of new business for companies speed up in 2015, said Ulster Bank chief economist Richard Ramsey
Northern Ireland saw the expansion of new business for companies speed up in 2015, said Ulster Bank chief economist Richard Ramsey

The expansion of new business for firms in Northern Ireland sped up last year, business analysts said.

This encouraged companies to take on extra staff as the private sector ended 2015 in better shape than it began it, according to Ulster Bank chief economist Richard Ramsey.

He said: "Back at the start of last year, local firms were reporting falling levels of output, orders, exports and employment. However, Northern Ireland's private sector has signalled rising employment every month since.

"Meanwhile, firms have notched up continuous expansion in output and new orders since April."

Today sees the release of December data from the Ulster Bank Northern Ireland Purchasing Managers Index.

The latest report - produced for Ulster Bank by Markit - showed that the end of 2015 saw further growth of output as the rate of expansion in new business accelerated. This encouraged firms to take on extra staff. Meanwhile, the rate of cost inflation quickened to the fastest for a year.

Mr Ramsey added: " Overall, last year can be viewed as a game of two halves.

"The first six months of the year were disappointing, with marginal growth in output, falling exports, and subdued rates of growth in orders and employment.

"However, the second half saw an acceleration in output, new orders and employment growth.

"Furthermore, exports returned to growth too. Inflationary pressures were also subdued in the first half of last year but have been picking up since."

This overall improvement conceals contrasting fortunes among different types of businesses.

The retail and construction sectors experienced a significant turnaround in performance, with falling output in the first half of 2015 being replaced with expansion in the latter half of the year. The services sector maintained the same growth rate in both periods.

Manufacturing was the only sector to post a notably weaker growth rate in the second half of the year, Mr Ramsey said.

Meanwhile, in the Republic, estate agents MyHome.ie and financial advisers Davy said h ouse price growth of up to 5% was predicted for 2016 as prices outside Dublin continued to catch up.

Asking prices nationally rose 7.4% in 2015 but by just 2.6% in Dublin.

The house price survey said the slowdown in inflation continued towards the end of last year but predicted that rising incomes and ongoing economic recovery will lead to a single-digit gain in prices for the next 12 months.

The author of the report, Conall MacCoille, chief economist at Davy, said inflation had slowed from double digit levels - largely driven by an unsustainable pace of increase in Dublin prices - and Ireland's housing market had " normalised" in the final quarter of 2015.

He said: "The Central Bank's mortgage lending rules appear to have prevented home-buyers from taking out ever-higher leveraged mortgage loans, thus limiting the pace of house price inflation.

"Housing market activity was artificially inflated towards the end of both 2013 and 2014 by expiring mortgage interest reliefs, capital gains tax exemptions and a rush of transactions and mortgage approvals ahead of the Central Bank's lending rules.

"In 2015 the usual summer peak for activity reasserted itself with the result that both housing transactions and movements in asking prices in Q4 were always likely to be relatively modest."

Simon Barry, chief economist Republic of Ireland at Ulster Bank, noted that t he Irish construction sector ended 2015 on a firm footing, according to the latest results of the Ulster Bank Construction PMI.

The pace of activity growth picked up sharply last month as growth indicators rose to a five-month high in December.

Mr Barry said: "Overall activity trends were buoyed by a strong acceleration in both commercial and housing activity, with the pick-up in the residential arena a particularly welcome development given concerns about the housing supply shortfall.

"Growth in civil engineering continues to lag some way behind the other sectors though it did record a fourth consecutive month of expansion last month."

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