Belfast Telegraph

From 2017's surprises to wishes for economic prosperity in 2018

Our team of economists, John Simpson, Paul MacFlynn, Richard Ramsey, Andrew Webb, Esmond Birnie and Neil Gibson, give their overview of the economy's biggest surprises during 2017 - and their Christmas wish for its future prospects

John Simpson: Thank goodness, despite the erosion of business confidence and the slow recovery in the local economy, the number of people in jobs has remained high. Unemployment has been lower than it might have been.

But real earnings, after allowing for price increases, have fallen and living standards are not rising. That is no surprise: productivity has stalled.

Northern Ireland, like other parts of the UK, needs clarity and certainty on the outcome of the Brexit transitional agreement and, just as important, a long-term agreement maintaining easy trading access to the EU of 27 and, desirably, a revamped free trade agenda.

A clever Brexit is an essential: so also is an agreed working basis to restore the Assembly. Current difficulties in health, education, housing and infrastructure investment are worsening by the day.

My Christmas wish

A wish that our most outspoken political leaders would rein in the degree of excessive emotional, often ill-founded, comment on the merits and demerits of moves to implement Brexit.

Can we calmly consider what is meant when we eschew the possible arrival of a hard border? The absence of a formal north/south border will, we hope, mean that there will be no customs duties, either way.

Can the debate begin to focus on the serious dangers that Northern Ireland will be perceived as a 'place apart'; so far apart that people will stay away and avoid constructive development of positive answers to the negativity that is associated with an Ulster version of 'ourselves alone'?

John Simpson is an independent economist

Neil Gibson

The strength of the labour market has surprised me. I thought a degree of nervousness from the Brexit process would have slowed consumer spending, investment and, in particular, recruitment.

That the Brexit vote did not bring an immediate recession did not surprise me at all, but sadly it means that predictions of the economic challenges that lie ahead are being treated with more scepticism than I would hope. Unlike most people I was genuinely surprised that the Executive did not return.

I thought the economic and policy stakes were too high for the parties not to find a way to return to Stormont.

My Christmas wish

I would wish for a restoration of the Executive, a commitment to long-term investment in skills and infrastructure and a smooth Brexit journey that stays focussed on ensuring the best economic outcomes for all.

In the spirit of Christmas I would hope that in 2018 we could all make a better effort to understand why people hold different views to our own.

If you voted in a particular way in Brexit I would encourage a period of reflection over Christmas to understand why others did not share the same view.

We can only make progress if we can empathise with other viewpoints. Sadly, the economy has not delivered all that it might for all of our people. The reasons are complex, but simply disagreeing with other points of view will not lead to sound policy choices in what is a critical period for the local economy.

Neil Gibson is EY chief economist

Esmond Birnie

At the start of 2017 I did not expect Northern Ireland unemployment to still be falling at the end of the year.

Relatively low joblessness, whether in terms of the claimant count or the Labour Force Survey measure, is to be welcomed but this economic victory may have been somewhat hollow.

The decline in unemployment has been matched not by a rise in employment but a growth in economic inactivity, especially of people becoming long-term sick.

My Christmas wish

That whatever form of government we have — restored devolution or full direct rule — it would begin to make some of the hard but necessary decisions, not least in the area of how to fund public services.

We cannot continue to rely on the Treasury in London as the backstop funder of NI plc. As compared to comparable regions in Great Britain, Northern Ireland citizens pay much less in the form of regional taxes and charges. It may seem strange to wish for more fiscal pain but in the absence of a bit more realism and honesty I cannot see how economic policy-making in Northern Ireland can make much real progress.

Esmond Birnie is senior economist at the Ulster University

Richard Ramsey

Without a doubt, the biggest surprise for me was the strong performance of the eurozone economy.

Pre-2017, the UK economy was in a position of strength relative to the eurozone, but during the course of the year the two economies moved in opposite directions and the eurozone is now in a much stronger position than the UK economy.

This is a trend that it likely to continue in 2018.

Another significant surprise was the Bombardier situation.

I had envisaged Trump and protectionism being a concern for the global economy, but I was surprised by how quickly and directly this came to impact on Northern Ireland. Indeed, Northern Ireland found itself on the frontline of the first trade war to emerge in Trump’s presidency.

My Christmas wish

That Brexit doesn’t distract us from dealing with core, longstanding economic issues that are actually within our control, and for policy-makers to have the courage to make necessary and long-sighted decisions that are in line with the economic and fiscal realities.

We could also do with turbo-charging the decision-making process at various levels.

Richard Ramsey is Ulster Bank chief economist

Andrew Webb

One word sums it up — resilience. Many would have seen us being in the depths of a serious downturn by now off the back of the Brexit vote.

That time may yet come, depending on the terms of trade we ultimately end up with, but the overriding sense of this year is one where the trends were upwards across a swath of economic statistics such as employment, trade, inward investment and consumer spending. I was most (pleasantly) surprised by NI’s continued resilience in attracting inward investment. I did previously think that Brexit, and plans to leave the single market and customs union, would mean we would become a ‘no-go zone’ for inward investors, but I have been proved wrong.

My Christmas wish

I see a growing confidence among councils and I think the Secretary of State will grant them the regeneration powers they were they were bizarrely denied by the Executive early in the new year.

That would give councils the green light to ‘kick on’ so 2018 feels like the year when local councils really start to drive economic development across NI.

Andrew Webb is managing director of Webb Advisory

Paul MacFlynn

Economic inactivity is one of Northern Ireland’s greatest economic weaknesses and throughout 2016 it looked as though we might have turned the corner on this issue. However, 2017 showed that hope to be wishful thinking. Many had attributed the hitherto fall in inactivity to the UK government’s welfare reforms, but this was clearly not the case. We need a better understanding the structural issues in the Northern Ireland labour market to avoid these surprises in the future.

It would be difficult to say that the move to increase interest rates last November was ‘surprising’ given that it was probably the most predicted interest rate rise in the last two decades.

However, the Bank of England had many plausible excuses not to do it. The rate of growth and the outlook for the UK economy looked increasingly weak and external factors were clearly to blame for elevated inflation.

In the end, the Bank caved to the will of the mob.

My Christmas wish

One of the casualties of the fall of the Executive was the lack of a debate over the industrial strategy document launched last January, Economy 2030.

This may not sound like much of a tragedy, but it is. While the Northern Ireland economy added jobs in 2017, the profile of the jobs that were lost in plants like JTI and Michelin was of a different order.

These jobs were the backbone of the private sector economy and there desperately needs to be a discussion on how we are going to create jobs of the same value in the future.

Paul MacFlynn is an economist at the Nevin Economic Research Institute (Neri)

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