Belfast Telegraph

Northern Ireland plc remains resilient but economic inactivity is still the sticking point

By Andrew Webb

Welcome to 2018. This is the second year in a row that the Economy Watch rota has given me the chance to write the first of the year.

Obviously my first port of call was a look back at what I wrote at the beginning of 2017. That article started with "2016 is finally over. We can all breathe a sigh of relief and look forward, can't we?...Now we turn into 2017 in a state of major uncertainty at home and abroad."

I then went onto note a series of points, chief of which was how challenging the budget would be for the then Finance Minister Mairtin O'Muilleoir. We never got that budget and spent much of 2017 in a state of budgetary 'splash and dash', as civil servants and the Secretary of State did just enough to get us over the line on a couple of occasions.

We all know the narrative of the past 12 months has been dominated by Brexit and the uncertainty that surrounds it, but the year has ended with some progress on that front and 2018 should start to see more clarity emerge on the terms of future trade. In the local economy, the year ended well, as a feast of data emerged to show a resilient economy.

For example:

Exports statistics for 2016 showed NI sales grew by close to £1bn to reach £44.7bn. This is the highest level of sales since 2011. Sales to Great Britain increased by 2% to hit £14bn - also the highest level since the survey began in 2011. External sales, which include exports as well as sales to GB, were up 4.2% to £24.1bn.

Exports beyond the UK had stronger growth at 7.3% to £10.1bn, up £686m. Exports to the Republic grew by £73m to £3.4bn but growth in EU markets other than the Republic was even stronger, up 9.4% to £2.3bn. The strongest export growth was to all countries outside the EU, which increased by 10.4% to £4.4bn.

While much of this could be attributed to the decline in sterling, even more encouraging was that the number of businesses selling to destinations outside Northern Ireland also rose - getting more companies to export has been a long-standing policy aim.

Employment figures ended the year at their highest levels on record. In fact, since hitting a recession low at the end of 2011, net gains over the last six years are just over 60,000 - just shy of a 10% increase.

Amongst the various sectors, the buoyant tourism performance in 2017 was reflected in strong jobs growth of close to 2,500. Conversely, the retail sector lost 4,400 jobs over the past year, perhaps an outworking of the cost of living squeeze impacting on demand. It may also be related in part to welfare reform reducing spending power.

To explain, there are nearly 30,000 fewer DLA claimants in NI now than 12 months ago. I'm not offering a view on the merits or otherwise of that but by my calculations, that is a reduction of at least £100m annually.

Measures for output suggested that the service sectors are growing at an annual rate of 2.5%, a full percentage point faster than the UK rate.

The stand-out sector amongst services is ICT, which grew by 5.7% over the year. On the production side, performance was unfortunate with manufacturing output down 10% since the start of 2017 as recent large-scale closures such as JTI Gallaher and Michelin ripple through the system.

Now these closures are through the statistics, the sector will be hoping to reveal a resilient, remaining core.

However, among the broadly positive statistics, one of the most pressing issues our economy faces, and one which I and others have referenced previously, is the increasing level of economic inactivity.

There are 34,000 more economically inactive people in Northern Ireland than there were one year ago. That is 29% of people aged 16-64.

In the UK, it's 21.5%. Looking at where the increases have come from, the bulk (21,000) are in the 50+ age cohort but even among 18 to 24 year olds, there are 10,000 more economically inactive than a year ago. As we move into 2018, the economic inactivity challenge surely has to move to the top of the priority list.

Thinking of 2018, wasn't this the year we were meant to reduce corporation tax to 12.5%? My outlook for the local economy in 2018 is for the rise of local councils.

An increasingly confident group, the 'new' councils have come through their community planning phase and are fast moving into delivery mode.

The absence of an Executive is creating a space/vacuum that local councils can step into. Driving some of the spring in the step of councils is that 2018 could be set to be the year that Belfast and its bordering councils get a City Deal - the latest 'game changer' policy being pursued.

I'm a little cynical about our ability to negotiate the city deal over the line by the end of 2018 but really hope that we can as some of the proposed projects I've seen would give the member councils a brilliant opportunity from which to boost economic performance.

To close on a personal note, after three years of running Webb Advisory, I have accepted an offer from Baker Tilly Mooney Moore to establish an economics practice in their firm.

Running my own firm has been a brilliant experience but I'm looking forward to being part of an ambitious local practice and part of a worldwide network of firms.

In next week's Economy Watch, we hear from Danske Bank economist Conor Lambe

Belfast Telegraph

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