Belfast Telegraph

Stalemate means little or no hope of kickstarting stagnant economy

Analysis

By John Simpson

Monitoring the problems facing the Northern Ireland economy is now unfortunately a passive activity.

All the levers of economic incentives should be for consideration - tax changes, public spending reallocations, social policy improvements, and major capital project approvals - but lie undeveloped. In the early months of 2018, we are living with near economic paralysis.

What can be done to rebuild and give momentum to the economy?

While the scope for policies and actions to bring about beneficial changes is wide-ranging, the political agenda and the political stand-off mean a near absence of new policy actions by the Civil Service. We are living with deteriorating standards.

The critical influences that would be expected from a fully functioning Executive would range from adjusting and re-targeting the resources available in the annual public sector budget, to tackling questions that might influence the Brexit negotiations.

The possible emergence of an economic border on this island is acknowledged by people in the business world as important.

The symbolism of an economic frontier down the Irish Sea is repeated in political jousting but, standing back in the better informed debates, is a red herring, or digression. There are possible answers to the search for a backstop deal which combine the constitutional imperatives of a national UK setting with the maintenance of continuing all-island trading certainty for local produce with an appropriate agreement on goods whose place of origin was either in the Republic or Northern Ireland.

Our economy is performing poorly.

The growth of GDP and personal incomes is, by historic standards, low, but more critically is lagging behind what might be the normal UK comparators. The exception is that employment numbers are doing better than was expected. The number of migrants working here has increased and this has sustained some parts of the economy often more reliant on lower earnings where output per employee is below the regional average.

In this unusual setting, the dynamics of economic progress are distorted. There is sufficient uncertainty to be a deterrent to investment, particularly the business investment classified as FDI (foreign direct investment).

The most recent State of Trade Survey, conducted by the Construction Employers Federation, in association with BDO, reaches a telling conclusion: "While the industry has welcomed the extra clarity on Brexit provided by December's UK-EU deal, there is significant uncertainty as to what companies should be preparing for in terms of the final outcome."

Now that the December statement has been overtaken by the recent March conclusion, the stage for action is still fraught with uncertainty.

The construction industry is a major bellwether of the state of the economy. There is a well appreciated social and economic need for a more buoyant industry. By any of the social yardsticks, Northern Ireland is not generating enough new housing.

In the absence of an Executive, and (further) in the absence of quantified policies on the numbers and types of new housing which are needed, initially the workload for the builders is too low but - less clearly appreciated - there is a growing shortage of new housing, in whatever forms, which will ultimately build a negative social consequence for purchasers.

The construction industry's State of Trade survey gives some ideas on the experience of firms in the industry. Some of the headlines were:

Two-thirds of firms expect their workload in the next year to level out or decline

Shortages in (skilled) trades are reported across the board

Critically, failure to restore the Executive "is a clear impediment (having) a major impact on tenders coming to market..."

Did this set the scene for a Happy Easter?

Belfast Telegraph

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