The success of private business is crucial to the health and recovery of the Northern Ireland economy.
Today, facing the collapse of customer demand, many local businesses are making efforts to keep going with considerable difficulty. Never in the history of western economies has there been a funding crisis on the scale of the last two months.
In parallel, there has never been a period when Government financial efforts to sustain the economy have been so unusual. The decision, even if only temporarily, to extend the public sector borrowing requirement so that there can be a major support to the pay-roll of private businesses, is such a large commitment that is unprecedented. For the moment, the job retention subsidy of up to 80% of the earnings of employees, who would otherwise be laid off, has maintained the functioning of the labour market.
Soon the Government will be faced with a difficult choice. The scale of public sector funding, if continued unaltered, will put growing pressure on interest rates, the exchange rate, and probably on price increases, leading to higher rates of inflation. If these pressures develop, there will be knock-on effects for finance and property markets.
Families reliant on accumulated savings, held in cash or savings accounts, may see the value of these assets become less valuable in real spending power. Pensioner households will need to adjust their planning for years in retirement. Incentives to continue in active employment after the conventional retirement age will become a harsher reality. Holders of defined benefit pensions entitlement with inflation protection will have better security than people who have saved for a contributory pension fund. Of course, the number of defined benefit pension schemes is falling and employers are now much less likely to make them available to employees.
Managers of private sector businesses now face the uncertainties of trying to keep their businesses profitable.
Customer demand has fallen unevenly across the economy and cannot with assurance be expected to recover either in total or evenly.
The unexpected and sweeping arrival of Covid-19, along with the restrictions imposed by Government, has hit businesses with sharp and severe changes. Hotel and tourist accommodation providers have been hit hard. Temporary Government job retention schemes cannot begin to provide a full financial cushion.
By co-incidence, this economic disaster has arrived just at the time when overall assessments were being compiled for business performance in the more recent year. It comes with little comfort to contrast what has been a period of buoyant activity with the dramatic loss of that buoyancy.
The largest 100 businesses registered or headquartered in Northern Ireland had, on average, a further increase in profitability in financial years ending in 2019 (or late 2018). On an initial review of registered results, a pre-tax profit increase of nearly 14% seems likely.
Of this group of the 100 most profitable businesses, 33 are strongly linked with family shareholders.
Probably, each of the 100 will be facing a painful mix of diminishing cash reserves, a loss of customer orders and changing pressure on profit and cost margins. Past history is no guarantee of future trends, but some evidence can be gleaned from previous success.
The pre-tax profit figures for these businesses need to be carefully interpreted, so that unusual year-to-year variations caused by exceptional items or revaluations of assets are taken into account.
The full list of the 100 most profitable local businesses will be published in due course. The reassurance is that Northern Ireland is home for some world-class businesses which now face major restorative challenges.
The 10 family owned businesses working in (and from) Northern Ireland, earning the highest levels of pre-tax profits in 2018-19 were:
W&R Barnett Grain and feed importers - £46m
John Henderson Food wholesalers - £33m
Gardrum Hld. Auctioneers - £20m
LCC Group Petroleum distributors - £19m
SHS Group Distribution - £18m
FP McCann Construction - £18m
MJM Marine Contracting - £17m
TG Eakin Medical equipment - £16m
EOS IT Hld. Video systems - £12m
Tobermore Concrete Manufacturing - £12m