Northern Ireland economy faces worst conditions for a decade, expert warns
Analysis fears recession and the loss of 18,000 jobs
Northern Ireland could slip into recession next year with a no-deal Brexit likely to cost 18,000 jobs amid the toughest conditions for a decade, according to a report.
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EY's Economic Eye also said it had downgraded its predictions for growth in the economy this year from 1.1% to 1.0%, in the event of an orderly Brexit.
But if there is a no-deal Brexit, EY today predicts that the economy would shrink by 0.6% next year, though growth would resume the year after. In the second recession warning this week, EY Ireland chief economist Neil Gibson said: "The external economic climate is as challenging as it has been for a decade.
"A no-deal Brexit has the potential to push Northern Ireland into recession and lead to a contraction in the labour market in Northern Ireland, which so far has consistently proven wrong some of our gloomier predictions."
But he said businesses should take comfort from the resilience they have already shown in challenging conditions such as the lack of an Executive.
EY’s report is the second recession warning for the province this week, after the Ulster Bank purchasing managers’ index survey for August said the province’s economy may already be in recession.
However, EY’s job losses forecast is more optimistic than a Department for the Economy report in July, which predicted that 40,000 jobs would be at risk here in a no-deal Brexit in industries with strong exposure to the EU.
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EY said that Northern Ireland has now slipped behind the UK average growth rate after a relatively strong 2018, and continues to experience lower levels of growth than the Republic.
The Irish economy is tipped to grow at 3% in 2020, before slowing to 2.8% in 2021.
Professor Neil Gibson, chief economist for EY Ireland, said: “The external economic climate is as challenging as it has been for a decade... Although estimates of a no-deal impact vary considerably, they all suggest there will be a cost in the form of disruption across the island.
“There is no doubt that the resilience and adaptability of businesses will be tested, but their resilience thus far without a functioning Executive and in the shadow of Brexit uncertainty offers encouragement.” But the EY Economic Eye said that Northern Ireland’s economy would regain ground in 2021, and expand by 1%. The Republic would avoid recession but GDP would dip to 1.3%. EY also predicts a no-deal would result in 60,300 fewer jobs across the island by 2022, with 41,500 jobs going in the Republic and 18,800 here.
Michael Hall, managing partner at EY NI, added: “Firms must be ready to react quickly when clarity finally emerges over the nature of the UK’s exit from the EU. Low levels of preparedness, particularly among smaller firms, is not surprising given the level of uncertainty, but nimbleness and adaptability may be the difference between survival and closure for some. Many larger firms have progressed well with basic preparation but more substantial structural changes, understandably, remain largely on hold.
“Looking at new ways of working, sourcing new markets and developing new partnerships and relationships is yielding results already for many firms in Northern Ireland, but not every business has the resources at its disposal to invest in new areas.”