Belfast Telegraph

New year predictions: Our experts look ahead to 2016

Five experts in their field discuss what 2016 is likely to bring in the world of business.

Economy: Challenge to achieve higher productivity begins

The regional economy is growing but not fast enough.

The inheritance from 2015 offers a much improved launch pad. The 'Fresh Start' secured by the politicians sets new parameters.

The 'Fresh Start' has allowed the preparation of an agreed Government budget. Delivering on that budget will not be easy. In real terms, spending will be tight and in some cases cut. Some extra funds have been reallocated to health and to cope with welfare reform. Other funds have been earmarked to compensate jobs lost to early public sector leavers.

In 2015, the NI economy grew more slowly than most UK regions and the Republic. In 2016, if current economic policies continue unchanged, the gap will widen.

The biggest challenge for ministers in 2016 lies in the setting of priorities to be introduced after the May elections. Are ministers ready to reconsider current policies, moving some funds and focusing on high priority economic incentives, selected infrastructure schemes and a reshaped series of housing policies?

The private sector is proving more successful than is often acknowledged. The casualties such as JTI and Michelin make headlines. However, a spectrum of success stories is available, including Kainos, Almac,Randox and First Derivatives. More significantly, there have been better employment numbers and an apparent overall improvement in profitability.

Teasing out the implications of improved employment and profits alongside concerns about modest (but too small) productivity gains suggests that competitiveness is still an issue. Policy dilemma: with an acknowledged advantage in overall costs of business, compared to most other regions, why has this not converted into stronger competitive advantages?

In 2016 the search is for higher productivity and a slimmed down public sector.

  • John Simpson, Independent Economist

Manufacturing: New markets vital as this year is looking flat

Conditions outside our local control will continue to be a large drag and we expect it will result in a pretty flat year in 2016 across manufacturing.

Stumbling global growth, pressure on prices and the strength of sterling, particularly against the euro, all have a negative impact on growing our manufacturing base. Indeed, while it's good news for the domestic consumer and car drivers among us, the depression in oil and gas prices is dragging down other commodities - limiting investment by firms exploring and extracting and thus impacting on our important engineering sector.

All combined, it's important that our manufacturers explore new markets, seeking out better margins and widening their customer base. The Irish economy is really heating up and given our location, should be an easy first step for non-exporters. Manufacturing is big and important, but particularly sensitive to costs. We can't do anything about currencies, commodity prices or global demand, but it is within our gift to deal with rates, energy and the labour environment.

We'll have a new Executive and new Programme for Government come May. We hope they will be ambitious and remain committed to rebuilding the economy. We can create wealth and work if they do.

  • Stephen Kelly, chief executive Manufacturing NI

Dairy: End of quotas has left milk supply overflowing

The local dairy sector is in bad need of good news as we enter 2016. However, the global oversupply at the root of last year's adverse dairy markets continues.

Commentators expect dairy markets to remain weak for most of 2016, as even if markets move into balance, it will take time for stocks of milk powders to be consumed. Normally the low milk prices in 2015 should have led to reduced output. Instead, milk supplies have continued to grow faster than demand due to a surge in European milk output following the ending of milk quotas last April. In recent months, New Zealand farmers have reduced their milk production in an attempt to balance the global market.

However, the growth in output from the much larger European dairy industry has been enough to maintain the global oversupply.

As in the past, poor weather could curb milk output or a lifting of the Russian EU dairy import ban or a pick up in Chinese imports could increase demand. But unless one or all of these happens, the EU dairy industry faces the stark choice between easing its growth back to a sustainable level or facing ongoing low milk prices.

  • David Dobbin, chief executive Dale Farm NI

Retail: Future’s looking bright on Belfast shop front

A relatively strong final quarter to 2015 has seen the local retail sector heading into the New Year with a feeling of cautious optimism. 

There is no doubt that Belfast is now an attractive proposition to major national and international brands.

Last year created a strong platform for growth, with impressive names including Michael Kors, 5 Guys, Zizzi, Boux Avenue and STA Travel all investing in Belfast for the first time.

I would anticipate the food and beverage sector to keep expanding steadily. Ed's Diner and Zizzi also plan more sites and we expect more new brands to invest in 2016.

An adjustment in rates and rents in the past year has been instrumental in giving the overall sector a lift and with continued low interest rates retailers are more confident about footfall and spending power in Belfast.

Spending will only continue if people are confident about the economy. That means stable jobs and more investment in industry. Retail can't afford further contraction in sectors such as manufacturing.

The ongoing weakness of the euro is also a challenge.

Our sector doesn't need more competition and a strengthening of the euro would help level the playing field, especially for those in border areas.

  • Criona Collins, Director and Head of Retail, Lambert, Smith and Hampton

Global Economy: Open minds are needed for more testing times

Not much seems to be expected of the world economy for 2016. Looking around the industry's end of year outlook documents, the most prevalent view is 'more of the same' - inflation is set to remain largely absent around the world and output growth meagre, with likely risks to the downside.

The political backdrop will be a source of rising consternation while rising US interest rates, amidst durably higher capital markets volatility, will further crimp investor returns as valuations suffer.

However, our advice remains to keep an open mind - there is still as much, if not more, cause for optimism as there is for pessimism. The fact that the US has just endured its worst decade of growth in over 50 years may well make it more likely that the next decade sees faster growth. As we head into 2016, the European economic recovery is looking more assured, while China's ongoing rebalancing has regained some poise and the US consumer still looks perfectly capable of shouldering much of the burden for the world's economic prospects. All of this, set alongside those subdued expectations for global growth and inflation, suggest there is still mileage left in this business cycle for equity investors.

On the other hand, even if inflationary pressures remain benign as widely expected, fixed income investors will likely have to work very hard to make positive real returns over the next couple of years from current levels.

  • Jonathan Dobbin, Barclays Head of Wealth and Investment Management


Belfast Telegraph