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Economic meltdown in Northern Ireland was steepest in UK, says economist

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Belfast streets were empty for weeks during the lockdown.

Belfast streets were empty for weeks during the lockdown.

Belfast streets were empty for weeks during the lockdown.

Northern Ireland's economy will suffer long-term scars from the Covid-19 outbreak, it has been claimed, as the private sector suffered its worst contraction in many years.

The region's collapse in activity from March to April was the steepest in the whole of the UK, according to Ulster Bank chief economist Richard Ramsey.

He said the economic hit is of much greater magnitude than the last recession - and the future for workers when the government's job retention scheme is withdrawn is a major concern.

The Ulster Bank purchasing managers index for April said that with many companies shut, it was the worst month for business since at least August 2002.

And Mr Ramsey warned that it would take years for activity to recover to 2019 levels. With a reading of 8.3, business activity is much lower than at the worst point of the downturn in 2009, when the worst reading was 32.1.

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Stark warning: Richard Ramsey

Stark warning: Richard Ramsey

Stark warning: Richard Ramsey

Output and new orders were hit at the worst levels in the UK, employment was down at a record rate and confidence for the next 12 months also suffered.

Mr Ramsey said: "With a full lockdown maintained throughout April, it came as no surprise that all 12 UK regions posted record rates of decline in output and employment.

"Northern Ireland's private sector reported an additional raft of record rates of decline with new orders, exports, backlogs and business confidence.

"Furthermore, the rates of decline in output and new orders amongst local firms were steeper than elsewhere across the UK."

Mr Ramsey said evidence suggested that the fall in unemployment here was less steep than in other UK regions. Other surveys suggested that Northern Ireland's take-up of the job retention scheme was higher than in the rest of the UK. Just over half of firms here had left their headcount unchanged.

But 45% had reduced their headcount, though that could include a failure to replace someone who had left.

Mr Ramsey said all four sectors of the economy - manufacturing, services, retail and construction - recorded levels of activity below 10 in April.

Retail had the worst measure for activity at 6.1, the PMI said.

Mr Ramsey noted that until the pandemic had hit, figures in the 20s were extremely rare.

He added: "The scale of the collapse in demand in April relative to 2009 is clear when looking at the proportion of firms reporting a fall in output. Around 87% of manufacturing firms and 90% of service sector firms reported a decline in output in April relative to March.

"Back in January 2009 the corresponding percentages were 44% (manufacturing) and 48% (services). The speed and scale of the current slump is of a much greater magnitude than the last recession."

He said the services sector - covering everything from restaurants to estate agents - was hardest hit, with 42% of firms reporting a fall in headcount.

"Back in January 2009 just over one in seven firms were shedding staff. Meanwhile manufacturers are reporting similar rates of job losses, 39% versus 37% in January 2009.

"Remember these readings are with the Job Retention Scheme in place. What happens when this safety net is removed is a major cause for concern."

Mr Ramsey said April was an "extremely low base" against which growth in May would be measured. He added: "As a result, we can expect to see some strong rates of output growth in the coming months but this must be interpreted with caution.

"The key point is that actual levels of activity will remain extremely weak for some time. Job losses are expected to surge in the second half of 2020. Returning to the levels of private sector activity and employment that existed before the pandemic will take years not months. Covid-19 will leave scars on the economy that will last even longer."

Separate retail figures published today reveal that Northern Ireland suffered its greatest footfall drop in history during April.

Retail experts Springboard said overall footfall in all shopping landscapes here plummeted by 80.3% compared to last year during April. It said the decline was "of an unprecedented magnitude".

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