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NI's business activity slumps in first month of new protocol era

Costs rising for companies as they adjust to new trading arrangements that 'redraw map of UK single market'

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Trucks arriving from Scotland leaving Larne Port (Brian Lawless/PA)

Trucks arriving from Scotland leaving Larne Port (Brian Lawless/PA)

PA

Trucks arriving from Scotland leaving Larne Port (Brian Lawless/PA)

Business activity in Northern Ireland slumped during January with costs rising as a result of new post-Brexit arrangements, according to a key survey today.

The Ulster Bank purchasing managers' index said last month was the worst downturn since May for all UK regions.

However, businesspeople here were the least optmistic about the year ahead of anywhere in the UK.

Ulster Bank chief economist Richard Ramsey said that while the roll-out of the Covid vaccines was a cause for optimism, the roll-out of red tape following the end of the Brexit transition period was less of a cause for celebration.

Construction had seen the worst contraction, as there had been a severe drop in demand during the month, followed by services, retail and manufacturing, in order of severity.

And all four sectors reported a fall in output, orders and jobs, with firms putting up prices at the fastest rate in 27 months after facing the highest rate of input cost inflation of anywhere in the UK.

Services reported its worst month since June for output and orders.

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Richard Ramsey of Ulster Bank

Richard Ramsey of Ulster Bank

Richard Ramsey of Ulster Bank

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The costs being faced by construction companies were also at close to a nine-year high.

Mr Ramsey said: "All 12 UK regions started 2021 with the sharpest deterioration in business conditions since May last year.

"Lockdown restrictions were the primary cause of the slump in demand back then and in January. There was also a consistent theme across all 12 UK regions as far as new orders and employment were concerned, with contractions across the board.

"Within Northern Ireland, this theme of falling output, orders and employment was also evident across all four sectors."

He said the new Brexit arrangements, with checks in place for goods of animal origin entering NI from Great Britain under the NI Protocol, were pushing up costs.

"Higher shipping costs were widely cited alongside higher raw material costs and increased transport costs linked to the new Brexit arrangements.

"As a result of these cost pressures, local firms, most notably retailers, hiked the price of their goods and services at the fastest pace since October 2018."

He said the NI Protocol had effectively "redrawn the map" for the UK single market.

Mr Ramsey said: "2021 has been the year of the rollout on two fronts. The rollout of the vaccine will be the single biggest factor driving economic performance later in the year.

"Meanwhile the rollout of red tape linked to the new Brexit arrangements will hinder Northern Ireland's economic recovery by adding costs to business and restricting trade.

"While Northern Ireland has the advantage of remaining within the EU's single market for goods, it finds itself on the wrong side of a regulatory sea-border which has effectively redrawn the map of the UK's single market and customs union."

He said the construction sector was the most gloomy about the year ahead - though the services sector, which may be counting on a post-lockdown spending frenzy, was the most optimistic.

Both construction and retail expect output and sales to be lower in 12 months' time, according to the survey.


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