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Northern Ireland economic activity slump leads to recession warning


Concerns: Esmond Birnie

Concerns: Esmond Birnie

Nigel McDowell/Ulster University

Concerns: Esmond Birnie

Northern Ireland's biggest business group has warned that the economy could be on the brink of another recession after figures showed a slump in activity triggered by slowdowns in construction and the public sector.

Angela McGowan, CBI regional director, said there was a "stark warning" as the Northern Ireland composite economic index (NICEI) indicated activity had decreased by 0.3% between the end of 2017 and the first three months of 2018.

She said the effects could be felt well beyond the business community as activity fell 1% over the year, leaving us perpetuating a trend of lagging behind the UK as a whole.

That compared with GDP growth of 1.2% in the UK over the same time.

Mrs McGowan said: "The latest NICEI data reveals worrying levels of economic contraction and presents a stark warning for the Northern Irish economy.

"With two consecutive declines in economic activity in the middle of 2017, the region looks to be on the brink of recessionary territory."

And even slight economic growth at the end of the year was scant comfort, she said. "Although we saw a small upturn in the economy in Q4 of 2017, a contraction of 0.3% at the beginning of this year should give everyone pause for thought.

"The private sector, the public sector, production and construction have all contracted, leading to wide-ranging repercussions that extend well beyond the business community."  

The quarterly slump was down to a fall in the construction sector of 0.6 percentage points, while the public sector suffered a slight decrease of 0.1%.

However, the falls were offset by a slight growth in services.

The Northern Ireland Statistics and Research Agency said the overall trend suggested declining growth.

"When the trend in the index is considered over the last three years there is evidence that the rate of growth has slowed," it said.

"Annualised average growth over the last four quarters to Quarter 1 2018 compared to the previous four quarters remained flat. This was lower than the annual growth over the previous two-year period to the first quarter of 2017, which was 2.0%." Dr Esmond Birnie, senior economist at Ulster University's economic policy centre, said our economic performance since its pre-recession peak had been anaemic compared to Britain.

He said: "In January-March, measured total economic output in Northern Ireland remained 6.3% lower than its pre-banking crisis/pre-world recession peak level, which was reached at the end of 2006.

"In contrast, UK GDP in quarter one was 10.5% higher than it was before the recession a decade ago. This encapsulates just how far the Northern Ireland economy is underperforming compared to the UK average.

"We had a deeper recession than the UK average at the end of the last decade, the subsequent recovery was slower and weaker, and now there are signs we have moved into reverse gear.

"If the Northern Ireland economy had grown at the same trend as the UK average during 2007-18, the regional economy would now be about 17% larger than its current size - we would have had billions of extra pounds of resources."