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Unrest in NI 'could dent economic recovery'


Warning: Richard Ramsey says NI’s slow pace of lockdown exit is affecting output

Warning: Richard Ramsey says NI’s slow pace of lockdown exit is affecting output

Warning: Richard Ramsey says NI’s slow pace of lockdown exit is affecting output

Supply issues due to Brexit and the blockage of the Suez Canal have prompted firms here to put up their prices at the fastest rate on record, according to a key survey today.

The Ulster Bank purchasing managers' index (PMI) said business activity had stabilised in March, with employment rising for the first time in 13 months thanks to recruitment in manufacturing and services.

But Ulster Bank chief economist Richard Ramsey also warned that the political unrest of the last week could quell the incipient recovery.

Mr Ramsey said that "what confidence there is could be dented by the current political situation, and there is a risk that this could be a head wind for the recovery".

Mr Ramsey said Northern Ireland had been the only UK region to end the first quarter of 2021 without a growth in output as it has been lagging behind the rest of the UK in the gradual loosening of lockdown.

But the prospect of restrictions being lifted had also made businesspeople feel more optimistic, and expectations were the highest they had been since February last year.

There was also evidence of hospitality firms gearing up for reopening, making the outlook brighter for the services sector, as well as renewed confidence in manufacturing.

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"Manufacturers will also be looking to the months ahead with more confidence given the improving conditions in key export markets," Mr Ramsey said.

"The Northern Ireland export climate index within the latest PMI improved markedly in March and this should filter through to increased demand over the next quarter."

He said rising input costs were a challenge, and were prompting firms to put up prices for their goods and services at the fastest rate since the PMI began.

"The growing issue is inflation as firms grapple with significant rises in their input costs, driven by wage increases, rising freight costs and Brexit-related charges.

"Indeed, services was the only sector not to post record rates of cost increases.

"As a result, companies are increasing the prices of their goods and services at the highest rates in the survey's history.

"Firms also reported severe supply chain delays, which is unsurprising given Brexit-related challenges, alongside the temporary blockage of the Suez Canal."

Respondents to the survey were asked for the first time about suppliers' delivery times, and reported that there had been severe delays in the receipt of purchased items.

The Suez Canal in Egypt was blocked for nearly a week last month after container ship the Ever Given got stuck, clogging up one of the world's most vital waterways. Global supply chains have already been under pressure due to the coronavirus pandemic.

Brexit and the demands of the NI Protocol, which has introduced checks on goods coming into Northern Ireland from Great Britain, have also combined to push up freight costs.

The PMI said there were still signs of strengthening demand for business, with higher spending on home improvements.

New orders for companies here also fell at a much softer pace in March, although Northern Ireland and Scotland were the only two UK regions to post a reduction in new business.