Firms across Northern Ireland have over the years faced significant challenges and upheaval. You’ll have read all about them here in the Belfast Telegraph. I think it is fair to say that the impact of Covid-19 is right up there, weighing heavy on business leaders’ minds.
orthern Ireland’s Top 100 companies are feeling their way through this unprecedented period. But all good chief executives know that despite the challenges, it is important to look for the light at the end of the tunnel.
The CBI has never been busier. We’ve been helping members - providing them with information, insight and good practice on how to deal with Covid. And we’ve been collaborating with government to ensure there is enough support in the system for business during these uncertain times.
We’ve been helping businesses prepare for Brexit as best they can and relaying their key concerns to policy makers. And we have been keeping an eye on that light at the end of the tunnel - thinking about ways we can build our economy and society back better, make the transition to lower carbon, create green jobs and reduce inequality.
So how has Covid affected our economy?
After a historic contraction in the economy early in the second quarter, economic activity has been recovering as lockdown measures have been gradually relaxed. UK GDP fell by 25% over March and April, but since then we’ve seen a recovery from May with growth of 2.4 percent which picked up pace in June when growth of 8.7 percent was recorded, followed by 6.6% in July. Of course, this improvement needs to be put in context: the UK economy is still 12% smaller than it was before the pandemic, so there’s still a long way to go.
The picture has been similar in Northern Ireland and given the higher level of company shut downs in March and April relative to the rest of the UK, the Fraser of Allander Institute estimates that the impact of Covid on economic output locally is even greater in Northern Ireland.
The economic shock in Q2 has been felt differently across the economy. While many businesses have seen demand weaken, a key feature of the recession was its varied impact across the economy: on different sectors, on different businesses within the same sector, and for different groups of workers. Locally the hospitality and transport sectors have taken the largest hit in terms of economic output as these are sectors that rely on face-to-face interactions – and indeed they have made widespread use of the government’s furlough scheme.
Business closures, changing working patterns and a rise in economic uncertainty have had a less severe, but a still substantial impact across several other sectors such as business support services, property, construction manufacturing.
For the manufacturing sector, which accounts for around 15 percent of Northern Ireland’s economy, there has been a very disparate performance across the sector. For example, food, packaging and pharmaceutical firms have fared much better than, say the production of heavy machinery or aerospace. Indeed, aerospace saw output collapse as 95% of aeroplanes sat idle on the runway.
Sectors that have been least affected include essential services like grocers and pharmacies, or those that can most effectively operate remotely such as financial services and tech sectors.
Given all of this, the CBI has suggested that a short-time working scheme be set up by the UK Government and in place by 1 November, for those companies struggling most once the JRS ends.
Shaping up for recovery
The economic recovery will depend upon several things. In the first instance, how we cope with Covid-19 in the autumn/winter 2020 will be important. Second, getting a Brexit deal will be crucial and finally, support for business large and small in terms of cash flow, investment and job retention will make a huge difference to the shape of our recovery.
Coping with Covid in autumn/winter 2020
From the government’s perspective, getting good at implementing very targeted measures to deal with virus outbreaks will be an important aspect of our recovery. At a company level, it will be important not just to continue providing a Covid-safe work environment, but CEO thoughts are increasingly turning to other challenges beyond the physical barriers to work. For example, how do firms maintain productivity levels, ensure good team management when distancing or working from home and promote collaboration and innovation.
Getting a good Brexit deal
NI businesses couldn’t be clearer - they need a good trade deal with the EU.
For the Top 100 companies in Northern Ireland and indeed for firms operating right across the island of Ireland, a UK-EU free trade agreement would minimise the need for strict controls on a range of goods entering Northern Ireland from the rest of the UK.
A deal is needed to make the Protocol work in a sustainable way, ultimately protecting the Good Friday Agreement.
Giving companies time to transition to any new arrangements is hugely important to economic stability. Unfortunately, the business calendar and the political calendar aren’t in sync. For example, local firms tell CBI that they need to order new labelling of their export product months in advance, to avoid disruption to their export business. Thus, the responsibility for government is not just to deliver a deal, but to deliver the deal with sufficient time built in for companies to make a transition to the new operating environment.