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Uncertainty over Brexit will lead to subdued economic growth: report

PwC's chief economist John Hawksworth
PwC's chief economist John Hawksworth
Ryan McAleer

By Ryan McAleer

The Northern Ireland economy will grow by just 1% next year, even if the UK can secure an orderly Brexit, a new report from PwC states today.

The latest UK Economic Outlook (UKEO) expects 1.2% growth here this year, the lowest of all UK regions.

PwC has forecast that even if a no-deal scenario can be avoided, the picture for the UK as a whole will remain subdued, growing by around 1.4% on average in 2019 and a similar rate in 2020.

But it said the projections were weighted to the downside, owing to the risks associated with Brexit.

The UKEO states that economic growth has slowed since early 2018, due primarily to the dampening of business investment as a result of Brexit-related uncertainty and heightened global trade tensions.

The report indicates that consumer spending, backed by recent increases in incomes, continued to drive Northern Ireland's economy.

But PwC has cited the findings of the Financial Conduct Authority's Financial Lives Survey, which found that adults here borrow more on store credit cards and catalogues than any other UK region, with 10% considered to be 'in difficulty' financially.

It also forecasts that job creation is likely to slow over the next year, while business investment will remain subdued until the situation on Brexit becomes clearer.

The most optimistic picture comes from the hotels sector, which PwC projects will deliver Northern Ireland's greatest growth, at 3.5% in 2019 before falling back to 1.6% in 2020. It compares with the UK average of 2.6% and 1% respectively.

House prices here are projected to rise by 3.2% in 2019 and 3.9% in 2020, the third highest across the regions. However, prices remain lowest here with the average rising to £158,000 in 2020 compared to £189,000 in Wales and £170,000 in Scotland.

The UKEO predicts that economic growth will be more balanced across UK regions in 2019-20, with London no longer growing significantly faster than the UK average. It cites the impact of Brexit on the City, along with housing affordability and transport capacity as slowing London's traditionally faster pace of growth.

Most industry sectors are projected to see relatively modest growth in 2019-20, though short-term trends remain volatile and highly dependent on how events develop around Brexit. Manufacturing and other export intensive sectors face risks from heightened trade tensions.

The PwC's chief economist John Hawksworth said the impact of Brexit-related stock-building will likely leave "choppy" economy growth in the UK. "But the underlying trend is for continued modest growth, possibly picking up later next year if the fog of uncertainty around Brexit clears and business investment regains momentum," he said.

"Risks to growth are weighted to the downside due to the possibility of a no-deal Brexit, although there are also brighter spots to the economy such as rising real earnings levels linked to record employment levels."

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