Mon 1st Jul 2013
Quarterly Economic Survey: signs of improvement but economy still fragile
Above: Chris Morrow, Communications and Policy Manager at NI Chamber of Commerce and Nigel Harra, Senior Partner at BDO present the latest findings from the Quarterly Economic Survey
Enterprise Zone must be Northern Ireland wide to maximise job creation and private sector growth says Northern Ireland Chamber of Commerce
The latest Quarterly Economic Survey (QES) released today (1 July 2013) by Northern Ireland Chamber of Commerce in partnership with BDO revealed that the local economy is showing signs of improvement. The survey, made up of responses from almost 450 businesses, highlighted that many key balances are stronger in Q2 2013 than Q1 2013 for both manufacturing and services.
The manufacturing sector has shown particular signs of improvement with both domestic and export sales increasing. The balance in manufacturing orders has moved from a negative to a positive over the quarter and for domestic orders is now higher than the national average. Progress for the service sector in terms of domestic and export sales/orders is much less pronounced although balances remain positive.
In this quarter more businesses in both the manufacturing and services sectors have been recruiting rather than reducing their workforces .The percentage of manufacturers trying to recruit has actually doubled (up from 40% to 79%) although much of this appears to be part-time. The percentage recruiting in services is very high (94% vs. national 73%). Encouragingly, recruitment intentions remain positive for both over the next 3 months but particularly for manufacturers – now on a par with the national balance ( 18% vs 20%). Around two-fifths of manufacturers have experienced recruitment difficulties (national 52%) and 29% of service businesses (national 37%).
Cash flow remains a significant issue for NI manufacturers and this is the only manufacturing balance that is still negative (-20%) which means that more manufacturers are seeing their cash flow position worsen than improve. Business confidence around turnover and profitability in the next 12 months for the manufacturing sector remains positive but sluggish in comparison to the relatively strong confidence levels for both within the wider UK economy.
Confidence, cash flow position and investment intentions are all improving in the service sector. Confidence balances are now higher than the UK national average.
Competition remains the most important concern to businesses by a considerable margin although the percentage of businesses citing this as an increasing concern has fallen slightly from the last quarter – 45% in quarter 1 2013 to 42% in quarter 2 2013. This is followed by concerns around taxation and business rates. Business rates are a source of increasing concern up from 20% in quarter 1 2013 to 25% in quarter 2 2013.
As part of the Quarterly Economic Survey for Quarter 2 of 2013 businesses were also asked for their views on the importance of what, at that stage, might be potential elements within the economic package for Northern Ireland.
Businesses believed the most important aspects of any potential economic package to be centred around enhanced business rates relief (54% consider this very important), fast tracking of key infrastructure projects (46% very important), the provision of some form of guarantee to lenders to support more favourable business borrowing (45% very important) and enhanced capital allowances (44%). Interventions considered less important are the relaxation/fast tracking of planning processes and the introduction of a large-scale apprenticeship programme.
The QES revealed that almost half of members believe that should some form of enterprise zone status be given to Northern Ireland then it should be given to the region in its entirety. Thirty per cent believe that a number of enterprise zones should be created across Northern Ireland while 1 in 5 members are not sure how it should be geographically defined.
Commenting on the findings, Ann McGregor, Chief Executive at Northern Ireland Chamber of Commerce said:
“Overall the survey continues to show welcome progress for the latest quarter. If this progress can be sustained then there are realistic hopes that growth forecasts will be revised upwards. However, the recovery still faces major risks including global financial turmoil, eurozone issues and domestic inflation. Business rates are a source of increasing concern amongst the survey’s respondents and we welcome enhanced businesses rates relief which formed part of the economic pact announced earlier this month.
We are especially pleased that the enterprise zone concept is being considered as part of the economic pact, something Northern Ireland Chamber of Commerce has lobbied for since 2011. The detail isn’t clear as yet particularly around the geography of any enterprise zone or zones but Northern Ireland Chamber of Commerce believes that a number of zones across Northern Ireland will simply displace investment from one part of Northern Ireland to another. This view also seems to resonate with the majority of businesses who responded to the survey. We therefore recommend that an Enterprise Zone is established right across Northern Ireland to help stimulate job creation and grow the private sector.
For this to be successful, the Northern Ireland Assembly must assume the main leadership role in the process, rather than the Treasury. There should be an appreciation of the objectives of all institutions of Government, but the responsibility for an enterprise zone must rest with Northern Ireland.”
Nigel Harra, Senior Partner and Head of Audit at BDO said:
“The big improvement in the manufacturing results was the most welcome aspect of the latest survey for Northern Ireland. Both domestic and export balances are firmly in positive territory although local manufacturers appear to have some concerns going forward. The service sector balances are also positive but at a much lower level. However, service firms are feeling more confident and that is encouraging as we enter the second half of the year.
The G8 summit last month allowed some of the world most powerful leaders to see for themselves how Northern Ireland has changed over recent years and also see the potential that exists here. For that potential to be realised it will require the introduction of the right business conditions. The economic pact contains many measures that will help create those conditions and we welcome the news that the government will take forward further work on Corporation Tax devolution.”