Sat 6th Jul 2013
NI Chamber QES: Signs of improvement but Northern Ireland still lags behind the UK
Pictured above: Ann McGregor, Chief Executive of Northern Ireland Chamber of Commerce and Peter Burnside, Head of Tax at BDO
9 April 2013
– Northern Ireland still remains a lagging region behind any UK recovery
– 1 in 5 non-exporters believe that their product or service has export potential
– Managing currency fluctuations the biggest challenge for current exporters
– Only 7% of respondents believe the UK’s withdrawal from the EU would have a positive effect on the Northern Ireland economy
– Almost 1 in every 2 businesses trying to recruit have experienced difficulties
The latest Quarterly Economic Survey (QES) released today (9 April 2013) by Northern Ireland Chamber of Commerce in partnership with BDO revealed that more businesses in Northern Ireland expect turnover and profitability to improve over the coming year than decline however Northern Ireland still remains a lagging region behind any UK recovery.
The new survey, made up of responses from more than 400 businesses, revealed that 48% of business believed that their turnover will increase over the next 12 months, compared to just less than one quarter (23%) who believe that their turnover will decrease. 37% of businesses believe their profitability will increase over the next year with 27% expecting a decrease.
But relative to most other UK regions business confidence remains low. Northern Ireland currently ranks 2nd from the bottom after Scotland in terms of business confidence around profitability in services and 3rd from the bottom for manufacturing. The balance of both manufacturing and service firms expecting profits to increase over the coming year is half the UK average.
The outlook for current exporters in Northern Ireland appears promising with export sales (outside the UK) rising for 34% of businesses this quarter compared to 29% of businesses during the last quarter of 2012. When current exporters were asked what their biggest export related challenge is at present, managing currency fluctuations was the most significant challenge followed closely by the cost of exporting including transport costs.
Significantly 1 in 5 of businesses that do not currently export believes that their product or service does have export potential. When asked what was preventing them from exporting 40% stated that they do not have the staff resources to consider exporting. Size of business and lack of knowledge is also an issue when it comes to exporting with 29% and 28% respectively stating that it is the reason preventing them from exporting. Significantly only 7% of non-exporters believe that exporting is “too risky”.
As the first survey in Northern Ireland to address the UK’s membership of the EU and its impact on Northern Ireland businesses, only 7% of respondents in Northern Ireland believe the UK’s withdrawal from the EU would have a positive effect on the Northern Ireland economy in light of Northern Ireland’s closer trade links with Republic of Ireland. Respondents were also asked to rate the key benefits of EU membership to Northern Ireland. Opening up export market opportunities was believed to be the biggest benefit for Northern Ireland with 66% of businesses stating that it was either fairly or very beneficial. Over half of respondents rated the availability of EU funding/programmes (58%), as beneficial to Northern Ireland.
Almost 1 in every 2 of those businesses trying to recruit have experienced difficulties. This is much more of an issue for manufacturing compared to services here. In fact Northern Ireland is one of the regions most impacted on by recruitment difficulties in the manufacturing sector (3rd highest reporting recruitment difficulties across the regions). Manufacturers have particular difficulty recruiting skilled manual/technical staff (70%). Services have greatest issues in recruiting professional/managerial staff (75%).
Commenting on the findings, Chamber Chief Executive Ann McGregor MBE said:
“This quarter’s survey shows some signs of improvement, albeit modest, however many balances are still below pre-recession levels. Manufacturers seem more confident than services but growth prospects still remain relatively low for both. The business community must continue to press for the introduction of pro-growth polices over the coming months in order to start rebalancing the Northern Ireland economy.
Increasing exports is one of the main ways in which Northern Ireland can start to reduce its over dependence on the public sector and address its low level of productivity vis-a-vis the UK regions. Where internal demand is weak, as has been the case here for some time now, exports can help accelerate recovery. It is encouraging that our exporters’ performance in the first quarter of 2013 is stronger than previous quarter’s and we hope that this trend continues.
The challenge is how to convert the 22% of non-exporters which believe they have products or services with potential abroad into active exporters. Danske Bank Export First, a Northern Ireland Chamber initiative, is currently in the process of helping businesses develop the capability, especially in terms of personnel, that will enable them to grasp the business opportunities abroad.
There are also a number of challenges holding current exporters back from developing further with managing currency fluctuations cited as the biggest challenge. Exporters are certainly right to be cautious, but managers should not allow currency concerns to inhibit growth abroad. There’s plenty of expert help and advice readily available from local banks, the most popular being Irrevocable Letters of Credit, to help local companies to manage foreign currency and to hedge against any risks, perceived or real.
It is interesting that the majority of businesses believe that Northern Ireland will be more negatively impacted should the UK withdraw from the EU. Exporters are particularly positive about the benefits of EU membership and feel we have a lot more to lose if the UK were to withdraw from the EU compared to non-exporters. The fact that the Republic of Ireland is our most important export partner will have significant bearing on this view.”
Peter Burnside, Head of Tax at BDO said:
“Although the progress seen in the first quarter of this year is modest, it is progress nonetheless. It is clear however, that more help is needed. The government should be quick to implement the supply-side measures announced in the Budget to get growth moving, and consider new ways to support business confidence including grasping the initiative on a special corporation tax rate for Northern Ireland.
It is apparent from our survey that any growth this year will be subdued, and it is important that this does not veer off course. Recent welcome steps to improve business access to finance, including the commitment to create a business bank, must be followed through without bureaucratic delays.
It is a real worry that Northern Ireland is lagging behind the rest of the UK in terms of recovery. Our clients tell us that real action is required. Although business supports the government’s plans to shift current spending towards capital investment over the next Parliament, it could, and we believe should, go further still to boost growth in the short-term, such as through road maintenance and house building. We must also look at implementing traditional fiscal support such as increased capital allowances and extended relief for trading losses.”