Tue 12th Jan 2016
QES 2015 Q4 Results: Challenges remain but businesses upbeat about 2016
• Almost all key balances remain positive in Q4 of 2015
• Two-thirds of businesses expect their businesses to grow in 2016
• Competition, performance of the NI Executive and the strength of the pound cited amongst biggest challenges for 2016
Competition, the performance of the NI Executive and the strength of the pound have been cited as the biggest concerns for businesses in 2016.
The findings form part of the latest Quarterly Economic Survey for Q4 of 2015 released today (Tuesday 12 January 2016) by Northern Ireland Chamber of Commerce and Industry (NI Chamber) and leading business advisors BDO.
The survey, which was completed by over 300 local businesses, who between them account for almost 22,500 jobs in the region, also revealed concerns about the availability of skills to meet the needs of employers; the impact of proposed public spending cuts and the introduction of the National Living Wage in April 2016.
Commenting on the findings, Christopher Morrow, Policy Manager at Northern Ireland Chamber of Commerce and Industry said:
“The survey shows that businesses are trying to be optimistic about the year ahead, however there are a number of challenges facing them.
“Competition has been constantly cited as a key issue for members alongside rising costs. Northern Ireland businesses feel that they cannot be as competitive as their counterparts in other parts of the world with our manufacturers in particular suffering due to increasing costs, issues around exchange rates and global economic conditions.
“Members from sectors such as tourism and hospitality are also concerned about the introduction of the National Living Wage and its proposed timetable, with the view that the policy has not been well enough thought through and potential impacts not adequately assessed.
“It is also reassuring that as a result of the Fresh Start Agreement, there is now a sense of stability coming from the NI Executive. The majority of members who responded to the survey believed that the instability of the Northern Ireland Executive in 2015 held back international (87%) and local (79%) business investment.”
However despite the challenges facing businesses in 2016, around two-thirds of those surveyed expect their business to grow in 2016. Around 15% (one in six) expect their business to contract during the year.
Mr. Morrow continued: “Government will be consulting with the business community on a number of initiatives including the reform of business rates which began in December 2015; the development of a new Programme for Government; the new Department of the Economy and an action plan to address Northern Ireland’s low levels of export activity.
“Businesses finally have an opportunity to contribute to the review of business rates – an important policy tool which requires careful and strategic consideration. Along with the new Department of the Economy, which will bring skills and the economy closer together, a new Programme for Government and an action plan to boost exports, 2016 can provide the foundations required for businesses to grow.”
The survey also revealed that as we enter 2016, Quarter 4 of 2015 brought a somewhat more positive outlook for both manufacturing and services although both continue to face challenges. Most key balances remain positive suggesting some growth in the local economy and the majority recorded increases after what had been a relatively poor performance in Q3. In manufacturing 10 of the 14 key balances improved during Q4 along with 11 of the 14 key balances in services.
However, challenges for manufacturers in both domestic and export markets particularly stand out. The manufacturing sector domestic orders balance became negative during Q4 (-1%) meaning that slightly more manufacturers expect sales in the home market to fall in the next 3 months than expect them to rise. In the services sector the balances around employment fell during Q4 with fewer taking on staff in the last 3 months and fewer expecting to over the next 3 months.
Commenting on the Q4 2015 findings, Mr. Morrow, continued:
“There was a slightly more positive outlook to the Q4 2015 QES for both Northern Ireland manufacturing and services sectors. Most key balances remain positive and the majority recorded increases after what had been a relatively poor performance in Q3.
“However, both sectors face challenges. The continuing slowdown in domestic and export sales particularly stands out for manufacturing. The services sector sales indicators are now quite substantially below the national average.
“The Q4 results still point to some economic growth and a sense that businesses are feeling more positive about prospects going forward.”
Michael Jennings, Partner at BDO said:
“Having bid farewell to 2015, Northern Ireland businesses are looking forward to a prosperous 2016 with many anticipating growth in the year ahead.
“Despite their optimism for business in 2016, many respondents do not expect the local economy to grow, noting concerns that instability in the Northern Ireland Executive is holding back business investment. Such concerns should have been alleviated by the Executive’s ‘Fresh Start Agreement’ and the confirmation of Corporation Tax devolution in 2018, albeit that implementation could present its own difficulties.
“Proposed public spending cuts represent significant change for the local economy. However, it could prove to be a valuable opportunity for the private sector to gain access to skilled labour. Indeed, with continued focus on promoting local business, foreign direct investment and economic growth, it is hoped that the private sector will be able to absorb many of the employees being released from the public sector.”