Tue 19th Apr 2016
Quarterly Economic Survey: Assembly tasked to help manufacturing sector
The Northern Ireland Assembly should establish a “taskforce” from the private sector charged with creating a positive plan for the manufacturing sector which will drive competitiveness.
That is one of the suggestions made by members of Northern Ireland Chamber of Commerce and Industry (NI Chamber) who were surveyed in the latest Quarterly Economic Survey for Q1 of 2016 released today (19 April 2016) by NI Chamber in association with leading business advisers BDO.
Most members believe Northern Ireland’s manufacturing sector has a future particularly in higher value manufacturing but are concerned about the lack of government policy specifically targeted towards the sector.
Members are also concerned about the lack of effective energy strategies to support the industry and believe that addressing the issue of high energy costs should be the number one priority for the Assembly to support local manufacturers.
The survey, which was completed by almost 300 local businesses, was conducted against the background of a number of substantial job loss announcements recently in the sector.
Q1 2016 results show that local manufacturers are continuing to face considerable challenges. Over the quarter, manufacturing employment balances, reflecting balances of business taking on staff in the last 3 months and those expecting to in the next 3 months, both fell. Confidence in both turnover and profitability going forward has also fallen, investment intentions are lower and fewer manufacturers are operating at full capacity.
However, there were improvements in both manufacturing domestic sales and orders balances this quarter and both are now more positive than UK balances. There was also some small signs of pick up in export orders.
Meanwhile, exchange rates remain a challenge with more than twice as many members (45%) citing them as a key concern compared to this time two years ago.
Members suggest a range of initiatives to help the manufacturing sector including educational programmes which support young people in pursuing a career in skills suitable to the manufacturing sector and identifying factors which are most crucial to creating a more vibrant manufacturing base including the early adoption of the lower corporation tax rate.
NI’s service sector performance in a regional context continues to be poor generally across most of the indicators. Only 5 of the 14 key balances improved this quarter while 7 of the 14 fell. The sector is in the bottom 3 performing UK regions for 10 of the 14 key balances.
There was an improvement in the domestic sales balance which increased by 10 points to +19%. The domestic balances remain low however compared to the UK average and the domestic order book looks particularly weak. The employment balance fell by 4 points to 11% in Q1. Fewer businesses appear to be taking on part-time staff. The cash flow balance also deteriorated falling by 19 points to +4% in Q1.
The New NI Executive
In light of the forthcoming Assembly elections, the survey also revealed how businesses believe that the most important government intervention that the next NI Executive can introduce to help support their business and help the Northern Ireland economy grow is to reduce corporation tax (24%). Some members asked for its early introduction while others expressed concern that it might not be implemented.
Other important interventions include lowering business rates (13%) and ensuring that the UK remains within the EU (13%). Concern was also expressed over growing payroll costs, particularly for small employers, in light of the introduction of policies including most recently the National Living Wage.
Commenting on the survey, Ann McGregor, Chief Executive of Northern Ireland Chamber of Commerce and Industry, said:
“There are some signs of growth in the Northern Ireland economy this quarter and it is positive to see an improvement in sales and a slight pickup in export orders in manufacturing. However the sense of uncertainty is palpable. More key balances weakened than strengthened and fewer businesses in both manufacturing and services took on staff during the last 3 months. It is concerning to note that many of the forward looking indicators point to a dampening of employment expectations, investment intentions and confidence going forward.
“Energy costs consistently dominate member concerns particularly in sectors such as manufacturing. NI Chamber welcomes the recently published recommendations of the Ministerial Energy & Manufacturing Advisory Group but would like to see the NI Executive put in place a plan of action to respond to those recommendations as a matter of urgency. Northern Ireland’s manufacturing sector has a future but support from the Executive is crucial to give the sector a level playing field with other regions and countries.”
Brian Murphy, Partner at BDO, said:
“The real take-home message from the first Quarterly Economic Survey of 2016 is that the mood of industry is resolute and that Northern Ireland’s political establishment must meet its concerns with positive action. In particular, we need to see a concerted strategy that focuses on the region’s potential as a centre of high-value manufacturing excellence.
“The Northern Ireland Assembly must also take more aggressive steps to address issues around competitiveness and energy costs. As the region readies itself for the introduction of lower corporation tax, members of NI Chamber clearly want to see a greater sense of urgency and resolve from Stormont. The demand for an industry task force should be a clear wake up call to our politicians. Only by working together in partnership will we ensure that Northern Ireland’s appeal to investors is as compelling and comprehensive as we believe and know it can be.”