When NI Chamber and BDO published Quarterly Economic Survey results for Q2 in August, we highlighted then that inflation was a dominant concern amongst NI businesses. In fact, during the fieldwork period, 76% of manufacturers and 74% of service businesses said that they were more concerned about inflation than they had been in the three months previous. A growing share (40% of manufacturers and 48% of services) were also concerned about rising interest rates.
In recent weeks, the Consumer Prices Index (CPI) rate of inflation was reported at 6.7%, an indication that whilst proving stubborn, inflation appears to be gradually easing off. Producer price inflation (PPI) fell by 2.3%. This news was followed a day later by a decision by the Bank of England to hold the base rate at 5.25%, when many commentators had speculated that it would increase.
Businesses, who have been dealing with constant hikes in the cost-of-borrowing, have cautiously welcomed the Bank of England’s decision. With clear signs that inflation, including core inflation is slowing down, the decision to pause and possibly bring to an end the interest rate hike cycle, makes sense.
As with all things, when it comes to fiscal and economic policy, businesses value stability and certainty. So, while the Bank of England’s most recent decision about interest rates will have received a cautious initial welcome, companies still need reassurance that it was not a knee-jerk reaction to inflation data. Across the British Chambers of Commerce network, there have been calls for clear direction from decision makers, creating a roadmap for business that boosts confidence and investment.
In Northern Ireland that’s important because despite the challenges which undoubtedly exist, our businesses continue to report strong levels of confidence, so we are in position to build from a good base.
In Q2, 62% of NI Chamber members were positive that turnover would grow in the next 12 months. Most key indicators in the Northern Ireland survey were positive, meaning that in the second quarter of the year, more firms were reporting increasing export sales, employment growth, confidence around turnover and profits and investment intentions than those reporting any fall.
And while in the past, Northern Ireland typically ranked among the bottom performing UK regions across most of the QES key indicators, in recent quarters our regional ranking has been much more positive. In Q2, Northern Ireland ranked as the top region for 4 of the 11 indicators including employment activity and confidence in turnover growth.
Without ignoring the challenges, there is a lot to be said for building of that positive momentum, which was certainly the sentiment when I attended the recent NI Investment Summit. That focus on investment was welcome and throughout the Summit, delegates learned about the unique reasons which make Northern Ireland stand out as a place to grow and invest, through the compelling success stories of our homegrown and newly located businesses.
It was a very positive experience and in the few weeks since, at NI Chamber we’ve had many more positive engagements besides. In the past month alone, thousands of local businesses have attended our events – they are there to do business, to network and learn because they are poised for growth.
Opportunity exists and stability in all things; fiscal policy, monetary policy, trading arrangements and of course, the devolved institutions, is the key to unlocking it.