Lack of confidence is choking our recovery
Business confidence in Northern Ireland remains "poor'' with a lack of available credit and lacklustre business optimism constraining recovery.
A review of business by advisors PricewaterhouseCoopers (PwC) which examined seven regions across the UK, reveals that while there was a significant improvement in business confidence in the second half of 2009 in 6 regions, Northern Ireland was the only area to report ‘average’ confidence levels.
The regions surveyed include Northern Ireland, London, Midlands, The North, Scotland, The South East and West and Wales.
PwC managing partner in Northern Ireland, Hugh Crossey says the findings reflect Northern Ireland’s steepest decline in house prices out of all the UK regions, coupled with a large rise in unemployment and fears for political stability.
“There is concern in the business community about political events in Northern Ireland and particularly that the Executive is not focused on the economy and the hard choices necessary to drive recovery,” he added.
The inaugural Regional Trends Survey collates the results of a poll of PwC’s regional business leaders on the current prevailing sentiment among the wider business community in their regions. It also provides an outline of UK business health, prospects and concerns.
Key findings include:
n political instability remains a key concern in some regions;
n lacklustre business confidence is further inhibiting investment;
n a lack of bank lending and perceived onerous borrowing conditions;
n construction and engineering hardest hit sectors across all regions; and
n tax rises are stifling entrepreneurship.
Northern Ireland, the North, South East and Scottish regions say uncertainty regarding future taxes and post-election spending, is leading businesses to err on the side of caution when considering investment decisions.
These regions and the Midlands report significant scepticism about reported increases in bank lending; the PwC regions suggest that increased bank lending is being offered selectively and under what are often prohibitively strict terms.
Manufacturing has suffered from weak demand and uncertainty remains as to when this is likely to pick up. Wales & West, Scotland and the North identify the weak pound as a driver of improved exports, but rising costs of energy and other raw materials have squeezed margins across the UK.
Major upheavals in the financial services industry have led to significant redundancies in the North of England and London, with most other regions also seeing some effects. London, as the centre of the UK financial market, saw the most losses earlier in the crisis.
Business services companies, too, have reduced head counts in an effort to cut costs as clients seeking discounts are forcing margins down, though the Midlands have seen legal services firms performing better than the national average over the period.
Northern Ireland, the Midlands and the North have all seen declines in house building activity, though house prices have shown some signs of recovery in recent months, which may help to reverse this trend. Given that consumer credit markets are still feeling the squeeze, full recovery is some way off.
Mr Crossey says housebuilding is at a virtual standstill as the absence of liquidity and lending keeps first-time buyers out to the market:
“In the private sector many large construction projects have been mothballed due to financial constraints and, as major public works contracts conclude, lack of public sector liquidity may see more projects frozen, further driving up unemployment.
“Whether public sector spending continues to take up the slack in the industry after the upcoming general election remains uncertain.
“There is no doubt that the general sentiment amongst PwC’s UK business clients is one of lacklustre confidence.”
Declines in the construction, manufacturing and financial services industries have been significant contributors to rising unemployment across the UK.
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Tuesday 14 February 2012
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