76% of chartered accountants in Northern Ireland believe that the local economy is either contracting or stagnant

A survey of chartered accountants in Northern Ireland has revealed that 76% believe that the Northern Ireland economy is either contracting or stagnant, with only one in four believing the economy is growing at present.

Meanwhile more than half (54%) of those surveyed believe that prospects for the economy in the year ahead are ‘poor’, with only 7% rating the outlook as ‘good’ or ‘very good’.

A long list of negative influences cited in the survey were headed by political instability and cost of living pressures, with 82% of those surveyed saying that the NI Executive should be restored.

The survey from Chartered Accountants Ulster Society, which represents over 5,300 Chartered Accountants in Northern Ireland, also disclosed a significant rise in the number of chartered accountants who feel that the number of businesses in financial distress was increasing (77% in 2023, up from 44% in 2022).

Despite a difficult year ahead, respondents identified the Northern Ireland Protocol as the biggest opportunity for Northern Ireland in the years ahead, citing its potential to provide a unique trading position for businesses here. The survey was conducted prior to the publication of the Windsor Framework, which replaces the Northern Ireland Protocol.

A low cost base, high skills offering, geographic location, English speaking workforce and the ability to potentially lower corporation tax were also cited as plus points for the local economy in terms of attracting more inward investment.

The biggest negative issues for the year ahead are ‘rising inflation and squeeze on living standards’ (96%), ‘cutbacks in government spending’ (95%) and ‘current political conditions in Northern Ireland’ (93%). 75% of those surveyed identified ‘EU Exit’ as a ‘strongly negative’ or ‘negative’ factor on the performance of the local economy.

The survey showed that the rise in the cost of doing business is leading most businesses to absorb the costs, or pass on the price rises to customers, with only 10% having to look towards staffing cuts at present.

The survey did show some modest positives for business from EU Exit in terms of sales/ turnover growth and export growth outside the UK. However, the predominant impacts for business were negative, particularly in the areas of business costs, purchases from Great Britain, access to EU workers, profits growth and investment plans.

A majority of respondents to the survey (78%) held a strong belief that Northern Ireland’s reputation had been damaged by the handling of the EU Exit process. 72% of those surveyed believe that the Northern Ireland Protocol presents an opportunity for Northern Ireland and 76% believe that the Northern Ireland Protocol challenges can be addressed. The Windsor Framework is the most recent attempt to overcome these challenges.

Meanwhile 82% say that the Northern Ireland Executive should be restored, while 69% feel that more powers should be given to Permanent Secretaries within government departments until the Executive is restored.

The survey found mixed views on whether there should be further devolution of tax powers in Northern Ireland, with 44% saying ‘yes’ and 40% saying ‘no’.

Corporation Tax was considered the most suitable tax to devolve, followed by short haul Air Passenger Duty and the Apprenticeship Levy.

Attracting and retaining people and skills dominate the challenges facing businesses in Northern Ireland, with 85% saying that it was becoming ‘increasingly difficult’ to find the right people for jobs, while 78% felt there was ‘a lack of skilled people to fill new skilled positions in Northern Ireland’.

80% of chartered accountants surveyed are expecting a fall in wages in real terms, with 25% expecting no change in wages or a pay cut this year.

The survey shows that most chartered accountants expect hybrid working to continue in the year ahead.

Emma Murray, chairperson of Chartered Accountants Ulster Society, said: “The survey results highlight that chartered accountants are seeing some significant warning signs for the local economy with a period of stagnation and fairly poor prospects ahead.

“They are pointing to a long list of negative influences including the current political impasse in Northern Ireland, the squeeze on living standards, cuts in government spending, and the increased cost of doing business, plus the impact of the UK’s exit from the European Union.

“Our members want the Executive to be restored so that we can begin to work together to address these issues for the benefit of everyone in Northern Ireland.

“Our survey shows that a majority of businesses believe that the NI Protocol, now the Windsor Framework, with access to both the British and EU markets, presents a significant opportunity for Northern Ireland.

“They believe it is vital that we have leadership taking key decisions, encouraging business investment and better public services. The longer that political instability continues, the more difficult it is for local business to contribute to growth, jobs and a better quality of life in Northern Ireland.”

Independent economist Maureen O’Reilly, who formulated and analysed the survey of Northern Ireland’s Chartered Accountants, explained: “These findings provide a very valuable insight into the underlying challenges and opportunities for the NI economy from the perspective of chartered accountants at the cold face of doing business across the private, public and third sectors here.

“Their main focus is on the financial health of the businesses and organisations they represent and it is concerning that the share of members who believe that financial distress among businesses is on the increase (77%). This is the highest share recorded over the last 7 years by a considerable margin.

“Businesses are trying to deal with rising costs by absorbing and/or passing them on through increasing prices while at the same time trying to hold on to staff, a difficult balancing act to juggle that can only last for so long if those inflationary pressures persist.

“The current political and economic environment is extremely difficult which unsurprisingly is dampening the mood around prospects for the year ahead. However, members do see opportunities going forward and the NI Protocol (and now Windsor Framework) is certainly viewed as the main catalyst to support the region to move on to a stronger growth path.

“Members believe economic success should be measured in terms of higher productivity and higher wage jobs sending a clear message around where policy focus should sit. However, they are largely split on whether the devolution of tax varying powers to Northern Ireland should be pursued, the main concern being the need for much greater political stability before this should be pursued further. It is noteworthy that corporation tax remains the most popular tax to devolve here.”

A summary of key findings:

23% felt that the economy was growing; 33% of local Chartered Accountants feel that the local economy is stagnant; 43% believe that the economy is contracting.

77% say that the number of businesses in financial distress is increasing. 2% say the number is falling. 16% say the number is unchanged.

7% feel the outlook for the NI economy in the year ahead is ‘Good’ or ‘Very Good’; 40% feel the outlook is ‘Fair’; 54% say ‘Poor’ or ‘Very Poor’.

Rising inflation and squeeze on living standards (96%), Cutbacks in Government spending (95%) and current political conditions in Northern Ireland (93%) are seen as the most negative issues for the economy.

72% of those surveyed believe that the NI Protocol presents an opportunity for Northern Ireland. 76% believe that the NI Protocol challenges can be addressed.

85% say their business or organisation is experiencing skills shortages (up from 62% in 2022)

82% want the NI Executive to be restored.

69% feel that more powers should be given to permanent secretaries within government departments until the Executive is restored.

254 Chartered Accountants took part in the survey.