Brexit blamed for sharpest orders drop in seven years

The sharpest fall in business activity rates in seven years has been reported in the latest Ulster Bank Northern Ireland PMI.

By The Newsroom
Monday, 9th December 2019, 10:50 am
Updated Wednesday, 11th December 2019, 1:14 am
Dr Jim McIlroy, (left) head of operations at Millicent Pharma; Kevin Holland, the new CEO of Invest NI and Ken Nelson, CEO of LEDCOM
Dr Jim McIlroy, (left) head of operations at Millicent Pharma; Kevin Holland, the new CEO of Invest NI and Ken Nelson, CEO of LEDCOM

Brexit uncertainty has been blamed for a decline in employment and output and new orders.

Northern Ireland companies posted the sharpest reduction in output of the 12 monitored regions.

The rate of decline in new orders accelerated and was the sharpest since May 2012.

There were particularly marked declines in construction and retail. Wage rises and currency weakness were mentioned as factors leading input costs to increase.

However, a fall in employment in Northern Ireland was broadly in line with the UK average.

Commenting on the latest survey findings, Richard Ramsey, chief economist Northern Ireland, Ulster Bank, said: “One of the most striking aspects of the latest survey is the continued resilience of the labour market, with firms broadly maintaining their staffing levels despite a big fall-off in demand. Indeed, the pace of decline in business output and new orders fell to seven and seven-and-a-half-year lows respectively last month.

“All four sectors have posted falling output in six of the last seven months; however, the performance of retail and construction are of particular concern. Construction order books continued to shrink for the 15th month in a row and November marked the sharpest rate of decline in 92 months. It is a similar story for retailers with orders falling at their fastest pace since March 2009.

“In this environment, firms’ desire to maintain staffing levels comes at a cost to profit levels. The latest survey shows that input price inflation continued to rise in November, but firms are not able to pass these increased costs onto their customers and indeed discounting is widespread in an attempt to generate new business.

“Firms therefore seem willing to take a hit to their profits in the short-term in the hope that conditions will improve once there is greater certainty around the situation with Brexit. Indeed, their expectations for the year ahead are relatively upbeat overall with an expectation that business conditions will have improved marginally in 12-months’ time; albeit that this is largely confined to manufacturing and services.

“This may well prove to be overly optimistic however as even if a Brexit deal is passed there is still much to be decided around the new relationship with the EU and how any new arrangements would work. Uncertainty will therefore continue to be very much present in 2020.”

However, some firms predicted greater certainty next year and a return to new order growth with a rise in output.

Firms in Northern Ireland were optimistic regarding the 12-month outlook for business activity and progress on Brexit. However, this was not shared by the construction and retail sectors which remained pessimistic regarding the 12-month outlook.

Meanwhile, an enterprise centre in Co Antrim has helped clients to create more than 200 jobs in 2019 resulting in a £5m boost to the economy.

This performance was reported at the AGM of LEDCOM (Local Economic Development Company), in Larne, which operates in Mid and East Antrim and Antrim and Newtownabbey.

LEDCOM chair Dr. Norman Apsley said: “This year there are 224 more people in employment through a mix of programmes, mentoring and targeted support. We have also helped support a further 942 individuals offering a better future to unemployed young people, the longterm unemployed and people with disabilities. The Directors’ Report highlighted LEDCOM’s social and economic impact with more than £400,000 poured into the wider social economy, with the organisation delivering support to 155 businesses.”