Employment down for first time in four years: 'Northern Ireland private sector is going through a challenging period at present'
The decision to reduce staff is largely driven by efforts to limit overheads, particularly in anticipation of the upcoming increase in employer National Insurance Contributions
The latest Ulster Bank Regional Growth Tracker has revealed a continued decline in business activity in Northern Ireland, with the region's private sector showing signs of struggle.
In February, the headline Business Activity Index – a seasonally adjusted index that measures the month-on-month change in the combined output of the region’s private sector – stood at 44.9, just slightly lower than January’s 45.0 and below the critical 50.0 mark that separates expansion from contraction for the third consecutive month.
According to the report a major factor in this downturn was a reduction in new orders, as demand remained subdued across various industries. The construction sector was also notably weak, with some respondents highlighting its struggles within the housing market.
Three of the four categories covered by the report saw activity decrease in February. The sharpest contractions were in construction and retail, while services activity fell for the first time in 16 months.
However, manufacturing continued to see growth offering a glimmer of positivity amid the broader downturn.
A more concerning development in the report was the reduction in employment, marking the first time in four years that companies in Northern Ireland had scaled back their workforce numbers. The decision to reduce staff was largely driven by efforts to limit overheads, particularly in anticipation of the upcoming increase in employer National Insurance Contributions.
While the decline in employment was significant, it was one of the weakest in the UK, with only the North East of England and Scotland experiencing less severe reductions.
However despite the overall downturn, business confidence improved in February, suggesting that companies are cautiously optimistic about the future. Manufacturing, in particular, saw a positive outlook, with many businesses expressing confidence despite broader economic pressures.
Sebastian Burnside, NatWest chief economist, commented: “A first reduction in employment in four years added to the sense that the Northern Ireland private sector is going through a challenging period at present.
"Firms acted to lower staffing levels amid further declines in output and new orders, but also to try and limit overheads before the impending increase in employer National Insurance Contributions. In fact, both input costs and output prices rose at the sharpest rates in almost two years, with costs up more quickly in Northern Ireland than anywhere else in the UK.
“By sector, the overall downturn continued to be driven by the construction and retail categories, but there were signs of emerging weakness in services as well.
“On a more positive note, business confidence regained some ground in February, with manufacturers particularly bullish in the outlook.”