Interest rate cut expected but '˜unlikely to have great impact'

That was the downbeat response from local economists to the latest historic rate cut from the Bank of England from the previous record low of 0.5%.

“Savings rates are already near-zero and borrowing costs for business and homeowners are extremely low, while sterling could well weaken further, adding to inflation and business costs,” said Dr Esmond Birnie, PwC chief economist in Northern Ireland.

“It’s also worth noting that the Bank is now forecasting inflation to rise about its 2% target; and, while its quarterly inflation report does not foresee a recession, UK unemployment is expected to rise to 5.4% next year and 5.6% in 2018.

“Whilst the fiscal target to balance the books by 2020 appears to have gone by the board, how far the UK government will use this new flexibility to spend more on, say, infrastructure investment in unclear.”

Any re-setting of the UK’s fiscal policy and the new government’s attitude to austerity would inevitably have a “read-across” effect for the province by way of the Barnett consequentials, he said, though details would only become apparent with the Autumn Statement.

“Northern Ireland will share in any slowdown in the overall UK economy and for some time the indicators have suggested that our regional growth rate has been lagging behind the UK,” Mr Birnie.

“PwC’s latest forecasts for 2016 are for growth of 1.6% in the UK but only 1% for Northern Ireland.

On a more positive note, he said business opportunities remained.

“If, the pound remains low that could boost price sensitive sectors such as tourism, food processing and cross-Border shopping.

“Some key Northern Ireland sectors such as aerospace and pharma could also become more competitive if the pound remains weak compared to the US dollar.”

For Danske Bank, chief economist Angela McGowan said the Bank of England had signalled its willingness to tackle the any Brexit-related slowdown.

“The economic climate has clearly darkened as Markit PMIs and the Bank of England’s own forecasts demonstrate, but people should remember that monetary policy is only one side of the coin.

“Fiscal policy will undoubtedly also be stepped up by the new Chancellor and measures to support households, businesses and investment will undoubtedly feature in the Autumn Statement.

“The latest move from the Bank of England will have obvious repercussions for sterling and inflation.

NIIRTA CEO Glyn Roberts said it was concerning that the Bank of England had revised its 2017 UK growth figures from 2.3% down to 0.8%.

“If we see a major slowdown in the economy and reduced consumer confidence, our retail sector will be the first to be impacted. Given that the Northern Ireland economy has already very slow growth, this a major cause for concern”