Growth slows as employment rate falls and consumer spending stalls

Manufacturing has played a major part in Northern Ireland's recovery from the property crash but consumer confidence remains a critical factor
Manufacturing has played a major part in Northern Ireland's recovery from the property crash but consumer confidence remains a critical factor

Northern Ireland will continue to be the slowest growing region in the UK as it trails the rest of the country in in economic growth in 2019 after a lacklustre performance in 2018, accordng to PwC’s latest UK Economic Outlook.

PwC says growth in 2018 is likely to be equal-lowest with Scotland at 1% and expected to reach only 1.1% in 2019 behind Scotland’s 1.2% and a UK average of 1.6%.

Fastest growing amongst the UK’s 12 regions in 2019 are expected to be the South East of England at 1.7% and London, the East Midlands and South West at 1.6%.

Adding to the suggestions that the NI recovery is slowing, are data from the Office for National Statistics (ONS) which show that NI’s previously improving employment rate fell by around 1.2% in the year to December 2017 - the largest fall amongst the 12 UK regions.

The East Midlands (-0.6%) and Yorkshire and the Humber (-0.2%) were the only other regions experiencing a decline, with the average employment rate across the UK growing by 0.6% in the 12 months to Q4 2017.

A detailed comparison of the UK regions’ relative performance over the past two decades indicated that NI’s manufacturing contribution to the region’s gross value added (GVA) increased by around 1.4% between 2009 and 2016, well ahead of the UK average rise of 0.6% and most other regions other than Wales and the Midlands.

However, over the same period, the province saw the second-lowest increase in professional, technical and scientific services’ contribution to GVA, while the regions also experienced the biggest fall in public sector employment.

“Between 1998 and 2007, Northern Ireland was the second fastest-growing region after London, but suffered the greatest reversal in the immediate aftermath of the financial crisis,” said PwC regional chairman Paul Terrington.

“Since then London is the only region to have increased its overall share of national GVA.”

Analysis of ONS data suggested, he said, is a positive relationship between relative regional GVA growth rates and education and skills, business formation rates and employment in professional and technical services.

“Regions reliant on public sector employment have grown more slowly, while employment alone is not a proxy for productivity or regional prosperity.”

Looking to 2019, the report says real consumer spending growth is expected to slow from around 1.8% in 2017 to around 1.1% in 2018 rising again to 1.3% in 2019.

“Looking to the 2020s, however, growth could return to its long term trend rate of around 2% if the UK can negotiate a favourable future deal with the EU and automation boosts domestic productivity growth and holds down prices,” said PwC chief economist John Hawksworth.

“Consumer spending accounts for more than two thirds of UK GDP, making it the most important driver of UK economic growth. But it has slowed significantly recently as higher inflation has squeezed consumer spending power and it looks set to remain sluggish in the short term, dampening overall GDP growth.”