Esmond Birnie: Northern Ireland and Great Britain teeter on the edge of a recession which is very much home made

To a great extent this flatlining in the private sector reflects draining confidence amongst businesses and firms as they face budgets squeezed by escalating costs. And those higher costs have largely been driven by policies made either at Number 10 or Stormont Castle.

First and most importantly, the October Budget raised the National Insurance tax on jobs. At a UK-wide level this represents an extra £24bn on an employer annual labour cost bill of £1,300bn or a 1.8% increase.

International evidence suggests that a 1.8% increase in labour costs could imply a 0.9% decrease in employment: about 300,000 jobs across the UK or about 9,000 here in Northern Ireland.

The "hit" in Northern Ireland could well be worse given our greater reliance on small firms. Of course, businesses could choose to react to the higher costs in a range of ways - cutting wages or by reducing investment - but none of these would be good.

Additionally, the UK government has followed its Conservative predecessor in increasing the legal minimum wage (national living wage/NLW) at above inflation rates. This, again, raises labour costs with added ripple impacts on wage earners above the threshold.

A job demand reduction is quite possible especially in a less buoyant economy. And any impact is magnified in Northern Ireland given that our average wage level is lower.

A third policy problem hitting the private sector is the UK government's employment rights policy. This is well intentioned but does imply a further increase in labour costs (0.4% according to the official impact assessment) and in turn we could be looking at a job reduction of up to 2,000 here in Northern Ireland or some combination of lower wages and less investment.

In fact, the Northern Ireland impact could be worse given our greater representation of small firms, the perceived need to "catch up" with GB employment legislation which occurred during the years when Stormont was "down" and our economy minister's "good jobs agenda ".

The fourth hit is an entirely Northern Ireland affair. Stormont executives have repeatedly refused to act to place the funding of the Northern Ireland water and sewerage service on a stable and sustainable basis.

It is very hard to see any alternative which does not involve some form of charging but this is the very thing which has been repeatedly ruled out by the politicians.

The limited capacity of the sewerage and treatment system is now acting as a constraint, limiting house building and commercial development across many parts of Northern Ireland. This is Stormont's own anti- growth (indeed, anti-environmental) agenda.

Last, but by no means least, Northern Ireland has its peculiar cost hit to the private sector in terms of the frictions imposed on imports of goods from Great Britain given the Irish Sea ‘border’. Such frictions are likely to worsen in 2025 given EU customs checks on parcels and divergence between Northern Ireland and Great Britain in terms of product safety regulations.

Since the 2007-9 banking crisis the economic growth rate of both the UK and NI have been a quite modest 1 or 1.5% annually. Some recent economic forecasts (Danske or UUEPC) imply something similar in 2025.

Such economic modelling by its nature tends to focus on the main components of demand in the economy, notably the growth in public spending.

At the start of 2025 the key economic problem in the UK is a dramatic rise in business costs which means businesses may be very unwilling to supply higher output.

So, quite apart from international developments such as Trump tariffs, NI and Great Britain teeter on the edge of a recession which is very much home made.

Dr Esmond Birnie is senior economist at Ulster University