- NI growth to remain sluggish with 0.8% growth projected for 2020
- Unemployment remains at historic lows and expected labour market slowdown yet to materialise
- Information and Communication Technologies (ICT) projected to be the greatest job creator in ROI and NI with just under 30,000 additional jobs forecast across the island over the next five years
EY has revised its forecasts for Northern Ireland slightly downwards, projecting 0.8% growth in 2020 in the firm’s latest EY Economic Eye report. A planned increase in government spending and high levels of job growth have improved the employment forecast and prevented the growth outlook slipping into negative territory, according the professional and consulting services firm.
Modest growth of 1.3% and 1.5% is expected in NI in 2021 and 2022 respectively but is dependent on a Free Trade Agreement being reached with the EU. This performance is in stark contrast to the neighbouring ROI economy, which is projected to grow at 3.4% in 2020, and is behind the expected UK average growth rate of 1.2%.
Commenting on the report, Professor Neil Gibson, Chief Economist for EY Ireland said, “Political developments have dominated the all island economy in recent months and the contrast between economic growth and election results is striking. In the UK, the Conservatives secured their biggest majority in a generation with growth barely topping 1% and in the Republic of Ireland the incumbent government could not secure a majority with headline growth rates of well over 5%.
This speaks to a long standing disconnect between headline growth and the citizen experience and we are likely to see a focus on public services, quality of life and what can be characterised as more internal, or personal outcomes gather than a singular drive for growth and globalisation. This has already been seen in the New Deal New Approach document. It is the nexus of economic, social and environmental considerations that is creating a new paradigm and shaping the political landscape.”
Labour market expected to slow
Job creation has been particularly remarkable in NI against a backdrop of weak growth, Brexit uncertainty and, until recently, a lack of an Executive. Provisional 2019 estimates suggest over 3% growth in total employment and the economy is experiencing record-low levels of unemployment. There are just under 55,500 more jobs in the region than there were three years ago, on a seasonally adjusted basis to Q3 2019, with self-employment levels increasing sharply in recent quarters. While EY expects the labour market to slow down through 2020, this has yet to materialise.
Neil added, “Finding talent has been cited as the top challenge for our clients for the fourth consecutive quarter. The performance of the labour market has been a pleasant surprise, but it is perhaps obscuring the underlying challenges from citizens. The growth of jobs, low cost of borrowing and above inflation pay increases means there will be more money to spend, however how we spend it may be very different than before.”
Brexit still weighs on all-island economy
A notable pickup in business sentiment in early 2020 reflected a feeling that the worst of Brexit is over with the UK having left the EU on 31st January. Though little noticeable change will occur during the transition year the hard work lies ahead as the EU and the UK try to agree a trade arrangement and winds solutions to the unique challenges that NI presents.
Michael Hall, Managing Partner, EY Northern Ireland commented, “Dealing with Brexit is identified as the second biggest risk for business in our recent client survey, but notably it has fallen in prominence from 56% to 45%, reflecting the mood amongst firms that Brexit is now official. Firms are optimistic in their outlook for a free trade agreement but they must still prepare for a host of potential outcomes. Adaptable plans and flexibility should remain a top priority in preparing for a post-Brexit island.”
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