Business Month, news, June 2013
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Unemployment in Northern Ireland rose by 1.4% to 8.1% in the year ending April as measured by the Labour Force Survey. Those claiming unemployment related benefits rose by 3.4% in the year to 7.1%.
The FTSE 100 has accelerated from under 5500 to nearly 6800 in the last year – a 29% rise.
Inflation was measured at 2.4% in the year ending April, down from 2.8% in the year ending March. This is the first fall in the inflation rate since autumn last year.
UK gross mortgage lending in April rose by 21% compared to last year and was 4% up on March. Comparisons with 2012 are misleading because of the ending last year of stamp duty relief.
Down
The pound has fallen from over $1.62 to about $1.52 since January.
There was a 29% fall in the number of new homes being built in Northern Ireland in 2011/12 compared to the year before: building on 5,702 new homes was started in 2011/12.
Average house prices in Northern Ireland fell by 1% in the first quarter of 2012, down by 6% in the last year.
Retail suffering
UK retail sales fell in April, down by 1.3% in both volume and value on the previous month. In the food sector, sales fell by 4.1% by quantity and 3.5% in value. On an annualised bases, total retail sales rose in cash terms by a marginal 1.3% – less than the rate of inflation.
Northern Ireland continues to underperform the rest of the UK, according to the latest figures from the Northern Ireland Retail Consortium. Shop vacancy rates have increased further and now stand at 18.1%, compared to the UK average of 11.9%. There was a 6.4% drop in footfall in Northern Ireland shops in April over the year, against a 1% increase across the UK.
Professor Neil Gibson, director of the Northern Ireland Centre for Economic Policy in the Ulster Business School, believes that the sector is set for further contraction. “Retail employment levels grew rapidly during the boom and have been slowly falling for four years,” he explains. “This decline is likely to continue as the sector remains larger than the overall spending power in the region will support.
“With house prices not yet rising, a static labour market, inflation above pay rises for most and migration flows having moderated, the sector is facing numerous pressures on top of the significant threat from online retailers. With no indication of a much needed reform in the business rating system the prospects for retailing are sadly very challenging. This could be devastating for many towns and villages in which the sector is a key employer.”
MLAs criticise Invest NI
Invest NI needs to move quickly to adopt a more objective basis for measuring its performance and outcomes, a committee of MLAs has said. The Assembly’s Public Accounts Committee said that Invest NI should be assessed on the number of jobs created and saved, rather than those ‘promoted’ as is currently the case. It is unclear how many of the ‘promoted’ jobs are actually created and for how long, said the MLAs.
“We are disappointed that systems which will track whether jobs are created or retained have only been implemented recently and it will be some years before any meaningful data becomes available,” said committee chair, Michaela Boyle MLA. “This is of particular concern given that Invest NI spent almost £520m on Selective Financial Assistance grants to companies over the past decade.”
The committee expressed unhappiness also at the lack of follow-up information sought and retained by Invest NI. The MLAs reported that five of the largest recipients of financial support, to a total value of £144.5m, could not supply details of how many jobs were subsequently lost.
Invest NI should do more to support the employment of people who live in disadvantaged areas, added the committee. It pointed to 92% of inward investment support by Invest NI meeting a performance target of investment being located within 10 miles of a deprived area, yet no records existed to indicate how many of the jobs created went to people living in deprived areas.
MLAs were also concerned that performance targets for Invest NI narrowing the productivity gap with Great Britain had been dropped because the targets were not being met.
However, the MLAs reported that Invest NI had met all its nine key performance indicators in the period 2008 to 2011, despite the severe global economic crisis. Performance was particularly strong in terms of the quality of jobs created and in businesses’ investment in research and development.
The committee noted that Northern Ireland could lose its special Regional Aid status, curtailing Invest NI’s ability to provide financial assistance and expressed concern “that there is little tangible evidence that they [Invest NI and DETI] have been active in developing alternative strategies for promoting economic development”.
Business insolvencies halve
The number of Northern Ireland businesses going into liquidation has halved in the last year, according to figures published by the Insolvency Service. In the first quarter of last year, 111 firms went in compulsory or creditors’ voluntary liquidation. The figure in the first quarter of this year was just 55.
However, there has been a 5% rise in declared personal insolvencies, though with a 19% fall in personal bankruptcies. Preferred options have instead been debt relief orders, which have risen by 5%, and individual voluntary arrangements, which have shot up by 41%.
The picture in Northern Ireland differs from that in England and Wales, where there has been a sharp fall in both corporate liquidations and personal declared insolvencies. In England and Wales there was a 16% fall in corporate liquidations over the year, a 30% fall in receiverships and a 29% drop in administrations. There was also a 13% reduction in declared personal insolvencies.
Ulster Bank chief economist Richard Ramsey said that firms in Northern Ireland were in worse shape than those in Great Britain because of the bigger collapse of the property market here and firms’ greater exposure to the economic crisis in the Republic.
Ramsey pointed out that while personal insolvencies in England and Wales are now lower than before the recession began, in Northern Ireland they are currently more than double the level in 2007. However, the rate of personal insolvencies per capita is actually slightly lower in Northern Ireland than in England and Wales. Given the growing unemployment in Northern Ireland, the excessive levels of household debt, falling property prices and continued fall in real incomes, it can be expected that the personal insolvency rate in Northern Ireland will continue to rise, he suggested.
Agri food strategy launched
An extra 15,000 jobs could be created in Northern Ireland’s agri-food sector if recommendations in a strategic action plan are implemented, according to the Agri-Food Strategy Board, which was established by the Department for Enterprise, Trade and Investment. The plan was launched by First Minister Peter Robinson and Deputy First Minister Martin McGuinness at the first Royal Ulster Agricultural Society Show to be held at the Maze.
The report contains 100 recommendations to grow the farming, fishing and food and drink processing industry, which is already NI’s most successful industry with a value of £4.4bn.
Targets in the plan including growing agri-food sales by 60% to £7bn; increasing employment by 15% to 115,000; increasing sales outside NI by 75% to £4.bn; and increasing total value added in local companies’ products and services by 60% to £1bn. The First Minister said that the Executive would now consider the recommendations and how best to support the industry.
Tony O’Neill, chair of the Agri-Food Strategy Board, said: “The aim of the board in developing the Strategic Action Plan has been to support the development of fully integrated supply chains which are focussed on the needs of customers at home and in our international markets. Our primary producers and processors must work more closely than ever if we are to deliver sustainable profitability across the supply chain.
“We are confident that implementation of the recommendations in the plan will enable us to harness the huge global opportunities for our produce, as the provision of wholesome, healthy and safe agri-food products offers enormous potential in terms of feeding an ever more demanding global population.”
Late payment plaguing firms
More than half of Irish businesses have debts of over 90 days and more than a third expect a quarter of their sales will not be paid on time, according to the latest Business Monitor survey of businesses in the North and South conducted by InterTradeIreland.
But while the survey analysis concluded that there is a convergence between the two jurisdictions in terms of business performance and fortunes, it also found significant differences in business practices. Specifically, firms in the Republic are much better at negotiating lower costs in their insurance and telecoms supply contracts. More than half of businesses are seeking to reduce their energy costs and more than a third their telecoms costs.
Aidan Gough, strategy and policy director at InterTradeIreland, said: “It is very understandable that in the current environment, businesses are putting an effort into reducing costs. It is important though that cost-cutting doesn’t undermine the overall focus on growth as this could significantly hinder economic recovery as well as the performance of individual firms.
“An interesting finding was that businesses in Ireland were more than two times as likely to have negotiated better rates with regards to telecoms, energy and insurance, than those in Northern Ireland. I would urge local SMEs to continue to be assertive when it comes to negotiating costs with suppliers and indeed in securing payments from debtors.”
New jobs
Almost 1,400 jobs are being created in Northern Ireland, according to a series of high profile announcements by companies.
Allstate are in the process of recruiting 650 highly paid and skilled workers for their three operations in Belfast, Londonderry and Strabane. Linden Foods, part of the Fane Valley farmers’ co-operative, is creating 179 jobs in Dungannon.
Accountancy and consultancy firm Deloitte is setting-up a technology studio in Belfast, which will involve the recruitment of 177 new employees, who will be well paid and highly qualified. Also in the financial services sector, the Lloyds Banking Group will be losing 850 jobs in Great Britain, but increasing its staffing in Belfast by 160 to increase its back office and anti-fraud operations based here. Payment systems technology provider Merchant Warehouse is to establish a customer support and development centre in Belfast, taking on around 70 people.
Ballymena’s Wrightbus will engage an extra 50 people, having secured a further order for London buses. Bangor based telemarketing company Mango Direct is to expand and take on a further 55 workers. And Pharmalink Consulting Operations are enlarging their base in Belfast, creating 30 new jobs.
It is hoped that planning approvals for three new distilleries in Derry, Portaferry and Kircubbin will also lead to new jobs being created.
Enterprise minister Arlene Foster said that the job announcements, along with other progress being made by Invest NI to attract investment, “is further proof that we have the people, skills and technology to support the business needs of major companies”.
Presbyterian disqualifications
Five former directors of the collapsed Presbyterian Mutual Society have been disqualified from being company directors, the Department for Enterprise, Trade and Investment has announced. An advisor to the society has also been banned from being a director.
The longest ban was for David Ferguson, who was described as a “de facto director” of the society and has agreed a disqualification undertaking for six years. He is shown on Companies House records as having in the past been a director of the Glengall Management Company, which was part owned by PMS.
PMS directors David Clements, the Rev David McConaghy, Herbert McCormick and the Rev Samuel McFarland have all agreed four year disqualifications. Philip Black, another former director, has agreed a three year disqualification.
The society went into administration in November 2008, with an estimated deficiency to creditors and members of £123m. The directors and “de facto director” accepted that the society had acted in ways in which it was not fit to act and were beyond its legal authority.
PMS conducted banking business without having a banking licence; it carried on a deposit taking business without authorisation from the Bank of England; and it entered into mortgage lending without being authorised to do so. The society was also found to have loaned at least £52m to non-members in breach of its own rules.