Bus Month February 2014
Up and down
Gross mortgage lending in the UK has risen to its highest level since 2007. The December figure was £17bn, the highest for a December in six years and up 49% in a year.
Construction sector activity in Northern Ireland rose in the third quarter of last year by 2.4% against the second quarter, but was down by 2.6% against the same period in 2012.
Unemployment in Northern Ireland in the quarter ending November remained at 7.3%. The UK rate fell to 7.1%. The claimant count unemployment level fell to 6.6%, compared to the UK’s rate of 3.7%.
UK house prices rose 7.5% last year, according to Halifax.
The UK’s consumer price inflation rate has fallen to 2.0%, the first time it has not exceeded the Government’s target since the end of 2009.
‘Economic growth set to accelerate’
The Northern Ireland economy is set to grow by 1.6% this year, according to PwC’s latest economic forecast. This is an increase over previous projections, but would still represent the slowest growth of any UK region. PwC expects claimant count unemployment here to fall to about 58,000, from the current level of 59,500.
Both PwC and the International Monetary Fund predict the UK economy to be the fastest growing large European economy in 2014. PwC expects UK economic output to exceed pre-recessionary levels for the first time this year, growing by between 2% and 3%. The IMF projection is for growth of 2.4%, but for a slight fall in the growth rate in 2015, at 2.2%.
Further positive signs emerged from the latest Danske Bank consumer confidence survey. This showed the highest levels of confidence since the survey was established just before the onset of the recession, in September 2008.
Danske Bank chief economist Angela McGowan said: “The latest surge in consumer confidence is consistent with a marked improvement in the wider economic environment and reflects a substantial fall in negative responses. People appear much less apprehensive about their financial future and there is a definite sense that the worst is behind us.”
Ms McGowan added that consumer sentiment seems to have been boosted by falling levels of unemployment, rising house prices and falling inflation.
The UK government is providing incentives to councils in England to promote the extraction of shale gas, enabling local authorities to keep all the business rate income generated by fracking. However, there are no plans to provide comparable incentives in Northern Ireland.
The rates system in Northern Ireland is different from that in England, with Northern Ireland’s councils already keeping all their business rates income. A spokeswoman for the Department of Finance and Personnel said: “DFP has no intentions, at this stage, of introducing such financial incentives. Any such proposals would need to be considered and endorsed by the Executive.”
Meanwhile, industry experts have raised doubts about whether the mineral environment in Northern Ireland can support large scale shale gas extraction here. One energy specialist investment house has suggested that the lack of suitable local supplies of sand and chemicals is likely to prevent the development of the industry here.
Christopher Boxall, director of Fundamental Asset Management Ltd, argues there is insufficient ‘proppant’ in Northern Ireland to enable the shale gas to be extracted – the ‘proppant’ is the water, sand and chemicals required to dislodge the gas reserve. Each shale well requires about £5m worth of proppant.
Boxall told Business Month: “Success from fracking comes from an abundance of all the necessary resources, not simply the gas in the shale. The US is blessed with huge quantities of the proppant – largely a special type of sand – which is delivered from the source by rail. The UK will never be able to build out this type of infrastructure to support and I suspect Ireland will also find it difficult.”
He argues that to date studies have concentrated only on the size of the reserves – not the practicality of extracting it. Boxall says: “I don’t think this element has been seriously researched in the UK as they are currently too busy simply proving-up the shale part of the jigsaw!”
Hopes had been expressed that the development of a shale gas industry would cut energy costs. The Manufacturing Northern Ireland lobby group claims that energy costs here are the second highest in the whole of Europe. However, it does not believe that shale gas extraction in Northern Ireland will cut energy costs.
MNI CEO Stephen Kelly explained: “Our understanding is that the only saving will be in the cost of distribution and transmission as the gas will have to be sold at the European market price.” He added that energy costs would only be driven down by supplies of shale gas if there was a very large, pan European, industry.
Proposals to streamline the planning process have been put forward by environment minister Mark H Durkan. Consolidation of 20 existing planning policies into a single new strategic planning policy statement is intended to provide greater clarity and speed into the process.
In future, all sub-standard planning applications will be promptly refused. At present, planning officials spend significant time working with applicants to upgrade poor quality applications. Putting the emphasis on reworking sub-standards back onto the applicants is intended to enable officials to consider sooner the higher quality applications.
In addition, there will be more effort put into reaching stakeholder consensus on scheme proposals before they are formally submitted as planning applications. There are to be what the Department of Environment terms “intense, pre-application discussions, and widespread involvement of community in discussions” to speed-up the consideration of formal applications. Action will be taken to require faster responses from statutory consultees during the consideration process.
Mark H Durkan said: “My aim is to create a planning system that is fast, fair and fit for purpose: a system which is less complex, more effective, more efficient and more customer focused; a system that delivers for business, with timely decisions that bring investment and jobs but not at the expense of our environment, planet or people; a system which realises that the environment and the economy should not, and cannot be, at loggerheads; a system that fully recognises that a vibrant, sustainable environment can be a driver of prosperity and job creation.”
The proposals were welcomed by the CBI in Northern Ireland, particularly the requirement for statutory consultees to respond speedily.
The Federation of Small Business’s policy chairman, Wilfred Mitchell, also reacted positively. “Our members repeatedly cite difficulties in navigating the planning process in a timely way, yet when we speak with colleagues elsewhere, many of the processes involved in their planning systems are significantly quicker and more efficient,” he said. “It is important that our new system matches the best performance amongst its peers.”
It is intended that the new system will be in place to coincide with the transfer of planning powers to the new local councils next year.
NI firms ‘set to increase employment’
Three quarters of Northern Ireland businesses expect to grow this year, with just one in ten predicting they will contract, according to a survey conducted by the Northern Ireland Chamber of Commerce in partnership with BDO. Slightly over half intend to recruit more staff.
The strongest signs of business confidence were recorded in the manufacturing sector, but there has been a worsening in business cash flow amongst manufacturers. Companies in this sector report rising prices, as new raw material cost rises take effect. Manufacturers here are under more pressure than in most UK regions to raise prices. Northern Ireland and Wales have the weakest export performance amongst UK regions.
While there are positive indications from Northern Ireland businesses about their desire and intention to increase employment, many companies complained about the lack of relevant skills.
The Chamber’s chief executive, Ann McGregor, said the figures are encouraging for business performance this year. “We are especially delighted to see that three quarters of businesses envisage that they will target new markets in 2014,” she said.
“NI Chamber of Commerce will continue to focus on inspiring export and we will be launching a new UKTI supported initiative with the world-wide Chamber network to support trade in 2014. We will also be prioritising access to finance and pursuing the devolution of corporation tax to Northern Ireland following the Scottish Referendum.”
Ulster Bank under pressure
Ulster Bank’s lending policies are to be subject to an independent investigation commissioned by the regulator, the Financial Conduct Authority. A second investigation will be conducted by law firm Clifford Chance, on behalf of Ulster Bank’s parent, the Royal Bank of Scotland. Both investigations will look at allegations levied against the whole of the Royal Bank of Scotland, including Ulster Bank.
The investigations follow allegations contained in a report produced by Dr Lawrence Tomlinson, a special advisor to the UK’s Department for Business, Innovation and Skills. Dr Tomlinson claims there is evidence that RBS and Ulster Bank put businesses, including in Northern Ireland, into administration, receivership and liquidation in order to obtain assets at below full market value.
The allegations were repeated by Ian Paisley junior MP at a hearing of the Northern Ireland Affairs Committee of the House of Commons. He asked the Financial Conduct Authority, which was giving evidence to the committee, “how does the authority view the actions of RBS and perhaps – I say ‘perhaps’ -the Ulster Bank, which has seemingly and deliberately forced and… defrauded SMEs out of businesses in order to seize their assets?”
A spokesman for Ulster Bank said: “Serious allegations have been made about the treatment of some customers: as of now no evidence has been produced that backs these claims of systemic fraud. Ulster Bank is committed to working with customers who find themselves in difficulty and work with customers who engage with us to help them find a solution on a case-by-case basis. We understand the importance of a thriving and successful business sector.”
Ulster Bank makes £1bn available
Ulster Bank is making £1bn available for business lending this year. This represents additional lending facilities and the bank is seeking applications from large and small companies and from both existing customers and non-customers that have growth plans.
Ken Murnaghan, head of business banking at Ulster Bank, said: “In 2014 we are delighted to have £1bn available to help business as the real drivers of growth, employment and confidence in our economy. We know that many of our business customers view 2014 as a key year in terms of implementing growth plans, from introducing new products and services to expansion overseas and hiring additional employees. Access to funding is essential to ensuring they are able to fulfill these ambitions.”
In support of the additional finance, Ulster Bank is holding support and networking events, ‘Ahead for Business’. These will be held during the year in Belfast, Lisburn, Ballymena, Cookstown, Enniskillen and the north west.
Belfast on cusp of digital business boom
Belfast is increasingly seen as one of the most exciting new locations in Europe for high tech start-ups. An article in the Observer referred to Belfast, and specifically the Titanic Quarter, as “home to a new generation of tech innovators”.
The recognition of Belfast’s potential came off the back of the recent report from NISP Connect, which found that the growth rate of high businesses in Northern Ireland is more than twice as high as in the UK as a whole. An earlier NISP Connect report – from 2011 – estimated that 25,000 jobs could be created directly in the sector and a further 24,000 indirectly in the wider economy – but only if Northern Ireland is sufficiently skilled-up.
Reports produced by e-skills UK – the ICT sector skills council – concluded that the tech sector in Northern Ireland generates an annual turnover of £1.4bn, with employment growth of over 4%. However, the e-skills reports also found that ICT employers are frustrated at both the lack of skills in the Northern Ireland labour market, leading to problems with recruitment and also a shortage of necessary skills, even amongst their existing employees.
A Belfast Tech Mission visited California’s Silicon Valley at the end of last year, led by Belfast City Council and Invest NI, to underline the prospects for the sector. The group of 20 fast growing local businesses met with tech entrepreneurs, mature businesses and venture capitalists. Belfast City Council said the aims of the visit were to promote Belfast as a leading digitally connected city, as a prime location for ICT investment, to provide new trade opportunities for the city’s firms in the United States and to improve networking connections between the two regions.