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Northern Ireland’s unemployment rose 1.5% in the last year and 0.4% in the last quarter, as measured by the Labour Force Survey. It now stands at 8.4%, compared to the UK rate of 7.9%.
Production sector output rose by 0.3% in the last quarter, but fell 3.2% in the last year.
Service sector output rose by 0.7% in the last quarter.
House prices may be rising: more surveyors report rising prices than say prices are falling, the latest RICS/Ulster Bank housing market survey found. However, the Office for National Statistics reported that Northern Ireland average house prices fell 7.7% in the last year.
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Gold prices have fallen by 14% since January.
Consumer confidence as measured by Danske Bank’s Index has fallen significantly in the last quarter: 41% of people intend to spend less in the next year, 14% intend to spend more.
Northern Ireland economy grows
Northern Ireland’s economy has begun growing again according to the recently launched and still experimental Composite Economy Index. The figures, compiled by the Northern Ireland Statistics and Research Agency, suggest that our local economy grew by 0.4% in the last quarter of 2012 and by 0.3% over the year.
However, the Index reported that Northern Ireland’s economic activity is 11% below its peak in 2007. This compares with a fall of 3.2% below peak, in 2008, for the UK as a whole.
Figures produced by the Office for National Statistics found that UK Gross Domestic Product rose by 0.3% in the first quarter of 2013, avoiding the feared ‘triple dip’ recession. There was a 0.6% increase in economic activity in the UK service sector, but the UK’s construction sector contracted by 2.5%.
Finance minister Sammy Wilson said that the figures illustrated that Northern Ireland may be entering economic recovery. “I am very optimistic about Northern Ireland making its way out of the current economic difficulties,” he said. “The results from the Northern Ireland Composite Economic Index report are very promising, confirming that Northern Ireland’s economic activity has continued to increase over the last year.
“These figures alongside other positive indicators, including the recent data that there has been an increase in the construction sector, albeit a small rise in activity, and the recent house sales under the co-ownership scheme are evidence that some confidence is returning.”
The minister added that the Executive is spending over £1bn in a continuing two year programme on capital projects to stimulate the economy.
Funding for Lending reform
The Government’s Funding for Lending Scheme has been extended and reformed, the Treasury and the Bank of England have announced. Changes are intended to increase the reach of the scheme, to support more SME’s borrowing needs and to bring in some non-bank and building society lending institutions.
Forty financial institutions have drawn nearly £14bn to date from the Bank of England under the Funding for Lending Scheme. But those 40 institutions signed-up to FLS have actually reduced their net lending by £1.4bn over that period.
While FLS was intended to increase lending, in particular to SMEs, the impact has been to provide lower cost funding for banks, which has partially been passed on to mortgage borrowers in lower cost loans. SMEs have had little benefit from the scheme.
Of the 40 financial institutions signed up to FLS, only 14 are banks – the other 26 are building societies. This has assisted building societies to significantly increase their share of the mortgage lending market.
The largest banks to be involved with FLS are Barclays, which has increased net lending by £5.7bn; Santander, which has reduced net lending by £6.3bn; Lloyds, whose net lending has been cut by £5.6bn; and RBS, including Ulster Bank, which reduced net lending by £2.4bn. Northern Ireland’s other leading banks – Bank of Ireland, Danske and First Trust – are not members of the scheme.
Under the new arrangements, invoice factors and other asset based lenders will be able to join. It is hoped this will lead to an improved lending flow to SMEs.
Economic inactivity targeted
The Executive is to target the very high levels of economic inactivity in Northern Ireland. While 27.4% of Northern Ireland’s working age adults are economically inactivity, the figure is just 22.3% in the UK as a whole.
Transferring large numbers of those who economically inactive into productive work could greatly improve Northern Ireland’s economic performance and reduce welfare costs.
Analysis conducted by the Department for Employment and Learning reported that the largest single group who are economically inactive are students. (But students who study at higher education institutions in Great Britain are only included in the Northern Ireland economically inactivity statistics if they live in university halls of residence. Those who live in independent accommodation are recorded as being economically inactive in their area of study, not in Northern Ireland.)
The next largest groups of the economically inactive are the long-term sick and disabled, people with family or home commitments and those who have taken early retirement. Executive action will focus on people who are long-term sick or disabled, or who have family or home commitments. About 20% of these two groups are lone parents. However, the research shows that only 18% of adults who are economically inactive would like to be in work.
Several measures will now be taken by departments to persuade and support the economically inactive to connect with the labour market. Welfare reform intended to ensure that all benefit claimants would be financially better-off if working is part of this process.
Issues of self-confidence and skill shortages are to be addressed, along with improving the motivation to work for those who are unwilling, possibly involving health professionals.
Employment and learning minister Dr Stephen Farry said: “The research suggests that the key focus of the economic inactivity strategy should be on increasing economic participation by assisting individuals with family commitments, health conditions or disabilities to move into work.”
UK Government promises economic aid
A package of special measures is being drawn up by the UK Government to assist Northern Ireland’s economy, the secretary of state Theresa Villiers has revealed.
Speaking in a debate in the House of Commons, she said: “I am working with the Northern Ireland Executive on our shared objective of rebalancing the economy by boosting the private sector and pursuing a strongly pro-enterprise agenda.”
Responding to a question, the secretary of state indicated the support may involve enterprise zones being created in Northern Ireland. “We certainly believe that enterprise zones such as those being established in England, Wales and Scotland can play a positive part in boosting the private sector and in job creation,” she explained. “Our conversation with the Executive on a fresh economic package to provide additional help for Northern Ireland includes looking again at enterprise zones, to see whether we can make them attractive to the Executive.”
She continued: “The Government are examining ideas on making enterprise zones more attractive, helping the Executive to take forward infrastructure projects, improving access to bank finance, and various other measures. Meanwhile, the Executive have the opportunity to use their devolved responsibilities to develop economic and social measures, including work on a shared future which we are all committed to delivering.
“Put simply, this is a two-way street: the greater the Executive’s ambition, the more the Government will be able to do to support and help them. This is about partnership and working together on our shared goals, and I am optimistic about the chances of achieving a good outcome for Northern Ireland.”
Finance minister Sammy Wilson responded that the Executive was unhappy at support for the economy being linked to progress on a shared society. He said that a stronger economy would do more than anything else to create a more cohesive society.
‘Redundancy law change should extend to NI’, says CBI
The CBI has complained that changes to the law on collective redundancy consultation periods are not being introduced in Northern Ireland, but are in Great Britain.
From the beginning of this financial year, the consultation obligation on employers for collective redundancies was reduced from 90 days to 45 days in England, Wales and Scotland.
CBI Northern Ireland assistant director Kirsty McManus said: “This is good news for businesses across Great Britain, as a shorter consultation period will reduce uncertainty for staff and allow businesses to focus on the future more quickly.
“Unfortunately, Northern Ireland continues to lag behind modern reform of employment law. Our collective redundancy consultation period will remain at 90 days which is now twice as long as Great Britain and three times as long as the Republic of Ireland.
“Our members have raised serious concerns that this deviation in Northern Ireland employment law is creating an additional cost burden to ensure compliance with two separate NI and GB employment law systems. We call on the Executive to urgently address this gap in competitiveness for Northern Ireland businesses.”
Some optimism for construction sector
There are tentative signs of a bottoming out in the construction sector. The favourable indicators come from the Northern Ireland Statistics and Research Agency figures on actual activity, and the Royal Institution of Chartered Surveyors’ report on its members’ level of confidence in the sector.
According to the NISRA figures, construction output by volume rose in the last quarter of last year by 0.5% over the previous quarter. However, it was still 5.8% below the activity level of the last quarter in 2011. It is 41.1% below its peak, at the second quarter of 2007.
The improvement came from a slight rise in maintenance and repair work. New orders remained stagnant.
RICS’ members remain short of confidence in the sector, but their level of pessimism is decreasing. The latest RICS Construction Market Survey reported the least negative start to a year since 2008. Overall confidence amongst surveyors was at minus 32 – this is the percentage of surveyors who have negative sentiment, less those who have positive sentiment.
Despite this, the RICS survey revealed that all parts of the industry suffered from falling workloads in the first quarter.
RICS Northern Ireland construction spokesman Jim Sammon said: “Activity is still falling, and the key challenges for the sector remain. Finance is constrained, private sector activity remains scarce and public sector demand remains constrained. Many firms are increasingly turning to markets outside of Northern Ireland for work.”
Fears rise of long term youth unemployment
Youth unemployment is now almost two and a half times greater than it was 15 years ago, when the Good Friday Agreement was signed, according to figures produced by Ulster Bank. Unemployment for the 18 to 24 year age group was 23.8% in the quarter ending January this year, whereas it was 10.6% in April 1998.
The Nevin Economic Research Institute – a new Northern Ireland think-tank with close links to trade unions – has proposed a package of measures to deal with the problems of youth unemployment and resulting social alienation. It points out that not only has the official unemployment figure for young adults reached 24,000, but even more – 34,000 – are not in employment, education or training.
Paul Mac Flynn, Nevin’s researcher, suggests that the financial cost to Northern Ireland of this scale of youth unemployment could be around £300m a year. In addition, he argues, it will create ongoing negative social consequences.
Nevin’s s latest quarterly economic commentary proposes a ‘Youth Guarantee’ that would provide employment, work experience or relevant training to every young person; additional employment opportunities, such as community employment; and take measures that will reduce structural youth unemployment over the longer term. The report suggests financial help might be available for such a programme from the European Social Fund.
The report also points to a disturbing rise in long term unemployment in Northern Ireland. In the period 2007 to 2012, there has been a 235% increase in unemployment lasting more than 12 months. And there was a 635% rise in unemployment in that timeframe lasting more than six months.
The combined trends of higher levels of youth unemployment and much longer periods of unemployment raise the fear, suggests the Nevin report, that a large proportion of young people who have never worked will not gain employment even after the economy recovers.