- Conference facilities
CEE’s Economic Insight
A round up of the economic news from Northern Ireland and beyond
This week saw the consultation period for the Executive’s Programme for Government and Economic Strategy come to an end. This resulted in a number of public statements on the strategies. It was reported that the Economic Advisory Group has concerns that NI government departments may not have the authority and flexibility needed to pursue a business-focused agenda. This criticism may go some way to explaining that despite the mire of strategies we have produced throughout the years, Government policy has had a limited impact on our local economy’s headline figures.
Perhaps reflecting on this reality, the Institute of Directors called on the Executive to establish ways to ensure that government departments deliver on their commitments. The IoD also said the reduction in corporation tax must happen in a much shorter timescale than proposed.
A boost to Northern Ireland’s potential integration into the global economy was delivered by the Treasury this week, as the power to set Air Passenger Duty rates for direct long haul flights will be devolved to the Northern Ireland Assembly and provided for in the UK Government’s Finance Bill 2012.
However, moves by the Obama administration to impose a minimum tax on US companies’ foreign earnings, as part of an effort to reduce incentives for US companies to shift income and investment overseas, has raised eyebrows. Despite assertions that it should not impact on the corporation tax debate here, south of the border commentators are definitely worried.
The need to create higher value added jobs was illustrated by a local paper this week, which raised concerns about the mass exodus of young graduates from Northern Ireland.
However, those who are golf fans may be better staying put as controversial plans to create a £100 million golf resort on the fringes of the Giant's Causeway were given the go ahead this week.
A reflection of the economic times saw the Bank of Ireland remain upbeat when posting a €190m pre-tax loss in the year ending December 31. This is down from a €950m loss a year earlier. Why they might be pleased was illustrated by reports later in the week which saw Ulster Bank, the RBS subsidiary, announce a pre-tax loss of £1bn for 2011, with the writing off of bad debts coupled with a declining high street activity being blamed.
The difficulties on the high street continued this week as it emerged that two hundred and sixty-three jobs will be lost as 19 Peacocks shops will close down in Northern Ireland, despite the chain being saved from administration. Despite the gloom a new National Skills Academy for Retail has launched a new Retail Skills Shops at South Eastern Regional College which will offer retail training in customer service, sales and frontline management, in a further bid to help save the high street.
The Office of Budget Responsibility published its statistical Bulletin for January 2012 this week. It showed that public sector net borrowing recorded a surplus of £7.8bn in January. Whilst January is generally the highest month of the year for receipts, the figure was greater than expected. The figures were attributed to less borrowing by local authorities and public corporations as opposed to a growth in central government receipts.
Despite this, the news prompted calls from both the left and right of the political spectrum for tax cuts to stimulate growth. Ed Balls, the Shadow Chancellor called on George Osborne to introduce a temporary cut in VAT and a National Insurance tax break for small firms in the forthcoming budget. Whilst Liam Fox re-entered the front line political debate by calling for further public spending cuts to fund employment tax reductions and further labour market deregulation. Although both pronouncements are unlikely to be welcomed by the Chancellor, the two approaches illustrate the main parties’ different views of the growth problem; with one seeing it as more of a demand problem and the other a supply.
This week saw the Office of Budget Responsibility confirm that the UK economy shrank by 0.2%, despite a 0.5% rise in household spending and a 4% annual rise in consumption by the government.
Finally the number of people who are in a work place pension has fallen below 50% the ONS revealed this week; the lowest proportion since this series of records began in 1997.
Republic of Ireland
The Irish economy is to grow by 0.9% this year according to the Economic and Social Research Institute, which also claimed that austerity is working as a policy, in its quarterly economic commentary. This resulted in criticism from SIPTU who cited that whilst the report predicted growth it also predicted a fall in employment.
Taoiseach Enda Kenny outlined a hardening of the Government’s position on welfare recipients this week, as he stated jobseekers must actively seek employment or engage with employment or training courses in order to receive benefits. The speech was made after the Government launched its Pathways to Work plan.
Finally the manufacturing prices increased by 2.7 per cent year-on-year in January, according to new data from the Central Statistics Office, with dairy products rising by 10%.
Eurozone leaders agreed a second bailout for Greece this week, which will see a further 130 billion euros pumped into Greece’s coffers and along with further austerity measures aims to reduce Greece's debt to around 120 percent of GDP by 2020.
This news was followed by an announcement from the European Commission that the Eurozone would suffer a mild recession in 2012, contracting by an expected 0.3%. This news further added to ongoing debate about the likelihood of the Eurozone area surviving in its current form.
At the individual country level, a flash PMI reported growth in the German private sector maintained, but job creation was slowest in almost two years as new orders fail to gain traction, in February. Whilst France saw a slower rise in service sector activity offset by manufacturing output pick-up in February.
G20 leaders met in Mexico at the end of this week. Brazil used the platform to state that developing nations would be happy to provide more money to ease the Eurozone's debt crisis, in return for more power within the International Monetary Fund.
HSBC Holdings Plc predicted that China will overtake the US as the world's largest trading nation by 2016, as intra-Asian commerce and rising demand from emerging markets boost shipments, a further indicator of shifting economic power.