CEE's Economic Insight

A weekly roundup of economic news from Northern Ireland and beyond

Northern Ireland

This week began with the publication of the DETI Economic Commentary. The stand out statistic was that total exports in Northern Ireland grew by 9.5% over the last year. This information is based on DETI’s new Exports Monitor and will be welcome news to the Minister, who is making growth in exports a pillar of the Executive’s economic strategy. Whilst the figure is encouraging it is worth noting that exports fell by 17% in 2009. What is perhaps the best gauge of policy progress is a 29.7% increase in exports to BRIC countries, even though this is from a low base.

This news coincided with a visit to Northern Ireland from the Business Secretary, Vince Cable, who was here to open Northern Ireland Advanced Composite Centre (NIACE) in east Belfast. Mr Cable stated that “the opening of NIACE is welcome as it demonstrates our ideas and innovations are being turned into new products and jobs”.

These figures were backed up by the fact that more than 17m tonnes of goods have passed through Belfast Harbour in 2011 – although this reflects imports and exports.

More good news on the export front came this week as the Northern Bank became the first local bank to engage in the UK Government’s Bond Support Scheme, which is aimed at increasing financial investments to local companies seeking to export. The scheme works by banks partnering with UK Export Finance to offer the Bond Support Scheme, effectively sharing the risk between the bank and UK Government, meaning the Northern Bank can offer greater levels of export support to both new and existing customers.

Northern Ireland manufacturing also grew by 5.7% in quarter 3 of 2011 compared to a static situation across the UK as a whole.

No doubt the construction sector, which has seen a 38% decline in output since 2007, welcomed the announcement this week that Belfast City Council would be spending £150million in an investment package aimed at supporting businesses, creating employment opportunities, growing the local economy and providing economic infrastructure to ensure future competitiveness. The announcement was also welcomed by the First Minister.

The controversy surrounding the potential extraction of shale gas from Fermanagh, via the controversial process of fracking made the headlines again this week as figures emerged of the potential economic benefits of moving forward with any project. Tamboran Resources says that preliminary results show there could be enough gas to guarantee security of natural gas supply for Northern Ireland over 50 years; discovery could lead to 600 direct jobs by 2025 and 2400 in total; with potential tax revenues of £6.9billion. The issue still remains a political ‘hot potato’.

This week also saw the announcement of the introduction of a 5p plastic bag tax in Northern Ireland by 2013.

The Minister for Finance and Personnel also introduced an amendment to the Rates (Amendment) Bill this week which would see rates relief given to those who occupy long-term vacant shops. The Bill contains a provision to grant 50% relief on long-term empty shops where the property is first occupied during the 2012/13 rating year. This proposal will be welcomed by many especially in light of the call from Philip Wrigley ex-director of Debenhams and BHS who claimed that many shopping streets are “in a death spiral” and many should be converted into housing.

Finally despite the relatively positive news week, the Irish League of Credit Unions (ILCU) released its findings in the first Household Income Tracker for Northern Ireland this week which suggested that 65% of Northern Ireland people expect their budgets to be harder hit in the coming months.

UK

The week ended with a warning from the National Institute of Economic and Social Research that the UK economy is likely to enter into recession soon with a predicted 0.1% contraction in 2012 followed by a return to growth in 2013. Somewhat complementing this analysis the Institute of Fiscal Studies published a report in the middle of the week which suggested that due to Government’s austerity measures it will underspend on plans by some £3billion which strengthens the a case for a significant short-term fiscal stimulus to boost the economy.

Last week saw the controversy of RBS Chief, Stephen Hester’s bonus, whilst this week saw the banking agenda continue as Fred Goodwin was stripped of his knighthood.  In an attempt to capitalise on the public mood Ed Miliband has called for “one nation banking” where banks and bankers should shift from a focus on individual gain to facilitating the economic good of the nation. With a sound-bite that will no doubt annoy people on both his left and right, many will be waiting to see the substance of any proposals.

Growth in the UK service sector improved in January to its highest level since March 2011. However, the development of a knowledge-based economy may be dented by a fall in the number of applicants to university - which is being blamed on an increase in fees.  

Finally a report suggests that fewer people were declared insolvent in 2011 in England and Wales than during the previous year, but the number of companies going bust increased.

Republic of Ireland

Ireland’s Central Bank cut its growth forecasts for 2012 sharply on Friday, citing slowing export growth and weak consumer spending.  In a timely manner the National Economic Social Council published a report with a number of suggestions for boosting domestic demand. These included ways to improve credit to SMEs and the consideration of public work projects to boost employment.

At the beginning of the week Ireland joined its EU partners in agreeing a package to boost employment by tackling youth employment, completing the single market, and through better funding of small and medium enterprises. This followed agreement amongst 25 Eurozone states agreed to sign a treaty designed to stop overspending at a national level.

The Irish Government is set to cut exceptional needs payments for communion to €110 after reports that the average payment was €330. Finally VHI health insurers have announced another price increase amidst reports that up to 6,000 people are getting rid of health insurance every month.

Europe

25 countries in the European Union, excluding the UK and the Czech Republic, agreed to sign a new treaty designed to stop overspending in the Eurozone. The gravity of what is potentially at stake was illustrated when it emerged that Germany's government wants to install a "budget commissioner," with the power to veto budget choices by Athens, as a condition to a €130 billion Greek bailout. Despite what appears to be a softening of his position, in allowing European Union institutions to implement the plan, David Cameron insists this is not an EU Treaty.

Tentative political progress appeared to be matched by tentative economic progress as a Markit Composite PMI suggested that the Eurozone economy stabilised in with growth seen in Germany and France and slower declines in Spain and Italy.

Relations between the EU and Hungary came under further strain this week as the Hungarian national airline Malev folded after the European Commission ordered it to repay various forms of state aid it received from 2007 to 2010.

Finally the Anglo-Swedish drugs maker AstraZeneca has announced a further 7,300 job cuts over the next two years as part of a new restructuring programme.

World

The US economy showed further signs of sustained recovery this week as it created 243,000 jobs in December, the highest total for nine months. Brazil also showed strong growth this week recording the fastest private sector output increases since March 2011.

Japanese electronics giant Panasonic has forecast a record annual net loss of £6.3bn for the year to March.

Finally the African Union Commission, which met this week, has called for speedy economic integration across the continent to improve the lives of the people.