By Conor Lambe, Chief Economist at Danske Bank
At this time of year, it’s natural to look back over the last twelve months and reflect on the year that was. For me personally, 2018 has been a pretty good year.
I’ve had the pleasure of speaking about the outlook for the UK and Northern Ireland economies with Danske Bank’s personal and business customers all over the country, from Portrush to Enniskillen to Newry and back to Belfast. Whether at business breakfasts or in the boardroom, the questions, insights and stories I have heard this year really reinforce the fact that we have some excellent businesses and business leaders in this small part of the world.
During the summer, I attended the Shape Europe 2018 Conference hosted by the Belfast Hub of the Global Shapers Community. This event brought 150 young leaders from around the world to Northern Ireland to discuss issues such as Brexit, climate change and the future of cities. As well as the exchange of ideas on these vitally important topics, the fact that a group of young people left Belfast with a positive story to tell about Northern Ireland is something to be celebrated.
I’ve also found myself back at university, studying on the MBA programme at Queen’s. I’ve been diving into topics such as globalisation and its impact on businesses, ethical leadership and corporate finance.
But what sort of year has it been for the Northern Ireland economy? Regular readers of this column will know that the local economy has faced a number of significant challenges over the last twelve months. But it hasn’t been all bad news.
Here are the five highs and lows that stand out for me when I look back at the Northern Ireland economy in 2018.
1. The jobs have kept on coming – Despite the modest rates of economic growth, the number of employee jobs increased in quarters one, two and three (we don’t have data for Q4 yet). In September, there were around 765,880 jobs in Northern Ireland – that’s the highest number on record.
2. The Budget brought a Belfast Region City Deal – In his Autumn Budget, the Chancellor of the Exchequer announced £350 million of funding for a Belfast Region City Deal. Further funding is expected to come from the Executive and the local councils. With this set to enable investment in innovation, tourism, infrastructure and skills, this was a piece of welcome news for the Northern Ireland economy.
3. A good year for the housing market – House prices in Northern Ireland increased, in annual terms, by around 4-5 per cent in each of the first three quarters of the year. This was closer to the rate of median wage growth in the local economy than we’ve seen for a few years. It’s also been encouraging to see more houses being built. The number of housing starts in the first three quarters of this year is the highest since 2007, while the number of completions has not been higher since 2009.
4. Belfast’s FDI success recognised – In a report published by fDi Intelligence, Belfast was ranked 14th in fDi’s Global City of the Future league table, higher than Seoul, Beijing and Sydney. The report also included an editors’ choice award for FDI Strategy in which Belfast was placed second, with the judges calling out Belfast’s efforts to attract inward investment from around the world as well as recent, and planned, investment in commercial real estate.
5. Northern Ireland still the UK’s happiest region – The performance of the economy is one factor that can have an impact on people’s personal well-being, and information on well-being can be a useful input when designing government policy. According to the Office for National Statistics, Northern Ireland continues to have the highest well-being scores of all the countries of the UK. Local people report higher levels of life satisfaction, of belief that the things they do are worthwhile and of happiness than people in England, Scotland and Wales. They also report lower anxiety levels than those in the rest of the UK.
1. Brexit – The Brexit process continues to act as a drag on the UK and Northern Ireland economies, and has done throughout 2018. The events of the last week emphasise how volatile and unpredictable this process is and consumers and businesses alike have had to endure a year filled with uncertainty.
2. Consumers felt the squeeze – The consumer squeeze has eased in 2018, but there is still some pressure on household budgets. Wage growth has increased as a result of the tighter labour market but inflation remains above the Bank of England’s 2 per cent target. It hasn’t been all plain sailing for consumers this year.
3. Businesses held back on investment – The uncertainty around Brexit has adversely affected businesses’ willingness to invest. Business investment in the UK fell in each of the first three quarters of 2018. A recent survey from the CBI also revealed that 80 per cent of UK firms said that Brexit has negatively impacted their investment decisions.
4. Another year without an Executive – Northern Ireland has now gone almost two years without a functioning Executive and Assembly. The business community has expressed its frustration about this situation and in the first three quarters of this year, the Danske Bank NI Consumer Confidence Index showed that around one third of people said that the local political impasse was the factor that had the largest negative impact on their confidence levels.
5. The global economy lost momentum – The global economy has lost some of the momentum it had earlier in the year. Back in January, the IMF expected global GDP to increase by 3.9 per cent this year and next year. But in October, the IMF revised their forecasts for global growth in 2018 and 2019 down to 3.7 per cent.
The last twelve months won’t be remembered as a time when the Northern Ireland economy was powering along in top gear. But there was some positive news during the year.
As we edge closer to 2019 – a year that is expected to see the UK leave the EU in March – I can’t help but wonder what my ‘year in review’ article will look like in twelve months’ time.
This article was published in The Irish News on 18th December 2018.