By Conor Lambe, Chief Economist at Danske Bank
As we enter the last few weeks of the year, now seems like the right time to pause and look back over the last twelve months. 2019 was originally set to be very significant for the UK – it was the year in which the country was expected to leave the European Union. However, we know that that did not happen as expected.
But what did happen this year? And what did 2019 bring for the Northern Ireland economy? Here are some of the highs and lows that stood out for me.
1. The strong labour market
2019 was another good year for the Northern Ireland labour market. We don’t yet have data for the whole year, but the numbers we currently have make for encouraging reading. Over the period from July – September, the Northern Ireland employment rate hit a high of 72.3 per cent and the unemployment rate fell to a record low of 2.5 per cent. In addition, in June of this year, the number of employee jobs in Northern Ireland reached 778, 890 – the highest number on record. This strong labour market performance has led to reasonably strong rates of wage growth which, in turn, has supported rising levels of consumer spending.
2. Housing was a bright spot
The housing market in Northern Ireland remains in reasonably good health. In the third quarter of the year, house prices increased by 4.0 per cent compared with the third quarter of 2018. This annual price growth was broad-based with detached, semi-detached, terraces and apartments all increasing in price. The average house price also increased over the year in all 11 Local Government Districts, though there was some variation with house prices in Fermanagh and Omagh rising by 7.6 per cent over the year while prices in Derry City and Strabane only experienced annual growth of 0.2 per cent.
3. A stand-out year for tourism
For local tourism, 2019 was a year to remember. The total number of rooms sold by hotels, guesthouses, B&Bs and other guest accommodation in the first eight months of this year (which is the latest data available) was around 5 per cent higher than in 2018. In July, a new cruise terminal opened in Belfast Harbour and Belfast was recently named the best port of call in the UK and Ireland for cruise ships. And of course there was The Open at Royal Portrush, which was a huge success.
4. Belfast emerges as a hotspot for Fintech
Belfast was ranked third overall in fDi Intelligence’s Fintech Locations of the Future study for 2019/20, behind London in first place and Singapore in second. Belfast ranked higher than cities such as New York, Tokyo and San Francisco. The overall rankings are based on how cities perform on five measures – economic potential, FDI performance, innovation & attractiveness, connectivity and cost effectiveness.
The heightened uncertainty around the Brexit process has acted as a drag on the Northern Ireland economy throughout 2019. For example, the 2019 Q3 Danske Bank Northern Ireland Consumer Confidence Index revealed that 23 per cent of people said that the progress during the Brexit negotiations had the largest negative impact on how they were feeling, while a further 9 per cent highlighted the UK Government’s long-term Brexit objectives as a factor adversely impacting them.
2. Businesses held back on investing
Many businesses held back on capital spending this year. After falling in all four quarters of 2018, business investment in the UK increased in the first quarter of this year. But in Q2, it fell again and business investment was flat in the third quarter. All-in-all, business investment in the UK is around 3 per cent below where it was at the end of 2017. The lack of clarity around the UK’s future relationship with the EU has been one of the main reasons that businesses have held back on sanctioning strategic investment projects.
3. The ongoing political stalemate
2019 has been another year in which Northern Ireland has not had a functioning devolved government. The challenges that this has posed to the local economy are well known by now so as we approach three years of this local political stalemate, it must be hoped that 2020 will finally see the Executive and Assembly restored.
4. Weaker global growth
This year has been a more challenging one for the global economy. The OECD, in its November 2019 Economic Outlook, forecast that global GDP would increase by 2.9 per cent in 2019. To put that into context, in each year between 2012 and 2018, global GDP growth came in at somewhere between 3 and 4 per cent. Trade tensions and geopolitical uncertainty have been some of the reasons behind this slowdown in global growth.
Overall, 2019 has been a modest year for the Northern Ireland economy. There have been some bright spots but a number of issues are still persisting and economic growth remains subdued.
As we approach a new year, and indeed a new decade, one can’t help but wonder what challenges and opportunities 2020 will bring for local businesses and consumers.
This article was published in The News Letter on 17 December 2019.