North’s economy hits Brexit pause but may escape recession

Northern Ireland may bypass an "outright recession" but the Brexit decision has put the brakes on the economy which is expected to grow this year by just 1 per cent, according to latest bank forecasts.

Danske Bank has revised down its previous growth projections, blaming Brexit-related uncertainty, lower investment levels and higher inflation in the medium term.

The bank’s latest Quarterly Sectoral Forecast suggests the economy will grow by 1 per cent this year and 0.5 per cent in 2017.

It previously predicted growth of 1.6 per cent in 2016 and 1.9 per cent next year.

Danske Bank chief economist, Angela McGowan said: “We stress that uncertainty surrounding our forecasts is higher than usual as the Brexit withdrawal negotiations are only set to begin early next year.

‘Lack of clarity’

“There is no doubt that the current lack of clarity around future trade relations, access to skills, the border and future funding streams will all negatively impact upon investment and recruitment in the year ahead.”

Ms McGowan believes the North’s economy is relatively well placed for the Brexit challenge - with low unemployment and low inflation, although she warns that the depreciation of sterling is a double-edged sword.

“The initial shock of the referendum result appears to have now faded and given way to a more stable picture - albeit a temporary one. The withdrawal from the EU has not yet happened and Brexit uncertainty could hit sentiment, growth and financial markets again when Article 50 is finally triggered.

“For many NI firms it makes sense to carry on in a ‘business as usual’ mode as access to markets has not yet changed,” she added.