Northern Ireland’s political deadlock over welfare reform threatens to “delay or jeopardise the devolution of corporation tax” PwC warned today, as its latest research suggests there is little evidence of a recovery in wages or living standards despite an improving local economy.
According to its latest Northern Ireland Economic Outlook (NIEO), job creation has returned to nearly pre-recessionary levels with almost 24,000 new jobs recorded in the last 24 months.
Yet, regardless of the improving local labour market, when it comes to economic performance the North scores poorly compared to other UK regions with productivity lagging and its gross value added (GVA) predicted by PwC to grow by around 1.7 per cent in 2015.
Dr Esmond Birnie, PwC's chief economist in Northern Ireland, said job creation and falling unemployment levels might suggest a strong economic recovery is underway locally but a number of other factors show this is not the case.
“NI’s economic inactivity rate is 27.8 per cent and remains the highest of the 12 UK regions and in the past year the growth in the number of economically inactive was actually greater than the total decline in unemployment.
"We should be aware that consumer price index (CPI) inflation fell to zero in February - the lowest level since CPI records began in 1989 - and that amounts to a real increase in wages. However, property prices accelerated in Northern Ireland to reach 7.3 per cent in the year to January 2015," Dr Birnie added.
PwC also highlighted in its latest outlook report that it believes the political deadlock over the implementation of the full Stormont Agreement is not conducive to investment and business confidence.
The legislation to devolve corporation tax powers to Northern Ireland was passed by both the UK’s House of Commons and House of Lords last month and is now an act of parliament.
But the devolution of tax setting powers remains tied to the Stormont Agreement being implemented in full in relation to welfare reforms.
Against this backdrop PwC warns that the impact of austerity cuts will continue to have a significant impact on public spending budgets in the North.
Separately today the umbrella organisation for the voluntary sector in the North - NICVA - has warned that at least 450 jobs could be lost in the next few weeks from voluntary and community organisations as a direct result of government budget cuts.