North's economy slips officially into recession as Executive deadlock continues

BELFAST BRIEFING:Northern business is growing increasingly frustrated with the Executive's paralysis

IT IS official - the Northern Ireland economy is technically in recession.

That is according to the findings of a new report to be published today which details a rapid economic slowdown in the North, rising unemployment and the threat of further job losses.

The latest Ulster Bank Northern Ireland Quarterly Economic Review says there is overwhelming evidence that the North's economy is now in a much worse position than previously anticipated.

There has been little doubt over recent months that the North's economy was slipping towards a recession. The signs have been unmistakeable from the dramatic drop-off in the construction sector to mounting redundancies and a steep decline in the retail and business sectors.

But now for the first time one of the North's leading economists has declared that Northern Ireland has shot past the rest of the UK when it comes to the recession timetable.

"The UK is not expected to go into technical recession - two quarters of negative GDP growth - until Quarter 4 2008," says Richard Ramsey, Ulster Bank's Northern Ireland economist.

"However, the Northern Ireland economic slowdown is more marked and has occurred earlier than the UK. As a result, we believe that the Northern Ireland economy is currently in recession," Ramsey states.

He bases this assumption on the fact that since the middle of 2007 the North's economy has rapidly slowed and at a much faster rate than the UK average.

"Northern Ireland has experienced the sharpest contraction in business activity of all the UK regions during the 12 months to September 2008.

"Construction has borne the brunt of the slowdown; however, the local manufacturing sector recorded the sharpest falls in output and employment in the third quarter of this year.

"We expect the economy to record no economic growth during 2008, which compares to 0.8 per cent for the UK," Ramsey outlines in the report.

He says that while the North managed to escape the worst of the last recession to hit the UK in the 1990s, this time round it will not be so lucky. Ramsey claims this is because there were specific factors that helped make Northern Ireland recession proof in the 1990s, including the North's then larger public sector, the high levels of financial assistance that were available to the manufacturing sector and the lack of a construction boom and bust cycle.

But these factors no longer apply in 2008. Not only is Ulster Bank predicting that there will be zero growth in 2008 but it is expecting that the situation will get worse next year. Its research suggests that the economy will contract by 1.5 per cent in 2009.

So where does this leave Northern Ireland?

In an unholy mess if the evidence is to be believed - particularly that being presented by key business bodies and employers' groups.

There is growing resentment in the business community, across all levels and sectors of industry that politicians in the North appear to have no sense of urgency about what is happening to the local economy. The Northern Ireland Executive has not met since June and no decisions have been taken on key capital investment projects since then.

Business leaders in the North have been urging politicians to put aside party loyalties and act in the best interests of "Northern Ireland plc". But their appeals have met with little sympathy.

At stake, they argue, are thousands of jobs and the £1.8 billion budget allocated by the British Treasury to public expenditure projects in Northern Ireland. These projects have the potential to inject millions of pounds into the North's economy and both sustain and safeguard jobs.

According to Nigel Smyth, director of the Confederation of British Industry in Northern Ireland, there is a real danger that if it is not spent in the North the budget allocation will have to be returned to the British Treasury.

"We are in the midst of the world's worst financial crisis and our politicians cannot agree to sit down and talk to each other.

"What we need are serious politicians who will put Northern Ireland plc first and not political parties first," Smyth said.

Michael Wightman, chairman of the Northern Ireland Manufacturing Group, which represents 500 firms in the North, says there is "growing frustration and anger" among its members that "when other governments are working night and day to bolster their economies, ours isn't meeting". He says some major manufacturing companies have been forced to make almost a third of their workforce redundant and confidence in the business sector is fading fast.

Last week the Construction and Employers' Federation also issued a dire warning to the Norths Executive and appealed for it take decisive action to assist the sector.

The federation warned that more than 22,000 construction and engineering jobs are currently under threat.

Joanne Stuart, chairman of the Institute of Directors in Northern Ireland, believes no one can now ignore the fact that the North's economy is facing major challenges which she says requires a co-ordinated response from across government.

Representatives of the business sector will continue to work with the Ministers to ensure capital spending is not delayed and steps are taken to assist sectors such as construction most severely affected by the downturn.

"Ministers are aware of our view that political leadership and stability are prerequisites for dealing with economic issues" Stuart said

They may be aware of these views but until the North's politicians can agree to get back to the business of governing, the outlook for the North's economy will simply get bleaker and bleaker as each week passes.