PwC forecasts leaner times for Northern Ireland's economy

 

ECONOMIC GROWTH could dramatically slow in the North to around 1.25 per cent this year and next, according to a new forecast from a leading firm of business advisers.

The latest economic outlook report from PricewaterhouseCoopers (PwC) suggests that as a result of the current business climate, economic growth rates will fall back from the 2007 rate of 2.75 per cent.

Philip McDonagh, PwC's chief economist in Northern Ireland, says high energy and food prices, combined with the decline in the property market, will put the brakes on consumer spending in the North.

"These factors will all combine to reduce consumer confidence and impact on retail sales.

"Northern Ireland wages are below those of the UK and fuel and household costs have been rising rapidly. The outlook for household spending growth in Northern Ireland is looking more subdued now than at any time since the early 1990s."

The latest gloomy economic predictions for Northern Ireland come as one of the UK's biggest mortgage lenders, the Halifax, revealed that house prices are now falling at their fastest rate in nearly 20 years.

According to the Halifax House Price Index, which takes into account the bank's operations in Northern Ireland, house prices fell across the UK by 2 per cent last month.

Its latest research shows house prices in the UK have fallen on average by 6.1 per cent over the last 12 months.

The bank says it expects prices to fall by 9 per cent by the end of the year.

Business advisors PwC are now warning that the chance of the UK economy falling into recession has risen to 30 per cent as a result of the continued rise in oil prices.

But although the North's economy is under pressure, it may not, according to PwC, suffer as much as some regions in the UK because of its large public sector.

More than a third of the North's entire working population are employed by the public sector, with a further third indirectly supported by public spending.

Philip McDonagh believes this may provide some shelter from the impending economic storm.

"Overall the picture for the UK as a whole is bleak. However Northern Ireland will fare better than many regions thanks to substantial public spending commitments.

"But with the proportion of poorer households, the gap between the haves and have-nots will probably widen."