The Northern Ireland economy is showing signs of slipping into recession, according to the Northern Ireland Chamber of Commerce and Industry.

Four out of five business leaders in the North now believe that a recession is likely within the next six to 12 months, with about half of NI Chamber’s members also scaling back or postponing investment plans, again on account of the chaos around Brexit.

The survey found evidence that much of the post-recovery economic gain has been eroded following the Brexit vote. 

The ‘Brexit Watch’ highlights the negative effect on the sales of almost half of members. Costs have gone up (47% of members) and EU nationals are harder to retain or recruit (32%).  Two thirds have experienced a negative impact in terms of sales, costs and ability to recruit. 

The percentage of chamber members citing Brexit for reduced turnover has increased from 35% to 46% in the last nine months and has more than doubled since members were first asked about Brexit’s impact on turnover at the end of 2016.

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Chief executive Ann McGregor said: “These figures are tangible warning signs about current economic conditions in Northern Ireland, with this quarter’s performance being arguably the weakest in almost a decade.  When compared to other regions across the UK in the same survey, Northern Ireland ranked bottom for eight of the 14 key manufacturing balances and 10 of the 14 key services balances.

“This is clear evidence that the impact of the ongoing Brexit uncertainty is being felt more harshly in Northern Ireland than anywhere else. The lack of a functioning Executive visibly adds to this uncertainty and, combined with Brexit, creates an environment where key strategic business decisions are being abandoned or delayed.”

Order books in manufacturing and services are very weak for both domestic (UK) sales and exports, with more firms in both sectors reporting a fall in orders over the next three months compared to those reporting a rise. 

Confidence Hammered

The report finds that cashflow has been a persistent problem for both manufacturing and services and also deteriorated this quarter. Previous surveys highlighted that businesses have been trying to remain confident around prospects, but the Q3 findings suggest that this confidence is being severely challenged — many fewer members believe turnover and/or profits in their business will grow in the next 12 months.

In manufacturing, both export and domestic trade order books are shrinking, down 10% and 29% respectively, the worst recorded by the chamber in almost a decade. As a result, the NI economy is now the worst performing region of the UK for employment prospects, with the same applying to cashflow balances.

According to NI Chamber:  “There has been a striking deterioration in the service sector’s performance in Q3, particularly around trade. More key balances are negative this quarter (8 out of 14) and 12 of the 14 balances are down on Q2 19.”

On the upside, employment indicators remain positive, with more services businesses taking on people than those who are not. There are also some signs of confidence in the sector, with more businesses believing that turnover will grow than contract in the next 12 months.