Northern Ireland growth slows as employment rate falls and consumer spending stalls

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Northern Ireland will continue to deliver the lowest economic growth amongst the 12 UK regions in 2019 after a lacklustre performance in 2018, according to PwC’s latest UK Economic Outlook.

PwC says Northern Ireland’s growth in 2018 is likely to be equal-lowest with Scotland at 1% with NI’s growth in 2019 forecast to edge up only marginally to 1.1%, behind Scotland's forecast 1.2% and the UK average of 1.6%.

Fastest growing amongst the UK’s 12 regions in 2019 are expected to be the South East of England at 1.7% and London, the East Midlands and South West at 1.6%.

Adding to the suggestions that the NI recovery is slowing, are data from the Office for National Statistics (ONS) which show that NI’s previously improving employment rate fell by around 1.2% in the year to December 2017 - the largest fall amongst the 12 UK regions. The East Midlands (-0.6%) and Yorkshire and the Humber (-0.2%) were the only other regions experiencing a decline, with the average employment rate across the UK growing by 0.6% in the 12 months to Q4 2017.

A detailed comparison of the UK regions’ relative performance over the past two decades indicated that NI’s manufacturing contribution to the region’s gross value added (GVA) increased by around 1.4% between 2009 and 2016. That was well ahead of the UK average increase of 0.6% and most other regions other than Wales and the Midlands.

However, over the same period, NI had the second-lowest increase in Professional, technical and scientific services’ contribution to GVA, while the regions also experienced the biggest fall in public sector employment.

 

PwC regional chairman Paul Terrington said the detailed analysis of ONS data provides additional insight into the local economy:

 

“Between 1998 and 2007, Northern Ireland was the second fastest-growing region after London, but suffered the greatest reversal in the immediate aftermath of the financial crisis. Since than London is the only region to have increase its overall share of national GVA.

 

“The analysis of ONS data suggest that there is a positive relationship between relative regional GVA growth rates and education and skills, business formation rates and employment in professional and technical services. Regions reliant on public sector employment have grown more slowly, while employment alone is not a proxy for productivity or regional prosperity.”

 

Looking to 2019, the UK Economic Outlook says that real consumer spending growth is expected to slow from around 1.8% in 2017 to around 1.1% in 2018. Subsequently consumer spending is projected to edge up to 1.3% in 2019, but has the potential to return to around 2% trend growth on average in the 2020s assuming a reasonably favourable Brexit outcome and productivity gains from automation.

Housing and utilities will continue to consume a rising share of household budgets according to PwC’s analysis, reaching over 30% by 2030 compared to around 27% in 2017. Financial services and personal care are also likely to take a rising share of total consumer spending, while the share of spending on clothing, food, alcohol and tobacco, and transport will tend to decline in the long run.

 

John Hawksworth, chief economist at PwC, commented:

 

“Consumer spending accounts for more than two thirds of UK GDP, making it the most important driver of UK economic growth. But it has slowed significantly recently as higher inflation has squeezed consumer spending power and it looks set to remain sluggish in the short term, dampening overall GDP growth.

 

“Looking to the 2020s, however, growth could return to its long term trend rate of around 2% if the UK can negotiate a favourable future deal with the EU and automation boosts domestic productivity growth and holds down prices.

 

“The pattern of consumer spending will continue to evolve in the longer term, with our projections suggesting that housing and utilities will continue to eat up more of household budgets, while spending on other essentials like food and clothing tends to decline.”

 

PwC also says that automation could reduce the number of retail jobs in the long term, but also benefit consumers by lowering prices. By the mid-2030s, over 40% of existing jobs in the UK retail and wholesale sector could potentially be impacted by automation. This will reduce prices for consumers, stimulating demand for other services and new jobs where tasks are less prone to automation.

Technological innovations will also create new jobs, from online website designers and AI specialists to those involved in designing, supervising, repairing and maintaining robots. Additionally, PwC suggests that efficiency improvements from automation will allow consumer prices to be kept lower than would otherwise be the case, leaving more money to be spent on other goods and services, which will in itself create additional human jobs.

 

Ends.

Notes to editors.

1. The latest UK Economic Outlook can be downloaded below. 

2. Further analysis of the potential economic impact of automation from PwC is available online here: https://www.pwc.co.uk/services/economics-policy/insights/the-impact-of-automation-on-jobs.html

Contact us

John Compton
Corporate Affairs, Northern Ireland and Deputy Head of UK Media Relations, PwC United Kingdom
Tel: +44(0)7799 346 925
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