Construction Downturn Defies 'Recovery'

Some parts of Northern Ireland's private sector are still growing despite a weak economic recovery that is underlined by continuing problems in the building sector.

That's according to Northern Bank Chief Economist Angela McGowan whose latest 'Quarterly Sectoral Forecasts' report forecasts annual growth of 1.0% overall for 2010 and 1.8% for 2011 while it also said that the chance of the local economy falling back into recession remains high - at 20%.

However some sectors in Northern Ireland are continuing a downward trend with construction still expected to contract by nearly 3% this year.

The financial services industry in Northern Ireland (although relatively small at only 4.4% of economic activity) is also expected to contract by 0.4%.

Public Administration will contract by roughly 0.9% this year and then follow a downward path for a number of years.

Overall growth in the economy will remain weak but that growth will not be evenly balanced, with some sectors still contracting but others growing by over 3%.

Ms McGowan said that despite the prevailing sombre mood amongst the business community, there is some good news for the local economy: "We are seeing that some positive growth has been experienced this year within certain parts of the private sector, in particular in Manufacturing, Hospitality, Agriculture and Retail.

"Manufacturing showed strong growth in the first half of this year with the creation of 700 new jobs and year on year growth of 2.5% - a scale of growth not experienced in this sector since 2005. In the hospitality sector, we saw strong employment data and we forecast year on year growth of 3.6% for 2010.

"The growth in hospitality is actually rather remarkable considering the pressures on consumers and that the visitor numbers do not fully confirm this observation.

"However, the 'stay at home' holiday phenomenon is definitely on the increase and going forward this sector could also benefit from weaker sterling in the last quarter of this year," she explained.

The report shows that in the Agriculture and Retail sector year on year growth levels are estimated to be 3.4% and 3.0% respectively.

Business Services, which represents over 14% of local economic activity showed disappointing growth of 1.4% which can be attributed to some parts of this sector such as Real Estate and Recruitment dragging down the overall average.

However, in terms of economic importance this is a sector to watch, as it is considered to hold significant potential.

Ms McGowan explained: "The potential for growth in business services is high, particularly if this sector taps into international markets.

"The need to grow NI's economy will require thinking beyond the local customer. Remote working and good technological infrastructure in Northern Ireland means that international companies seeking consultancy, accountancy, marketing and many more business services could easily be serviced by local companies in the short and medium term."

Ms McGowan said: "Overall the outlook is for weak economic growth if the status quo remains unchanged.

"But opportunities are there and we should not underestimate the potential for the private sector.

"Supporting growth of the private sector through enterprise initiatives and building up international trade is essential.

"Indeed, that restructuring of our economy from public to private sector growth is no longer an aspiration, it is now a necessity," she concluded.

(BMcC/GK)