Aug 1, 2017 - The Q2 2017 results showed continued business growth in. Northern Ireland despite mixed performances by bo
QUARTERLY ECONOMIC SURVEY S U M M ARY Q2 2017 The Q2 2017 results showed continued business growth in Northern Ireland despite mixed performances by both the manufacturing and services sectors during the quarter. All key balances remained positive during Q2 with more businesses in manufacturing and services reporting increases in indicators such as sales, exports and employment than those reporting a fall. The majority of key manufacturing balances strengthened during the second quarter of 2017. However, 11 of the 14 key services balances fell during Q2 reflecting a weakening in growth observed over the last few
quarters. Northern Ireland’s regional position did however improve for both sectors with the majority of key balances now ranking above the UK average. There was a positive performance by the manufacturing sector during Q2 despite considerable cost pressures. The sector’s domestic (UK) sales and orders balances continued to improve although growth did appear to slow. There was a strong pick up in export sales and orders reflected in NI’s improved regional position for this measure, 4th out of the 12 UK regions. However, employment balances did fall suggesting fewer manufacturers are taking on
employees. Businesses continue to face pressures largely from rising raw materials costs, but increasingly from pay settlements, putting manufacturers under pressure to raise prices. There were signs of a slowdown in growth in the services sector during Q2 2017. Fewer businesses reported an increase in sales and orders in the domestic economy and the export order book weakened. Employment balances in the service sector also fell. Pressure to raise prices in the service sector did ease during Q2 but businesses are increasingly under pressure to raise prices due to pay settlements.
Confidence Business confidence is still holding up in both the manufacturing and services sectors although has fallen slightly around turnover prospects over the next 12 months for both. Manufacturers are increasingly confident around profitability with a balance of +30% in the sector expecting profitability to improve over the next 12 months, a considerable improvement on Q4 2016 where it was negative (-3%). Confidence around profitability, although positive, has been falling in the service sector since the end of 2016.
Investment intentions by the manufacturing sector, both in capital and skills, bounced back to levels last seen before the outcome of the EU referendum was announced during Q2. There had been a deterioration in investment intentions following the referendum results. Investment intentions by the service sector in capital weakened during Q2 while remaining largely unchanged around skills development.
exchange rates were more of a concern than 3 months ago (51% in Q1). Inflationary pressures also eased somewhat (25% Q2 vs. 31% Q1) but remains high compared to a year ago. In Q2 2016 this figure was just 8%.
Exchange rates concerns continued to ease in Q2 2017. In Q2 39% of members said that
The NI Chamber Perspective This quarter’s results indicate that there is continued business growth in the region – albeit slow. The survey also highlights three key challenges facing businesses at the moment – inflation, recruitment difficulties and Brexit. These are major issues for the local economy to face and the lack of an Executive at Stormont is becoming increasingly frustrating. In what is becoming a tired plea, we ask that our parties resume talks and reach a positive outcome as soon as possible.
Prepared by NI Chamber on 1st August 2017
SUM M ARY Q2 2017
Quarter on Quarter Change (Q1 2017 to Q2 2017) Nine of the 14 key manufacturing balances increased this quarter. The sector now ranks above the UK average for most key balances in Q2 2017 (9 of the 14). Eleven of the 14 key services balances fell this quarter continuing a weakening trend since the start of 2017. The sector still ranks above the UK average across most key balances.
= fall in a key balance between Q1 2017 and Q2 2017
= increase in a key balance between Q1 2017 and Q2 2017
= No change in a key balance between Q1 2017 and Q2 2017
Quarter on Quarter Change (Q1 2017 to Q2 2017) Key Balances
Manufacturing
Services
Domestic Sales Domestic Orders Export Sales Export Orders Employment – last 3 months Employment – next 3 months % Tried to Recruit Cash flow Investment – Plant & Machinery Investment – Training Confidence – Turnover Confidence – Profitability % Full Capacity Prices
Additional Questions Each quarter NI Chamber members are asked a number of additional topical questions. This quarter focuses on the impact of Brexit as well as issues faced by businesses around recruitment and skills.
Recruitment and Skills Recruitment intentions are still strong in manufacturing in Q2 with 69% of members trying to recruit new staff over the last 3 months. Recruitment intentions in the service sector did weaken during Q2 with 54% of businesses trying to recruit, down from 66% in Q1. Both sectors however continue to experience high levels of recruitment difficulties for new jobs with 81% of manufacturers and 71% of services stating that they have had difficulties finding suitable staff. Members were asked what they considered to be the key issues impacting on recruitment difficulties for their businesses.
the required attitude/motivation (31% say this is a major issue). Some 22% of businesses feel that there are not enough applicants generally, 20% noted a lack of work experience as a major issue, and 18% stated that there is too much competition from other employers. As a result, 44% of members indicated that the recruitment difficulties are placing an increased burden on their current employees, and 24% have difficulty meeting customer service needs as a result. One in 4 members believe that difficulties finding the right staff are having an adverse impact on productivity in their business.
A lack of the right skills and attitude are the main drivers of recruitment difficulties among local businesses. The primary issues cited when recruiting are that businesses feel that there are not enough applicants to meet the required skills (32% say this is a major issue) and there are not enough applicants with
Prepared by NI Chamber on 1st August 2017
SUM M ARY Q2 2017
Did you experience any difficulties finding suitable staff? In Q2 2017 81% of manufacturers and 71% of services businesses who were recruiting staff had difficulty finding the right staff, particularly professional/managerial staff along with skilled trades for manufacturers.
100 % Services experiencing recruitment difficulties % Manufacturers experiencing recruitment difficulties
80
60
40
20 Q3 11 Q4 11 Q1 12 Q2 12 Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 Q2 15 Q3 15 Q4 15 Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17
The BDO Perspective The recruitment difficulties reported by many members is troubling and is further compounded by a lack of clarity on the future status of EU labour. The strength and depth of our workforce is rightly identified as a core concern. The quality of talent in Northern Ireland has always been a high performing asset, but there are concerns that a skills shortage is evolving. While we do not know what lies ahead in the Brexit negotiations, the reality is that we will need a trained, highly skilled and diverse workforce which can flex with the needs of the economy and the priorities of business if we are to thrive in a post-Brexit world.
Prepared by NI Chamber on 1st August 2017
SUM M ARY Q2 2017
Brexit Watch! Each quarter NI Chamber asks a series of questions through the QES aimed at understanding the impact of the UK’s vote to leave the EU on Northern Ireland businesses and wider economy. This quarter the NI Chamber’s quarterly Brexit Watch focuses on how the impact of the UK’s impending exit from the EU has impacted on the strategic direction of member businesses. Around 1 in 2 member businesses have not changed or considered changing their business model in light of the UK’s impending exit from the EU with many adopting a
‘wait and see’ attitude as negotiations continue. Of those that have made or considered changes, they are most likely to have (9%) or considered (28%) changing their target market(s) followed by identifying new suppliers and introducing new products /services. Around 7% have considered making changes to their business location or setting up a presence outside Northern Ireland/the UK, largely citing the Republic of Ireland as their key choice. Some members are also re-examining recruitment plans and existing/new trade partners.
In what way, if any, has the UK’s vote to leave the EU made you change or adapt any of the following?
Not Applicable
Not Sure
6%
2%
7%
3%
5%
4%
Products or Services
-68
18
6
Target Market(s)
-54
28
Recruitment Plans
-69
14
Suppliers
-65
20
5
5%
4%
Trade Partners
-60
19
4
12%
5%
-80
-70
-60
-50
No Change
-40
-30
-20
-100
Consider Changing
8
10
20
9
30
Have Changed
The QES survey focuses on “key balances” around a number of business indicators including local sales, exports, employment and confidence. The balance is determined by taking the percentage of firms reporting increases in a key balance and subtracting the percentage of firms reporting decreases. 279 businesses responded to the NI Chamber of Commerce & Industry Quarterly Employment Survey, in partnership with BDO, for the 2nd quarter of 2017. Together they account for over 26,000 jobs in Northern Ireland.
Prepared by NI Chamber on 1st August 2017
