Quarterly Economic Survey Q2 2023

Positive momentum and consistency are the order of the day and businesses across Northern Ireland are clearly demonstrating both. Considering the difficult conditions many organisations are operating in, achieving such a degree of momentum over consecutive quarters, is very encouraging.

Confidence has grown, with 62% of companies positive that turnover will grow in the next 12 months, this is up 2% from Q1 2023 and more significantly up 15% on the last quarter of 2022, demonstrating real time progress.

This is not to say that businesses are not under pressure, nor does it imply that challenges around recruitment, skills and costs have dissipated but what it does demonstrate is that businesses are learning to operate and grow whilst simultaneously dealing with the many pressures that come their way.

Another indicator of this momentum is the steady drop in the number of companies having significant difficulties with recruitment, down by 8% since the previous quarter. It is important that this continues to decrease into 2024 and for this decrease to be sustained, key barriers around the skills gap, competition for talent and the rising cost of living need to be addressed for the long term.

Rising labour costs continue to impact members, who as a result are expecting to raise prices. However, for the manufacturing industry this has dropped to 30% and within services, expectations to raise prices over the next three months fell yet again, with the balance now at its lowest since Q1 of 2021.

It is no surprise that inflation continues to dominate as a key concern for members, along with rising interest rates. Although we are starting to see some signs that inflation is turning, it will take time for this to be realised in terms of spending, production and employment.

While 4 in 5 businesses are trading well or reasonably in Q2, the availability of consumer’s discretionary spending is having an impact on the demand for goods and services. With around half of members seeing some level of slow down in demand, this is one to watch. It certainly won’t be helped by the increased duty on alcohol, that came into effect this month and which will likely put further pressure on operators to pass this cost on to customers.

The local business community certainly does not rest on its laurels. Across the board, businesses have adapted and transformed their offering to meet the changing needs and demands of their market, identifying opportunities for investment and collaboration as they go.

Members also acknowledge there is a real need for Northern Ireland PLC to generate additional revenue to support public spending, with suggestions including water charges, planning reform, lowering corporation tax, and promoting and selling the region’s unique trading position.

The growing momentum we have seen over recent quarters is no small achievement and the Northern Ireland business community should be congratulated for its efforts in overcoming difficult trending conditions and for striving ahead for economic growth and prosperity.