By Andrew Webb, Chief Economist, Grant Thornton Northern Ireland

Andrew Webb
Andrew Webb

The quickening pace of Covid-19 transmissions, and the move towards more restrictions, has created even greater uncertainty about how or even when the economy will recover.

Economic confidence is shattered, and many livelihoods are at grave risk from job losses. While the economic effects of the pandemic are not yet working through the system, we do know that redundancy announcements are running at vastly increased rates, even with the various job protection measures that have been put in place.

Many of these redundancy announcements will turn to job losses and come through in the employment statistics in the coming weeks and months.

Business activity, even before the newest restrictions, remains suppressed. During the initial lockdown in March and April, one third of businesses here closed temporarily. By the end of June, there were still one in 10 Northern Ireland businesses closed.

As we know, the vast majority of these are in the accommodation, food, arts and entertainment sectors. Having only just got pubs open, new restrictions are throwing sustained trading into doubt again.

Ulster University’s Economic Policy Centre has undertaken analysis of which sectors are most vulnerable based on measures of financial resilience (e.g. cash reserves) and measure of the impacts of Covid-19 on sectoral employment numbers, turnover and trading status.

Approximately 25,000 firms (which is around one third of all Northern Ireland companies) fell within the sectors that are most affected and least financially resilient. These businesses provide for around one quarter of our employment and almost 20% of our economic output.

Arts & Entertainment and Accommodation & Food sectors remained most vulnerable to the effects of Covid-19. Business Administration & Support, Transport & Storage and Construction were also in a highly vulnerable position relative to other sectors.

The search for signs of a sustained economic recovery are thin on the ground then.

Business and consumer confidence is low, footfall in our town centres is down drastically, and our local government (councils and Stormont) are not awash with financial firepower currently.

It is difficult to see through the challenging times to a point when we can look towards sustained economic recovery. That time will come, and in the meantime, we can plan for the type of economy we want, and reflect on where our priorities lie.

A key area where we can make a sustained economic difference is with our infrastructure. When an economy is slowing or in recession and consumers have retrenched, Government spending on infrastructure acts as a shot in the arm that boosts construction employment and ripples positively across the economy.

Infrastructure enhances the productive capacity of the economy – the A5 road scheme and faster broadband infrastructure for example will all serve to enable us to be more productive.

There is no shortage of infrastructure projects where Northern Ireland could make a significant impact. It will therefore be interesting to see the details of the Ministerial Advisory Panel on Infrastructure.

Without seeing the contents of the Advisory Panel’s work, it should not be difficult to note the key elements where work is needed, some of which (such as the North South interconnector) the Minister is progressing with.

A major element of infrastructure that is holding us back is our wastewater and sewerage treatment capacity. Significant shortfalls in investment over past years mean there are capacity constraints that are curbing economic development.

New housing and businesses are unable to get connected to the sewerage system in around 70 towns here. That is a major impediment to all sorts of investment, including the ambitious City Deal investment programmes that our local councils are pursuing.

Continuing on an infrastructure theme, and directly relevant to the capacity constraints noted in our wastewater and sewerage system, housing can offer a significant opportunity to grow out of this economic malaise.

New, quality housing can play a positive role in our environmental efficiency ambitions while also prompting economic activity across the construction and retail sectors (as people decorate and furnish properties).

To that end, I was interested to note the Chartered Institute of Housing NI (CIHNI) launch an important document, ‘Rethinking Social Housing’ last week. As their report notes, the coronavirus pandemic has shown the importance of secure, quality housing like never before, as people spent more time at home than perhaps at any other period.

The CIH report calls for social housing to be at the heart of the coronavirus recovery. The logic is compelling. Housing stress levels remain significant and continue to increase; as of June 2020 there were 28,945 households in housing stress, compared with just over 22,000 at the same time in 2015.

Housing investment continues to be a relatively high political priority in Northern Ireland. The New Decade New Approach deal committed for housing to be included as a specific priority in the forthcoming Programme for Government.

Addressing social housing shortages, and retrofitting existing houses with energy efficiency measures could provide a compelling path towards economic recovery.