STORMY CLOUDS lie ahead for the Northern Ireland economy with the end of the UK’s VAT holiday, the conclusion of stamp duty concessions and the potential removal of the car scrappage scheme, a leading local economist warns.
Alan Bridle, head of economics and research with Bank of Ireland in the North, says 2010 could be a year when the Northern Ireland economy appears to be in something of a “twilight zone.
He believes the fact that a general election is looming in the UK could also deliver challenging economic scenarios for the North to contend with.
The Bank of Ireland economist says that if the Conservative Party is returned to power, the North might well benefit from changes to regional economic policy such as lower corporation tax levels and designated enterprise zones. But on the other hand the Conservatives could choose to reduce the block grant which would result in further public expenditure cuts. The Executive is struggling to cut some £400 million (€445 million) from this year’s budget.
Mr Bridle believes that, while the recession could technically end in the North during the first quarter of this year, it is unlikely there will be much momentum in the recovery and the jobs market will continue to be depressed.
“The local labour market faces both short and medium-term challenges – the jobless total has risen by 20,000 in the last 12 months and arguably this total would have been higher but for greater employment flexibility in terms pay freezes, pay reductions and shorter working weeks,” he said.
Mr Bridle expects the total number of people claiming jobless benefits to rise further during 2010 to 60,000.
He is predicting unemployment, business failures and house repossessions will not peak before the second half of this year.
Mr Bridle says there are some signs that confidence in the local property market is stabilising which could result in a pick-up in the low volumes of residential and commercial transactions.
Mr Bridle says top earners who have seen the value of their asset portfolio drop are now facing further pain as a result of proposed changes to income tax, national insurance and pension contributions. The Bank of Ireland economist believes household and government spending will in general be more constrained this year which will pose fresh challenges for the local economy.
“The drivers of economic growth will almost certainly be different to the recent past with business investment, exports and import substitution having to make a more significant contribution to growth,” Mr Bridle said.
