Recent economic updates don’t paint a very rosy or optimistic picture of Northern Ireland for the latter half of 2012 and into 2013. According to PwC’s latest UK Economic Outlook published in July 2012, Northern Ireland can expect minimal or negative growth and falling employment to continue into 2013.
Overall UK economic growth is predicted to be virtually zero during 2012 with only modest recovery in 2013, and that growth being led by London and the South East. Add to this picture the continuing euro zone crisis, (which will constrain recovery and depress confidence), subdued earnings growth, static property values and further public sector job cuts, it’s easy to see why some may be tempted to pack it all in and take a job serving drinks and tapas in a Spanish seaside resort.
Yet remaining positive and confident is vital if we are to see out this downturn. On the international stage, there is a lack of confidence as a result of the euro zone crisis and general economic malaise which is discouraging cash-rich global investors from being more pro-active in the M&A market. On a local level, a lack of confidence is also perhaps preventing companies, large and small, from investing in their businesses. On top of this, SMEs suffer from continued difficulties in accessing much needed bank funding to support their growth strategies, as banks continue to restrict lending.
The one possible ‘silver bullet’ for the Northern Ireland economy is a reduction in the corporation tax rate which has been supported by the business community at large, with some notable exceptions. However recent noises over the summer months about this being approved have been more negative. There are real concerns that the Treasury and the Executive may not reach an agreement on the cost and practicalities of devolving the relevant powers. A final decision on devolving corporation tax-varying powers will now happen in the autumn.
For those of us working with Northern Ireland’s private sector on a daily basis, it is refreshing to engage with some thriving examples of confidence and positivity. One only has to glance at Northern Ireland’s Top 100 companies to see there are companies determined to remain optimistic and challenge themselves on how they do business to reach new areas of growth and expansion: W&R Barnett, Wrightbus, Chain Reaction Cycles, First Derivatives, SHS and Andor, to name but a few.
As lawyers working in the corporate sector we are seeing reasons to remain quietly confident despite all the surrounding negativity. A recent Experian report revealed that Northern Ireland is one of only three UK regions which saw both the volume and value of M&A transactions rise year on year. But even more interesting is the fact that whilst there was a volume increase of around 12 per cent, deal value increased threefold from £232 million to £691 million. The spike in transaction value was the result of a relatively small number of large value transactions which occurred, but it also serves to highlight the fact that Northern Ireland has solid businesses which can attract international trade buyers.
Whilst some people might argue that the transition to international ownership of Northern Ireland businesses is not a positive trend, in many cases it leads to more rather than less investment and employment in Northern Ireland. It is encouraging to see deal volume on the rise in NI as it demonstrates that increasingly, outsiders are seeing Northern Ireland as a positive place for investment
The bottom line is we need a robust private sector to grow our economy and reduce our public sector reliance over the coming years. A key element has to be the continued growth and success of our leading companies. Now really is the time for the private sector to rise to the challenge in pursuit of the opportunities.
For further information please contact Neasa by email email@example.com or 028 9034 8816