Business survey: Government must address business tax and competitiveness concerns

    • Most businesses in Northern Ireland (78%) are trading well or reasonably well
    • However, the share of those trading ‘well’ fell to its lowest point in four years (27%)
    • The percentage just covering costs or struggling (22%) is also up from last quarter
    • 4 in 5 members are under pressure to raise prices because of rising labour costs
    • 44% of members expressed concern about taxation
    • 78% of businesses are struggling with the persistent problem of labour shortages
    • Fewer members note inflation as a key concern
    • 63% of Manufacturers and 22% of Professional Services require employees to be in the workplace five days a week.

     

    Most businesses in Northern Ireland (78%) are trading well or reasonably, according to the findings of the latest Quarterly Economic Survey published today (Thursday) by NI Chamber and BDO NI. However, the percentage trading well (27%) is the lowest recorded in four years, and the share of members just covering costs or struggling increased between Q2 and Q3 24 from 16% to 22%. 

    Business confidence
    The balance of firms confident that turnover will grow over the next year fell for Manufacturers and was largely unchanged for Services in Q3 24.  The Manufacturing turnover confidence balance stood at +33% (+48% Q2) and in Services +44% (+41% Q2) this quarter. 

    37% of respondents to the survey reported a slowdown in demand in Q3 24. This has fallen considerably since the start of the year when it accounted for 56% of members. While most are only seeing a little slowdown (25%), for one in ten, that slowdown is significant.

    Investment intentions remain stronger for Manufacturing than Services this quarter. For Manufacturers, investment intentions around plant and machinery have been falling since the start of the year, with a current balance of +18% (+30% Q2). It has also been falling for Services and was negative in Q3 24 at -10% (+4% Q2). 

    READ MORE; Bruce Boytim Named New CEO of Quor Group

    Prices and costs
    More firms were expecting to raise prices in both sectors than reduce them in Q3 24. The balance has been largely unchanged for Manufacturers for the last year while for Services it continues to fall.

    Labour costs remain the most significant cost pressure affecting both sectors but particularly for Services. In Q3 24 80% of Services firms and 62% of Manufacturers were under pressure to raise prices because of labour costs. However, that has softened considerably for Manufacturers where it was 83% in the same quarter last year.  Utility cost pressures have halved for Manufacturers over the last year. 

    In terms of external cost pressures, there has been a significant drop in the share of members concerned about inflation compared to the same quarter last year, although it is still a pressing concern for 2 in 5 members.  A growing sense of concern over taxation stands out, particularly for Manufacturers affecting 43% of businesses
    in Q3 24, compared to 17% in the same quarter last year.  Competition is the most pressing concern for members in the Services sector. 

    Cash flow
    The Manufacturing cashflow balance improved slightly (-5%) in Q3 24, having turned negative ( -10%) in the previous quarter, making it a mid-ranking UK region on this metric. In Services, the cashflow balance was negative at -2% in Q3 24, ranking it joint eighth across the UK regions.  

    READ MORE; 8 In 10 NI Households Would Make Energy Efficiency Changes To Their Home – But For Very Different Reasons

    Recruitment
    Recruitment intentions are stronger among Manufacturers that Service based businesses, with 76% of Manufacturers and 61% of Service businesses trying to recruit in Q3 24.

    The balance of firms expecting employment to grow in the next three months is positive for both sectors, meaning more firms are expecting employment to grow than contract. However, both balances fell during Q3 24. The balance of Manufacturers expecting employment to grow in the next 3 months fell to +20% after a period of increases (+34% Q2, +22% Q1).  For Services the balance continued a downward trend, falling to +24% (+29% Q2, +35% Q1). 

    Recruitment difficulties, which have grown significantly for more than a decade now, have been easing but remain persistently high for both sectors. In Q3 24 80% of Manufacturers and 76% of Service businesses faced recruitment difficulties.  

    Trading arrangements

    Most NI Chamber members (83%) report that they have adapted to EU Exit but for 17% there are still challenges.

    Two in five members (42%) have used the Trader Support Service (TSS), which was set up to support customs administration for the movement of goods into Northern Ireland.

    Hybrid working

    This quarter, members were also asked about their current approach to working arrangements. According to the survey, in 76% of businesses, employees are in work at least three days per week. Almost half (45%) require employees to be in five days per week. Just 3% of businesses have employees who are completely home based.

    READ MORE; Esri maps over 200 spooktacular events around Ireland this Halloween

    The findings indicate that Professional Service firms are much more likely to have some form of hybrid working. Around two-thirds (63%) of Manufacturers have staff in the workplace five days per week compared to 22% of Professional Services.

    Commenting on the survey findings, Suzanne Wylie, Chief Executive, NI Chamber said:

    “Whilst we are encouraged to report that a majority of our member businesses are trading well or reasonably, this research indicates that trading conditions in Q3 were more challenging than previous quarters of the year, particularly for Manufacturing businesses. Ahead of the Chancellor’s Budget next week, this is some of the clearest evidence yet that the UK government must act to rebuild lost business confidence.

    “One of the standout findings is a growing sense of member concern about the impact of taxation, which again, is a particularly prevalent issue among manufacturing firms. With 43% of NI manufacturing companies reporting it as a concern, it is time for the UK government to work with the NI Executive to address the corporation tax question in particular and deliver a more competitive, level playing field on the island of Ireland for NI firms.

    “Equally, there is now a persistent and related concern about competition, which is the most significant external pressure for our service businesses. To that end, we welcome commitments in the draft Programme for Government to growing a globally competitive and sustainable economy and we look forward to working with the Executive on creating the right conditions to meaningfully deliver upon this shared priority.

    “Northern Ireland is poised for growth, but the government must act now to restore confidence by addressing concerns about tax, competitiveness and access to skilled labour.”

    Brian Murphy, Managing Partner, BDO NI added:

    “As businesses continue to press forwards, it is reassuring to know that so many local firms echo the view that their outlook continues to be optimistic. The overwhelming majority report they are trading positively and that they expect turnover to grow in the year ahead.

    “Having weathered the storms of the pandemic, political instability, a cost of living crisis, and international conflict, it is notable that the concerns around Brexit- and the implication for local businesses- appear to have passed for most, with 83% now saying they have adapted to the new arrangements, with only 17% reporting they still face some challenges.

    “Over the last three years, it seems that we’ve had more Prime Ministers than seasons, and many businesses had hoped that a decisive election result in the UK would provide not only stability, but a renewed confidence in the economy.

    READ MORE; Danske Bank and NI Cyber hold first event supporting women working in cyber security

    “With inflation falling and growth increasing, there is much to be confident about, however, concerns remain about the new government’s first budget and what the Chancellor has planned regarding the tax burden. Uncertainty leaves a vacuum that will always be filled with speculation and apprehension, which may well be why so many local companies have raised this as a major concern.

    “However, there is no doubt that whatever the Chancellor announces at the end of the month, it will provide both opportunities and potentially challenges for local firms. Clarity should emerge soon and when it does, it will enable businesses to better plan for the future.”

    Source: Written from Press Release

    Subscribe to our Sync NI newsletter for all the latest technology news, jobs and upcoming events in Northern Ireland.

    Read Sync NI's latest quarterly magazine online for free here.

    Visit Sync NI online for the latest technology news in Northern Ireland.

Share this story