Positive new figures have relvealed that 78 per cent of businesses in Northern Ireland are trading well or reasonably.
The latest findings published by the Quarterly Economic Survey by NI Chamber and BDO NI reveal that despite the high percentage trading well (27 per cent), this number is actually the lowest recorded in four years, with the share of members just covering costs or struggling increasing between Q2 and Q3 24 from 16 per cent to 22 per cent.
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. Meanwhile, 37 per cent 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 per cent of members. While most are only seeing a little slowdown (25 per cent), for one in 10, that slowdown is significant.
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 per cent of Services firms and 62 per cent of Manufacturers were under pressure to raise prices because of labour costs. However, that has softened considerably for Manufacturers where it was 83 per cent 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 two in five members. A growing sense of concern over taxation stands out, particularly for Manufacturers affecting 43 per cent of businesses
in Q3 24, compared to 17 per cent 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 per cent) in Q3 24, having turned negative ( -10 per cent) in the previous quarter, making it a mid-ranking UK region on this metric. In Services, the cashflow balance was negative at -2 per cent in Q3 24, ranking it joint eighth across the UK regions.
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 three months fell to +20 per cent after a period of increases (+34 per cent Q2, +22 per cent Q1). For Services the balance continued a downward trend, falling to +24 per cent (+29 per cent Q2, +35 per cent 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 per cent of Manufacturers and 76 per cent of Service businesses faced recruitment difficulties.
Trading arrangements
Most NI Chamber members (83 per cent) report that they have adapted to EU Exit but for 17 per cent there are still challenges.
Two in five members (42 per cent) 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 per cent) require employees to be in five days per week. Just 3 per cent of businesses have employees who are completely home based.
The findings indicate that Professional Service firms are much more likely to have some form of hybrid working. Around two-thirds (63 per cent) of Manufacturers have staff in the workplace five days per week compared to 22 per cent of Professional Services.
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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 per cent 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.”
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