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In 2016 we saw Leicester City win the premier league, our Olympians shine in Rio and our footballers and fans showed their class in France. It was turbulent and uncertain for the business community but the economists were proven wrong and the sharp decline predicted as a result of the Brexit vote hasn’t materialised. Already in 2017 we are heading for an Assembly election in Northern Ireland and Theresa May is bullish but positive about her Brexit plans. As Donald Trump prepares to take residence in the White House it seems the USA might be only 140 characters away from all-out war or an economic melt-down.

The Stormont Effect

In the short term a local election will have an immediate impact on our economy as it often stalls and changes the decision making process.  Projects close to sign off are put on hold, particularly those that could be politically sensitive in the run up to an election.  Lack of decision making often has a greater impact than the wrong decision.  The public purse will tighten and in an economy that still has an over reliance on it, I would expect we will feel the impact in the coming months.

An independent corporation tax regime seems as far away as ever and lack of political stability would raise concerns as to whether our political leaders have the capability to manage the fiscal responsibility that comes with it.  If this is to be delivered there is a lot of work to do and the recent fall out only distracts from that.   

If Brexit means Brexit?

Theresa May seems to recognise that a return to border controls would be impractical and unnecessary though it remains to be seen what solution will be put in place to control immigration which is also high on the priority list.  Any special trade arrangement between Britain and Ireland is unlikely as EU countries are unable to enter independent discussions, therefore we will be bound by a single agreement.  It is positive, however that the Prime Minister has recognised the importance of our links with the South of Ireland both on a political and economic level.  Political unrest continues to be a challenge for local business with the effects often significant, immediate and largely uncontrollable. 

The Brexit plan will prioritise particular trading relationships and sectors, it remains to be seen how those negotiations will go or what those priorities are.  Global trading negotiations are likely to be underway.  There’s a lot to be done and national priorities will take precedent over those specifically of Northern Ireland; our economic landscape is different so we will have a challenge to retain the status quo.

So what will it mean for Northern Ireland Business?

We have a professional and close knit business community keen to collaborate and develop at every opportunity.  The passion of local growers and producers shone through in 2016 with Northern Ireland’s Year of Food and Drink showcasing the best our country has to offer.  In many cases this diversification has been the result of challenges faced by the farming sector and our ability to adapt to the changing economic landscape.

This entrepreneurial spirit will be called on yet again as farming is likely to be impacted by Brexit.  That sector currently benefits from European funding in terms of capital support and subsidies whether this will be replaced with national support remains to be seen.  It’s unlikely that the tap will be turned off immediately but the funding landscape will undoubtedly change.                               

Manufacturing and engineering continues to be an important sector within the local economy.  Volatile exchange rates, commodity prices and high cost of labour will continue to challenge in 2017.  Links with the US are important here and Trump’s early presidential decisions could impact.  If US relations with China become strained there could be opportunity but in the medium to long term our focus will be on product development and design rather than large scale production activities.   

We have a growing professional services industry with a reputation for quality and expertise.  Our education system continues to deliver strong candidates that impress global employers and help attract investment.  This will continue as our lower cost base and skilled workforce presents an attractive opportunity for many firms.  Notwithstanding this a lack of office space in key areas and a requirement to improve IT infrastructure continues to be a barrier.

Will we ride the storm?

It seems that we have been talking to clients about political instability and Brexit implications for a long time.  Monitoring exchange rates, seeking opportunities to better match trading relationships to deal with the volatility are now common place.  There is no doubt we face challenges, our fate is not always within our control and global uncertainty will impact growth.  That said the global economic climate is changing and within that there will always be opportunity. 

We believe our client base provides a good indicator of the mood of the Northern Ireland SME sector.  In the past few years we have learned a lot about the resilience and expertise amongst our own clients and in the local business community.  2017 will not be without its challenges but if we can weather the storm in the early part of the year and return some stability to the political and economic landscape we will be well placed to deal with the opportunity 2017 will bring.  

 

Contact us:
Rachel Fowler – Director/Advisory
T: 028 8775 2990
E: Rachel.fowler@cavanaghkelly.com
W: www.cavanaghkelly.com