NI Chamber and BDO Survey Shows Signs of Recovery but Rising Price Pressures Emerge Fifty three per cent of Northern Ireland’s manufacturers are expecting to raise prices over the next quarter, the highest share recorded since the time of the financial crash. According to results from the Quarterly Economic Survey for Q1 2021, carried out by NI Chamber and BDO NI, price pressures are coming to the fore. Almost all (92%) manufacturers are experiencing pressures from rising raw materials costs, resulting in expectations of raised prices in the next three months. The survey does however suggest some signs of recovery in the Northern Ireland economy during the first quarter of 2021, particularly in manufacturing, but with some way to go to recover all of the lost ground precipitated by the COVID-19 pandemic. Confidence and investment intentions Business confidence has continued to improve in Q1 2021 after the large collapse experienced at the start of the pandemic. In fact, the business confidence indicators are positive in Q1 2021, meaning that more businesses believe that their business turnover and profitability will grow over the next 12 months compared to those who believe that it will fall.
New trading arrangements Two in five businesses (41%) reported difficulties in adapting to new trading arrangements for their business/supply chains, with 14% findings them very difficult. Fifteen per cent have found the new arrangements relatively easy to deal with, while 18% believe it is too early to say. According to the survey findings, new arrangements appear to be impacting on trading relationships for some businesses, particularly in terms of trade with Great Britain. Eighteen per cent of members stated that the new arrangements have had a major negative impact on their trade with Great Britain and 34% have experienced a minor negative impact. However, the same survey also shows
that two in three members (68%) believe Northern Ireland’s status post EU Exit presents opportunities for the region. Nearly half (47%) believe the new trading status will present opportunities for their own business going forward. COVID-19 impact Members’ initial reaction to the COVID-19 crisis was very stark, particularly in Q2 2020. Signs of improvement have been reinforced in Q1 2021, with 54% of members stating that they traded well or reasonably during the quarter. However, conditions remain very challenging for a sizeable minority of around 1 in 3 members, with 15% seeing no signs of improvement at all.
Commenting on the findings, Ann McGregor, Chief Executive of NI Chamber, said:
Ann McGregor, Chief Executive of NI Chamber.
“Price pressures are emerging as a significant concern from Q1, particularly in the manufacturing sector. Hikes in the price of raw materials are a significant factor, but we also know that there are multiple other
escalating costs contributing, including higher logistics costs and significant additional costs associated with trading during COVID-19. Over the course of the next quarter, we can expect to see a sizable portion of these price rises passed on to the consumer, as firms simply cannot afford to absorb them. “The survey does show that some of the lost ground experienced in the economy since the start of the pandemic has been recovered and confidence is starting to return, particularly in manufacturing. However, we must temper this with the reality that large parts of the economy are still shut down, there remains significant spare capacity and many key balances remain negative, meaning that there are still more businesses in Northern Ireland reporting falls in domestic and export sales/orders, cashflow and investment than those reporting an increase. “This is the first Quarterly Economic Survey since new trading arrangements came into effect on 1 January after the end of the EU exit transition period. In Q1,
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some members have reported significant difficulties. NI Chamber has been working closely with businesses adapting to the rules and we know that there are multiple factors leading to these difficulties. For example, issues with the technology are hindering their ability to complete the cycle of customs clearance requirements. An onerous volume of information is needed and in many cases the actual data is inaccessible. Issues around what is defined as goods ‘at risk’ continue to be troublesome. In addition, defining origin is a challenge, with companies unsure how to classify their products. “Our members tell us that there is also a significant level of misunderstanding among customers and suppliers about Northern Ireland’s trading status both within the UK and with the EU, which is contributing to delays, additional paperwork and costs. In some cases, it is also triggering EU and GB customers to source goods elsewhere. There is therefore an urgent need to educate customers and suppliers in new trading arrangements.”
