Cross-border shoppers a major boon to North economy, says bank

The economic impact of shoppers flooding across the border from Ireland cannot be overstated, a leading bank said in its latest review of the North's economy today.

Many border towns are experiencing huge retail buoyancy and the position should be cemented by the recent reduction in VAT, said the First Trust Bank.

The benefits of the euro influx, coupled with the relatively high public sector spending should mean Northern Ireland is better placed than other UK regions to ride out the economic tough times, it said.

At the same time, the North’s Executive was urged to take bold decisions to boost consumer and business confidence in the midst of the global economic downturn.

The banks’ latest Economic Outlook and Business Review said there was a strong case for the Executive to revise the priorities set out in the current budget to boost the local economy against the downturn.

Among a range of measures proposed was the fast tracking of some larger planning applications.

The report examined the current North economic climate within the context of the UK, Ireland and international economies.

It concluded that, while the North will not escape the recessionary forces surrounding it, its relative dependence on public expenditure will mean the economy will be less severely affected than many other UK regions.

And it said: “The impact of cross-border shopping cannot be overstated with many border town experiencing huge retail buoyancy. This position should be cemented by the recent reduction in VAT here, again helping to lessen the downturn in retailing.”

Indeed the report was not all gloom, it said the North's economy had not completely followed the national trend and there remained a few bright spots.

:: Manufacturing output rose by 1% in the second quarter of the year – an increase the bank said had taken many by surprise. Output in NI was 4% higher than in the same quarter last year, a performance which bucked the national trend which recorded an output decline of 0.9%.

:: Employment rose in the second quarter reaching 722,320, some 0.6% higher than a year before, making Northern Ireland one of the lowest jobless economies in the world. But at the same time claimant count unemployment began rising towards the end of 2007 and had risen in each of the last five quarters reaching 3.5% in October.

:: Unfilled vacancies stood at 10,437 in September, up 7.5% on the previous quarter indicating some capacity for growth.

Terry McDaid, managing director of First Trust Bank said: “While undoubtedly the worldwide economic picture remains bleak, it is important that we don’t exaggerate the conditions in Northern Ireland.

“Northern Ireland’s unemployment figures tell us that the picture for the province, in the short term at least, must be kept in perspective.

“When we add the relative strength of public sector spending here, and the benefit of cross-border shopping, we are perhaps better placed than other regions to ride out the tough climate ahead.”

Commenting on the latest report Michael Smyth, head of the School of Economics at the University of Ulster, urged the Executive in the light of the Chancellor’s recent Pre-Budget Report to revise its priorities.

“For instance, if capital expenditure could be redirected towards social housing, it would help offset the collapse in private sector house building.

“Similarly, on the assumption that there will be fewer foreign direct investment projects, Invest NI’s budget could be redirected towards support for existing businesses.”

Mr Smyth added: “It is time for the Northern Ireland Executive to take some bold decisions that will boost consumer and business confidence here.

“These include the speeding up of public procurement invoice processing, the fast-tracking of some larger planning applications, measures to encourage participation in co-ownership schemes, initiatives to boost-retraining or up-skilling and measures to incentivise businesses to reduce energy consumption.”

While the focus of the Executive and Assembly was currently on short-term measures that can alleviate the worst effects of the economic downturn, the review also cautioned ministers against taking their eyes off the longer term needs of the economy and the development of the future pillars of the economy.

Mr Smyth said tourism must be one of the pillars, but it had received such a low priority in public policy to date. The Titanic Signature project was a welcome development but there remained a major gap in what was offered.

“Given the weakening sterling exchange rate, there has never been a better time to invest in the human and physical capital of the tourism industry,” he said.