- Most businesses say they are currently trading well (31%) or reasonably (49%)
- 55% of NI Chamber members believe their business will grow in 2023
- 68% expect the NI economy to contract in 2023
- 78% have experienced energy cost increases in excess of 30%
After a significant drop across all indicators in Q3 22, business performance in
Northern Ireland during Q4 22 remained steady, albeit at a very weak level. That’s
according to the findings of the latest Quarterly Economic Survey from NI Chamber
and business advisors BDO NI.
Two in three businesses who responded to the survey stated that demand for their goods
and services is falling, although for most (51%) only a little. 55% believe their business will
grow in 2023, while 33% expect it to contract. Members are considerably less optimistic
about prospects for the NI economy as a whole, with 68% expecting it to contract in 2023.
Only 18% expect the local economy to see some growth this year.
Trade and demand
Most businesses are still trading well (31%) or reasonably (49%), however there are signs
that businesses are not performing as well as the same time 12 months ago. In Q4 22, 31%
of NI Chamber members said they were trading well, down from 40% in Q4 21. One in five
reported finding trading conditions challenging, with 14% just covering costs.
More members believe issues with the Northern Ireland Protocol can be resolved compared
to this time last year. In Q4 22, 49% said they believed that the Protocol issues can be
resolved in the coming year, compared to 39% in Q4 21. However, one in four members said
they did not believe Protocol issues will be resolved this year.
Confidence and investment intentions
Members continued to express concerns around their business profitability in the next 12
months. Confidence around profitability plummeted for both sectors in Q3 22. In Q4 22, the
profitability balance remained negative in both the manufacturing and services sectors,
meaning more businesses expect profits to fall in the next 12 months than rise. However, in
manufacturing this has improved significantly, up to -7% from -26% in Q3 22. In services, the
balance remained largely unchanged at -19% compared to -18% in Q3.
Investment intentions were mixed in Q4. In terms of training, the Q4 22 training balances
remained positive, at +22% (+17% Q3 22) for manufacturers and +11% for services (+16%
Q3 22). Investment intentions around capital also improved for manufacturers, at +12% in
Q4 22 (+7% Q3 22) but remained negative for services at -1% (-3% Q3 22).
Prices and costs
Expectations to raise prices are highest on record for the services sector in Northern Ireland,
ranking it highest across the UK regions. While also still high for manufacturers,
expectations have been falling since the start of the 2022. 72% (81% Q3 22) of
manufacturers and 76% (70% Q3 22) of service businesses said they were expecting to
raise prices in the next 3 months.
The inflationary pressures driving price pressures are acute, with nine in ten businesses
impacted. Businesses are facing significant cost pressures in terms of utilities, labour and fuel costs and particularly for manufacturers, raw material costs. The large quarter-on-quarter jump
in the share of businesses under pressure from rising utility costs is notable, as is the greater
pressure from rising labour costs.
Rising interest rates are also a growing concern. In Q4 21, 18% of manufacturers and 25% of
service businesses were becoming more concerned about interest rates. One year later, in
Q4 22, this had risen to 51% for manufacturers and 45% for service businesses.
In terms of energy, four in five businesses have seen energy cost increases in excess of 30%,
up from 60% in Q3 22.
Commenting on the survey findings, Ann McGregor, Chief Executive, NI Chamber
“In such a prolonged challenging environment, it is welcome to see that our members are not
reporting material deteriorations since the last quarter. However, performance is still weak
and business prospects around profitability have declined. In Q4, inflationary pressures
continued to dominate, with members also expressing greater concern over interest rates.
Rising energy costs should be a cause for alarm following the UK government’s recent
announcement that it will significantly scale back support for businesses at the end of this
“Despite the challenges, for a number of reasons 2023 is a year that Northern Ireland must
target investment– seizing the opportunities presented in green growth, digitisation and
international trade. Of course, as we know, the number one ask of any investor is political
stability – one of the many reasons why we need to see an Executive restored and an
agreed, workable outcome on the Protocol reached without further delay.”
Brian Murphy, Managing Partner, BDO NI added:
“Looking ahead to a New Year can often provide business owners with at least some cause
for anxiety, particularly after the events of the last year. However, it can also provide an
opportunity to look again at your business’ performance, its structure and crucially, your plans
for the future.
“We won’t overlook the fact that performance continues to be described as “weak”, but, context
is everything and when evaluated against the incredibly challenging environment it should be
recognised that maintaining the status quo in terms of performance, staffing levels and
recruitment must be seen as a win.
“It is heartening to see that two thirds of businesses expect to stabilise in 2023 with 55%
anticipating their own business to grow this year. Although many respondents are confident
about their own business, they are less certain about others, with 68% not feeling optimistic
about the wider local economy. It is notable though that if their individual business aspirations
come to fruition there should be, as a result, a direct impact on the wider economy, and we
are encouraged by this potential.
“Although no one can say for certain what 2023 will bring, for businesses to succeed we must
be aware of the challenges and be able to deal with areas of risk and concern, we must also
use the opportunity a new year brings to plan and adapt for the future to ensure
success. Proactive planning by business owners will be key to this success.
“We can make 2023 our year. The opportunities are there to make it happen.”