The biggest ever annual surge in output from food and drink firms in Northern Ireland may have been fuelled by the NI Protocol, an economist has said.
The site of Deli Lites in Warrenpoint
September 15, 2022.
The biggest ever annual surge in output from food and drink firms in Northern Ireland may have been fuelled by the NI Protocol, an economist has said.
Figures on the economy from the Northern Ireland Statistics & Research Agency (Nisra) show that food and drink firms’ output was up just under 14% in the second quarter of 2022, compared to the year before.
There had also been growth of 6.2% between the first and second quarter of the year.
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The agreement has brought restrictions such as checks on trade from Great Britain to Northern Ireland — leading companies such as big supermarkets to source products like sandwiches from companies in Northern Ireland instead of shipping them over.
Ulster Bank chief economist Richard Ramsey tweeted that “the impact of the NI Protocol [is] arguably behind the surge in NI food and beverage output”.
The separate index of services showed that private sector services output had fallen in the second quarter by 0.3% compared to the first few months of the year.
But there had been growth of 2.7% year on year.
And when the most recent four quarters were compared to the previous four, output from the Northern Ireland services sector had expanded by 7.4%, stronger than the 6.9% growth for the UK as a whole.
Mr Ramsey said the 0.3% quarterly fall in services could be evidence of a recession. “Given the deteriorating economic conditions and outlook since then, Q2 2022 could well mark the first of a series of quarterly contractions as Northern Ireland enters recession and battles with cost-of-living and cost of doing business crises.”
Meanwhile, the index of production, which is mostly manufacturing, increased by 0.5% quarter on quarter, and by 3.9% year on year.
In fact, industrial production was at a decade-high in the second quarter, while manufacturing was up 0.6% quarter on quarter and 2.9% year on year.
But over the year, there was contraction within the index of production for the sub-section of gas, steam and air conditioning supply, down 5.8%, as well as a 16.3% slump for mining and quarrying.
There was also evidence of the impact of the cost-of-living crisis on spending in shops.
Nisra’s retail sales index reported a substantial 2.4% quarter on quarter decline, which was steeper than a 1.4% slump in Great Britain. The index also fell 2.1% over the year.
Mr Ramsey said the trend was unsurprising, given the cost-of-living crisis — and he warned it would intensify in the next few quarters.
Retail sales were also 3% below pre-pandemic levels, he added.
And discounting the period of lockdowns during the pandemic, the index had descended to its lowest level in eight years.
Mr Ramsey said the findings reflected the slump in Northern Ireland household discretionary income recorded in the latest income tracker from supermarket Asda.
It found there had been a year-on-year fall of one-third in discretionary income for households to £93.50 in the second quarter.
Mark Magill, senior economist, Ulster University economic policy centre, tweeted:
“The squeeze of what was already relatively low discretionary income starting to come through in the data. Expect this series to post record lows in the coming quarters.”
Mr Ramsey said the 6.2% quarterly surge in output for food and beverage companies was eight-times the level experienced in the UK.
And a 13.9% year on year increase was the largest annual increase in the sector to date, when the impact of lockdowns in the pandemic is discounted.
Mr Ramsey said: “Northern Ireland’s food producers have benefited from the NI Protocol which came into force at the start of January 2021.
"Local firms have experienced increased sales to the Republic of Ireland (EU) at the expense of GB producers.
"Since the NI Protocol came into effect, food and beverages output amongst NI manufacturers has increased by 18.3% which is 2.5 times the comparable growth rate amongst UK firms.”
Manufacturing output was also 5.5% above pre-pandemic levels in the final quarter of 2019 — a much more favourable performance than in the UK as a whole, where it had shrunk 0.1%.
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