Business

North’s business services and finance sector maintains boom momentum, but slower quarter for retail and manufacturing

Output in fast-growing sub-sector up 9% in a year - Nisra

Bedford House, the key Belfast office base for business services group EY, which announced 1,000 new jobs in Northern Ireland in September 2023.
Bedford House, the key Belfast office base for business services group EY, which announced 1,000 new jobs in Northern Ireland in September 2023.
By Ryan McAleer

Output in the north’s services sector grew by 0.4% in the second quarter of 2024, driven by the continuing boom in the business services and finance sector.

The latest official economic data from the Northern Ireland Statistics and Research Agency (Nisra), estimates output in services sector at the end of the first half of 2024 was 3.8% higher than 12 months previous,

Nisra said it represented a new series high for the quarterly index of services, leaving it 10.6% above pre-pandemic levels, outperforming UK levels.

The services sector, which covers everything from banking and IT companies to hospitality and retail, accounts for around 55% of all Northern Ireland businesses.

Business services and finance sector was again the standout performer, with output increasing by 2.9% between the first and second quarters of 2024.

That left output in the sub-sector up by 8.9% over the year.

Growth in the sector was epitomised 12 months ago, when business services giant EY announced plans to create 1,000 new jobs in the north.

Elsewhere, the category including the north’s hospitality sector, grew by 3.3% between the first and second quarters. The sub-sector also includes the retail and motor trade.

However, the latest retail sales index (RSI) from Nisra suggests a challenging quarter for the north’s retail businesses.

Output in the RSI was down 0.6% in the second quarter, but it still remained 0.6% up over the year.

Graph showing the performance of the north's business services and finance sector over the past decade, compared to the wider UK trend.
Graph showing the performance of the north's business services and finance sector over the past decade, compared to the wider UK trend.

The retail index remained 4% below pre-pandemic levels.

Elsewhere, the latest Index of Production, which includes the north’s manufacturing sector, was 0.1% down in the second quarter.

It left output in the sector down 3.5% over the year.

As a sub-sector, manufacturing output was down 1.1% over the quarter.

The official data follows Ulster Bank’s latest business survey, which found manufacturing was the standout performer in the north’s private sector during August.

Nisra said the latest Index of Production was 0.9% below pre-pandemic levels, while the UK-wide index for production was 8.4% below its level from the fourth quarter of 2019.

The data comes one day after the Office for National Statistics said UK gross domestic product (GDP) did not grow during July.

The closest thing Nisra has to measuring GDP in Northern Ireland is the composite economic index.

The next edition of the index, covering the second quarter of 2024, is due to be published on September 26.

UK national debt on track to triple over next 50 years

Meanwhile, the Office for Budget Responsibility (OBR) said national debt is on an “unsustainable path” and on track to triple against the size of the economy over the next 50 years without “mitigating policy action”.

The fiscal watchdog’s latest Fiscal Risks and Sustainability report said the public debt is set to jump to over 270% of GDP by the mid-2070s.

UK national debt currently stands at around £2.7 trillion, or 99.4% of GDP, according to estimates from the Office for National Statistics for July.

This sits around the highest levels the UK has seen since the early 1960s.

The latest report highlighted that an ageing population linked to the falling birth rate, fiscal costs from climate change and rising geopolitical tensions are all expected to put increased pressure on Treasury budgets.

Currently, public spending is at almost 45% of GDP for the past fiscal year - its highest sustained level for almost 50 years.

The OBR said these potential pressures could push public spending to over 60% of GDP over the next 50 years.

However, it projected that state revenues - money brought in, predominantly through taxes - are expected to remain at around 40% of GDP.

The report said: “If these pressures and shocks were to materialise as we project, then governments would need to take mitigating policy action to prevent this debt spiral from occurring.”

It comes amid warnings from Chancellor Rachel Reeves that the public finances already face a “£22 billion black hole”.

The new Labour Government has said some tax increases and public spending cuts, such as the move to strip winter fuel payments from millions of pensioners, are needed as a result.

The latest projection showed that health spending is particularly likely to soar over the coming decades, with projections it will grow from 7.6% of GDP to 14.5% over the next 50 years.

Spending on state pensions is on track to rise from 5.2% to 7.9% of GDP, while net interest spending is estimated to quadruple from 2.8% to 11.3% of GDP as the stock of debt increases.

Chief Secretary to the Treasury Darren Jones said: “The OBR has laid bare the shocking state that our public finances were left in by the previous government.

“That’s why this Government began work immediately to address the inheritance with tough choices on spending alongside ambitious action to drive growth.”