A nation of shopkeepers or administrators?

Today saw the release of the Northern Annual Business Inquiry (NIABI) by NISRA. This is a key resource for measuring the size, performance and structure of the Northern Ireland non-financial business economy. It excludes the public sector and accounts for around two-thirds of Northern Ireland’s overall economy.


Turned over. NI’s Annual Business Inquiry (NIABI) revealed a fall in turnover last year (-1.7%) for the first time since 2010. Overall, 2017 was a reasonably encouraging year for local businesses.  However, the closure of the JTI tobacco plant in Ballymena blew a notable hole in the various metrics. While not trying to downplay the significance of the loss of this factory, JTI’s closure distorts the underlying picture experienced by the majority of businesses. The JTI effect contributed to a hefty 13.5% fall in manufacturing turnover in 2017 bringing turnover down to a seven-year low. Conversely, construction firms saw turnover rise by a similar amount in 2017 to a decade high of £7.5bn.

Lagging the UK. NI’s non-financial business economy expanded at a much slower rate than the UK as a whole. NI aGVA – which is a measure of income less business expenditure – increased by just 0.6%, after adjusting for inflation, this equates to a real terms decline of 1.6%. Conversely the UK posted a real-terms rise of 3.6%.

A nation of shopkeepers or administrators? At an industry level, construction aGVA fell by 0.7% in real terms, the distribution sector was broadly flat and non-financial services recorded the largest gains of 2.9% (after inflation). At over £5bn, wholesale and retail trade accounts for close to one-quarter of NI’s non-financial business economy (in terms of aGVA). So NI could be seen as ‘a nation of shopkeepers’, or rather wholesalers & retailers. However, the biggest growth area in 2017 was administrative and support services with a real terms gain in aGVA of 16% y/y. This will lead some to suggest that Northern Ireland’s private sector is becoming increasingly a region of administrators.

Enterprising start. Northern Ireland has many successful businesses; the problem is it simply doesn’t have enough of them. Encouraging start-ups is a key strand of promoting enterprise and growing the private sector. Statistics revealed by the ONS today provide some grounds for optimism. Last year there were 60,610 active enterprises in Northern Ireland. That represents an increase of 4.5% (+2,585) relative to 2016. Northern Ireland’s growth in the number of active enterprises was on a par with Wales and compared favourably with all other UK regions bar the North West (+7.7%).

More births than deaths. The overall stock of businesses is a function of the number of births and deaths. The UK reported a decline in the number of UK business births (-7.7%) for the first time since 2010. Indeed, most of the UK regions bar Wales, the North West and Northern Ireland (+16%) posted a fall in the number of business births in 2017. Northern Ireland has witnessed a 74% rise in business starts in the last five years.  However, while things are moving in the right direction locally, they are from a low base. Northern Ireland has one of the lowest business birth rates (births expressed as a % of the active business population) in the UK.  For 2017 NI was 11.1% (UK = 13.4%) only the South West was lower with the North West the highest birth rate at 16.3%.

I will survive! Northern Ireland not only has one of the lowest business birth rates, it also has the lowest business death rate. Just over 8% of Northern Ireland’s active stock of enterprises ceased trading last year.  That compares with 12.2% for the UK. A low death rate is not necessarily deemed a good thing as business churn and failure are viewed as a natural part of ‘creative destruction’ associated with capitalism. From an economic perspective, replacing old inefficient firms with new more competitive ones is to be welcomed. Less encouraging is the trend that is emerging within Northern Ireland – falling survival rates for new enterprises.  Northern Ireland had the lowest 1-year survival rate of the UK regions for enterprises born in 2016. 88.5% survived versus 91.5 % for the UK. For firms born in 2012, Northern Ireland had the lowest business survival rate of UK regions for 2 and 3 years. Only half of firms born in 2012 survived to 2016 with just 43% making it through to 2017. For firms born in the last few years Northern Ireland has one of the lowest enterprise survival rates of the UK regions. Why this is warrants closer inspection.

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