Friday 23 October 2009

Poorer again

The news that the British economy is still in recession even while major Euro-zone economies like France and Germany are already growing again, is hardly good news in Northern Ireland.
"The UK economy unexpectedly contracted by 0.4% between July and September, according to official figures, meaning the country is still in recession.

It is the first time UK gross domestic product (GDP) has contracted for six consecutive quarters, since quarterly figures were first recorded in 1955."
The danger lies as much is the cure as in the disease:
"The worse-than-expected GDP figures are likely to make the Bank of England consider extending its policy of quantitative easing.

Quantitative easing is the central bank's policy of printing money and using it to buy bonds from banks and other companies to help stimulate the economy."
Quantitative easing is the neologism for inflation – it basically means that the Bank of England prints more money in an attempt to stimulate economic activity. But more pounds chasing the same amount of production (or less!) simply means that prices will go up. But the products and services that these extra pounds are chasing are neither better nor more abundant than before – so the real value of those extra pounds will reduce. Already, the news has sent sterling sharply lower, with the euro gaining more than a penny to 91.5p this morning.

What it means, quite simply, is that the pound in your pocket is now worth less, and the prices of everything that is imported will rise. True, the corollary is that things produced in the UK will become slightly cheaper elsewhere, which may increase demand. But in order for this to be sustained, the costs in the UK have to stay down. Which all means that wages will not be able to rise to compensate for those higher import prices. People in the UK are going to feel slightly worse off.

It s all good news for those southern shoppers who will now get more goods for their euros in Newry, Enniskillen and Derry. Good news too for the shop-owners who may profit from a slight increase in the numbers of southern shoppers.

But overall the weakness of the UK economy, and its sluggishness vis-à-vis the major EU economies, shows that the Northern Irish economy is probably hitched to the wrong neighbour.

And, of course, with the UK economy underperforming, and the Treasury haemorrhaging money at unsustainable rates, the outlook for Northern Ireland's public sector dependent economy is especially bad.

Budget cuts and a weakening currency … Northern Ireland is heading for lean times.

25 comments:

Watcher said...

If things are so bad in Northern Ireland, I look forward to a wave of Nationalists heading south. After all getting fed by The UK exchequer must be more than any true Irish 'man' can take...

hoboroad said...

I see Ian Parsley has been picked by the Tories in North Down for the next General Election. Sylvia Hermon is going to have to make up her mind pretty soon.

Anonymous said...

Watcher, the best Loyalism has to offer.

Anonymous said...

Does anyone have the actual figures on N.I.? I mean does it contribute say 1 billion pounds to Britain in taxes and revenue, but consume 1.2 billion pounds? Or 900 million? Does Britain gain or lose from having N.I.? I'm just asking in a strictly non-partisan manner.

New times, New approach said...

Horseman - From very many viewpoints I would have difficulty arguing with your assertion that N.I. 'is probably hitched to the wrong neighbour', but I think an economy based one might not be the strongest argument just at the moment. In June this year the IMF published it's conclusion that 'The stress affecting the Irish economy exceeds that being faced currently by any other advanced economy'

Nice try, though.

hoboroad said...

I see the DUP have now offered the UUP an election pact for the next General Election. And that 4 UUP party veterans including Chris McGimpsey have signed a letter protesting against the UCUNF pact.

Seymour Major said...

This blog summarises the grim outlook for Northern Ireland's economy reasonably accurately except for the bit about being hitched to the wrong neighbour.

The truth is, nobody can really tell at this point how well the ROI economy will perform compared to the UK economy in the short and medium term.

To answer Anonymous at 18.53 yesterday, Northern Ireland collects 12 Billion in Revenue and spends 19 Billion. NI is dependant upon England for sustaining its economy.

It is now common ground between both the Conservatives and Labour that there will be considerable cust in public spending after the next election.

It is not clear how these proposed cuts will affect Northern Ireland in the short and medium term or how that will be reconciled Conservative economic policy for Northern Irleand

The Conservatives have promised policies to help Northern Ireland ween itself away from its dependancy over a very long period of time.

Whatever any Government does in the short or medium term, if you live in Northern Ireland or, for that matter, anywhere in the British Isles, there are tough times ahead.

hoboroad said...

If UCUNF win no seats at the next General Election in the North where will the public sector axe fall? Not in England or Wales not even Scotland.

Anonymous said...

I've been thinking this too hoboroad.

If the Conservatives get in and make large cuts to the public sector, the civil service in NI will likely be downsized considerably, and a lot of people, including middle class Protestants (and Catholics) will be put on the dole.

Why the UUP want to be allied to the party that carries this out is beyond me. It's a big gamble, they could well alienate large numbers of their constituents.

hoboroad said...

They will make massive cuts they have no choice. A lot of the new Tories will be of the shrink the government till you can drown it in the bathtub school of thought. The only person I can think of doing well out of this is David Trimble who is the mastermind behind UCUNF. Mr Trimble might get his seat in Mr Cameron's Cabinet while his former party get shafted by the DUP and TUV.

Anonymous said...

> The truth is, nobody can really tell at this point how well the ROI economy will perform compared to the UK economy in the short and medium term.

This is true enough. The UK may leave the EU after all. However, the ROIs education system turns out a more educated workforce overall. Hence the higher GDP per capita. This will not change any time soon and when the recession ends the divergence will resume.

hoboroad said...

Yes I think a lot of Foreign Investors will think twice about investing in Britain if it leaves the EU. Ireland could only benefit if that happened. A low tax economy with a well educated workforce. Britain is not Switzerland it can not let a Foreign Born Billionaire like Mr Rupert Murdoch dictate Foreign policy.

Anonymous said...

So is that right then? N.I. throws out 12 billion in revenues but consumes 19? A 7 billion dollar annual deficit? If I were a unionist that would worry me more about the U.K. wanting to maintain the connection then any unfavourable demographic trends. On the other hand does Ireland really want to take up the difference? I read a lot of blogs about the British isles (which, at least geographically speaking includes Ireland). It is hard to get the facts, (I guess because there is so much bias). I read a lot of blogs and posts about Scottish independence. Some writers insist Scotland pays more into the U.K. then it gets out. Others say the exact opposite. It is very hard to get accurate information. What would happen to N.I. if Scotland DID become independent?

hoboroad said...

If Scotland became a Independent successful wealthy country it would cause Unionists to have a fit. It would force the English to stand on there own two feet. It might lead to the breakup of England. Britain could stand alone when it had it's vast Empire. If England left the EU who would it trade with? The United States of America would be pretty pissed off if England left the EU. The only countries who would trade with England would be India and China and maybe Russia.

Watcher said...

hoboroad said:

"If Scotland became a Independent successful wealthy country it would cause Unionists to have a fit. It would force the English to stand on there own two feet. It might lead to the breakup of England. Britain could stand alone when it had it's vast Empire. If England left the EU who would it trade with? The United States of America would be pretty pissed off if England left the EU. The only countries who would trade with England would be India and China and maybe Russia."

LOLOLOLOLOLOLOLOLOLOLOLOLOLOLOL...

If The UK left The EU, it would still trade with EVERY single EU country. How do I know this? Because people with cash need people with goods and services and people with goods and services need people with cash. Simple - even you must be able to understand that Hoboroad.

The posts on this site just get better and better - I'm loving it!

Anonymous said...

Reply to hoboroad:

I don't understand your logic. Why wouldn't countries trade with England if it left the E.U.? Don't countries trade with Switzerland? Why would the USA care if England left the E.U.? Your logic is lost on me.

Dazzler said...

Whats the inflation rate in the uk. Surely as sterling is devaluing inflation must be increasing?

Anonymous said...

There is the hidden subsidy that is not acknowledged in that transport costs to NI are not factored into the price that NI shoppers pay for their goods.

Anonymous said...

Seymour Major wrote: 'To answer Anonymous at 18.53 yesterday, Northern Ireland collects 12 Billion in Revenue and spends 19 Billion. NI is dependant upon England for sustaining its economy'

That the English taxpayer subsidises Northern Ireland by about 7 billion pounds, presumably annually, is quite incredible. Does Dublin want to buy into that? Can it afford to? Northern Ireland seems to be nothing but an immense drain on the resources of any state that has sovereignty over the place, and so must govern and subsidise it. Has Northern Ireland ever pulled its weight economically? No wonder English nationalism has been on the rise in recent years. The English taxpayer would be saying: Who needs them? Who needs this? And what does England get for its massive subvention of the other consituent countries of the United Kingdom, these being Northern Ireland, Scotland, and Wales? Very little, I'll bet. England does not even have its own parliament and yet it must subsidise those countries within the UK that do. It is all an exceedingly strange situation.

Anonymous said...

Seymour Major wrote: 'To answer Anonymous at 18.53 yesterday, Northern Ireland collects 12 Billion in Revenue and spends 19 Billion. NI is dependant upon England for sustaining its economy'

That the English taxpayer subsidises Northern Ireland by about 7 billion pounds, presumably annually, is quite incredible. Does Dublin want to buy into that? Can it afford to? Northern Ireland seems to be nothing but an immense drain on the resources of any state that has sovereignty over the place, and so must govern and subsidise it. Has Northern Ireland ever pulled its weight economically? No wonder English nationalism has been on the rise in recent years. The English taxpayer would be saying: Who needs them? Who needs this? And what does England get for its massive subvention of the other constituent countries of the United Kingdom, these being Northern Ireland, Scotland, and Wales? Very little, I'll bet. England does not even have its own parliament and yet it must subsidise those countries within the UK that do. It is all an exceedingly strange situation.

Paddy Canuck said...

Anonymous said...

"This is true enough. The UK may leave the EU after all."

Can the UK really be said to be in it? They only want the benefits of lowered trade barriers but don't want to take on the obligations of the project... the euro, the customs union, the Charter of rights. They seem to have this vague idea that they're going to be in NAFTA someday with 'their people', instead of all these creep bohunks. It ain't gonna happen, kids. You're in Europe. Get over it, and get on with it. Or quit in a fit of pride and take your lumps... at least you'll stop being the whiny, dragging ass of European integration.

Paddy Canuck said...

Watcher said...

"If The UK left The EU, it would still trade with EVERY single EU country."

LOLOLOLOLOLOLOLOLOLOLOLOLOLOLOL..., to coin a phrase. :)

Oh, yes, certainly... albeit far less once France and Germany INSTANTLY leap to the opportunity to get tariff barriers to British goods resurrected and have just that much more of the internal trade of 400 million customers (as opposed to the self-amputated 55 million of the UK) to themselves. Good luck with that. :)

Paddy Canuck said...

Anonymous said:

"That the English taxpayer subsidises Northern Ireland by about 7 billion pounds, presumably annually, is quite incredible. Does Dublin want to buy into that?"

Given that Dublin won't be sucking money out of Northern Ireland to finance a nuclear weapons program, Trident, nuclear subs, and being the eager toady of the United States in every Middle East imperialistic venture the Republican Party can squeeze through Congress... a good chunk of that 12 billion quid Norn Iron coughs up, I'll wager... I'm willing to bet they can manage it with far more economy.

Paddy Canuck said...

Anonymous said...

"What would happen to N.I. if Scotland DID become independent?"

Nothing. Wales would presumably inherit Scotland's place as England's SECOND biggest pain in the ass... ;)

Paddy Canuck said...

Anonymous said...

"Has Northern Ireland ever pulled its weight economically?"

Yeah, what a bitch it is when you invade somebody else's country AND you don't even post respectable dividends! Must make 'em wanna pack up and go home... lotta Yankees thinking that in Iraq these days too, I bet. :)