If you were a fund manager tasked with investing exclusively within the Northern Ireland economy, your portfolio would now likely be overweight in software, agri-food, pharmaceuticals and utilities and underweight in construction and financial stocks.
You’d also probably be reducing your exposure to consumer sensitive sectors, particularly ahead of forthcoming public expenditure cuts. However, it is important to remember that even when sectors go into decline, not all firms within them do.
Adapt and prosper
Ultimately those that remain competitive and adapt to changing circumstances will prosper and those that do not will suffer. This explains the ongoing ‘survival of the fittest strategies’ being adopted by pubs, restaurants and retailers as they aggressively compete for discretionary spending.
As far as the economic news of relevance to consumer spending is concerned, there simply isn’t much that can be presented as positive. The recent news flow from the high street makes for a depressing read. Whether it’s the latest UK multiple closing its doors on the high street or the latest report from the British Retail Consortium highlighting that Northern Ireland’s town centres have the highest vacancy rates within the UK.
However, it should be remembered that it is not all one-way traffic. The local retail space has witnessed a number of new arrivals such as Cath Kitson, White Stuff, Paperchase and Jack Wills. With a sustained programme of fiscal austerity underway no stimulus is likely to be forthcoming in this month’s Budget or any subsequent ones in the foreseeable future. Instead, any meaningful stimulus will have to be external.
Grounds for optimism
On this front, however, there are grounds for some optimism. Whilst the local downturn continues at an economy level, the tourism industry is entering what might be termed its ‘sweet spot’. The next 18 months will see some of the biggest tourism events ever to be staged in UK and Northern Ireland, which in turn will provide a salvo of much needed consumer spend from external sources.
In addition, it is incumbent upon local retailers to become as outward looking for new markets as our exporters. Through online shopping, the pound of a Northern Ireland consumer can just as easily be spent on the other side of the world. The best way for retailers to survive is to create an online offering and reach out for retail revenues beyond these shores.
The world must be the marketplace
An online presence makes it possible to grow a business despite the fact that the domestic market may be shrinking. Chain Reaction Cycles, based in Doagh, claims to be the world’s largest online bike store. Cross-border retailing is no longer enough. The world must be the marketplace.
Post by Richard Ramsey, Chief Economist, Northern Ireland, Ulster Bank Capital Markets