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So, when I set about considering what 2023 might have in store, I have made a conscious effort not to use phrases like omnishambles. That said, it is harder than I thought not to sum up the situation we find ourselves in seriously negative fashion.
Think about it... the Bank of England has predicted a recession that will last the whole way through 2023 and has gone ahead and raised interest rates in an effort to get inflation under control. The Government, which would be expected to meet a recession by injecting demand into the economy, is doing the exact opposite. The recent Autumn Statement has delivered tax increases and much tighter public spending in the years ahead. All this is combining to mean that our living standards are going to fall dramatically.
With inflation at its highest rate in 40 years, incomes are failing to keep pace. This inevitably makes us worse off. Over the next year, the Office for Budget Responsibility forecasts our living standards to fall by 4.3%, which will be the highest fall since records began in the 1950s. The following year, we are expected to take another hit to our living standards of about 2%. These falls in living standards will wipe out any gains we have made in living standards since 2013/14 – a decade of progress wiped out in two years.
Locally, the Northern Ireland budget causes grave concern heading into 2023. The formation of an Executive would not have solved the £660m over-spend in this current financial year but now that the Secretary of State is setting the budget, he has delivered a very sharp message that he has set a budget to bring public finances under control. Unless there are some very quickly grasped new ways of delivering public services here, this means our already poorly delivered public services are going to get worse. It might also mean that we face significant increases in our local tax burden. I would not be surprised if regional rates are hiked considerably and, if the Executive doesn’t form any time soon, I expect water charges to come back onto the agenda in 2023.
So, the outlook for 2023 is not good, and this is reflected in consumer sentiment. Tourism NI’s sentiment tracker finds that 44% of people are going to eliminate big purchases such as cars and 70% of people are going to cut back on eating out in the months ahead. It isn’t just the bigger spending items that are at risk. Nearly 10% of us are planning to eliminate subscriptions to things like Netflix and the gym. Just shy of 50% are planning to reduce spending in these areas. We are now in the ‘wait and see’ period as far as consumer spending goes. Consumers are cutting back now in the hope that things improve soon. When so much of our economic prospects rely on consumers that are hunkering down, that makes predicting what comes next even harder.
There are, however, some reasons to be hopeful as we head into 2023. The upcoming 25th anniversary of the Good Friday Agreement (GFA) will provide an opportunity to reflect on how the economy here has changed in 25 years, and how we do have a compelling story to ‘sell’ to potential investors. Imagine thinking 25 years ago that Northern Ireland would be the number one location in the world for any type of inward investment, and yet that’s precisely what we have achieved in cyber-security. Imagine 25 years ago that we would have a thriving tourism sector with many new hotels and be capable of hosting major sporting events like Giro d’Italia, The Open and the UEFA Super Cup.
We do have a good story to tell. The investment conference that was announced in the recent Autumn Statement will be held as part of the 25th anniversary of the GFA and could be a bright spot in the year ahead, and could tee up new investment here in the years ahead.
Later in 2023, the One Young World Summit arrives in Belfast. This will see more than 2,000 of the brightest young leaders from across the world arrive here. Over the course of several days in October the summit will take place. What an opportunity for them, and for us to showcase all that is good here, particularly in our hospitality sector. So, while the economic numbers might be working against us just now, 2023 gives us a chance to pitch for better.