2022 Sector Outlook

Local businesses hoping unique post-Brexit arrangements will continue to fuel export boom

View our 2023 sector outlook for Northern Ireland

Export-led growth

After a year that has seen many companies achieve record export figures, Adrian Doran, Head of Corporate Banking – Northern Ireland, believes businesses can continue to thrive in 2022 despite ongoing labour shortages.

The peculiarities of post-Brexit trading arrangements under the Northern Ireland Protocol have meant 2021 was a really good year for many businesses in our region.

Arguably, the Protocol deal has created a business environment that provides NI businesses with the ‘best of both worlds’ – with one foot in the UK and the other in the EU, giving them easy access to both of these key markets.

While the increased friction and additional red tape affecting goods coming from Great Britain across the Irish Sea has made all the headlines, trade with the EU, and the Republic of Ireland in particular, has increased dramatically.

As things stand, the Protocol means it’s much easier for our companies to export to the EU than it is for a company in Great Britain. Information from the Republic’s Central Statistics Office highlights exports from Northern Ireland into the Republic have surged more than 60% year on year.

This has really helped to drive the local economy forward and many of our clients in manufacturing, services, technology and agri-food have seen a big bounce-back in 2021, with some even breaking export records. Such has been their success that figures released by the UK Office for National Statistics for the third quarter of 2021 showed Northern Ireland made the fastest recovery of any of the four UK nations.

Our unique trading position is also clearly attracting companies to locate here, and we’ve seen lots of welcome foreign direct investment in NI, along with some high-profile projects including December’s Belfast Region City Deal, which will see up to £1 billion of public and private sector funding over the next 10-15 years and is expected to generate up to 20,000 jobs.

No easy fix to labour shortage

Provided the Protocol deal is resolved in a way that’s sensible for business, the biggest challenge that we hear about from our clients is the chronic shortage of people – from HGV drivers to waiters and software engineers.

When you're seeing exports grow at significant levels you clearly need to be able to put ‘petrol in the engine’ to keep it running, but there often just aren’t the staff available – particularly with the economy south of the border also growing strongly and facing labour shortages too.

I've been chair of the CBI in NI for the past two years and we’ve spent a lot of time talking about how we might fix the skills problem, but the honest answer is you just can't create suitably skilled people overnight. There’s undoubtedly a lot of effort going into working with the education sector on retraining and delivering the skills that employers need, as well as firms making greater use of automation, but these are all relatively long-term solutions and there is no magic-wand answer to fix the short-term issues many businesses are facing.

In common with the rest of the UK, our businesses are also having to deal with supply chain disruption, higher energy costs and some pretty hefty increases in the cost of materials for some sectors, such as construction.

What I’m hearing from clients is that most expect to be able to pass on these costs, including higher wages, because business conditions are relatively buoyant. Many companies have hedged their energy costs until the first quarter of 2022, which has bought them some time before they see the full impact. However, there’s no doubt inflation will remain one of the big challenges of 2022.

Digital strengths

At Barclays, we’re here to do all we can to help local businesses prosper and I’m delighted to say we’re leading the way in NI in providing digital banking service to support businesses as they increasingly migrate to e-commerce in all its forms.

I think our digital banking and payments platforms are way ahead of a lot of our competitors and this is something that will be increasingly important in 2022 and beyond as the decline in the use of cash continues and companies increasingly move to direct-to-customer business models.

None of us can know for sure about the future, but I think there’s a distinct feel-good factor for many NI businesses right now. I’ve been working in this market for many years, and whilst there are undoubtedly challenges in sectors such as hospitality, for many other sectors this is the most positive environment we've had since before the 2008 financial crisis. If we can get past Omicron without further lockdowns, and get a Protocol deal that works for business, I think the prospects for 2022 look really bright.

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