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2023 – a stronger, more confident year for businesses in Northern Ireland?

Strong exports, digital transformation and manufacturing growth, plus the prospect of more political stability, could all add up to a better year ahead. Adrian Doran, Head of Corporate Banking in Northern Ireland, talks about the outlook for 2023.

Adrian Doran

Head of Corporate Banking Northern Ireland

A look back at 2022

Soaring inflation, including pressure for higher wage bills, caused by the ongoing shortage of labour, meant that 2022 turned out to be a much tougher year than many businesses in Northern Ireland were expecting – yet most of our clients continued to trade strongly, particularly in sectors such as manufacturing, services and IT.

Supply chain shortages saw many businesses coming to us to put new working capital facilities in place to help book more stock further in advance. Tellingly, there wasn’t so much demand for term debt for new projects, expansion or merger and acquisition activity.

Whatever the challenges with the Northern Ireland Protocol, there is no doubt it did continue to boost exports and there was a striking increase in private equity investors taking stakes in local businesses, including some really sizeable investments in the technology sector. Among the beneficiaries were a couple of businesses out of our Belfast Eagle Lab, which was great to see.

Despite the many challenges facing local business in 2022, we actually enjoyed our best-ever year for new client acquisition. Feedback from our new clients is that they really value our tech-driven banking solutions and the real industry expertise of our people.

Facing inflation and skills challenges

Inflation will be a continuing challenge in 2023 but the government support on household energy bills will be of help.

Nevertheless, the retail and hospitality & leisure sectors in particular will likely continue to face tough trading conditions, especially in H1 2023, as the cost-of-living crisis fosters fragile consumer confidence and a post-Christmas tightening of belts when it comes to discretionary spend.

The scarcity of staff with appropriate skills will be an ongoing issue for Northern Ireland business, and I think one of the more interesting developments is that we are increasingly seeing businesses look to automation as a possible solution. It’s an option that can deliver a hat-trick of benefits by cutting both energy costs and carbon emissions, alongside addressing staffing gaps. Of course, there are some jobs gaps that can’t simply be automated away, and staffing will continue to pose challenges for many businesses.

An opportunity to invest again

While many businesses have been in fire-fighting mode for a while, 2023 may be an opportunity for them to invest again. We’ve had very high growth in our deposit base over the past few years and there are a sizeable number of businesses sitting on funds waiting for the right time to investigate.

I see 2023 as another strong year for exporters, while digital innovation, accelerated of course by Covid-19, promises opportunities across all sectors.

The entrepreneurial, high-growth technology sector has been trending upwards for a few years now and the signs are this will definitely continue, with all the evidence suggesting sustained interest in Northern Ireland from an increasing number of Silicon Valley and other international private equity players.

In terms of banking, Barclays is always looking to support businesses with their growth plans. I think we may see more organisations looking to raise money on the capital markets and we’re one of the few banks in the Northern Ireland market able to help clients in this way.

Political issues will have significant impact

However, there’s no escaping the fact that the outcome of talks around power-sharing at Stormont and the Northern Ireland Protocol will have probably the most significant bearing on business and consumer confidence going forward. The 25-year anniversary of the Good Friday Agreement in April 2023 may become an important milestone as we look toward a possible resolution to the Protocol negotiations.

If we can get a Protocol deal that allows businesses to continue to capture the opportunities that dual-market access allows and also find practical solutions to the administration and regulatory issues, that will be a massive win-win for our economy.

Summing up, I’d say there are a number of reasons to be optimistic for 2023. For a lot of businesses, the long-term trends in terms of exporting, digital transformation and manufacturing should make for very positive growth stories.

In addition, inflation looks to be peaking, supply chain issues are dissipating, and people are hopefully beginning to find ways around the staffing shortages. Put all that together with a solution to the political issues and you've got a lot of the foundation blocks for a stronger, more confident year.

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