It is a sad reality that just as we emerge from the damage caused to our economy from the Covid-19 pandemic, we are now plunged into yet another, potentially even more challenging, economic environment as a result of the ongoing situation in Ukraine.
It would be a mistake to assume that Putin’s invasion will only have a cursory impact on Northern Ireland; we are already seeing a sharp increase in energy and commodity costs, as well as inflation and disruption to our supply chains in some critical areas.
Unfortunately, the United Kingdom is once again facing an economic shock, the impacts of which are likely to be severe and widespread.
Recent analysis on the cost of the invasion to the UK Economy, carried out by the Centre for Economics and Business Research (CEBR), paints a very gloomy picture for the next 24 months – albeit one which is based on a number of economic assumptions, all of which will be tested by time and events.
The impact of the invasion – when combined with other economic factors, including the increase in National Insurance contributions, will be felt in every household. Living standards could drop by an average of £2,553 per household, while inflation is likely to climb towards 8.7% later this year.
Consumers and businesses across Northern Ireland are already feeling the pain. Energy prices are increasing in large increments with alarming regularity, making the cost of heating our homes and driving our vehicles more and more difficult to meet.
It would be foolish to think that these issues can be resolved at a local level, although we clearly have a role to play. We need action not only at a national level, but from countries across Europe who are all facing the same challenges and have some big decisions to take.
I would call on the Chancellor to act now to help families and businesses across the UK. Collectively we need to take tough decisions to ensure government spending is targeted, strategic and appropriate in order to protect people from the cost of living crisis that is taking a grip across the nation.
My Department’s own research highlights that households here already spend a greater share (16%) of their non-discretionary expenditure on energy compared to 10% for the UK as a whole. That means Northern Ireland is more vulnerable, compared to other regions of the UK, to increased energy prices and energy expenditure. This amounts to a gathering energy crisis which places in sharp focus – once again – the urgent necessity of moving away from our reliance on fossil fuels.
This is why we must drive forward, right now, with our energy strategy, which is designed to ensure Northern Ireland’s energy is secure, affordable and clean for future generations. This strategy, and its associated action plan, sets out how we will work towards phasing out imported fossil fuels, bringing to an end price volatility and ensuring that more of the money we spend on energy stays in our economy.
Importantly, we also need to take action to ensure our homes and buildings are as energy efficient as possible so that we can reduce the amount we spend heating them.
We learned from the pandemic that Northern Ireland businesses are resilient and adaptable. They focus on their strengths and rely on the skills of their teams in order to survive and then to flourish.
We recognised these qualities when we developed the 10X Economy: An Economic Vision for a Decade of Innovation. This is an ambitious vision to transform our economy as it emerges from one of the biggest shocks of a generation. It is built on focussing on our strengths in innovation in key areas such as energy, cyber-tech, advanced manufacturing, health sciences as well as on the skills of our workforce. We galvanised this vision with accompanying skills, as well as a trade and investment strategies.
Now more than ever, Northern Ireland needs to stick to the principles of 10X. By supporting our economy to expand, we are also equipping it to better protect itself against the challenges ahead.
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