Cross-border shopping patterns are set to switch from a south-north trend to a north-south one as the retail industry becomes the latest area to be squeezed by the contracting private sector economy in the North.

Ulster Bank’s latest Northern Ireland PMI (purchasing managers’ index), published yesterday, illustrates a tough start to 2015 for the North’s economy, with output, new orders and employment all falling.

Furthermore, the latest reduction in business activity, for January, the strongest seen since the end of 2012.

“Northern Ireland’s private sector has not had the best of starts for 2015. Local firms reported their first simultaneous decline in output, new orders and employment since May 2013.

“However, economic conditions are, perhaps, not as bad as this headline suggests, at least not for all sectors,” according to the Bank’s chief economist for Northern Ireland, Richard Ramsey, who also noted January’s welcome easing in inflation.

The services sector — the largest in the North — grew for the 19th straight month, but construction saw its first fall in output in 20 months to join retail and manufacturing as shrinking sectors.

According to Mr Ramsey, it is too early to know if the dip in construction is just a blip, but suggested the North’s retail sector is on a descending trajectory.

“Sterling is significantly stronger today than it was in the second half of 2012 and is currently at a seven-year high against the single currency.

“As a result, cross-border retail trade will be moving in the north-south direction, as opposed to south-north, which has been the dominant trade pattern for the last five or so years,” Mr Ramsey said.

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Irish and European stocks edged lower yesterday as Greek Prime Minister Alexis Tsipras reaffirmed his rejection of the country’s international bailout programme.

By the close in Dublin, the ISEQ Overall Index slipped 0.56pc or 31.55 points to end the trading day at 5,581.83.

The laggards on the Dublin market included Aer Lingus, which dropped 4.4pc to €2.11 amid a Bloomberg report that the Government was preparing to reject IAG’s indicative offer to buy a 25pc stake in the airline.

Its rival Ryanair, which holds a near 30pc stake in Aer Lingus, closed down 2.8pc to €9.57.

On the other side of the board, the leaders included Providence Resources, which rose 1.3pc to 78 cents after it reached agreement on commercial terms on the farm-out of its Barryroe asset.

Dalata Hotel Group fell 1.4pc to €3.

Elsewhere, a drop in banks led European stocks lower, with concern growing over the political situation in Greece.

The Stoxx Europe 600 Index fell 0.7pc at the close of trading in London after dropping as much as 1.4pc. With a 1.6pc decline, lenders contributed the most to the gauge’s retreat.

Greece’s ASE Index lost 4.8pc as National Bank of Greece and Piraeus Bank slid more than 9.8pc. Spanish and Italian stock measures fell the most in the region after the Greek gauge.

“The word to describe the situation would be fear,” said John Plassard, vice president at Mirabaud Securities in Geneva. Tsipras’s speech “raises concerns of tensions and fears for the worst for Greek banks and European banks,” he said.

Tsipras isn’t backing down from pledges that would breach conditions of the bailout aid. He vowed to increase the minimum wage, restore the income tax-free threshold and halt infrastructure privatisations. His Sunday speech also included demands for World War II reparations from Germany and the repayment of forced loans Greece made to the Nazi regime during the country’s occupation.

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A tax-relief scheme introduced by the Government to help lure senior foreign executives to Ireland and promote employment growth created just five jobs in 2012, according to a review by the Department of Finance.

The Special Assignee Relief Programme (SARP) was introduced in the 2012 Budget, and was seen as a key piece of legislation to underpin foreign direct investment that would result in jobs creation and business expansion.

But the review, in which the Revenue Commissioners was involved, said there is a “lack of measurable evidence” that the Special Assignee Relief Programme had resulted in an increase in foreign direct investment or the roll-out of new projects in the companies involved.

In 2012, just 12 employees in 11 companies availed of the relief under SARP. That resulted in just five jobs being created and six jobs retained, according to official figures.

Preliminary statistics for 2013 showed that 31 people claimed SARP relief that year, including seven who had claimed in 2012.

“The low number of jobs created as a result of SARP indicates that the scheme has not provided any significant increase in employment,” noted the review just published by the Department.

When it was first introduced, criteria for eligibility meant that an individual assigned or contracted to work in Ireland could disregard 30pc of their income between €75,000 and an upper limit of €500,000 for income tax purposes. They also had to have been employed by the same employer abroad for at least 12 months before coming to Ireland.

In the last Budget, the SARP programme was extended to 2017. The upper threshold on income was removed, while the 12-month stipulation was cut to six.

A previous requirement that a qualifying individual must have been resident here and not elsewhere during the year for which a claim is made was also removed.

The Department of Finance also undertook a review of the Government’s Foreign Earnings Deduction (FED) incentive, designed to support efforts by multinationals and indigenous companies in expanding their businesses to countries including South Africa, Russia, China, India and Brazil.

That review said that “it cannot be definitively stated that the existence of FED has led to an increase in exports to qualifying countries”.

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THE Government is planning to raise €500m at a bond auction this week.

The National Treasury Management Agency, which manages the country’s debt, said the 2.4pc, 2030 bond, will be auctioned on Thursday morning.

The move comes at a time when Ireland’s borrowing costs have plummeted.

The agency plans to raise between €12bn and €15bn in bond auctions this year.

Irish borrowing costs are expected to fall further as the European Central Bank (ECB) embarks on its massive quantitative easing programme.

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World financial leaders are likely to agree tomorrow to cut the number of actions they will take this year to boost growth to only 5-10 priorities per country to make it easier to check if they are being done, European officials said.

The world’s 20 biggest developing and developed economies (G20) are meeting in Istanbul.

They agreed last year to launch measures to raise their collective gross domestic product growth by an additional 2 percentage points over the next five years above the level projected in 2013 and create millions of jobs.

The pledge, called the Brisbane Action Plan, entails about 1,000 commitments. Since checking the implementation of such a number of steps would be very difficult, G20 finance ministers and central bank governors will agree to narrow them down to a handful this year.

“We support the (Turkish G20) Presidency’s intention that G20 members agree on a shortlist of measures with the highest growth impact on which further monitoring would focus … taking due consideration to their individual and collective impact on global demand,” a document prepared by European Union finance ministers for the G20 meeting said.

“We believe that in February, ministers should assess possible policy gaps and confirm the priorities for the growth strategies in 2015.”

International institutions — the International Monetary Fund (IMF) and the Organisation for Economic Cooperation and Development (OECD) — will negotiate the priorities with individual countries, European G20 officials said.

“There is an agreement to narrow down the focus of the almost 1,000 commitments that have been taken, to 5-10 for each country,” one G20 official said.

G20 leaders will meet in Antalya later this year.

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The Irish funds industry is well positioned to take advantage of global growth which is set to take total assets under management worldwide past some $100tn (€88tn) by 2020.

The next three years will present a range of opportunities for asset managers here and across the globe, but also create significant challenges for those not adequately prepared to take advantage of the changing landscape.

“Asset managers globally and in Ireland face a volatile environment over the next three years… opportunities exist because of some of the mega trends, for example, who will gain competitive advantage through disruptive technologies in the asset management industry?

“But there will also be challenges for those that do not have a strategy to succeed in high-growth areas,” said PwC Ireland asset management practice partner, Andy O’Callaghan.

Globally, asset management CEOs are confident of revenue growth but remain vigilant of costs, a new PwC report shows. Of the 1,300 managers surveyed across 46 countries, 88% were confident of achieving higher revenues this year, rising to 95% over three years. Almost half also anticipate cutting costs.

The US and China are considered the most important avenues for further growth.

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Household debt levels reached an eight-year low towards the end of last year, figures from the Central Bank showed yesterday.

According to the regulator’s quarterly financial accounts data for the third quarter of 2014 household debt fell €1.9bn to €160.6bn, or €34,846 per capita. Household net worth meanwhile, rose 5.5% in the quarter, largely driven by increases in housing assets. Net worth stood at €574bn at the end of last September.

“Household debt has fallen to 177% of household disposable incomes; the lowest level since the first quarter of 2006”, said Conall MacCoille, chief economist with Davy Stockbrokers, also noting that net worth is 28.3% up from its trough in the second quarter of 2012.

“This has reflected rising equity and house prices. Since the beginning of 2014, the Central Bank’s estimate of the value of housing assets has increased by €45bn, to €389bn, based on the 11.8% rise in the value of the CSO’s residential property price index over that period,” he added.

“Despite the pick-up in net worth, it is clear that households are still choosing to pay down debt at a rapid pace,” Mr MacCoille said.

“So far, the pick-up in Irish consumer spending has been driven by employment growth with savings rates remaining high to pay down debt. That said, new lending opportunities are held back by low levels of house building, with just 11,000 completions in 2014,” he said.

A swath of changes to corporation tax in the European Commission’s pipeline topped the Taoiseach’s agenda when he met the president of the European Commission, Jean Claude Juncker officially in Brussels.

New rules that would force every country to make public the tax arrangements with larger companies, including multi nationals is due in March and later in the year the Commission is expected to consider relaunching the stalled common consolidated corporate tax proposal.

They will also consider the the OECD proposals on having companies publish where and how much tax they pay under the plan to tackle base erosion and profit shifting – BEPS.

Ireland is under some pressure at the moment as the European Commission investigates its deal with Apple which came to light during a hearing in the US Congress that accused Ireland of being a tax haven.

Similar agreements in all EU countries with large companies are also under the spotlight, encouraged by the LuxLeaks that exposed hundreds of sweetheart deals with companies, many while Mr Juncker was finance and prime minister of the small duchy.

The Taoiseach said he told Mr Juncker of Ireland’s changes including abolishing the stateless concept and the double Irish and the cooperation on BEPS.

“We want it dealt with openly and transparently as we have nothing to hide in that regard”, he said.

He said that Mr Juncker reassured him that the corporate tax rate was an issue only for national governments.

“President Juncker was very clear as a former prime minister of a small country he understands the challenges a small country faces and he is in a position of influence as President of the Commission”, Mr Kenny said referring to the Commission’s investment plan, from which he said Ireland hopes to benefit.

Asked about his position on Greece looking for a new deal with the eurozone, he said the new Greek government must abide by their debt commitments as Ireland did, otherwise they wouldn’t get further help.

Asked whether he would support Greece looking to make changes to the details of its programme, the Taoiseach said that when Ireland reversed the minimum wage cut they compensated for it.

While Ireland had made great progress the economy was still very fragile. Obliquely referring to the coming general election, he added, “We still have challenges at home and that is why you need political stability for the next 3 to 5 years to finish the mandate that people gave to ensure that the public finances would be properly managed and that the country would get back to work”.

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Ireland will continue its impeccable record of hitting its EU deficit targets this year and next – provided tax receipts make up for the cost of Irish Water if it has to be counted in the national budget.

The other unknowable as far as the European Commission’s economic forecast was concerned is the contribution to Ireland’s growth of contract manufacturing, much of it composed of US companies becoming Irish.

For the first time since the start of the crisis all EU countries will grow this year but while the signs are good, nothing can be taken for granted as risks remain and uncertainty has increased, Economics Commissioner Pierre Moscovici warned, as prospects vary greatly between countries.

“Europe is at a critical juncture” he said but the weak euro, the fall in oil prices, the ECB’s quantitive easing are helping, as is the EU’s investment plan.

Ireland will have the fastest GDP growth in the EU next year at 3.5% – slower than the 4.8% expected for 2014 – and will have reduced its deficit at a faster annual rate than any other country over the two years, according to the winter forecast.

But the Commission say they would prefer if the government had taken their advice and off set extra health and other spending using the unexpected increase in revenue, to to cut the deficit by more than the 4% they expect it will be for 2014.

As a result, they say, the deficit this year will be 2.9% – just meeting the 3% target with little room to spare. The government expects it to be 2.5% and the ESRI 2.4%.

The Commission accepts that if Eurostat decides in April that Irish Water must be counted in the national accounts, it will add around 0.4 percentage points to the deficit, bringing it to 3.3%.

They are waiting to see if tax revenues continues its increase over the next few months, and then, a Commission source said, this could offset the cost of Irish Water.

They are perplexed by the contribution to the national accounts of US companies becoming Irish – so called tax inversions. They note that the ESRI did some work on this recently and acknowledged that they were unable to eliminate the effect from their figures, even using GNP rather than GDP as their basis for growth.

It turns up as ‘contract manufacturing’ where these newly Irish-owned companies contract the manufacture of goods abroad and export them to a third country without coming to Ireland so that no employment is created or tax paid.

“We are looking into this to try to see what is the real value to the economy. We need to see some of the royalties that come to Ireland, to try to judge what is the exact benefit, whether it is just statistical or whether it really improves the economic situation. There is still some doubt on how much we can count on it”, he said.

The ESRI quarterly report in December estimated that these tax inversions boosted GNP in 2010 by 2.9%.

The Commission said Ireland’s growth was due to buoyant tax returns and exports, helped by a weak euro which will continue to work in Ireland’s favour especially with a high percentage of exports to non euro areas such as the US and the UK.

Ireland will be one of just five countries that will continue to run a current account surplus together with Italy and Germany, but the Irish increase will be smaller than in 2014 at 4.6% of GDP and will drop to 3.9% in 2015.

A pic-up in Irish domestic consumption is expected helped by rising wages and the drop in energy prices.

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Ireland is set to remain the fastest-growing economy in the European Union, the European Commission said this morning, with growth of 3.5 per cent predicted for 2015.

The European Commission slightly revised downwards its projections for Irish GDP growth, predicting a 3.5 per cent growth in 2015 compared to the figure of 3.6 per cent estimated two months ago. Nonetheless, the forecast growth rate is the highest among all 28 EU economies. The French economy is expected to grow by 1 per cent, with German GDP expected to grow by 1.5 per cent this year.

In its analysis of the Irish economy published as part of its Winter Economic Outlook this morning, the Commission said that Growth slowed in the third quarter of the year in Ireland but is still set to exceed expectations. Noting the “volatility” of Ireland’s national accounts in pointed out that GDP growth fell to close to zero in the third quarter of last year having recorded record growth in the first half. It highlighted the impact of the aircraft purchase and intellectual property deals by multinationals on the volatile exchequer figures.

The bank has lifted a waiver that allowed it to accept junk-rated Greek government bonds.
Unemployment is expected to reach 9.6 per cent next year before falling to 8.8 per cent in 2016.

Ireland’s closely-watched debt to gdp ratio -which stood at 123.3 per cent of gdp in 2013 – is expected to fall to 110.3 per cent of gdp in 2015 and 108 per cent next year.

Referring to Ireland’s economic performance, EU economics commissioner Pierre Moscovici said the Commission forsees “ a really strong growth both in 2015 and 2016.” He highlighted the fact that Ireland had reduced its deficit to 4 per cent of gdp in 2014, down from 5.7 per cent in 2013 thanks to buoyant tax revenues and despite “very strong over spending.” A slowdown in the euro and British economy were the main risks to Ireland’s recovery, he added.

Overall, the European economy is expected to grow by 1.7 per cent this year, and 1.3 per cent in the euro area, slightly up from previous estimates.
EU economics commissioner Pierre Moscovici said the decline in oil price, depreciating euro and recently launched quantitative easing programme by the ECB would provide “a welcome shot in the arm for the EU economy. “

“Europe’s economic outlook is a little brighter today than when we presented our last forecast,” he said. However, the mildly improving economic picture would not be enough to significantly lift unemployment. “Economic growth is expected to be insufficient for a marked improved in employment, “ the French Commissioner said.

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