When Deanes Restaurant in Belfast won a Michelin Star in 1997, it signaled a new era for a city better known for bombs than bon viveurs. With rising unemployment and bankruptcies, lunch now costs as little as 6.50 pounds ($10.20) as it tries to lure customers.
“The boys in the Bentleys are gone,” owner Michael Deane said in an interview last week. “Things are tight in general with the way the economy is. Most people are looking for a cheaper spend. They have 20 quid instead of 50.”
As Northern Ireland hosts the Group of Eight Summit starting today, the province has yet to benefit from record-low government borrowing costs and the 375 billion pounds of stimulus pumped into the economy by the Bank of England’s quantitative easing. Unemployment, while still officially about 8 percent, is growing at the fastest pace in the U.K., according the Ministry for Enterprise in Belfast.
The U.K. 10-year gilt yield set a record 1.41 percent in July as the European debt crisis worsened and investors turned to places perceived as safe. While it has since risen to 2.07 percent, or 56 basis points more than German bunds, it is still 1.8 percentage points less than the average of the past decade, data compiled by Bloomberg show.
Speaking after meeting Northern Irish leaders in London on June 14, Prime Minister David Cameron said the G-8 summit is “an excellent advertisement” for the province. “It’s a great opportunity to show the world a Northern Ireland that is open for business, for investment and for tourism,” he said.
The summit is taking place in Enniskillen, 75 miles (120 kilometers) from Belfast, almost 26 years after an Irish Republican Army bomb ripped through its center on Remembrance Day, killing 11 people. The buildup to the meeting of leaders was marred by controversy over efforts to hide empty shops and derelict buildings from dignitaries.
At the end of last week Cameron gave the Northern Ireland Assembly a temporary increase in borrowing powers as part of a plan to help spur economic activity in the region.
Companies in Northern Ireland, which remained part of the U.K. after the rest of Ireland won independence in 1922, are finding it hard to get credit. Bankruptcies are 50 percent higher than in 2008, according to the Department of Enterprise.
“Lending isn’t as big a problem as it was, but it is still a problem,” Glyn Roberts, head of the Northern Ireland Independent Retail Traders Association, said last week. “There are issues around credit cards used by businesses as cash flow also, as well as that people aren’t spending.”
A year after Chancellor of the Exchequer George Osborne introduced the Funding for Lending Scheme designed to boost the flow of credit to households and businesses, loans from the 40 participating banks fell 300 million pounds in the first quarter after declining 2.4 billion pounds in the final three months of 2012, the Bank of England said two weeks ago.
Then there’s the question of outstanding debt. Foreclosure demands in Northern Ireland by mortgage lenders are rising at the fastest rate in the U.K.
“There are still strains there on the system and overhang of property debt being attached to businesses,” said Angela McGowan, an economist with Danske Bank A/S in Belfast.
Under Cameron’s plan to help the economy, Northern Ireland will get “targeted support” to create jobs and also bring down the “peace walls,” 10-foot high structures that separate Catholic and Protestant areas of Belfast.
Dissident republicans are also attempting to inflame conflict in the province, where the 1998 Good Friday peace accord ended three decades of violence known locally as the “Troubles.” They have killed two British soldiers and two policemen since restarting their campaign in 2009.
The province endured three months of street protests and riots since December, when pro-U.K. loyalists demonstrated against a decision to stop the British flag flying outside Belfast city hall. Deane, the restaurateur, said the protests took business to “the brink.”
While the province’s economy expanded by almost 70 percent in the decade after a 1997 cease-fire by the IRA, the financial crisis has seen a rollback of the gains.
Northern Ireland has the highest level of empty shops in the U.K. The economy, forecast to barely grow this year, is hurting after employers such as Seagate Technology Plc and Caterpillar Inc. cut workforces in the region. The average annual salary in the province is 22,169 pounds, 12 percent below the U.K. average, figures from the Department of Enterprise, Trade and Investment in Belfast show.
Deanes Restaurant, which lost its Michelin star in 2010 after closing for a flood, employs about 150 people at six eateries and still has a good relationship with its bank, the owner said. Others aren’t so lucky and that’s hurting the flow of money in the economy, he said.
“You used to go into the bank and say ‘I need this, I need that,’ now it’s not as easy,” said Deane. “Sometimes it seems the banks don’t want to back anything.”