Currency wars, the risk of further economic downturns, and political challenges will dominate the global economic environment in 2013 according to the Year of the Snake outlook. The eurozone faces ongoing fiscal challenges as several major economies like France, Italy, and Spain continue to contract. Youth unemployment rates have reached crisis levels in many countries. Political leaders face difficulties enacting reforms needed to restore growth. Overall, the recovery remains fragile and further economic and political turbulence seem likely in the coming year.

1. Currency Wars, Triple‐Dips & Politics to
Dominate in the Year of the Snake
13 March 2013
Richard Ramsey
Chief Economist Northern Ireland

2. Depending on who you talk to things may not that bad…
Muhammed Saeed al-Sahaf
aka ‘Comical Ali’
Iraqi Information Minister 2003
Source:
The Economist
Slide 2

3. Global output growth continues…
Global Output - PMI
65
Source: Markit Economics
60
Expansion
55
50
45
Contraction
40
35
30
Total Manufacturing Services
25
Feb-07 Feb-08 Feb-09 Feb-10 Feb-11 Feb-12 Feb-13
Slide 3

4. US remains the best performer relative to China, UK & EZ
Composite PMIs
(Manufacturing & Services ** Excludes Construction**)
65
Eurozone US (ISM) China UK
60
Expansion
55
50
Contraction
45
40
Source: Markit Economics
35
Feb-08 Feb-09 Feb-10 Feb-11 Feb-12 Feb-13
Slide 4

5. The biggest threat to growth & financial markets
is / was….sovereign debt dominos….
?
Slide 5
March 14, 2013 – Page 5 © Ulster Bank

6. Investor sentiment in sovereign debt markets has improved
since Draghi’s ‘Whatever it takes’
% 8-Yr Govt Bond Yields
18
16
14
12
Source: Bloomberg
10
8
6
4
2
12
10
11
2
3
0
1
12
11
10
9
2
0
1
-1
-1
-1
-1
-0
-1
-1
-1
n-
n-
n-
p-
p-
p-
ar
ar
ar
ar
ec
ec
ec
ec
Ju
Ju
Ju
Se
Se
Se
M
M
M
M
D
D
D
D
Slide 6

7. Debt Mountain still has to be conquered and that
applies to the US too
Source:
The Economist
Slide 7

8. -
G
-9
-8
-7
-6
-5
-4
-3
-2
-1
er
m
an
y Fi
nl
an
E d
Lu ston
xe ia
m
bo
ur
g
M
al
ta
Source: IMF, Dept of Finance
Ita
ly
Au
st
r
Be ia
N lg
et iu
he m
rl a
n
Sl ds
ov
en
% of GDP
ia
Fr
an
ce
Sl
ov Cy
ak pr
us
R
ep
ub
Po lic
rt u
Euro Area Budget Balances 2012,
ga
l
Sp
ai
G n
re
ec
e
I re
la
nd
-
20
40
60
80
100
120
140
160
180
G
re
ec
e
I ta
ly Po
rtu
ga
Ire l
la
n
Be d
lg
iu
Source: IMF, Dept of Finance
m
Sp
ai
n
Fr
an
ce
C
yp
ru
G
er s
m
an
Au y
st
% of GDP
ri a
N M
et al
he ta
rl a
n
Sl ds
ov
en
Euro Area Debt Levels 2012,
Sl ia
ov Fin
ak la
Re nd
Lu pub
The fiscal challenges in the Eurozone remain…
xe li
m c
bo
ur
Es g
to
Slide 8
ni
a

9. But the concern in Europe and the UK has returned to
economic rather financial indicators…economic growth
GDP Forecasts February 2013
% Y/Y
6
2011 2012 2013 2014
4
2
0
-2
-4
-6
Source:Consensus Economics & *Ulster Bank
-8
y
e
ly
oI
EZ
ce
I*
K
n
l
S
ga
an
ec
ai
N
U
U
Ita
R
an
rtu
Sp
m
re
Fr
er
G
Po
G
Slide 9

10. Recovery well under way in some economies – focus on
levels of GDP not just growth rates
Recession & Recoveries
(% GDP Change Since Pre-Recession Peak as of Q4 2012*)
4%
US EZ UK RoI
+2.4%
2%
0%
-2% -3.0%
-4% -3.3%
-6%
-8%
-7.7% or -9.5%
using GNP
-10%
Source: Bloomberg, *RoI as of Q3 2012
-12%
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21
Time in Quarters, Pre-Recession GDP Peak = 0
Slide 10

11. Last year saw Portugal, Italy, Spain & Greece continue to
contract at a rapid rate
Recession & Recoveries
(% GDP Change Since Pre-Recession Peak as of Q4 2012)
4%
Portugal Ireland Italy Spain Germany France
2%
+1.4%
0%
-2% -1.1%
-4%
-6.6% -6.7%
-6%
-8%
-7.7%-7.7%
-10%
Source: Bloomberg & UB Calculations @ -20%
-12%
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
Time in Quarters, Pre-Recession GDP Peak = 0
Slide 11

12. The 2nd, 3rd & 4th largest economies within the eurozone
are contracting at a rapid rate in 2013
Composite PMIs
(Manufacturing & Services ** Excludes Construction**)
65
60
Expansion
55
50
Contraction
45
40
35
Source: Markit Economics PMIs
30
Feb-07 Feb-08 Feb-09 Feb-10 Feb-11 Feb-12 Feb-13
Slide 12

13. After Greece, France & Italy post steepest falls in
manufacturing output. Denmark posts strongest gain
PMIs: Manufacturing Output February 2013
Denmark
N.Zealand*
US
Switzerland
India
Mexico
Brazil
Turkey
Russia
NI
South Africa
Global NI, RoI & UK
Canada
Ireland
China
Germany
Taiwan
Netherlands
Indonesia
Czech
S.Korea
UK
Vietnam
Poland
Austria
Singapore
EU
Japan
EZ
Spain
Australia
Israel** Source: Markit Economics Output Indices, *
Italy January, **December
France
Greece
35 40 45 50 55 60 65
Slide 13

14. It’s a similar story when it comes to services
PMIs: Services Output February 2013
US*
Russia
Germany
India
Ireland
Global
Emerging Markets
Brazil
China
UK
Japan
EU
Australia
EZ €
NI
Spain Source: Markit Economics Output Indices, *
France US Non-manufacturing which is wider than
Italy services
40 45 50 55 60
Slide 14

15. France hitting the headlines for the wrong reasons
‘The Psycho-Dwarf’’
March / April 2012 April / May 2012 November 2012

16. Les Misérable economy needs an economic revolution
Key Facts
• U‐Rate 10.6% Q4 2012
(7.5% Q1 2008)
• <25yrs U‐Rate 25.2% Q4 2012
(17.2% Q1 2008 & 5.9% Q1 1975)
• Employment Rate 51.1%
(Male 56% & Female 46.6%)
Starring Francois Hollande • Corporation tax rate 33.3%
(EU average 20.5%)
Slide 16

17. …with the French getting used to 19th century growth rates
Source: www.zerohedge.com
Slide 17

18. ‘The Grizz’ blasts French work ethic
“The French worker can be as
productive as anyone else when he
works, but he is not working”
“The French workers are paid high
wages but only work three
hours….they get one hour for breaks
& lunch, talk for three hours and
work for three”.
Maurice ‘The Grizz’ Taylor
“In five years, Michelin won’t be
Chairman of Titan International, a producing tyres in France. You can
US tyre giant asked by the French keep your so‐called workers”.
government to take over a Goodyear
plant in France. Comments made February 2013
Slide 18

19. Hollande must turn right and left!
Source: The Economist, 16 February 2013
Slide 19

20. The Self Preservation Society or Grand Coalition?
The Self Preservation Society or a Grand Coalition?
€ €
€ €
‘Rigor Montis’
the Technocrat
‘The Psycho-Dwarf’’
‘Dead man talking’ The Comedian

21. Italy has its worst 7‐yr run of economic growth since 1861!
Source: www.zerohedge.com
Slide 21

22. Italy not in great shape either, particularly the labour
market
Key Facts
• U‐Rate 11.7% Jan‐2013
(5.8% Apr‐07)
• <25yrs U‐Rate 38.7% Jan‐2013
(17.2% Q1 2008 & 5.9% Q1 1975) Big political risk for
Eurozone as a whole
• Employment Rate 51.1%
(Male 56% & Female 46.6%)
• Corporation tax rate 31.4%
(EU average 20.5%)
Slide 22

23. Italy has overtaken Portugal and its Youth unemployment is
where Greece was 2 years ago
€
Source: www.zerohedge.com
Slide 23

24. No quick‐fix – the ‘Juncker Conundrum’
“We all know what we need to do, we just don’t know how
to get re‐elected after doing it”
Jean‐Claude Juncker – Former President of the Euro Group (January 2005 – January
2013) & current Luxembourg Prime Minister. Quote November 2012.
Slide 24

25. Italy has overtaken Portugal and its Youth unemployment is
where Greece was 2 years ago
€
Source: www.zerohedge.com
Slide 25

26. The eurozone is also at a distinct advantage with its
currency & outbreak of currency wars
Yen per € Euro / Yen Exchange Rate € Sterling / Euro Exchange Rate
180 1.6
2007/08
€1.41
1.5
160
Yen weakening /
Euro strengthening
1.4 2008/09
140 €1.20 2011/12
2010/11 €1.16 (86.3p)
1.3 2009/10 €1.18
€1.13
120
1.2
Yen strengthening /
100 Euro weakening 1.1434
1.1
Source: Bloomberg
Source: Bloomberg
80 1.0
Mar-07 Nov-07 Jul-08 Mar-09 Nov-09 Jul-10 Mar-11 Nov-11 Jul-12 Mar-13 Mar-06 Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13
Slide 26

27. German & South Korean brands have gained market
share since 2007. But so too have brands built in the UK
Change (PP) in Market Share in EU New Car Sales*
2007-2012
Toyota
Opel (GM)
Fiat
Renault
Honda
Mazda
Suzuki
Citroen Land Rover, Mini &
Ford Seat's dominance in
Spanish market, & Nissan are built in the
Peugeot
Seat severe downturn in UK so +ve for UK
Alfa Romeo Spain explains economy
Chevrolet brands declining
Mercedes market share
Volvo
Land Rover
Mini
Skoda
BMW
Dacia
Kia
Audi
Source: ACEA, *flags denote nationality of
Hyundai
Nissan manufacturer
Volkswagen
-3 -2 -1 +0 +1 +2 +3
Percentage Point Change
Slide 27

28. French & Italian brands losing significant market share in
2012 as their domestic economies battle recession
Change (PP) in Market Share in EU New Car Sales*
2011-2012
Renault
Opel / Vauxhall
Ford
Fiat
Peugeot
Citroen
Alfa Romeo French, Spanish (Seat
Mitsubishi German owned) & Italian
Seat
Suzuki brands suffering as their
Mazda domestic economies Jaguar, Land Rover,
Volvo battle with recession Mini & Nissan are built
Smart in the UK so +ve for
Lancia/Chrysler UK economy
GM (US)
Lexus
Jaguar
Honda
Mini
Jeep
Dacia
Nissan
Chevrolet
Toyota
Land Rover
Mercedes
Skoda
BMW Source: ACEA, *flags denote nationality of
VW
Kia manufacturer
Hyundai
Audi
-1.5 -1.0 -0.5 +0.0 +0.5 +1.0
Percentage Point Change
Slide 28

29. UK Economy…from Triple A to Triple‐Dip?
Source: Financial Times 12th March 2013
Slide 29

30. UK composite PMI suggests Q1 2013 GDP growth will be
marginal at best
UK GDP versus UK Composite PMI
PMI Index GDP Q/Q
65 1.5
60 1
55 0.5
50 0
45 -0.5
40 -1
35 -1.5
30 -2
Source: ONS & Markit Economics, * refers to January & February
25 -2.5
2007 Q1 2008 Q1 2009 Q1 2010 Q1 2011 Q1 2012 Q1 2013 Q1*
GDP Q/Q PMI PMI No Change
Slide 30

31. UK experiencing a weaker (GDP) recovery than the 1930s
UK Recessions & Recoveries Compared
(% GDP change since pre-recession peak)
10% 1990/94
1973-77
5%
UK economy 1930/34
expanding
1979/84
0%
2008…
.
-5% 2008…
(as of Q4 2012)
UK economy
contracting 19 Quarters
-10%
Peak 2 4 6 8 10 12 14 16 18 20
Quarters After Pre-Recession GDP Peak
Slide 31

32. A lack of a consumer recovery explains the UK’s poor
performance…
UK GDP by Expenditure Category
(% Change Since Pre-Recession Peak Q1 2008)
8%
Household Final Consumption
6% Exports (Goods & Services) +4.7%
4% General Government Consumption Expenditure
2%
0%
+0.8%
-2%
-4%
-3.6%
-6%
-8%
-10%
-12%
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19
Time in Quarters, Pre-Recession GDP Peak = 0
Slide 32

33. …and a lack of disposable income explains the lack of
consumer spending…
UK Disposable Income & CPI
120
+17.3%
Gross National Disposable Income (GNDI) CPI
115
110
105
100
95
90 -7.3%
85
Source: ONS
80
2008 Q1 2009 Q1 2010 Q1 2011 Q1 2012 Q1 2013 Q1
Slide 33

34. With inflation set to go higher, UK consumer likely to remain
on strike…UK CPI (annual average) above 2% for 10 years!!
CPI inflation projection based on market interest rate expectations
& £375 billion asset purchases
3 years of an overshoot
Source: BoE QIR February 2013
Slide 34

35. Weak sterling good for exports but UK struggling from
weak demand in core export markets
Index 2009 = 100 UK Exports of Goods*
140 44% above 2009 low
Source: ONS,Excludes Oil & Erratics & 22% below
pre-downturn level
130
120
110
100 12% below
pre-downturn high
90
EU Non-EU Total
80
2006 Q4 2007 Q4 2008 Q4 2009 Q4 2010 Q4 2011 Q4 2012 Q4
Slide 35

36. Contrast UK performance with the RoI. Consumer
downturn not as bad but export recovery not as good…
RoI GNP by Expenditure Category
(% Change Since Pre-Recession GNP Peak Q1 2007)
+9.8%
10%
5%
0%
-5%
-10% -6.3%
-15%
Personal Consumption Expenditure
-20% Exports (Goods & Services) -18%
General Government Consumption Expenditure
-25%
0
2
4
6
8
10
12
14
16
18
20
22
Time in Quarters, Pre-Recession GDP Peak = 0
Slide 36

37. Ireland is a small & extremely open economy…
GDP Breakdown, % of Total
Ireland UK Germany US Port Greece Spain
Consumption 53 66 58 71 68 70 57
Govt Spending 17 23 20 20 21 20 21
Investment 12 15 17 12 19 16 24
Exports 101 29 49 13 33 21 23
Imports 82 33 43 17 41 27 26
GDP 100 100 100 100 100 100 100
Slide 37

38. UK loses ‘Triple‐A’ rating….So what?
10-Yr Government Bond Yields
Interest Reflects the cost (interest rate) of Government borrowing
Rate %
6
5
4
Moody's
downgrade
3
2
1
Source:Bloomberg
0
Mar-10 Sep-10 Mar-11 Sep-11 Mar-12 Sep-12 Mar-13
Slide 38

39. UK recovery more evident within the labour market
UK Workforce Jobs UK, NI & RoI Unemployment Rates
Millions Source: ONS, Labour Force Survey & CSO Live Register
32.2 15%
32.083 NI UK RoI
14.1%
32 13%
After 2.6% PTT 31.945
31.8 fall employment 11%
0.4% below peak
31.6 NI & UK
9% 7.8%
31.4
7%
31.2
5%
31
Source: ONS
30.8 3%
Sep-05 Sep-06 Sep-07 Sep-08 Sep-09 Sep-10 Sep-11 Sep-12 Jan-97 Jan-99 Jan-01 Jan-03 Jan-05 Jan-07 Jan-09 Jan-11 Jan-13
Slide 39

40. Weaker than expected growth means even more borrowing!
£bn UK Public Sector Net Borrowing (PSNB)
160
Source:OBR March 2012 Forecast ABS Dec-12
140 -5bn
120 +1bn
£541bn in 7 years or 19
100 -12bn times the annual output of
+13bn
the NI economy
80 +19bn
60 +21bn
40 31bn
20
0
2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18
Slide 40

41. Almost £170bn more than what UK Government first expected
£bn UK Public Sector Net Borrowing (PSNB)
160
Source:OBR June 2010 Forecast ABS Dec-12
140
+5bn
120
100 -9bn £169bn additional borrowing required
over 6 years or £198bn over 7 years
80
+39bn
60
+51bn
40
+53bn
+28bn
20
0
2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18
Slide 41

42. Public Sector Net Debt as a % of GDP not falling until 2016/17
Public Sector Net Borrowing / Public Sector Net Debt as % of GDP
PSNB PSNB Left Hand Scale PSND Right Hand Scale PSND
12 90
10
75
8
60
6
4 45
2
30
0
15
-2 Forecasts
Source: ONS, OBR Nov 11
-4 0
1963-64 1972-73 1981-82 1990-91 1999-00 2008-09 2017-18
Slide 42

43. Meanwhile 12‐yr public spending feast followed by 7‐year famine
UK Public Spending Growth in Real Terms
Y/Y (excluding Debt Interest & Social Security)
15% 17% cut in 7yrs over 60% of
Departmental cuts have been made
10%
We are here
5%
0%
-5%
Source: IFS February 2013
-10%
1951-52 1962-63 1973-74 1984-85 1995-96 2006-07 2017-18
Slide 43

44. And how is the Northern Ireland economy doing….
Slide 44

45. N.Ireland downturn by numbers 10 Facts
1. Unemployment (claimant count) up 41,500 (Jan 2013)
2. Workforce jobs have fallen by almost 55,000 in 4 yrs to June 2012
3. Personal insolvencies have doubled since 2007 & still rising
4. Corporate insolvencies have doubled since 2007 & still rising
5. House prices down 56% from peak (by Q4 2012)
6. House completions down 66% from 2006 peak & still falling
7. Mortgages for home movers at lowest level since 1974
8. Almost 1 in 4 retail outlets are vacant in Belfast
9. New car sales have fallen by one third relative to 2007
10. Consumer prices (UK CPI) up 19% since August 2007

46. Remember its levels of output not growth rates that are
important - private sector output still at 2003 levels
NI Private Sector Output Levels
Composite of construction, production and services sectors
PSO Index
**Excludes Agriculture**
120
115
110 15.2% below peak
& at 2003 levels
105
100
95
15.8%
90 fall
85
80
Source: Ulster Bank Private Sector Output Index (2009=100), using DFP output indices & ABI weights
75
2003 Q3 2005 Q1 2006 Q3 2008 Q1 2009 Q3 2011 Q1 2012 Q3
Slide 46

47. Services sector output has now been below its pre-
downturn peak for 24 quarters or 6 years
NI Private Sector Output Relative to Pre-Recession Peaks
As of Q3 2012 (Peak = 0)
10%
Total Private Sector Output Private Sector Services
Industrial Production Construction
0%
-11.8%
-10% -13.6%
-15.2%
-20%
-30%
-40%
-42.3%
-50%
0 2 4 6 8 10 12 14 16 18 20 22 24
Time in Quarters Since Pre-Recession Output Peak
Slide 47

48. ‘Winners’ during the downturn…
Change in NI Private Sector Output
Q2 2007 ‐ Q3 2012
Industrial Group % Change
Recession Winners ↑↑↑
Other Services 50.0%
Chemicals & Pharmaceutical Products 26.8%
Utilities (Electricity & Gas) 10.1%
Transport, Storage & Communications 7.3%
Food, Drink & Tobacco 5.8%
Wholesale & Retail Distribution, Accommodation & Food Service 1.2%
Agriculture (Gross annual output in real terms 2007‐11) 0.5%
Source: DFP Indices of Production, Services and Construction, DARD & Ulster Bank calculations
Slide 48

49. ….outnumbered by ‘losers’ & ‘big losers’
Change in NI Private Sector Output
Q2 2007 ‐ Q3 2012
Industrial Group % Change
Recession Losers ↓↓↓
Utilities (Water Supply & Waste Management) ‐1.4%
Engineering & Allied Industries ‐6.5%
All Production Industries ‐9.0%
All Manufacturing ‐11.4%
All Private Sector Services ‐11.4%
Total Private Sector Output (Construction + Production + Private Services) ‐15.2%
Recession Big Losers ↓↓↓
Basic Metals & Fabricated Metal Products ‐23.4%
Textiles & Textile Products ‐23.7%
Total Other Manufacturing ‐32.7%
Mining & Quarrying ‐33.3%
Construction / Wood & Paper Products ‐35.1%
property Construction /
Rubber, Plastics & non‐metal Products ‐41.1%
related property
Construction ‐42.2%
related
Business Services & Finance ‐48.2%
Source: DFP Indices of Production, Services and Construction, DARD & Ulster Bank calculations
Slide 49

50. Recent investments in 2011/12 – dominated by ‘the
worst performing sector’ business services & finance
Jobs Areas
501 IT Development, FX securities/settlement, Legal & Compliance
106 Marketing
317 HR, Finance, Legal
359 FS IT Development, Service Delivery, Project Management
90 FS IT Development, Project Management
242 R&D Product Development, Sales, Marketing
45 HR Consulting, Risk and Actuarial – Pensions management In the last 10 years
50 IT Development 78% of new FDI jobs
have been in
104 IT Development, Product Development, Engineering
business & financial
85 IT Development, Project Management
services and
297 Call Centre, Customer Service and Management software
109 IT Development, Product Development, Sales
130 R&D Product Development, Engineering
Source: Invest NI
102 Legal
Slide 50

51. And don’t forget NI 2012 ‘Our Time Our Place’
Average Hotel Room Occupancy
%
Annual
80
77 NI Belfast*
75
70
67
65
60
50
Source: NITB & DETI, *Belfast includes Castlereagh
40
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Slide 51

52. UK workforce jobs are just 0.5% below their June 2008
peak whereas NI has not recouped any of its job losses
NI & UK Workforce Jobs (as of June 2012)
3%
Source: DFP & NOMIS, June annual figures
2%
1%
0%
-1%
-2%
-3%
-4%
-5%
-6%
NI UK
-7%
June 2008 Peak to Trough Recovery from Trough Net Position Relative to
June 2008 Peak
Slide 52

53. Apart from manufacturing, NI’s job losses have been
more severe than in the UK
Employee Jobs Q3 2012 relative to recent peaks
0%
-5%
NI Peak Q2 2008 NI Peak Q2 2008
-10%
-15%
NI Peak Q2 2007
-20%
-25%
-30%
-35%
NI Peak Q4 2007
NI UK Source: DFP & NOMIS
-40%
Construction Manufacturing Services Total
Slide 53

54. No meaningful jobs recovery outside of manufacturing
Northern Ireland Employment
(Employee Jobs)
10%
Peak to Trough Recovery from Trough Q3 2012 Relative to Peak
0%
-10%
-20%
-30%
Source: DFP, QES
-40%
All Sectors Services Manufacturing Construction
Slide 54

55. Demand in NI remains weak in 2013 but pace of decline
has eased…
Private Sector Business Activity - PMIs
**PMI Surveys Exclude Agriculture & Public Sector**
65
NI UK RoI
60
Expansion
55
50
45
Contraction
40
35 Source: Markit & Ulster Bank NI PMI: 50 = threshold
between expansion / contraction
30
Feb-04 Aug-05 Feb-07 Aug-08 Feb-10 Aug-11 Feb-13
Slide 55

56. … lack of demand still a problem for jobs
NI PMI - Employment Index
3 month moving average
65
Manufacturing Services Construction
Job Gains
60
55
50
45
Job Losses
40
35
30
Source: Markit Economics & Ulster Bank NI PMI
25
Feb-04 Feb-05 Feb-06 Feb-07 Feb-08 Feb-09 Feb-10 Feb-11 Feb-12 Feb-13
Slide 56

57. NI enjoyed Southern Comfort through the Celtic Tiger years
Trade Tourism Investment Wealth
Slide 57

58. Eurozone’s fastest growing economy was on NI’s
doorstep. But what went up ……
• ISEQ +101% & +231%
(5yr/10yr prior to Feb‐2007 peak)
• House Completions +68% / +162%
(5yr/10yr prior to 2006 peak)
• Unemployment rate 4.6% (average 1998‐2007)
& 33% rise in employment (Q3 1998 – Q3 2007)
• Annual GDP growth 6.7%
(1998‐2007; averaged 5% 2002‐2007)
• House prices +269%
(10 years prior to Sep‐2007 peak)
• NI manufacturing exports to RoI +81%
(6 years to 2007/08)
Slide 58

59. Tourism Wealth
Trade
Investment
Slide 59

60. Peak to Trough Decline* / Latest Position
ISEQ ‐81% / ‐62%
House Completions ‐91% / ‐91%
Unemployment Rate* (*peak U% rate) 15.0% / 14.1%
Employment ‐15.1% / ‐14.7%
GDP / GNP ‐9.9% / ‐13.2%
‐7.7% / ‐8.6%
House Prices ‐50% / ‐50%
NI manufacturing exports to RoI ‐34% / ‐32%
NI manufacturing excl. Food & Drink ‐58% / ‐58%
Slide 60

61. Inflationary Pressures &
Declining Disposable Incomes
Challenge
Slide 61

62. The RoI has gone from having the highest annual rates
of inflation to the lowest
%
Consumer Price Inflation (HICP)
year-on-year
6
EZ UK RoI
5
4
3
2
1
0
-1
-2
-3
-4
Jan-01 Jan-03 Jan-05 Jan-07 Jan-09 Jan-11 Jan-13
Slide 62

63. Ireland has become the poster child of low inflation with the
UK experiencing the highest rises outside of Eastern Europe
EU-27 Cumulative % Rise in Consumer Prices (HICP)
August 2007 to December 2012 / January 2013*
Ireland
Germany Source: ONS, CSO, *January 2013 only for EZ & UK, all others December
France
Portugal
EZ €
Sweden
Netherlands
Malta
Denmark
Austria
Czech Republic
Belgium
Spain
EU 27
Luxembourg
Cyprus
Slovenia
Italy
Slovakia
Finland
Greece
UK
Poland
Bulgaria
Latvia
Estonia
Lithuania
Hungary
Romania
0% 5% 10% 15% 20% 25% 30% 35% 40%
Slide 63

64. Filling up an average family car with diesel now costs
over £88. One of the side‐effects of a weak currency
£ UK Fuel Prices - Tank* of Petrol / Diesel
(*60 Litres)
100
**Note Northern Ireland Prices are traditionally the highest of all UK regions**
£88.8 £88
90
£84
80
70
64%
60 rise
50 £51.3
'Credit Crunch'
begins
40
Source: ONS Petrol Tank Diesel Tank
30
Mar-05 Mar-06 Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13
Slide 64

65. Drinking, smoking & eating have become expensive pastimes
particularly after duty rises – past, present & future
UK v RoI Cumulative % Change in Consumer Prices
since 'Credit Crunch' began (Aug 2007 to January 2013)
60%
Source: ONS & Eurostat UK RoI
50%
40%
30%
18.8%
20%
10%
0%
Food & Non- Food Electricity Transport Transport All CPI
Alcoholic Gas & Other Fuels & Services
Beverages Fuels Lubricants
Slide 65

66. After Hungary, the UK has posted the largest rise in food & drink
prices (& the RoI the least) within the EU‐27 since Aug‐07
EU 27 Cumulative % Rise in Food & Drink Prices
August 2007 to December 2012 (HICP)
Ireland
Portugal Source: ONS, CSO & Eurostat
Spain
France
Greece
EZ €
Italy
Netherlands
Germany
Sweden
Luxembourg
EU 27
Belgium
Austria
Slovakia
Cyprus
Denmark
Slovenia
Czech Republic
Finland
Bulgaria
Poland
Romania
Estonia
Lithuania
Latvia
Malta
UK
Hungary
0% 5% 10% 15% 20% 25% 30% 35% 40%
Slide 66

67. UK inflation still rising at a faster rate than earnings
and prolonging the income squeeze
% UK Average Weekly Earnings & CPI Inflation
6
Ave Weekly Earnings 3m Y/Y % (Excl. Bonuses) CPI Y/Y
5
4
Income
3 squeeze 2.7%
2
1.4%
1
Does not include taxes
Source: ONS or changes to benefits
0
Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13
Slide 67

68. Discretionary spending hit with consumer confidence
also very weak…
21,200 fewer NI new car sales relative to 2007 peak
12 Month Rolling Sum
80,000
Sales now
31% below
68,708 peak
70,000
60,000 57,170
50,000
47,580 Temporary reduction 47,532
in VAT rate to 15% &
'Cash for Clunkers'
40,000
Source: SMMT
30,000
Feb-07 Feb-08 Feb-09 Feb-10 Feb-11 Feb-12 Feb-13
Slide 68

69. ….. following rise in dole queue & job insecurity
NI Unemployment Claimant Count Levels
140,000
120,000 Dec 2012
65,200 highest levels
since April 1997
100,000
80,000
60,000
Good Friday
40,000 Agreement signed
April 1998
57,900 Record low
20,000
Aug 07
Source: DFP 23,500
0
Dec-85 Dec-88 Dec-91 Dec-94 Dec-97 Dec-00 Dec-03 Dec-06 Dec-09 Dec-12
Slide 69

70. NI has posted steepest decline in UK but new car
sales in RoI remain 60% below peak…
New Car Registrations
Indexed 2007 =100
120
NI Scotland Wales UK RoI
100
-8.5%
-14%
-18%
80
-31%
60
40
-60%
20
Source: SMMT & SIMI
0
Dec-07 Sep-08 Jun-09 Mar-10 Dec-10 Sep-11 Jun-12 Mar-13
Slide 70

71. Kia car sales more than treble, Hyundai up 58% &
Skoda up 13%. All post new record sales in 2012
Growth in NI New Car Registrations by Manufacturer
2007-2012
Source: SMMT
Skoda
Nissan
Chevrolet
Hyundai
Kia
0% 50% 100% 150% 200% 250%
Slide 71

72. Brands gaining NI market share 2007‐2012
Cool? Seriously Cool? Sub‐Zero?
Value for Money?
Slide 72

73. Brands experiencing falling NI market share 2007‐2012
Uncool? Seriously Uncool?
Slide 73

74. N. Ireland premium brand new car sales have taken a hit
2007 (house price peak)
45 29 18 4 2 14 238 2
7 16 12 2 0 9 111 0
2012
Slide 74

75. Some retailers that have gone or are going
Slide 75

76. UK high street hit by changing consumer trends
UK Internet Sales as a % of Total Retail Sales*
% Not Seasonally Adjusted
12
10.4%
10
8
6
4
2
Source: ONS, * Excluding Automotive Fuel
0
2006 Q4 2007 Q4 2008 Q4 2009 Q4 2010 Q4 2011 Q4 2012 Q4
Slide 76

77. The Changing Face of the UK High Street 2012
Winners Losers
Payday Loans +20.0% Computer Games ‐45.0%
Pawnbrokers +13.2% Health Food ‐24.7%
Poundshops +13.0% Card Shops ‐23.4%
Supermarkets +3.6% Recruitment ‐15.1%
Coffee Shops +3.4% General Clothes ‐8.7%
Betting Shops +3.3% Women’s Clothes ‐7.2%
Charity Shops +2.7% Banks / Financial ‐2.9%
Net change in units in 2012. Source: Local Data Company
Slide 77

78. Input cost inflation eases in February (but up over last 3
months) with output prices and charges still falling
NI Private Sector Profit Squeeze
3 Month Moving Average
80
Output Prices Input Prices No Change
Profits
70 squeeze
Inflation
60
50
Deflation
40
Price of goods &
Source: Markit Economics & Ulster Bank NI PMI services falling
30
Feb-04 Aug-05 Feb-07 Aug-08 Feb-10 Aug-11 Feb-13
Slide 78

79. Unemployment a major problem within the <25s
NI Youth Claimant Count Levels
<25 years of age
25,000 GFA
April 1998 19,551
14,145 Highest level 17,876
since October
20,000 1996
15,000
Nov 07 low
7,050
10,000
5,000
Source: DFP
0
Nov-96 Nov-98 Nov-00 Nov-02 Nov-04 Nov-06 Nov-08 Nov-10 Nov-12
Slide 79

80. Public sector employment boom has been & gone. A
sustained period of job losses is anticipated going forward
NI Public Sector Employee Jobs Levels
230,000 Pre-recession peak
Source: DFP, * UB estimates Q4 2005
221,050
220,000
213,480
210,000 Good Friday Agreement
Signed April 1998 209,480
195,120 Q2 98 +26,000 jobs
(13%) in 7yrs Public sector employment
post GFA boosted by @5k in Q4 2008 as
part-nationalised financial
200,000 institutions reclassified as
public sector. Public sector
jobs (excl. financial institutions)
now estimated at @209.5k or
Q4 2002 levels.
190,000
Public Unadjusted Public Adjusted* (excl. financial institutions)
180,000
Q3 1994 Q3 1997 Q3 2000 Q3 2003 Q3 2006 Q3 2009 Q3 2012
Slide 80

81. Decade ahead will HURT
Downside risks to NI growth (EZ crisis linked to EZ politics)
Unemployment to stay higher for longer…. a lost decade for the under 25’s?
Households face devaluation in S.O.L, debt de-leverage
Factors present in ‘NICE’ era have gone into reverse - Next decade ahead will HURT
– Higher Unemployment Rising Taxes / Tariffs
Fiscal austerity in NI – it hasn’t really started yet!
Key labour market trends: part-time v full-time, working longer, multi-job careers v
job for life, demand for jobs with no skills falling
Slide 81

82. Economic Growth will be an uphill challenge…
Source:
The Economist
Slide 82

83. …with a ‘spreadsheet recovery’
Computer says Yes. But consumer says No!
Source:
The Economist
Slide 83

84. In UK & NI we too face the ‘Juncker Conundrum’
“We all know what we need to do, we just don’t know how
to get re‐elected after doing it”
Jean‐Claude Juncker – Former President of the Euro Group (January 2005 – January
2013) & current Luxembourg Prime Minister. Quote November 2012.
Slide 84

85. Any Questions
?
Slide 85

86. But NI is still better when I left school!
Laganside 1994 Source: Invest NI
Slide 86

87. Laganside today
Titanic Quarter
Source: Invest NI
Slide 87

88. Website
www.ulsterbankcapitalmarkets.com
Contact me (to be added to distribution lists)
richard.ramsey@ulsterbankcm.com
Tel .no. 02890 276354
Slide 88

89. Disclaimer
This document is issued for information purposes only for clients of Ulster Bank Group who are eligible counterparties or professional customers, and does
not constitute an offer or invitation to purchase or sell any instrument or to provide any service in any jurisdiction where the required authorisation is not held.
Ulster Bank and/or its associates and/or its employees may have a position or engage in transactions in any of the instruments mentioned.
The information including any opinions expressed and the pricing given, is indicative, and constitute our judgement at time of publication and are subject to
change without notice. The information contained herein should not be construed as advice, and is not intended to be construed as such. This publication
provides only a brief review of the complex issues discussed and readers should not rely on information contained here without seeking specific advice on
matters that concern them. Ulster Bank make no representations or warranties with respect to the information and disclaim all liability for use the recipient or
their advisors make of the information. Over-the-counter (OTC) derivates can involve a number of significant and complex risks which are dependent on the
terms of the particular transaction and your circumstances. In the event the market has moved against the transaction you have undertaken, you may incur
substantial costs if you wish to close out your position.
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Slide 89