Northern Ireland Private Sector Returns to Growth in July After Three Months of Decline, Ulster Bank Reports
Northern Ireland's private sector returned to growth in July 2026 after three consecutive months of contraction, according to the Ulster Bank Regional Growth Tracker, with construction, manufacturing, and services all recording expansion and the chief economist describing the data as a 'much more encouraging picture' for the regional economy heading into the second half of the year.
Background
The Ulster Bank Regional Growth Tracker is one of the most closely watched indicators of economic health in Northern Ireland, surveying approximately 200 firms across the manufacturing, services, construction, and retail sectors on a monthly basis. The tracker provides a timely snapshot of business conditions that complements the official economic statistics published by the Northern Ireland Statistics and Research Agency, and it is widely used by businesses, policymakers, and analysts to assess the direction of the regional economy.
The three months of contraction recorded between May and July 2026 reflected a combination of factors that have weighed on the Northern Ireland economy throughout the year. Persistent inflationary pressures have squeezed business margins and dampened consumer spending, while the uncertainty surrounding the Windsor Framework and its implications for Northern Ireland's trading relationships has continued to affect business confidence, particularly in the manufacturing and agri-food sectors. The difficulty of recruiting appropriately skilled workers has also acted as a constraint on growth, with many firms reporting that they would expand more rapidly if they could find the staff they need.
The return to growth in July is therefore a welcome development, though economists have cautioned against reading too much into a single month's data. The tracker's reading for July represents a rebound from the weak performance of the preceding three months rather than a sustained acceleration, and the underlying challenges facing the Northern Ireland economy have not been resolved by a single positive month.
Key Developments
The July tracker showed expansion across three of the four sectors surveyed. Construction recorded the strongest growth, driven by a combination of public sector infrastructure projects and private residential development. Manufacturing also returned to expansion, with output growth led by the food processing and engineering sectors. Services, which account for the largest share of the Northern Ireland economy, also grew, supported by increased activity in professional services, hospitality, and tourism. Retail was the exception, continuing to record a decline in activity, though the rate of contraction was notably less severe than in the preceding two months.
Sebastian Burnside, chief economist at Ulster Bank, described the July data as a "much more encouraging picture" for the region, noting that the return to growth across most sectors suggested that the economy had absorbed the headwinds of the first half of the year and was beginning to recover momentum. He highlighted increased domestic political stability — a reference to the relative calm at Stormont following the resolution of the previous Executive crisis — as a potential driver of improved business confidence in the second half of 2026.
On employment, the tracker showed positive signs, with some companies looking to increase staffing levels. However, firms continued to report difficulties in sourcing appropriate workers, a constraint that has been a persistent feature of the Northern Ireland labour market and that reflects both the skills gap in certain sectors and the competition for talent from employers in Great Britain and the Republic of Ireland. Inflationary pressures, while easing compared to the peaks of 2022 and 2023, remained a concern for businesses managing input costs and wage expectations.
Why It Matters
The return to growth in the Northern Ireland private sector is significant for several reasons. It suggests that the regional economy has greater resilience than the three months of contraction might have implied, and it provides a more positive backdrop for the budget negotiations between the Stormont Executive and the UK government that will take place in the autumn. A growing private sector generates tax revenues, employment, and economic activity that reduce the pressure on public services and create the conditions for sustainable investment in infrastructure and skills. The data also provides some reassurance to businesses that have been considering investment decisions in Northern Ireland, suggesting that the economic environment is improving rather than deteriorating.
Local Impact
The sectoral breakdown of the July growth data has different implications for different parts of Northern Ireland. The strength of construction activity is particularly relevant for Belfast, where several major development projects are under way, and for the wider housing market, where supply constraints have been a persistent problem. Manufacturing growth is significant for the Mid and East Antrim, Newry, Mourne and Down, and Armagh City, Banbridge and Craigavon council areas, where the manufacturing sector is a major employer. The continued weakness of retail is a concern for town centres across Northern Ireland, where vacancy rates have been rising and footfall declining, and it underlines the need for a coherent strategy to support the transformation of high streets in the face of changing consumer behaviour.
What's Next
The August tracker will be published in September and will provide the next data point on the trajectory of the Northern Ireland economy. The autumn spending review, which will determine the block grant available to the Stormont Executive for the 2027-28 financial year, will be a critical moment for the regional economy, and the July growth data will be used by the Executive to make the case for a generous settlement. The Department for the Economy is also expected to publish its economic strategy for Northern Ireland in the autumn, setting out a long-term vision for growth that addresses the structural challenges of skills, productivity, and connectivity that have constrained the region's economic performance for decades.
