Quarterly Business Insights Q1 2026
NI CHAMBER IN PARTNERSHIP WITH QUEEN'S UNIVERSITYGrowth signals in the Northern Ireland economy remain weak and uneven in Q1 2026, with little evidence of momentum building across the wider economy. While most indicators remain in positive territory — meaning slightly more firms report improvement than deterioration — the margins are narrow and have not strengthened, pointing to an economy that is holding up, but failing to build momentum.
Demand conditions remain soft overall. UK demand is diverging across sectors: services remain in modest positive territory, while manufacturing has slipped back into negative territory, pointing to renewed domestic weakness. Export demand remains subdued across both sectors, with balances close to zero and continuing to provide little in the way of growth impulse.
At the same time, cost pressures remain embedded. Price balances are still clearly positive, indicating ongoing cost pass-through, and there is little evidence that underlying inflationary pressures are easing in any sustained way, particularly given the continued strength of labour costs.
Recruitment activity has strengthened again this quarter, but this is not translating into stronger employment growth. Hiring remains active, but is increasingly focused on replacement rather than expansion, reflecting ongoing skills shortages and capacity constraints.
Investment remains positive but cautious, with firms continuing to prioritise training over capital expenditure. Cashflow remains one of the weakest indicators, with conditions flat to negative and no clear sign of a sustained recovery.
Against a generally weak UK backdrop, Northern Ireland continues to perform relatively well compared to other regions, but the pattern is more mixed than in previous quarters. Strength is now more concentrated in areas such as employment and training, while performance on demand, cashflow and investment sits closer to the middle of the regional distribution. This suggests that Northern Ireland’s relative position reflects resilience rather than strong growth, and is increasingly accompanied by persistent labour constraints, weak demand signals and ongoing exposure to cost pressures.
Taken together, the Q1 2026 findings point to an economy that is holding up, but with no clear forward momentum, as weak demand and persistent cost pressures continue to constrain growth.
% balance of firms reporting improved domestic (UK) orders (next 3 months)
Manufacturing
Northern Ireland’s manufacturing sector continues to perform relatively well compared to other UK regions, but conditions remain subdued and the picture is more mixed than in previous quarters. Strength is increasingly concentrated in areas such as employment, training and capacity, while performance on domestic demand and confidence has weakened.
UK order balances have turned negative again this quarter, pointing to renewed weakness in domestic demand. Export expectations remain only marginally positive, indicating limited support from external markets and no clear export-led growth impulse.
Turnover and profit expectations remain positive, but have eased and sit below historical norms, pointing to a fragile outlook. Price balances remain elevated, reflecting ongoing cost pressures, although some input costs — particularly raw materials — have eased slightly compared to recent peaks.
Recruitment activity remains high, but is increasingly focused on replacement rather than expansion, with recruitment difficulties reaching extremely elevated levels. These labour market constraints continue to act as a brake on growth.
Cashflow remains weak and volatile, with little evidence of sustained improvement. Investment intentions are positive but subdued, with capital spending only just above zero, while training investment remains stronger.
Overall, manufacturers continue to face a combination of weak demand and high costs, with labour costs remaining the dominant pressure. While activity is being maintained, there is little evidence of strengthening momentum.
Services
Northern Ireland’s services sector continues to perform relatively well compared to other UK regions and remains the main source of growth in the economy, although the pattern is becoming more uneven.
Strength remains evident in areas such as employment and domestic demand, but performance on exports, cashflow and investment is more mixed.
UK demand remains positive, but only modestly so, while export expectations are weak, indicating limited support from external markets. Turnover and profit expectations remain stronger than in manufacturing but have eased and do not point to any acceleration in activity.
Recruitment activity has strengthened again this quarter, reversing earlier softness. However, this has not translated into stronger employment growth, with the gap between high hiring activity and more moderate employment expectations suggesting that firms are primarily replacing staff rather than expanding headcount.
Price balances remain elevated, reflecting continued cost pass-through, while cashflow remains marginal and volatile. Investment intentions are positive but cautious, with no clear shift towards stronger capital spending.
Overall, services continue to support economic activity but are facing the same underlying constraints of weak demand growth, persistent cost pressures and labour shortages, limiting the scope for stronger momentum.
Recruitment
Hiring intentions have strengthened slightly in Q1 2026, with both manufacturing and services at +28%. This indicates that more firms are planning to increase employment than reduce it, although the balances remain moderate by historical standards and well below the peaks seen in 2021–22.
At the same time, a high proportion of firms are actively trying to recruit. In Q1 2026, 87% of manufacturing firms and 77% of services firms report recruitment activity, both up on the previous quarter, pointing to a renewed increase in hiring demand.
However, this is not translating into stronger employment growth. The gap between high recruitment activity and more moderate employment expectations suggests that firms are primarily replacing staff rather than expanding headcount.
Recruitment difficulties remain extremely elevated. In manufacturing, 100% of firms report difficulties in filling vacancies, a record high, while in services 77% report difficulties, remaining at historically elevated levels.
Overall, this points to a labour market where hiring demand remains strong, but supply constraints continue to limit expansion, acting as a persistent brake on growth.
% Facing Recruitment Difficulties
Confidence and Investment Intentions
Business confidence remains positive but has eased slightly in Q1 2026. Turnover expectations stand at +28% in both manufacturing and services, pointing to steady rather than strengthening optimism. Profit expectations are also positive, though more subdued, at +9% in manufacturing and +14% in services, highlighting continued pressure on margins.
While these readings are stronger than the lows seen in 2022–23, they remain below historical peaks, consistent with a pattern of gradual recovery but limited momentum.
Investment intentions remain positive but cautious. Training investment continues to lead, with stronger balances in both sectors, while capital investment remains more modest, indicating a continued reluctance to commit to large-scale spending.
Overall, investment behaviour remains consistent with a cautious environment, with firms prioritising maintaining capability and skills over expanding capacity.
Cashflow
Cashflow remains one of the weakest indicators in Q1 2026. Conditions are broadly flat in manufacturing and slightly negative in services, pointing to limited financial improvement despite positive activity elsewhere.
Recent quarters continue to show volatility, with no clear or sustained upward trend. Over the longer term, cashflow has been weak more often than strong, reflecting persistent cost pressures and constrained margins.
Current readings suggest that many firms are operating with limited financial headroom, restricting their ability to invest, absorb further cost increases, or respond to shocks.
Prices and Costs
Taken together, the data point to a continued environment of elevated and persistent cost pressure. While the most acute phase of inflation has passed, firms are still operating in conditions where costs remain high, price increases remain widespread, and margins are under sustained pressure. This helps explain why, despite broadly positive activity indicators, profitability remains constrained and uneven across the business base.
Internal Costs – Pressure on Prices (%)
Regional Position
Northern Ireland continues to rank relatively strongly across UK regions in Q1 2026
Northern Ireland
Northern Ireland continues to rank relatively strongly across UK regions in Q1 2026, although the pattern is more mixed than in previous quarters. Across manufacturing and services combined, Northern Ireland performs above the UK average on the majority of indicators and ranks in the top three on several key measures, particularly around employment and training.
Manufacturing
In manufacturing, strength is more concentrated than previously. Northern Ireland ranks in the top three on employment, investment and training — including first place on training investment — but sits mid-table or lower on domestic demand and confidence, reflecting weaker underlying demand conditions.
Services
In services, performance remains relatively stronger, with Northern Ireland ranking first in the UK on employment and recruitment activity, and in the top tier on domestic demand and training. However, export performance, cashflow and capital investment sit closer to the middle of the regional distribution.
Above UK
Taken together, Northern Ireland performs above the UK average on around three-quarters of indicators, but the picture is less uniformly strong than in Q4 2025. Strength is increasingly concentrated in jobs and skills, while demand, cashflow and investment are more mixed, consistent with an economy that is holding up, but not building momentum.
Current Business Conditions
Around 72% of firms report some level of profitability, indicating that most businesses remain in positive territory. However, this is largely driven by moderate rather than strong performance. Only 10% of firms report high profitability, while the largest share (44%) report moderate profitability, pointing to an environment where firms are trading, but not strongly.
What is your organisation’s current level of profitability?
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At the same time, a significant minority of firms are under pressure. Over one-third (36%) report low profitability, break-even or losses, highlighting uneven performance across the business base. This suggests that while activity levels remain positive, margins are being squeezed, consistent with persistent cost pressures and only modest demand.
This picture is reinforced by firms’ views on demand. In Q1 2026, 44% of businesses report a slowdown in demand, easing slightly from 47% in the previous quarter. While this points to a modest improvement, demand conditions remain subdued overall. Importantly, the slowdown is more widespread than severe, with most firms reporting only a slight rather than significant decline, indicating a broad-based softening rather than a sharp contraction.
Taken together, the findings point to an economy where most firms remain profitable, but often only marginally so. Weak and uneven demand, alongside continued cost pressures, is limiting the ability of businesses to convert activity into stronger returns, resulting in a pattern of steady but constrained performance.
Use of Graduates
If your business is using fewer (or no) graduates, which of the following are the main reasons?
Graduate hiring shows limited signs of expansion across the business base. Just over half of firms (54%) currently employ graduates, while 41% have never done so and 5% no longer employ them.
Among firms that do employ graduates, most report no change (55%) in graduate hiring over the past 2 to 3 years. However, 28% report reducing graduate use, compared to 17% increasing it, indicating a net decline among active employers.
This points to a limited, and in some cases declining, role for graduates within the workforce. Even among firms that do engage with graduate recruitment, growth appears modest, suggesting that graduates are not a primary route for workforce expansion at present.
The evidence suggests this is being driven more by longer-term structural issues than by short-term changes in demand. Skills mismatch is the most frequently cited factor, with 40% of firms reporting that graduates do not meet their technical or job-specific requirements. Cost pressures are also a major consideration (36%), reflecting the broader environment of rising employment costs.
Alongside this, 25% of firms report difficulties in attracting suitable candidates, pointing to challenges in both the quality and availability of graduate talent. There are also signs of a shift in workforce strategy, with some businesses moving towards apprenticeships (16%) or adjusting their skills mix, including greater use of automation and AI (14%).
Taken together, the findings suggest that graduate employment is becoming more selective rather than expanding. This reinforces the wider survey message of a labour market constrained not just by availability, but by the alignment between skills, cost and business need.
Windsor Framework & Goods at Risk
For those impacted by the Windsor Framework (46%), which of the following regulatory or operational aspects had the greatest impact on your business?
The impact of the Windsor Framework implementation remains uneven across the business base. 46% of respondents report some level of impact, not driven by a single requirement but by the broader challenge of operating within the framework. The most prominent issue is clarity on NI/EU rules (61%), pointing to ongoing uncertainty despite implementation milestones.
Alongside this, the use of the Trader Support Service (45%) is itself identified as a key area of impact, reflecting the practical realities of managing compliance. Regulatory divergence (40%) and parcel requirements (37%) are also notable, reinforcing that pressures are spread across multiple areas rather than concentrated in one. Taken together, this suggests that while implementation has progressed, complexity and uncertainty remain defining features for affected firms.
Views on the ‘goods at risk’ test reinforce this picture. Amongst those with a view, there is a clear balance in favour of change, with 35% supporting a review compared to 8% opposed. Support for a review is driven by practical business concerns, particularly increased administrative burden (65%) and higher costs (57%). Wider issues around supply chain uncertainty (43%) and lack of clarity (35%) also feature prominently, while 41% see a review as a means to improve transparency and confidence.
The QUB Perspective
“The Q1 results point to an economy that is proving resilient, but where weak demand, persistent cost pressures and severe labour market constraints continue to limit momentum. Northern Ireland’s relative UK performance increasingly reflects resilience rather than strong growth.”
Richard Ramsey, Professor of Practice, Queen’s Business School
The NI Chamber Perspective
“At the same time, the Northern Ireland Executive must not lose sight of the long-term structural issues firmly within its control, starting with putting Northern Ireland on a credible path to financial sustainability through a comprehensive review of public spending.
“At the same time, we urgently need progress on the long-standing barriers to growth that continue to hold back investment, particularly skills, planning and wastewater capacity constraints that are preventing development right across Northern Ireland.
“Businesses want to see an agreed, long-term economic plan that provides clarity, certainty and direction, and which we can all get behind. With the right policy framework in place, firms are ready to invest, grow and play their full part in delivering sustainable economic growth.
“On trade, it is vital that both the UK and EU continue to uphold their commitments under the legal text of the Windsor Framework to keep its operation under constant review. That must include reviewing the ‘goods at risk’ test to ensure it is as simple, proportionate and up‑to‑date as possible and reflects the capabilities of modern supply‑chain technology.”
Suzanne Wylie, Chief Executive, NI Chamber
A total of 180 businesses responded to the NI Chamber of Commerce & Industry Quarterly Business Insights Survey, in partnership with Queen’s University Belfast, for Q1 2026, representing almost 41,000 employees in Northern Ireland.
Fieldwork was conducted between February 11th until March 9th.
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