1.On 19 October 2019, the UK and the EU announced that they had negotiated a provisional agreement on the UK’s withdrawal from the EU. This agreement revised a deal that the previous UK Government had been unable to ratify in Parliament. An important change to the Withdrawal Agreement was the replacement of the Protocol on Ireland/Northern Ireland (commonly known as the ‘backstop’) with a revised Protocol. Following the 2019 UK general election, the newly elected Parliament passed the European Union (Withdrawal Agreement) Act, signifying its consent for ratification of the Withdrawal Agreement.
2.The original Northern Ireland Protocol attempted to reconcile the demands of the UK’s decision to leave the EU with the guarantees enshrined in the Belfast/Good Friday Agreement and to avoid the creation of a ‘hard border’ on the island of Ireland. The ‘backstop’, in the absence of a trade deal, attempted to do this by keeping the UK in a customs union with the EU, thereby avoiding controls and checks at the north-south border. The revised Protocol is different, because it takes the UK out of the customs union while continuing to apply some EU rules in Northern Ireland to avoid the need for checks and controls at the Irish border.
3.The implementation of the Northern Ireland Protocol has profound implications for Northern Ireland’s position in the UK’s internal market and for the all-island economy. The Protocol exists because the unique circumstances of Northern Ireland, as the only part of the UK with an EU land border, require Brexit to be handled in a distinctive way, a fact which is recognised throughout the Protocol text. The notion of ‘unfettered access’ to the rest of the UK market is particularly important in this regard, so that existing patterns of trade between Northern Ireland and other parts of the UK are not disrupted. The Protocol also has significant implications for businesses and households in Northern Ireland. The Northern Ireland economy will need to adapt to the new conditions arising from the Protocol. That may see business models and trade patterns change, with benefits and costs being picked up by consumers. There are also implications for business based in Great Britain that trade with Northern Ireland, which will also be affected by the matters that we consider in this report when they move goods across the Irish Sea.
4.The issue of unfettered access is as a priority, because of the crucial importance of trade between Northern Ireland and other parts of the UK to the Northern Ireland economy. The most recent statistics from the Northern Ireland Statistics and Research Agency show that in 2017–18 Great Britain accounted for £10.6 billion of Northern Ireland’s exports (49 per cent of total exports and 15 per cent of sales overall) and £13.4 billion of imports (46 per cent of total imports and 29 per cent of total purchases). Around 2,500 goods vehicles cross the Irish Sea each day, with more than 850,000 total roll-on/roll-off movements taking place in 2019. Many supply chains cross the Irish Sea, with businesses sourcing raw materials from Great Britain or importing goods for processing and re-exporting them eastwards. These supply chains are essential for key sectors such as agri-food and manufacturing, which together support more than 130,000 jobs in Northern Ireland, around 16 per cent of the total.
5.Noting the potential for significant change, and that the decision not to extend the transition period means that the Protocol takes effect on 1 January 2021, we decided to hold an inquiry into the future customs arrangements that would apply in Northern Ireland under the Protocol. The purpose of our inquiry was to investigate whether the implementation of the Protocol would create new barriers to trade between Northern Ireland and Great Britain and to examine the effect of the customs elements of the Protocol on the Northern Ireland economy.
6.In the course of our inquiry, we received written evidence from a range of sources, including businesses and sectoral bodies, customs experts, local authorities and academics. Our capacity for holding oral evidence sessions was constrained by the Covid-19 pandemic, but we were nevertheless able to take oral evidence virtually from expert witnesses, the Chancellor of the Duchy of Lancaster, the Rt Hon. Michael Gove MP, the Secretary of State for Northern Ireland, the Rt Hon. Brandon Lewis MP, together with officials from the Northern Ireland Office and the Cabinet Office. We are grateful to all those who took the time to engage with this inquiry.
7.We note, with disappointment, that the Government did not submit written evidence to our inquiry, despite having been invited to do so and it being the convention for Select Committee inquiries on Government policy. On 20 May 2020, the Government published a Command Paper, The UK’s Approach to the Northern Ireland Protocol, setting out the UK’s policy on implementing the Protocol. This Command Paper clarified some elements of the Government’s approach, but inevitably raised further questions. We expect the Government to engage constructively with Select Committee inquiries to enable effective parliamentary scrutiny. The lack of Government written evidence was indicative of the paucity of information provided by the Government on this topic, which is a matter of direct concern to businesses. Government messaging following the announcement of the Protocol was inconsistent, and little was known about the Government’s approach to implementing the Protocol until the publication of its Command Paper in May, barely seven months before the new arrangements were due to take effect. Even that paper leaves many questions unanswered. This lack of clarity has made it difficult to examine what the Protocol will mean for Northern Ireland, but, more importantly, has placed businesses in an unenviable position. Therefore, this report should be seen as an interim report.
8.With less than six months to go, businesses are still in the dark about what they should be preparing for on 1 January 2021. The situation is now urgent, and the continued lack of detail risks Northern Ireland not being prepared for the new trading arrangements, an outcome which would have significant economic consequences. We remain to be convinced that the Government fully understands that its political approach, apparently informed by limited understanding of how business works, provides neither the clarity nor the detail that Northern Ireland business requires. Political theory cannot trump commercial necessity. We also remain to be convinced that the cumulative impact of Protocol uncertainty, coupled to Covid-19, has been fully reflected upon.
9.Our inquiry focused on customs processes. Customs are merely one aspect of the Protocol that will affect businesses in Northern Ireland. In addition to the matters examined in this report, the Protocol has broader implications, including for the operation of VAT in Northern Ireland, state aid, the regulation of agriculture and industry and other regulatory checks. Beyond the scope of the Protocol, the UK leaving the EU raises wider issues for Northern Ireland businesses, such as the terms of trade in services and access to labour.
10.The Government’s decision not to agree an extension to the transition period gives the implementation of the Protocol increased urgency. From 1 January 2021, the legal and operational basis on which Northern Ireland trades with other parts of the UK will change overnight. Businesses have fewer than six months in which to prepare for a once-in-a-generation change, while simultaneously managing the challenges brought about by the Covid-19 pandemic.
11.Notwithstanding the convention that Government Departments respond to Select Committee reports within 60 days of publication, the existential nature of the matters raised in this report for businesses, compounded by the pressures of Covid–19, merit a response being provided by the end of August.
1 HM Government, , 19 October 2020
3 Northern Ireland Statistics and Research Agency, , 15 June 2020
4 Northern Ireland Business Brexit Working Group (); Freight Transport Association ()
5 Northern Ireland Business Brexit Working Group ()
6 Northern Ireland Statistics and Research Agency, , 16 June 2020; Department for Agriculture, Environment and Rural Affairs, , January 2020
7 The Protocol will take effect at the end of the transition period. Article 132 of the Withdrawal Agreement allowed the Joint Committee to adopt a decision to extend the transition period before 1 July, but that deadline passed with no decision being taken.
8 Cabinet Office, The UK’s Approach to the Northern Ireland Protocol, , 20 May 2020, pp. 13
9 Northern Ireland Business Brexit Working Group, , 5 June 2020
Published: 14 July 2020