14.The scale of the UK-Irish economic and trading relationship is significant. John McGrane, Director General of the British Irish Chamber of Commerce, said that it accounted for €60 billion a year in two-way trade and directly supported 400,000 jobs. Even though the Chairman of Allied Irish Bank PLC, Richard Pym, highlighted that the share of Irish exports going to the UK had declined from 50% in 1973 to around 17% today, Dan O’Brien, Chief Economist, Institute of International and European Affairs (IIEA), was clear that the UK was still hugely significant to Ireland’s economy.
15.The Secretary of State for Northern Ireland pointed out that Ireland represented the fifth largest market for UK goods overall and the largest for Northern Ireland’s exports. Office for National Statistics figures show that in 2014 5% of total UK exports (worth £28 billion) went to Ireland, while 3% of UK imports (worth £17 billion) came from Ireland. The Irish Department of Finance’s analysis notes that the UK is the source of almost 30% of imported merchandise to Ireland.
16.Since the referendum in June, concerns have been raised that these close bilateral trade links will be affected by Brexit, with implications for the Irish economy, North and South, and particularly for the significant level of cross-border economic integration on the island.
17.John Bruton argued that, given the volume of trade between the two nations, the effect of Brexit was “bound to be negative”, not least given the economic uncertainty already resulting from the referendum. Mr Bruton also noted the difficulty of assessing the long-term impact on Ireland without knowing the terms of the UK’s withdrawal agreement with the EU and what, if any, trade barriers will be erected post-Brexit. Richard Pym was also concerned that such uncertainty might deter investment.
18.In its report ‘Getting Ireland Brexit Ready’, the Irish Department of Finance predicts that, whatever trade deal is ultimately reached with the EU, the UK’s future GDP will be lower than if it had remained an EU member. The report suggests that the extent of these losses passing through to the Irish economy is “likely to be material.”
19.While the accuracy of economic projections on the impact of Brexit are a matter of contention, we note that most show that, were there to be a negative impact upon the UK economy, it would be replicated, and in some scenarios amplified, in respect of the Republic of Ireland. Edgar Morgenroth, Associate Research Professor, Economic and Social Research institute (ESRI), suggested that the negative impact on Ireland’s GDP of Brexit would be “somewhere between 2% and 4% relative to base.” John Bruton shared this concern, noting that Ireland could experience an even greater economic impact from Brexit than the UK itself. Modelling by the Bertelsmann Foundation suggests that Ireland stands to suffer the greatest loss to GDP of all other Member States, and perhaps even greater than the UK, depending on the terms of Brexit.
20.Agriculture is Ireland’s largest indigenous sector, with agri-food and drink accounting for 12.3% of exports (worth €10.8 billion in 2015), 8.6% of total employment and 7.6% of economy-wide gross value added.
21.Ambassador Mulhall noted that, for this sector, “Britain is the most important market.” Indeed, more than 40% of Irish agri-food and drink exports go to the UK market, compared with 31% to the rest of the EU and 28% to international markets. Bryan Barry, Acting General Secretary, Irish Farmers’ Association, highlighted specific sub-sectors where the UK market accounted for an even greater share of exports, including beef at 50%, cheese at 60%, and mushrooms at 90%. He argued this dependence made the sector Ireland’s “most exposed” should trade with the UK be negatively affected by Brexit.
22.The Irish Department of Finance analysis estimates a multiplier of 1.5 on the wider economy, meaning that if it were “to suffer a demand shock of €1 million, an additional €500,000 shock would hit the wider economy”. With Teagasc (the Irish Agriculture and Food Development Authority) projecting annual losses of between €150 million and €800 million in agri-food export value as a result of Brexit, the multiplier effect could be significant.
23.Richard Pym warned that, if the UK moved to trading with EU countries on World Trade Organisation (WTO) terms following Brexit, some WTO agricultural tariffs would reach 60–70%. Given the centrality of agriculture to the Irish economy, Ireland thus stood to be among the “worst hit by WTO terms”. The forthcoming report by our EU External Affairs and Internal Market Sub-Committees into Brexit: the options for trade considers in more detail the matter of WTO trade terms, as well as, more generally, all the different possible trade arrangements and their implications for trade between the UK and the EU.
24.Witnesses also highlighted the impact of the depreciation of Sterling following the referendum result, particularly on the Irish mushroom sector, which, as indicated above, depends heavily on the UK market. Shane Campbell, CEO of the Irish Central Border Area Network (ICBAN), told us that, constrained by contracts based on the value of the pound at the start of 2016, mushroom businesses had been unable to adapt, and their traditionally tight profit margins had been “wiped out”. A recent report in The Guardian claimed that six (out of 60) mushroom farmers had gone out of business since the referendum—though Edgar Morgenroth suggested that, given the narrow margins of the industry, mushroom businesses had always opened and closed depending on the favourability of the exchange rate.
25.Bryan Barry told us that the Irish beef industry (employing 80,000–100,000 people) had also been hit by the sudden and sustained depreciation of Sterling. He and Declan Billington, Chair of the Northern Ireland Food and Drink Association (NIFDA), noted that diversification away from the UK market would be challenging, both because of the time lag in indigenous industries being able to expand to meet demand, and because of the lower prices in the continental market.
26.A number of witnesses also commented on the potential impact on Ireland of future UK trade policy. Dan O’Brien suggested that any future UK trade deals that reduced tariffs on beef and dairy from Latin America and New Zealand could “decimate” Ireland’s agri-food sector. In light of these concerns, many witnesses highlighted the vital importance of maintaining “as free as possible market access to the UK … with the minimisation of any barriers to trade”.
27.There was general agreement that Ireland’s indigenous (Irish-owned) firms—mostly small and medium sized enterprises (SMEs)—were particularly vulnerable to the effects of Brexit. Ambassador Mulhall told us that Irish SMEs were heavily reliant on the UK market for exports, and were thus in a “more sensitive or exposed position from Brexit”.
28.This is supported by the Irish Department of Finance’s assessment, which, after food and beverages, identified electrical equipment and other manufacturing sectors as most at risk. These sectors are largely made up of Irish-owned SMEs, who are significant regional employers but with comparatively low profit levels. The UK provides a market for 26–36% of the sectors’ total exports; they also source 30–47% of their imported intermediate goods from the UK.
29.Patricia King, General Secretary of the Irish Congress of Trade Unions (ICTU), agreed that tight margins put Irish SMEs at particular risk from Brexit, as they were less able to absorb shocks. Pat Ivory, Director of EU and International Affairs, Ibec, asserted that this could have an impact on Irish regions already struggling to recover from the recent economic downturn.
30.The Irish Department of Finance has also noted that profit margins make it difficult for Irish SMEs to diversify away from the UK market, given the lower “fixed costs associated with exporting to the UK … due to a shared language, legal system and culture.” Dan O’Brien even suggested that, if Brexit threw up significant trade barriers, Irish companies dependent on the UK market would, rather than diversify, be more likely to “relocate at least part of their operations over those barriers into the UK”.
31.In contrast to the sectors we have discussed hitherto, the Irish financial services sector could stand to benefit from the UK’s decision to leave the EU. Dan O’Brien commented on the general “scramble for investment from the City” involving numerous countries, including Ireland, since the referendum result. Ireland could in fact benefit if trade barriers prompted large-scale disinvestment from London.
32.Professor John O’Brennan, Jean Monnet Professor of European Integration, NUI Maynooth, agreed that the International Financial Services Centre in Dublin could be a “big beneficiary” of Brexit. On the other hand, Richard Pym said that Dublin’s limited infrastructure and shortage of housing might deter financial firms from relocating there. Nevertheless, even the removal of 20,000–30,000 jobs (a relatively small proportion of the total) from London to Ireland would be “extremely valuable to the economy”.
33.John McGrane suggested that Ireland could also be an attractive destination for the technology sector, where companies were looking to ensure continued access to the EU Single Market. Ireland’s position as an English-speaking EU Member State, with a similar cultural and legal environment to the UK, could give Ireland a competitive advantage.
34.Witnesses also noted that the existing multinational sector in Ireland was perhaps the least likely to suffer much ill-effect from Brexit, given its focus on international markets, and its greater capacity to diversify.
35.Although Dan O’Brien argued that there was near-consensus among economists that Brexit was “overwhelmingly a bad thing economically for both Britain and Ireland”, some witnesses were more positive about Ireland’s prospects. Pat Ivory suggested that “the Irish Government are probably better prepared than many other member states for dealing with Brexit”, as shown by their extensive contingency planning prior to the vote. Richard Pym described the Irish economy as “very strong”.
36.Although the Secretary of State for Northern Ireland and the Irish Ambassador both affirmed their Governments’ commitment to maintaining the “hugely important” and “mutually advantageous” UK-Irish trading relationship, this relationship is sure to change.
37.Edgar Morgenroth observed that the combined value of trade with other EU Member States was already worth more to Ireland’s economy than bilateral trade with the UK. Because of this, he argued, Ireland’s focus would remain on protecting trade with the EU, out of pure “self-interest”. A paper by Durham and Newcastle Universities also suggests that Brexit “is likely to rebalance Ireland’s trade relationships away from the UK and towards the remainder of the EU”.
38.ESRI, though, argued that this rebalancing would take time. In the near term any barriers to trade would leave Ireland facing higher prices, which “affect competitiveness [and] impact on the wider economy”. Ultimately, ESRI forecast that UK-Irish trade flows could be reduced by 20%, with most exposed sectors experiencing a more significant impact.
39.Any potential negative impact of Brexit will probably be more significant for Ireland than for any other Member State, in particular in the event of any economic downturn in the UK, or in the event of tariffs or other barriers to trade being introduced between the UK and the EU. The agri-food and manufacturing sectors, and the SMEs that work within them, would probably be worst affected, given their reliance on UK exports, and this could place a particular burden on the communities that rely on these industries.
40.Notwithstanding the potentially negative economic outlook overall, some sectors may stand to benefit. As an English-speaking member of the Single Market, Ireland may be able to attract increased inward investment post-Brexit. The contingency planning undertaken by the Irish Government also means that it is well placed to respond to the economic challenges that Brexit will represent.
41.The nature of Northern Ireland’s economy makes it particularly vulnerable to the potential negative effects of Brexit. Patricia King noted that Northern Ireland’s economy was already characterised by the “highest levels of deprivation, unemployment and poverty” in the UK, with lower wages and productivity. Angela McGowan, Director, CBI Northern Ireland, argued that any economic downturn as a result of Brexit would hit Northern Ireland the hardest.
42.Ms McGowan also highlighted Northern Ireland’s high dependence on the EU (and especially the Republic of Ireland) market for its exports, compared with the rest of the UK. HMRC statistics show that 52% of Northern Ireland exports go to the EU, including 38% to the Republic of Ireland. ESRI’s report also found that Northern Ireland’s firms were highly reliant on the Irish market, leaving them more exposed to the impact of any trade barriers that might emerge after the UK leaves the EU. Angela McGowan therefore concluded that, for Northern Ireland, “the further away we are from the EU in [any] trade deal, the more negative economic effects it will have”.
43.In recognition of the particular issues facing Northern Ireland as a result of Brexit, the First Minister and deputy First Minister wrote a joint letter to the Prime Minister outlining five key issues of particular concern. As well as the Irish land border and EU funding, which we consider in later chapters, these included trade and access to labour, the agri-food sector and energy.
44.Angela McGowan and Declan Billington stressed the importance of free movement of labour to Northern Ireland in helping to boost a small domestic labour market, which also faced a steady exodus of young people. Mr Billington highlighted the agri-food sector as a particular example of Northern Ireland’s dependence on foreign labour: 60% of factory workers and 90% of seasonal labourers were non-UK nationals. In a report published before the referendum, the Social Market Foundation found that 7% of all employees in Northern Ireland were born in the EEA, making it second only to London in terms of reliance on European employees.
45.Declan Billington warned that any restrictions to the free movement of labour to Northern Ireland following Brexit could affect the economy’s “ability to stand still, never mind grow”. Businesses that struggled to access sufficient labour might relocate facilities south of the border, to benefit from continued access to EU labour.
46.As in the Republic of Ireland, agriculture and the agri-food business are highly significant to Northern Ireland’s economy. Estimates commissioned for NIFDA in 2010 found that the agri-food industry supported some 92,000 jobs, including direct employees, farmers, and those in the supply chain (transport, packaging, and engineering). The industry has grown in the intervening years. While around 72% of Northern Ireland food and drink processing sales are domestic (within Northern Ireland and the rest of the UK), the EU is the sector’s largest export market, accounting for annual sales of £1.15 billon, of which £700 million relates to the Republic of Ireland.
47.Declan Billington and Ruth Taillon, Director, Centre for Cross Border Studies, also highlighted the significance of EU Common Agricultural Policy (CAP) funding for Northern Ireland, where the single farm payment accounts for 87% of total farming income, and where the rural development programme supports important land management and agri-food business improvement projects. We will consider the impact of the full range of EU funding allocated to Northern Ireland further in Chapter 4.
48.Mr Billington acknowledged that the weak pound could benefit Northern Ireland’s exporters in the short term, but believed that any such benefit would be more than offset if tariffs were introduced post-Brexit. Michael Bell, Executive Director, NIFDA, agreed that there was a real risk that Brexit would cause the sector to lose momentum. He warned that the potential impact of the EU’s Common External Tariff could be “hugely significant” for the sector, which had average net margins of 2.7% to 3%, compared with potential tariffs of 7% to 65% on agricultural products under WTO terms.
49.Notwithstanding polling evidence that just over half of farmers voted for Brexit, Declan Billington cited a survey of agri-food businesses conducted by NIFDA following the referendum, which found that access to the European market was a key concern for respondents. The survey also showed that 64–67% of respondents were ‘very concerned’ about the potential impact of tariffs on their import and export costs, 88% would find it difficult or extremely difficult to find alternative export markets, and 73% would find it difficult or impossible to source inputs from the UK that they currently source from the EU.
50.Angela McGowan discussed Northern Ireland’s historic success in attracting foreign direct investment (FDI), noting that access to the EU market of 500 million people was a significant factor in attracting FDI. She believed that the implications of the referendum for “political and economic stability, regulation and business taxation levels, ability to attract talent and exchange rate risk” were likely to deter investment in Northern Ireland going forward.
51.Brexit could also affect the Executive’s plans to develop Northern Ireland’s economy. Dr Anthony Soares, Deputy Director, Centre for Cross Border Studies, noted that an ongoing priority for Northern Ireland had been to improve its export performance. This, he suggested, would be made significantly more difficult if the UK lost tariff free access to the EU internal market or decided to leave the customs union.
52.Bertie Ahern pointed out that much EU funding in Northern Ireland was invested in helping the economy to develop away from its current dependence on the public sector. Such development could be set back if Northern Ireland lost access to these funds.
53.Angela McGowan agreed that Brexit would hinder plans to grow Northern Ireland’s economy, arguing that tools intended to help improve Northern Ireland’s competitiveness—such as lowering corporation tax—”could be blunted” if Brexit led to the imposition of trade barriers.
54.HMRC regional trade statistics show that Northern Ireland accounts for just 2.4% of UK exports and 1.5% of imports. Witnesses therefore questioned how far Northern Ireland’s economic concerns would really be taken into account in Brexit negotiations. The Secretary of State for Northern Ireland attempted to offer reassurance. He described his efforts to seek a wide range of perspectives and “feelings on the ground” from the business community in Northern Ireland, including sectoral meetings and the establishment of a Business Advisory Group to provide ongoing input into the Government’s Brexit negotiating stance.
55.We return to this issue in Chapter 4.
56.The DUP, led by First Minister Rt Hon Arlene Foster MLA, was the only major Northern Ireland party to call for a vote to leave the EU in the referendum, arguing that Brexit presented economic opportunities for Northern Ireland as well as challenges.
57.While the evidence we received focused heavily on the potential damage that Brexit could inflict on Northern Ireland’s economy, we note the First Minister’s words in her speech to the DUP annual conference in October 2016:
“Brexit represents the biggest economic opportunity for this country in decades … the economic and social benefits for Northern Ireland within the United Kingdom are far more important than our relationship with the EU … I am quite confident that the investment offer that will be available, both now and in the future, will mean our reputation as a place to invest will continue to grow.”
58.The First Minister reaffirmed these views in a recent article in The Guardian, arguing that the rest of the UK was Northern Ireland’s most important market, and that the UK including Northern Ireland would continue to trade “quite capably” with the EU following Brexit. The Irish News has reported an announcement by the DUP Economy Minister of a new international trade plan to help Northern Ireland “seize the opportunities” of Brexit.
59.The Secretary of State for Northern Ireland pointed out that Northern Ireland was the only UK nation or region to see growth in the value of its exports over the past year, increasing trade with non-EU partners by 24%. He also said that, following conversations with businesses across Northern Ireland, he was convinced that, even with Brexit, there was “vast potential” to develop Northern Ireland’s economy.
60.While the First Minister and the Secretary of State for Northern Ireland perceive opportunities for Northern Ireland outside the EU, our evidence suggests that the risks to the Northern Ireland economy posed by Brexit probably outweigh the opportunities. Northern Ireland’s agri-food and manufacturing sectors stand to be particularly affected, and we therefore urge the Northern Ireland Office and Northern Ireland Executive to redouble their efforts to engage with both sides of industry in Northern Ireland to ensure that their views are taken into account in the forthcoming negotiations.
61.The two economies of Northern Ireland and the Republic of Ireland are deeply interdependent, with significant cross-border trade, integrated labour markets, and many industries that operate on an all-island basis. The border region is particularly vulnerable economically.
62.Ambassador Mulhall, though suggesting that trade between Northern Ireland and the Republic of Ireland was below what one might expect for “two neighbouring jurisdictions on an island”, observed that common membership of the Single Market had facilitated a significant increase in trade over the past 20–30 years. The Centre for Cross Border Studies accordingly argued that both economies would suffer “serious consequences” if the post-Brexit UK were shut out of the customs union or Single Market.
63.We discuss the feasibility of maintaining the open Irish land border in Chapter 3, and at this stage we note only that any changes in the border arrangements could have a significant economic impact, disrupting North-South trade flows and creating “additional administrative and financial burdens to Irish and UK businesses engaged in trade between their jurisdictions”. Declan Billington observed that, if the land border was closed or movement across it restricted, this could lead to the assets of cross-border businesses, including farms with land on both sides of the border, becoming “stranded on one side”.
64.The Chief Executive of the East Border Region, Pamela Arthurs, offered a case study of how the imposition of tariffs could negatively affect cross-border business:
“Warrenpoint harbour is in Northern Ireland, but there are a number of firms along the border in the Republic whose lorries come across. In a situation where you have tariffs or anything like that, that will not happen. Those firms in the Republic will have to go down to Cork or somewhere like that. Warrenpoint, the fifth largest port in the UK, will potentially flounder after a few years because of that.”
65.Aidan Gough, Strategy and Policy Director, InterTradeIreland, pointed to a survey conducted by his organisation which underlined the importance that cross-border businesses attach to maintaining “free movement of goods, services and labour on this island”.
66.The integration of labour markets on the island of Ireland was described by Pat Ivory as a “key feature” of both economies. As well as people who move permanently from one jurisdiction to the other for work, the Centre for Cross Border Studies estimates that between 23,000 and 30,000 people are cross-border workers—including non-Irish and non-UK EU citizens—living and working on different sides of the Irish land border. Bernie McCrory, Chief Officer, Co-operation and Working Together (CAWT), also highlighted “frontier workers”, such as nurses, whose work took them back and forth across the border several times each day. For such people the imposition of controls at the Irish land border would present a significant impediment.
67.There is also the issue of employment standards on both sides of the border. Patricia King was concerned that Brexit could affect workers’ rights, if the UK decided to cheapen labour costs after withdrawal. This could lead to a race to the bottom in employment standards, with companies in both the Republic of Ireland and Northern Ireland feeling forced to pay less or to bring down their labour costs to retain a competitive edge.
68.We heard abundant evidence that the agricultural sector on the island of Ireland operates on an all-island basis. Supply chains in particular are extremely interconnected, both North-South and East-West. Many of our witnesses commented on the significant cross-border flows of animals and other produce for processing. Bryan Barry told us that 350,000 lambs went from North to South, 500,000 pigs went from South to North, and millions of litres of milk travelled in both directions for processing. John Bruton noted that if you bought a sandwich at a filling station:
“The likelihood is that the bread may have been produced in England, the butter may have been produced in the Republic of Ireland and the filling may have come from Northern Ireland.”
69.Any restrictions on cross-border trade could thus have a significant impact on the sector. One way to manage this impact, proposed by Declan Billington, might be a trade agreement based on quotas, enabling Ireland, Northern Ireland and the rest of the UK to facilitate continued cross-border trade in agricultural produce and food:
“There is no reason why we cannot have legacy trade deals when we exit, on the basis of quotas … The scale of that quota would be small against the scale of all European agrifood … because Ireland is quite a small part of Europe … Having set a quota, how hard do you need to police and inspect transactions crossborder? You normally police them to make sure duty is paid, but, with a sizeable quota, why on earth would you then need to micromanage trade? You would end up putting electronic systems in place, using and auditing statistics to satisfy yourself that the quota was working as described, with a light touch in terms of the policing of trade … There is always leakage, but … if you size quotas correctly you can maintain the status quo and have a light touch, at least for a number of years.”
70.The non-tariff barriers resulting from Brexit could have at least an equal impact on cross-border trade. Declan Billington noted that, while high regulatory standards had raised production costs, the agri-food sector in the EU had been shielded by the EU’s Common External Tariff from competition from countries with lower standards. There was concern in the Northern Ireland agri-food industry that, outside the EU, the UK could pursue a ‘cheap food policy’, pricing producers on both sides of the border out of the market.
71.John Bruton noted that Northern Ireland depended on the Single Market for wholesale electricity within the island of Ireland, and in particular on the availability of surplus power from south of the border, to make up for insufficient local generation capacity. A new North-South interconnector was needed to meet Northern Ireland’s demand. This, Aidan Gough noted, “requires substantial investment over the next few years”. If investors were put off by the economic uncertainty caused by the Brexit vote, the security of Northern Ireland’s energy supply might be at risk.
72.John Bruton also observed that the Republic of Ireland was a net importer of electricity from the UK. Richard Pym raised the possibility of the UK withdrawing completely from the European internal energy market, while Edgar Morgenroth highlighted the potential for the UK and EU environmental regulation to diverge over time. Both scenarios would put Ireland’s energy security at risk, potentially forcing Ireland to invest in a direct connection to the EU grid, at substantial cost.
73.Nevertheless, Mr Morgenroth believed that, in the short term at least, the current legal arrangements underpinning the single market for wholesale electricity would be “robust to a Brexit.”
74.Niall Gibbons, Chief Executive of Tourism Ireland (which oversees marketing the island of Ireland as a tourist destination overseas), described tourism as “woven very deeply into the fabric of Irish society”. He noted that the industry supported 263,000 jobs across the island, representing 4% of Irish GDP and 5.3% of Northern Ireland’s GDP.
75.Mr Gibbons observed that a high proportion of tourists visiting the island of Ireland came from Great Britain: the industry was therefore vulnerable to currency fluctuations and economic uncertainty. He argued that increased controls at the Irish land border would also have a negative impact on the industry, since “the international tourist generally does not recognise borders. They are coming for an experience.” On the other hand, Edgar Morgenroth argued that “provided that nobody is proposing to close borders to tourists … the long-term impacts are likely to be small”.
76.Queen’s University Belfast expressed concern about the impact on the higher education sector, including immigration barriers restricting access to international research talent and impeding free movement of staff and students within the island of Ireland; uncertainty for current and prospective EU students about their immigration status, fee rates and access to student loans; and the possibility that either immigration barriers or loss of access to the Erasmus exchange programme would undermine the viability of degree courses involving a year abroad in European countries.
77.Queen’s University Belfast also noted that the UK’s participation in European framework research programmes, such as Horizon 2020, had been put at risk by the referendum result. Professor O’Brennan believed that UK institutions were already being “frozen out” of bids to European funding programmes, and noted that this would in turn be detrimental to Irish universities, who benefited from UK partners’ “critical” role in consortia partnerships. John McGrane, in contrast, saw this as an opportunity for Ireland in the longer term to secure a greater proportion of EU research funding.
78.The Secretary of State for Northern Ireland suggested that, for Northern Ireland’s border communities at least, the devaluation of the pound had resulted in “a slight lift in trade”, though some other witnesses did not consider this lift to have “any great strength.” Taking an all-island perspective, Aidan Gough stressed that short term gains on one side of the border did nothing to address the region’s structural problems, and so were unlikely to provide any sustainable benefit to border communities. Angela McGowan noted that this effect had occurred due to the “strange limbo” of currency fluctuations caused by the referendum result occurring while the UK was still in the EU, with full access to EU markets.
79.In the longer term, Angela McGowan suggested that significant depreciation of Sterling could actually “erode incomes” in Northern Ireland, which are already low compared with the rest of the UK. She also highlighted Northern Ireland’s dependence on commodities that rely on a good exchange rate.
80.Dr Nat O’Connor, Lecturer in Public Policy, University of Ulster, predicted that Brexit would open up further incentives for cross-border smuggling. The Outgoing Leader of the Alliance Party of Northern Ireland, David Ford MLA, agreed, noting that variable excise duties on either side of the border already led to smuggling in fuel, and painted a vivid picture of “curtain-sided lorries with plastic tanks.”
81.This concern was supported by evidence from the Police Service of Northern Ireland (PSNI), who considered that divergence in EU and UK immigration and taxation rules following Brexit would lead to an increase in commodity smuggling, including fuel, alcohol and counterfeit/contraband cigarettes.
82.We consider the question of smuggling further in Chapters 3 and 4.
83.Aidan Gough believed that the close interconnection between Northern Ireland and the Republic of Ireland would make the “impact of Brexit on the island … different and disproportionate”. Declan Billington was concerned that the intricacies of this cross-border relationship might not be “directly understood by the departments doing the negotiations”. A workable solution needed to take into account the all-island nature of the economy.
84.The Secretary of State for Northern Ireland acknowledged the complexities of the cross-border dimension. He emphasised the Government’s determination to secure the “best possible arrangements, working closely with the Irish Government”. However, Mr Brokenshire also noted that these cross-border implications would be considered “in the light of a UK-wide negotiation”, and he offered no indication of how specific cross-border issues would be resolved, concluding simply that “there are practical issues that arise in relation to the island of Ireland”.
85.Despite ministerial recognition of the substantial implications Brexit could have for cross-border economic activity on the island of Ireland, there is still significant uncertainty over how the UK plans to mitigate these effects, and over the priority they will receive in withdrawal negotiations.
86.It is extremely important for both Northern Ireland and the Republic of Ireland that an agreement is reached which takes into account the all-island nature of their economies. It is in the interest of the Irish economy, North and South, that the current movement of people, goods and services within the island of Ireland is maintained.
11 As referenced in House of Lords Library, Leaving the European Union: The UK and Ireland, Library Note, , November 2016
12 Irish Government Department of Finance, Getting Ireland Brexit Ready: Budget 2017 (October 2016): [accessed 15 November 2016]
17 Irish Government Department of Finance, Getting Ireland Brexit Ready: Budget 2017 (October 2016): [accessed 15 November 2016]
18 Irish Government Department of Finance, Getting Ireland Brexit Ready: Budget 2017 (October 2016): [accessed 15 November 2016]
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22 The Irish Farmers’ Association, The Value of Agriculture at County Level: IFA Estimate, 2016 (September 2016): [accessed 17 November 2016]
23 Bord Bia, ‘Factsheet on the Irish Agriculture and Food & Drink Sector’: [accessed 17 November 2016]
25 Bord Bia, ‘Factsheet on the Irish Agriculture and Food & Drink Sector’: [accessed 17 November 2016]
27 Irish Government Department of Finance, Getting Ireland Brexit Ready: Budget 2017 (October 2016): [accessed 15 November 2016]
28 Teagasc Agriculture and Food Development Authority, Brexit: Potential Implications for the Irish Agri-Food Sector (April 2016): [accessed 16 November 2016]
29 Tariffs are taxes or duties which are applied to imports or exports, while non-tariff barriers are all barriers to trade that are not tariffs, usually bureaucratic or legal issues that can hinder trade between countries. HM Government, Review of the Balance of Competences between the United Kingdom and the European Union: the Single Market (July 2013) p20: [accessed 1 November 2016].
30 Forthcoming report by our EU External Affairs and Internal Market Sub-Committee on Brexit: the options for trade (5th Report, Session 2016–17, HL Paper 72)
32 Henry McDonald, ‘Weak sterling puts Irish mushroom farmers in the shade’, The Guardian (12 November 2016): [16 November 2016]
38 See for instance Bryan Barry)
40 Irish Government Department of Finance, Getting Ireland Brexit Ready: Budget 2017 (October 2016): [accessed 15 November 2016]
43 Irish Government Department of Finance, Getting Ireland Brexit Ready: Budget 2017 (October 2016): [accessed 15 November 2016]
49 Durham and Newcastle Universities, Policy Paper: Brexit, Northern Ireland and Ireland (June 2016): [accessed 16 November 2016]
50 (Dan O’Brien) and (Ambassador Dan Mulhall)
53 Irish Government, ‘Contingency Framework: Summary of key actions to manage contingencies arising as a result of the UK vote to leave the European Union’ (24 June 2016): [accessed 15 November 2016]
55 (James Brokenshire MP)
56 (Ambassador Dan Mulhall)
58 Durham and Newcastle Universities, Policy Paper: Brexit, Northern Ireland and Ireland (June 2016): [accessed 16 November 2016]
59 The Economic and Social Research Institute, Scoping the Possible Economic Implications of Brexit on Ireland (November 2015): [accessed 15 November 2016]
60 The Economic and Social Research Institute, Scoping the Possible Economic Implications of Brexit on Ireland (November 2015): [accessed 15 November 2016]
64 Supplementary written evidence from James Brokenshire MP ()
65 The Economic and Social Research Institute, Scoping the Possible Economic Implications of Brexit on Ireland (November 2015): [accessed 15 November 2016]
67 Letter to the Prime Minister, The Rt Hon Theresa May MP from the First Minister and deputy First Minister of the Northern Ireland Executive, dated 10 August 2016: [accessed 30 November 2016]
70 Which they take to refer to Member States of the European Union plus Norway, Switzerland, Iceland and Liechtenstein.
71 Social Market Foundation, Working together: European workers in the UK economy, (May 2016): [accessed 17 November 2016]
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75 Northern Ireland Food & Drink Association, Brexit: Challenges & Opportunities for Northern Ireland Food & Drink (November 2016) [accessed 30 November 2016]
76 (Ruth Taillon) (Declan Billington). See also
81 Northern Ireland Food & Drink Association, Brexit: Challenges & Opportunities for Northern Ireland Food & Drink (November 2016): [accessed 30 November 2016]
86 HMRC, ‘Regional Trade Statistics Second Quarter 2016’ (6 September 2016): [accessed 15 November 2016]
90 Arlene Foster, ‘Leader’s Speech to Conference 2016’ (October 2016): [accessed 9 November 2016]
91 Arlene Foster, ‘The UK joined Europe as one nation, and that’s how we’ll leave’, The Guardian (28 October 2016): [accessed 16 November 2016]
92 Suzanne McGonagle ‘Simon Hamilton to develop global trade plan and air routes task force’, The Irish News (1 November 2016): [accessed 9 November 2016]
93 HMRC regional trade statistics quoted in supplementary written evidence from James Brokenshire MP (
94 Supplementary written evidence from James Brokenshire MP (
96 Supplementary written evidence from The Centre for Cross Border Studies ()
97 Written evidence from Fianna Fáil ()
98 Supplementary written evidence from The Centre for Cross Border Studies ()
103 The Centre for Cross Border Studies, ‘Introductory statement to oral evidence submitted to the Joint Committee on Jobs, Enterprise and Innovation’ (20 October 2016): [accessed 16 November 2016]
106 (John Bruton), (Pamela Arthurs), (David Ford) and (Bryan Barry)
109 . The complex question of Tariff rate quotas is explored fully in the forthcoming report by our EU External Affairs and Internal Market Sub-Committees on Brexit: the options for trade.
113 (Richard Pym) and (Edgar Morgenroth)
119 Written evidence from Queen’s University Belfast ()
120 Written evidence from Queen’s University Belfast ()
124 (Aidan Gough)
128 Written evidence from Dr Nat O’Connor ()
130 Written evidence from the Police Service of Northern Ireland ()