Report from the Sub-Committee on the Protocol on Ireland/Northern Ireland: Introductory report Contents

Chapter 3: The economic impact of the Protocol

Initial disruption

73.Aodhán Connolly, Director, Northern Ireland Retail Consortium and Convener of the Northern Ireland Business Brexit Working Group, said that there had been a “skewed narrative” at the start of the year, amid media stories of food shortages and empty supermarket shelves. While there were some problems, only a few hundred product lines out of 40–50,000 were initially affected.49 Disruption to the movement of goods from the EU due to COVID-19 restrictions over the Christmas period had an impact, as did typical seasonal supply patterns and global commodity supply issues.50

74.Nevertheless, Mr Connolly said that the lack of time to prepare for the Protocol to become operational did cause disruption:

“We did not know what the regulations would be for sending parcels to Northern Ireland until less than 18 hours before the end of the transition period. Three new computer systems—TSS, CDS and GVMS51—came in and were not really tested with businesses until two weeks beforehand. It is not as if you can flick a switch.”52

75.Stephen Kelly, CEO, Manufacturing NI, noted that 77% of manufacturers surveyed by Manufacturing NI had experienced some negative impact to their business, in particular because of the late provision of information, and 36% believed these difficulties were likely to persist.53

76.Seamus Leheny, Policy Manager for Northern Ireland, Logistics UK, noted that delays in customs processes had reduced since the early part of the year.54 There were minimal delays at departure ports in Great Britain or arrival ports in Northern Ireland, and a parking site for trucks at the Scottish port of Cairnryan had been closed because of lack of use. However, problems sometimes arose at the temporary Border Control Posts in Belfast, because of lack of space.55

77.The DUP cited Manufacturing NI’s surveys showing a sharp drop in confidence between February and April 2021 that the Protocol could work in the long term. They argued that this showed that business preparedness, while important, was not a panacea because it would not deal with the Protocol’s disruptive impact on trade between Great Britain and Northern Ireland.56

78.Lord Frost told us that £125 million had already been spent on the UK Trader Support Service, and £25 million on the Digital Assistance Scheme. In that context, “the number of non-compliant declarations and non-engagement with the process has fallen dramatically to really quite low levels from relatively high levels at the start. The real-world effect shows that companies are getting to grips with it.”57

Trade flows

79.Table 1 sets out data published by the Northern Ireland Statistics and Research Agency (NISRA) on Northern Ireland’s trade statistics for goods and services in 2018.

Table 1: Northern Ireland trade statistics (2018)

Rest of the UK

Ireland

Rest of the EU

Rest of the world

External sales (including exports)

£10.6 billion (£6.5 billion in goods; £4.0 billion in services)

£4.2 billion (£3.1 billion in goods; £1.1 billion in services)

£2.5 billion (£2.1 billion in goods; £0.4 billion in services)

£4.5 billion (£3.5 billion in goods; £1.0 billion in services)

Internal purchases (including imports)

£13.4 billion (£10.4 billion in goods; £3.0 billion in services)

£2.8 billion (£2.4 billion in goods; £0.4 billion in services)

£2.6 billion (£2.4 billion in goods; £0.2 billion in services)

£2.4 billion (£2.1 billion in goods; £0.3 billion in services)

Source: Northern Ireland Statistics and Research Agency, Overview of Northern Ireland Trade 15th June 2020: https://www.nisra.gov.uk/sites/nisra.gov.uk/files/publications/Overview-of-NI-Trade-June-2020.pdf [accessed 21 July 2021)

80.We asked our witnesses about the Protocol’s impact on these trade patterns. Dr Esmond Birnie, Senior Economist, Ulster University, noted that, although there was still “a statistical fog”, additional costs of trade across the Irish Sea could possibly total an additional £600 million per annum.58 On the other hand, Dr Birnie noted that Ireland’s Central Statistics Office had shown a €230 million increase in Northern Ireland exports to Ireland year-on-year in the first quarter of 2021 (though such data was likely to be adjusted).59

81.Professor Duncan Morrow, Director of Community Engagement, Ulster University, noted that since 1 January there has been an increase in trade via Northern Ireland ports, and a decrease in goods moving from Great Britain to Northern Ireland via Ireland. He also noted a decline in imports and exports between Great Britain and Ireland of between a third and two-thirds in January and February. However, different sectors had been affected differently.60

82.Seamus Leheny suggested that evidence of diversion of trade to the Great Britain to Northern Ireland route may have been due to increased friction in trade between Great Britain and Ireland under the TCA, including new sanitary and phytosanitary (SPS) controls and export declarations.61 However, he and Stephen Kelly agreed that the long-term impact on trade flows would only start to become clear towards the end of the year.62 Another factor to bear in mind in this context is the fall in value of the euro against the pound during 2021.

83.Ambassador O’Neill said that UK withdrawal inevitably meant that goods could not move as seamlessly as before from Great Britain to Ireland. Nevertheless, he noted that over 85% of goods movement traffic from Britain through the ports at Dublin and Rosslare are green-routed at present and face no delays.63

Business costs

84.Several witnesses reflected on the increased costs to businesses of compliance with the Protocol, and in particular the completion of Supplementary Customs Declarations, which are required in order to determine if tariffs will be applied in the case of goods deemed to be at risk of moving from Northern Ireland into the EU Single Market.

85.Seamus Leheny cited frustration at these time and resource costs, given that most goods entering Northern Ireland from Great Britain were not at risk of moving into the EU.64 Stuart Anderson, Senior Policy Adviser, CBI Northern Ireland, noted that the Supplementary Declaration needs to be completed on all goods entering Northern Ireland, regardless of the level of risk.65

Case studies

86.We heard evidence of a medium-sized Northern Ireland-owned company, which estimated an increase in staff costs of approximately £3,000 per month, plus one-off advisors’ fees of £130,000. Others estimated an additional 20% in costs to their main product.66

87.Johnson Brothers (Belfast) Ltd employ 90 people in Lisburn, and act on behalf of GB companies selling and distributing consumer goods in Northern Ireland. They highlighted the “sheer volume of red tape”, often with an “Alice in Wonderland” aspect, such as the requirement for confirmation that goods are not organic or from China. They argued that these bureaucratic requirements were designed for the shipment of containers of goods from Asia or the Americas, but were “wholly unfit” to deal with a regional supply chain of mixed goods.67

88.SDC Trailers Limited stated that they had been issued with approximately 900 Supplementary Declaration requests, each with ten submission lines requiring up to 160 individual pieces of data. Suppliers had not expected the “avalanche of data requests”, which led to delays in meeting the HMRC deadline.68

The sectoral impact

89.Dr Birnie said that the Protocol was likely to have a differential long-term effect on individual sectors of the Northern Ireland economy. Research by the Fraser of Allander Institute suggested that while sectors with a strong North-South dimension were likely to benefit, those dependent on East-West trade stood to suffer.69 We received detailed evidence on the impact on the agri-food, medicines and motor industries.

Agri-food

90.Seamus Leheny noted the administrative burden of sanitary and phytosanitary processes, notwithstanding the grace periods. These included STAMNI declarations,70 export health certificates, and pre-notification of arrival of goods in Northern Ireland.71

91.The Ulster Farmers’ Union drew attention to problems including the cessation of traditional trade in breeding sheep from Scotland due to scrapie controls; the requirement to replace cattle tags within 20 days; a six-month residency requirement in Great Britain for Northern Ireland livestock at shows and sales before re-entry to Northern Ireland; disruption in trade in machinery from Great Britain resulting from soil contaminant certification requirements; testing and labelling requirements for cereal seed; and the new regulatory environment for the supply of plant protection products.72

92.The National Farmers’ Union of England and Wales noted that in May 2021 DAERA reported that over 40,000 Export Health Certificates and 4,000 Phytosanitary Certificates had been issued since the start of the year for Great Britain-Northern Ireland movements of animal, plant and food products. They noted that only businesses based in or with a fixed place of business in Northern Ireland are eligible to access the UK Trader Scheme, which allows traders to declare their goods not at risk. The British Veterinary Association estimates that between 230 and 700 official vets will be needed to manage the movement of live animals and products of animal origin from Great Britain to Northern Ireland.73

93.In the longer term, Dr Birnie questioned whether the Northern Ireland agri-food sector would be able to benefit from trade deals signed by the UK, given its alignment with EU animal and food standards.74 In that context, we draw attention to the inquiry by the International Agreements Committee into the UK-Australia trade deal, which among other issues is addressing the agreement’s potential impact on Northern Ireland in the context of the Protocol.75

94.Article 4 of the Protocol states that nothing in it shall prevent the UK from including Northern Ireland in the territorial scope of its agreements with third countries, provided that those agreements do not prejudice the application of the Protocol. It further states that nothing in the Protocol shall prevent the UK from concluding agreements with a third country that grant goods produced in Northern Ireland preferential access to that country’s market on the same terms as goods produced in other parts of the UK. The question we ask is how the Government is taking into account the implications of its trade deals for Northern Ireland, including its ability to benefit from them, and their impact on the conditions for smooth trade between Great Britain and Northern Ireland.

Medicines and medical supplies

95.Several pharma-chem firms expressed concern about the Protocol’s potential impact on medicine supplies to Northern Ireland when the 12-month grace period agreed in the Joint Committee in December 2020 comes to an end. Alliance Healthcare UK warned that Northern Ireland could become a small and uneconomic marketplace, leading to product withdrawals or supply issues.76

96.The Ethical Medicines Industry Group noted that, after the expiry of the grace period, medicines supplied from Great Britain to Northern Ireland will require: importation via a Manufacture and Importation Authorisation holder; batch testing; certification by a qualified person; registration of marketing authorisation; and new unique identifier requirements. Their survey of members showed that, while only 6% had withdrawn or ceased trading any products in Northern Ireland via Great Britain, 56% planned to do so following the end of the grace period, assuming no extension or revision.77

97.The Healthcare Distribution Association, whose members are responsible for distributing 92% of NHS medicines, estimated that the operational cost of the Protocol for wholesale distributors in the first quarter of 2021 was £2.1 million. Only 20% of medicine products available to Northern Ireland patients are warehoused in Northern Ireland, while the rest are held in Great Britain and transported daily, as the medicines supply chain operates on a just-in-time basis.78

98.PAGB, the consumer healthcare association, estimated that between 75% and 98% of over-the-counter medicines currently available in Northern Ireland could be discontinued. Differences in availability, legal status, pack size, statutory information, and manufacturing/product processes mean it is not possible to supply medicines from Ireland.79

99.Teva UK Limited, a leading pharmaceutical company and the leading supplier by volume of prescription medicines to the NHS, noted that, while they supplied 631 stock keeping units to Northern Ireland and 310 to Ireland, there was direct overlap in only 77 units. Clarity was also needed on whether the MHRA had authority to issue UK-wide Marketing Authorisation, including for Northern Ireland. Without this, separate licenses for every single medicine supplied to Northern Ireland will be required.80

The motor industry

100.Gray and Adams Ltd, a manufacturer of premium specialist vehicles based in Scotland and with a depot in Newtownabbey, stated that the Supplementary Declaration process had led many suppliers to withdraw from Northern Ireland.81 We heard evidence of a motor retailer who had to complete 300 Supplementary Declarations per month, two-thirds of which were for goods not at risk.82

101.The Society of Motor Manufacturers and Traders cited problems with Supplementary Declarations and the VAT treatment on finished vehicles for direct sales from Great Britain to Northern Ireland. Some automotive companies are paying duties on movements of finished vehicles and parts and components due to goods being deemed ‘at risk’. Lead times had increased by up to five days, resulting in more stock having to be held in Northern Ireland.83

The impact on businesses in Great Britain

Lack of preparedness

102.We heard that businesses based in Great Britain were also unprepared for the new requirements that the Protocol imposed on trade with Northern Ireland. Aodhán Connolly said that “millions were spent on getting ready to trade with the EU and nothing was spent on getting ready to trade with Northern Ireland … there was no actual campaign to say, ‘Northern Ireland is open for business. Northern Ireland consumers still want to buy your goods. Some 1.9 million people still want to avail themselves of your services and your goods’.”

103.Stuart Anderson added that around 13,000 Northern Ireland-based SMEs were trading between Great Britain and Northern Ireland. They faced particular challenges in terms of human capital, customs requirements, and the digital skills required to automate and improve their processes.84

104.Lord Frost acknowledged that the late agreement with the EU in December of trading arrangements, both in relation to the Protocol and the Trade and Cooperation Agreement, had hindered business preparedness. However, he argued that establishing the Trader Support Service, the Movement Assistance Scheme and the Digital Assistance Scheme from a standing start had been “quite an achievement”. He said that there was active engagement with businesses, for instance through industry forums, “but you cannot be quite sure who you are not reaching”.85

Risk of withdrawal from the Northern Ireland market

105.Witnesses feared that GB businesses would decide (or had already decided) to withdraw from the Northern Ireland market. Aodhán Connolly said:

“There is a simple equation. It does not matter whether it is retail or any other industry. If the new frictions and new costs are higher than the profit margin, either the product or the business model becomes unviable. Some businesses that sent business to business have already stopped that. Some that sent business to consumer are seeing the extra burden as unprofitable or unmanageable.”86

106.Stephen Kelly said that more than 50% of manufacturers surveyed said that their GB suppliers continued to be unprepared for the requirements of moving goods to Northern Ireland, while 20% said that their GB suppliers were unwilling to supply to Northern Ireland: “That dial has not moved at all since the beginning of the year. It continues to be the single biggest struggle that our members face.”87 Stephen Kelly added that Great Britain’s traditional role as a distribution centre for the island of Ireland was under tremendous strain.88

107.Sir Nigel Hamilton and Mary Madden called on the Government urgently to embark on a major initiative, with the support of Northern Ireland business, to educate and train supply chains and customers on the requirements under the Protocol.89

108.Lord Frost conceded that “the chilling effect of companies in Great Britain deciding that it is all too much trouble … and not being bothered to engage with the process” had been “more of a difficulty than we thought”. He added that SMEs and micro-businesses were particularly affected: “dealing with this is a significant call on their time, and they just decide that it is not worth it.” This had led to trade diversion and supply chain issues for Northern Ireland, “and is at the root of some of the current difficulties that we have”.90

The impact on EU-based businesses

109.Stephen Kelly told us that 46% of manufacturers surveyed said EU suppliers were also unaware, unprepared or unwilling to supply Northern Ireland. He argued that the EU had not done enough to make it clear that Northern Ireland has a different status for the free circulation of goods:

“We have experience of bottles of wine being turned around on every three loads from German customs. We have transit documents not being recognised in Finland for stuff that moves across from Hull port. Containers of scrap steel are sitting portside in Lisbon. I have a guy in Newtownabbey whose ties continue to be opened up and returned by Italian customs.”91

The impact on consumers

110.The upshot of these problems is that the Protocol is having a tangible impact not only on businesses, but also on Northern Ireland consumers. Mary Madden said: “If you are trying to get potted plants or seeds across, or you are trying to move your pets or receive parcels, all those things are impacting right across the community on both sides.”92

111.Peter Sheridan, Chief Executive, Co-operation Ireland, agreed that the Protocol was having a material impact on people’s daily lives:

“If we took as our yardstick that both the EU and the UK said that there should be as little impact as possible on everyday life of communities in both Ireland and Northern Ireland, that is not what is happening because almost every household is affected by it … a lot of us understood at the time that the only people who this border would be visible to were the lorry drivers going through Larne, Warrenpoint or Belfast. It was not meant to affect every household.”93

The impact of the end of the grace periods

112.We have already noted the concerns of the pharma-chem industry about the expiry of the grace period for medicine and medical supplies.94 We heard from other industries that the full economic impact of the Protocol had not yet been felt due to the various grace periods agreed by the UK and the EU in December 2020, and in certain cases extended, either unilaterally by the UK Government or in agreement with the EU.

113.Aodhán Connolly said that business would not have had the capacity to provide export health certificates as of 1 April. While he did not agree with the UK’s unilateral action, extension of the grace period was nevertheless necessary, as several large retailers were two days away from having to make decisions about the supply of goods and food to Northern Ireland. He warned of severe problems when the grace periods expire in October.95

114.The leading parcels carrier firm, DPD, warned that the end of the grace period for moving parcels to Northern Ireland would lead to a replication of the significant disruption to UK-EU trade flows after the end of the transition period. Import tariffs, VAT and customs clearance charges, complex administrative burdens, non-tariff barriers and the consequent charges from transporters had all led consumers in both the UK and the EU to stop buying goods across borders. They stressed that industry would need a minimum 12-month period of transition to adapt to new processes and procedures.96

115.SDC Trailers Limited noted that the 900 Supplementary Declarations thus far completed represented only 20% of the anticipated volume once the grace period for parcels ends. The company feared that it would be unable to comply once the grace period expires.97

Economic benefits

116.Notwithstanding these concerns, we were also told of a range of potential economic benefits under the Protocol.

Northern Ireland access to the UK and EU markets

117.Jess Sargeant, Senior Researcher, Institute for Government, said that the obvious positive economic feature of the Protocol, and one which was too quickly dismissed, was that Northern Ireland will have unfettered access to both the EU and GB markets. She said that Invest NI (the Economic Development Agency for Northern Ireland) has been making the case that Northern Ireland is the only place where businesses can operate without customs declarations, rules of origin certificates or non-tariff barriers to both the GB and EU markets. She noted the potential for attracting investment, in particular in highly-regulated sectors such as chemicals or agri-food. However, she argued there needed to be “an active effort to ensure those benefits are realised. It is not something we can … expect to happen completely on its own.”98

118.Professor Peter Shirlow, Director, Institute of Irish Studies, Liverpool University, observed that “Northern Ireland is uniquely placed in three important economic interdependencies: the UK, Ireland and the European Union.” He noted that Northern Ireland businesses have an advantage trading with the EU compared to those in Great Britain, and that firms had begun talking about moving their supply of goods to Northern Ireland to avoid regulatory checks and additional costs.99 Johnson Brothers (Belfast) Ltd cited potential growth opportunities from helping British suppliers navigate the new administrative requirements under the Protocol.100

119.The SDLP argued:

“There are also very real economic opportunities which are being obscured by political noise and the failure of the UK Government to engage constructively. … Having been relatively uncompetitive for most of its existence, Northern Ireland now has a unique competitive advantage … It is clear that there is significant busines enthusiasm for this opportunity, notwithstanding a desire to minimise disruption in terms of goods imports under the Protocol. Invest NI has had large numbers of enquiries and had intended to begin selling the investment potential of Northern Ireland under the Protocol—but the political climate, not least in London, has so far proved a barrier.”

They called for a “collective commitment to working to deliver economic benefits from the Protocol and Northern Ireland’s unique position—coordinated across Northern Ireland’s devolved institutions, governments in London and Dublin, and the relevant directorates general in Brussels.”101

120.On 7 July, the Northern Ireland Chamber of Commerce and Industry/BDO NI Quarterly Economic Survey found that 67% of those surveyed believed that Northern Ireland’s unique status under the Protocol presented opportunities, and 47% perceived benefits for their own businesses.102

121.Ambassador Vale de Almeida said that there were “huge opportunities” for Northern Ireland in terms of its access to the “biggest internal market in the world for goods” in the EU Single Market, and to the UK market; “no one else has this access for industry, farmers and retailers”. He called for the discussion to move “from a very negative and depressing approach to the problems in Northern Ireland to a much more constructive, forward-looking and positive attitude towards the potential of Northern Ireland”.103

122.Lord Frost said that he did not “entirely buy … the best of both worlds argument”, as Northern Ireland’s economy was more dependent on trade with Great Britain. Although Northern Ireland businesses trading primarily with the EU may benefit, “it does not make sense for Northern Ireland to gain the ‘benefit’ of access to the EU market while having quite restricted access to the rest of its own market.”104 He did not see a case for the Government setting out the benefits of the Protocol, since “those who benefit are quite well aware of that”, and “I do not think it totally makes sense to encourage a situation that generated more of something that is a problem”.105

North-South trade

123.Witnesses told us that benefits under the Protocol are particularly evident in terms of the potential for growth in North-South trade. As we have seen, Ireland’s Central Statistics Office trade figures for the first quarter of 2021 showed that exports from Northern Ireland to Ireland had grown by 44% (€230 million year-on-year).106 Seamus Leheny added that the proportion of UK exports to Ireland coming from Northern Ireland had jumped from 12% to 25% year-on-year. Some Irish retailers were now sourcing goods from Northern Ireland rather than Great Britain, with beneficial effects for the local economy.107

124.Professor Shirlow argued that the growth in trade between Northern Ireland and Ireland showed that the intention of the Protocol to “protect the north-south dynamic has actually worked”.108 He said that 7,000 companies were benefiting from a growth in North-South trade.109 Aodhán Connolly added that the growth was particularly pronounced for agri-food goods.110

125.Notwithstanding his prediction (shared by the DUP111) that the costs would outweigh the benefits, Dr Birnie said that Northern Ireland businesses could benefit from displacing Great Britain counterparts in supplying the market in Ireland and the rest of the EU. He agreed that there were already signs of this in the food processing sector. Similarly, supermarket chains were now sourcing local products for their Northern Ireland stores.112

126.Lord Frost acknowledged that a “really essential … obvious advantage” of the Protocol was that it had ensured that there is no infrastructure at the border between Northern Ireland and Ireland, “even though sometimes it is taken for granted as a reality of life”.113 However, he said that the increase in trade within the island of Ireland in both directions was “in many ways, a problem rather than an advantage”, because “firms in Northern Ireland are not necessarily able to choose their preferred suppliers in Great Britain, and they are having to find substitutes elsewhere”.114

Foreign direct investment

127.Aodhán Connolly said that wider opportunities would arise from foreign direct investment taking advantage of Northern Ireland’s ability to sell into the EU and the UK. Stephen Kelly saw early signs of this happening: Invest NI was looking at 30 potential investors for Northern Ireland, based on the island of Ireland, in Great Britain, or across the globe. One such lead had the potential to create 500 jobs and a £100 million investment. He said that he had never before experienced such a high volume of potential investment opportunities.115

128.Dr Birnie noted that foreign direct investment into Northern Ireland had previously benefited service sectors (which are not covered by the Protocol) rather than manufacturing.116 Gray and Adams Ltd predicted that the fintech sector was likely to benefit from foreign direct investment, whereas traditional manufacturing companies were likely to lose out.117 On the other hand, Sir Nigel Hamilton and Mary Madden noted that Invest NI was negotiating major projects with considerable employment potential across the IT, finance, manufacturing and distribution sectors.118

The long-term impact and the need for stability

129.Our witnesses stressed that the benefits of such investment would be long-term, and dependent on political stability. Professor Morrow said that, while short-term disruption would be the dominant initial picture, benefits would emerge in the longer term as the new arrangements bedded in.119 Mary Madden agreed that, while businesses may perceive potential benefits, “the man in the street does not yet see what the benefits are.”120 She added that community unrest “sends out a very negative signal to investors … They will look at any conflict playing out in the streets and say, ‘Why would I want to go into Northern Ireland and invest?’”121 Stephen Kelly also stressed that political stability was needed to give investors confidence that Northern Ireland is a great place to invest: “Pictures of buses burning in parts of Belfast do not portray that.”122

130.The Northern Ireland Business Brexit Working Group wrote:

“The current instability does not allow businesses to plan, nor to garner investment for the future. This year’s political, social and economic instability could be the foundation for five years of economic stagnation or worse. … Half of our [survey] respondents saw potential opportunities with respect to the Republic of Ireland, and more than a third for local, GB and EU/EEA markets. This shows that the Protocol could contribute to the long-term prosperity of NI. The challenge would be finding the conditions of stability and competitiveness that would enable businesses to turn those ‘potential’ opportunities into a reality.”123

Conclusions

131.The disruption in Great Britain-Northern Ireland trade at the beginning of 2021 had many causes, including COVID-19 disruption, global supply chain issues and the impact of the Trade and Cooperation Agreement on UK-EU trade, as well as the Protocol itself. The initial impact was also more limited in scope than some media reports suggested, and some initial problems in the movement of goods have been addressed.

132.Despite the best efforts of businesses, they were significantly hindered in their preparation for the implementation of the Protocol by the lack of clarity, and the late provision of guidance, on its practical operation. The publication of guidance on movement of parcels just 12 hours before the Protocol came into effect was particularly egregious.

133.The long-term impact of Brexit and the Protocol on trade flows remains uncertain, and will not become clear for several months. But there are early signs of a shift away from Great Britain-Ireland movements towards movements between Great Britain and Northern Ireland ports, as well as a growth in North-South trade.

134.On the other hand, the new administrative requirements for moving goods from Great Britain to Northern Ireland have had the biggest impact on business. Firms have complained in particular about the burdensome, repetitive and disproportionate requirements for completion of Supplementary Customs Declarations. This has led to increased staff costs and difficulties with suppliers. These requirements, while suitable for the shipment of containers of goods from across the globe, appear wholly unsuited to the regional supply chains used by businesses in Great Britain and Northern Ireland, many of whom are SMEs with limited resources, and where the risk of goods moving into the EU Single Market is low.

135.While sectors that are dependent on North-South trade links may benefit under the Protocol, those that rely on East-West supply chains may suffer. While the agri-food sector shows signs of benefiting from North-South links, new sanitary and phytosanitary processes have hindered East-West trade. We have heard serious concerns about the impact on supply of medicines and medical products to Northern Ireland in the absence of further mitigating measures. The motor industry reported that new administrative requirements are deterring suppliers in Great Britain from delivering to Northern Ireland.

136.Their experience points to a wider problem: the lack of preparedness of businesses in Great Britain for the changes in trading arrangements with Northern Ireland. There are widespread fears that businesses in Great Britain will withdraw from the Northern Ireland market. The Government urgently needs to correct the lack of understanding among businesses in Great Britain of the new requirements for trading with Northern Ireland. Likewise, the EU and its Member States must address the lack of awareness among EU businesses of the opportunities for trade with Northern Ireland under the Protocol.

137.The impact has been felt not just by businesses but also by consumers in Northern Ireland. The fear of the business community is that this impact will worsen when the various grace periods expire, and the full economic impact of the Protocol is felt.

138.Yet there are potential economic benefits under the Protocol, given Northern Ireland is the only place where businesses can operate without customs declarations, rules of origin certificates or non-tariff barriers to both the GB and EU markets. There are early signs of a growth in North-South trade, and evidence that Northern Ireland businesses are stepping into the gap left by suppliers in Great Britain who have vacated the market in Ireland.

139.Northern Ireland also stands to benefit from foreign direct investment from firms wishing to sell into the UK and EU markets. We welcome Invest NI’s discussions with 30 potential investors in Northern Ireland across the IT, finance, manufacturing and distribution sectors. However, we note that such investment in Northern Ireland has historically been strongest in the service sector, which is not within the scope of the Protocol.

140.Yet such benefits and investment will only manifest themselves in the long-term, and on the basis of political and economic stability. This requires all sides to work together to calm political and community tensions, provide certainty for business and investors, and to seek to maximise the economic opportunities for Northern Ireland.

141.Article 4 of the Protocol states that nothing in it shall prevent the UK from including Northern Ireland in the territorial scope of its trade agreements with third countries, provided that those agreements do not prejudice the application of the Protocol. In that context, the Government has an obligation to ensure that Northern Ireland is able to benefit from, and is in no way disadvantaged by, the Free Trade Agreements that the UK is currently negotiating, or will negotiate in the future.


50 Q 14. See also Stuart Anderson in answer to the same question.

51 Trader Support Service, Customs Declaration Service and Goods Vehicle Movement Service.

56 Written evidence from the DUP (IIO0025)

59 Q 40 (Dr Esmond Birnie), Q 15 (Stephen Kelly)

63 Written evidence from Ambassador Adrian O’Neill (IIO0035)

65 Ibid.

66 Written evidence from the Northern Ireland Business Brexit Working Group (IIO0036)

67 Written evidence from Johnson Brothers (Belfast) Ltd (IIO0001)

68 Written evidence from SDC Trailers Limited (II00024)

70 Scheme for Temporary Agri-Food Movements to Northern Ireland. See Department for Environment, Food and Rural Affairs, Scheme for Temporary Agri-food Movements to Northern Ireland (STAMNI) Compliance Declaration: https://www.daera-ni.gov.uk/sites/default/files/publications/daera/STAMNI%20Compliance%20Declaration_Authorised%20Trader_V9.3.pdf [accessed 21 July 2021].

72 Written evidence from the Ulster Farmers’ Union (IIO0021)

73 Written evidence from the NFU (IIO0019)

75 House of Lords International Agreements Committee, ‘UK-Australia trade negotiations and agreement: Call for evidence’: https://committees.parliament.uk/call-for-evidence/518/ukaustralia-trade-negotiations/. The call for evidence was launched on 30 June 2021 and closes on 6 September 2021.

76 Written evidence from Alliance Healthcare UK (IIO0008)

77 Written evidence from Gray and Adams Ltd (IIO0011)

78 Written evidence from the Healthcare Distribution Association (IIO0032)

79 Written evidence from PAGB (IIO0015)

80 Written evidence from Teva UK Limited (IIO0014)

81 Written evidence from the Ethical Medicines Industry Group (IIO0009)

82 Q 13 (Stuart Anderson)

83 Written evidence from the Society of Motor Manufacturers and Traders (IIO0030)

89 Written evidence from Sir Nigel Hamilton KCB and Mary E Madden CBE (IIO0006)

93 Ibid.

94 See paras 95–99.

96 Written evidence from DPD (IIO0017)

97 Written evidence from SDC Trailers Limited (II00024)

100 Written evidence from Johnson Brothers (Belfast) Ltd (IIO0001)

101 Written evidence from the SDLP (IIO0033)

102 Northern Ireland Chamber of Commerce and Industry and BDO NI, Quarterly Economic Survey Summary: 2nd Quarter 2021: https://www.northernirelandchamber.com/wp-content/uploads/2021/07/21374G-QES-Report-Q2-2021-1.pdf [accessed 21 July 2021]

103 Oral evidence taken before the European Affairs Committee on 24 June 2021 (Session 2021–22), 13

106 QQ 39–40 (Dr Esmond Birnie)

111 Written evidence from the DUP (IIO0025)

117 Written evidence from Gray and Adams Ltd (IIO0011)

118 Written evidence from Sir Nigel Hamilton KCB and Mary Madden CBE (IIO0006)

123 Written evidence from the Northern Ireland Business Brexit Working Group (IIO0036)




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