Summary of conclusions and recommendations
Below is a list of all of the Committee’s conclusions and recommendations (recommendations appear in italics).
The economic impact of the Protocol
Trade between Great Britain and Northern Ireland
1.The most significant negative economic impact of the Protocol has been on trade between Great Britain and Northern Ireland, upon which the Northern Ireland economy has historically been dependent. This impact has been felt in terms of increased bureaucracy, staff resources, cost, and delivery times, as well as restricting the ability of firms to respond flexibly to supply and demand. This has had some impact on product availability and cost for consumers, although we note evidence that a number of companies have been able to mitigate this impact, and are adapting to the new rules in place. (Paragraph 86)
2.The Protocol has created difficulties in relation to East-West trade across a number of sectors, including retail, manufacturing, logistics, aerospace, and agri-food, although they have not been felt consistently: some sectors such as retail have been affected more significantly, while some within the manufacturing sector have been able to take advantage of the offsetting effects of the Protocol. Furthermore, the nature of the Protocol has meant that the problems have largely arisen in relation to movement of goods from Great Britain to Northern Ireland rather than the other way round. Nevertheless, there are a number of consistent patterns. (Paragraph 87)
3.Businesses and sectors that are reliant on supply chains from Great Britain are disproportionately affected. While larger firms have proved somewhat able to adapt to the new requirements and absorb their costs, there has been a disproportionately burdensome impact on SMEs. It is also accepted across all sectors of the economy that the Government’s unilateral continuation of the grace periods and derogations has significantly mitigated the full economic impact of the Protocol on East-West trade. The Government’s Trader Support Service and Movement Assistance Scheme have also helped facilitate the movement of goods from Great Britain to Northern Ireland, albeit that this support is only in place on a temporary basis. (Paragraph 88)
4.In our July 2021 report, we reported on the lack of preparedness of businesses in Great Britain for the new arrangements under the Protocol, and widespread fears that businesses in Britain will withdraw from the Northern Ireland market. It is worrying that, in spite of some signs of improvement, these problems and fears largely persist. (Paragraph 89)
5.We repeat our call for the Government to take urgent action to encourage businesses in Great Britain to continue to trade with Northern Ireland. (Paragraph 89)
6.There is also widespread concern within the business community about the impact on Northern Ireland of increasing regulatory divergence between the UK and the EU. (Paragraph 90)
7.We call on the Government and the EU to undertake a full impact assessment of the implications for Northern Ireland of regulatory divergence brought about by their legislative proposals, and for them to work together with business to formulate an effective process for managing such divergence in order to minimise its impact on Northern Ireland. (Paragraph 90)
North-South trade and trade with the EU
8.We note evidence of the beneficial impact of the Protocol in particular for Northern Ireland businesses trading with Ireland and the rest of the EU, including in the retail, logistics, manufacturing, pharmaceutical and agri-food sectors. A number of businesses have been able to take advantage of the Protocol in terms of product substitution (for instance providing locally sourced goods previously supplied by GB-based suppliers) or trade outside Northern Ireland (whether supplying goods to Great Britain, Ireland and/or the rest of the EU) because they enjoy a competitive advantage compared to businesses in Great Britain or Ireland whose access to each other’s markets is now constrained. (Paragraph 104)
9.We also note the evidence we have received of the importance of the Protocol for sectors of the economy such as the dairy and meat processing industries that are dependent on complex cross-border supply chains on the island of Ireland, and the damage that would be caused to these sectors should access to the EU Single Market be lost. We take note of business fears that the benefits of the Protocol in terms of facilitating North-South trade are being taken for granted, and may be placed at risk by steps to mitigate the impact on East-West trade. (Paragraph 105)
10.Nevertheless, we acknowledge concerns that these benefits have arisen due to trade diversion rather than growth, and that the overall impact on the economy therefore remains uncertain. We also take note of concerns that they are evidence of the ‘feast or famine’ impact of the Protocol, whereby businesses able to take advantage of the Protocol benefit, while those dependent on trade with Great Britain lose out. (Paragraph 106)
11.We also acknowledge concerns over the impact of Brexit upon cross-border service provision on the island of Ireland. (Paragraph 107)
12.We urge the UK and the EU (working with the Northern Ireland Executive, as and when it is functioning fully, and the Irish Government) to work collaboratively to provide the conditions for cross-border service provision on the island of Ireland. (Paragraph 107)
Mitigations and solutions
13.We note the proposed mitigations and solutions put forward by business representatives and other stakeholders to ease the practical impact of the Protocol, many of which are unchanged since the Committee’s July 2021 introductory report. We note, without prejudice to the views of individual members on the Protocol and on the UK and EU positions, and recalling the position set out in paragraph 36 of this report, that several of these recommendations are reflected in the proposals brought forward by the Government and by the EU. (Paragraph 172)
14.Businesses have stressed the key importance that the default position under the Protocol, whereby all goods moving from Great Britain to Northern Ireland are considered at risk of moving into the EU Single Market unless deemed otherwise, should be reversed. (Paragraph 173)
15.We accept this criticism, and urge the two sides through the Joint Committee to undertake a further review setting out realistic criteria for determining risk under Article 5 of the Protocol. (Paragraph 173)
16.We also repeat our concern that the rules on notice for food supply, supplementary declarations and import controls, 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. The EU has argued that its proposals will ease the amount of paperwork involved considerably, which the Government disputes. These claims need to be tested against the views and experience of the companies that would need to implement any revised systems, and we will seek further feedback from them in the autumn. (Paragraph 174)
17.The UK has proposed a system of green and red lanes or channels: green for goods destined for Northern Ireland only, and red for goods moving into the EU Single Market. The EU also proposes an express lane for goods moving to Northern Ireland only. This ‘lane’ approach, which in the UK case requires changes to the Protocol itself, and in the case of the EU requires a lighter touch application of existing Protocol articles, has widespread support in the business community, but there is frustration that the two sides have not been able to agree a common position or understanding on its operation. (Paragraph 175)
18.We call on the UK and the EU swiftly to reach agreement on how such a mechanism would work in practice. In that context, we stress the importance of a robust and mutually acceptable approach to real-time data sharing, monitoring and enforcement. (Paragraph 175)
19.We also note the widespread calls for such a system to be supported by an enhanced trusted trader scheme with audited supply chains and facilitated movements of known products. Such a system would have significant benefits for the free flow of goods, although we note concerns that, depending on its scale, it could benefit larger companies at the expense of SMEs. Both the UK and the EU accept the need for an enhanced trusted trader scheme in principle, but disagree over how it should work in practice. (Paragraph 176)
20.We urge the two sides to work together with business to reach agreement on its scale and application, and to ensure that it covers as wide a range of businesses as possible. (Paragraph 176)
21.We acknowledge the intention behind the Government’s proposals for a dual regulatory regime. We note that some witnesses welcomed the concept. However, there is widespread concern among business about its practical feasibility and implications for complex cross-border supply chains, in particular in the context of growing regulatory divergence between the UK and the EU. There are also concerns that such a regime may not suit all sectors of the economy. (Paragraph 177)
22.The Government urgently needs to explain how its proposals will ensure in practice that, as well as facilitating East-West trade, they do not imperil North-South trade, and to provide reassurance that businesses will not be forced to choose between trade within the UK and trade with Ireland and the EU. In that context, we urge the Government to engage with and address the specific concerns of business representatives over the feasibility of its proposals. (Paragraph 177)
23.We acknowledge widespread support for the continuation of the various grace periods and derogations, amidst warnings of the serious economic impact should they come to an end without being replaced. In that context, we note that the grace periods have been unilaterally extended by the UK, and there are concerns that the EU’s proposals for changes to the Protocol appear to be based on the assumption that the grace periods will come to an end, amplified by its decision to continue the infringement procedure against the UK in relation to the grace periods begun in March 2021 but subsequently put on hold. (Paragraph 178)
24.In view of business concerns over the negative impact should they come to an end without being replaced, we urge both sides to agree to the permanent continuation of the grace periods and derogations. (Paragraph 178)
25.We reiterate the conclusion of our July 2021 introductory report, that one of the most significant single measures to alleviate the regulatory and administrative burden of the Protocol would be a UK-EU SPS/veterinary agreement. It is regrettable that there has been no compromise in the intervening period between the EU’s preference for a dynamic alignment model, and the UK’s preference for an equivalence framework. (Paragraph 179)
26.We again urge both sides to work towards a common position on an SPS agreement designed with the specific circumstances of Northern Ireland in mind. (Paragraph 179)
27.Both the UK and the EU envisage specific labelling requirements in relation to goods in circulation in Northern Ireland. We note the concern of business representatives around the feasibility of a system of differential or dual labelling for goods in a market as small as Northern Ireland. (Paragraph 180)
28.We stress the need for both sides to identify a mutually agreed, practical solution to this issue. (Paragraph 180)
29.We also underline the importance of resolution of outstanding issues and difficulties regarding the application of Tariff Rate Quotas in Northern Ireland, and in particular to address concerns that Northern Ireland businesses are placed at a competitive disadvantage. (Paragraph 181)
30.Although we have taken limited evidence on the Government’s proposals in relation to VAT and State aid, business urgently needs clarity on the application of the Protocol in these areas. We will scrutinise these important issues further in the autumn. (Paragraph 182)
31.While we note the potential for technological solutions and mitigations in relation to many of these issues, we also acknowledge that they cannot resolve all of the issues in relation to the movement of goods, at least in the short term. (Paragraph 183)
32.Nevertheless, we call on both sides to work with business to explore what solutions technological developments can provide. (Paragraph 183)
Business support and engagement
33.We welcome the engagement by both the UK and the EU with businesses affected by the Protocol. However, business representatives have stressed that there is an urgent need for the UK and the EU to engage jointly with business representatives, to ensure they send and receive a consistent message, and to prevent mutual misunderstanding or misinterpretation. (Paragraph 193)
34.We urge the UK and the EU to provide for such dialogue by fulfilling their commitment, first given in February 2021, to set up a joint consultative business group. (Paragraph 193)
35.We welcome the support and assistance provided by the UK’s Trader Support Service and Movement Assistance Scheme. However, there are concerns over the compatibility of the Trader Support Service’s functionality with some existing business models. Furthermore, both are temporary measures, and there are significant concerns around the impact on businesses of the discontinuation of this support. We also note that the Government’s promised tariff reimbursement scheme is now significantly overdue. (Paragraph 194)
36.We urge the Government to make permanent the Trader Support Service and Movement Assistance Scheme and to ensure that as many businesses as possible are able to benefit from this support. We also call on the Government to implement the promised tariff reimbursement scheme without delay. (Paragraph 194)
Economic impact of political uncertainty
37.Business representatives have repeatedly stressed the damaging economic impact of continued political uncertainty over the Protocol. Notwithstanding their acknowledgement of the economically beneficial impact of the continuation of the grace periods, they have also set out serious concerns over the economic consequences of unilateral action. Without prejudice to the views of individual members on the Northern Ireland Protocol Bill or the EU’s response, we stress that a mutually agreed solution is the optimal outcome, and that the continued lack of agreement between the two sides is having an economically damaging effect. (Paragraph 204)
38.We therefore call on the UK and the EU urgently at a political and technical level to resume dialogue, in a spirit of flexibility and proportionality, and including full engagement and consultation with business, with a view to reaching such agreement. (Paragraph 204)
The provision of medicines to Northern Ireland under the Protocol
39.Given the importance of these issues for the people of Northern Ireland, we welcome the steps that have been taken to alleviate problems with the supply of medicines to Northern Ireland through the EU’s legislation that came into force in April 2022. Nevertheless, we note that it would have been preferable for these solutions to have been taken forward on the basis of mutual agreement rather than unilateral action by the EU. In that context, we note the concerns of the Government and pharmaceutical industry representatives that a number of issues remain outstanding, notably in relation to centrally authorised products, the application of the Falsified Medicines Directive, and the supply of medical devices. (Paragraph 217)
40.We urge the UK and the EU to work together in constructive dialogue, and in full consultation with industry representatives, to identify sustainable solutions to these issues in the months ahead. (Paragraph 217)
Conclusion—the need for a reset
41.Our July 2021 introductory report concluded that “addressing the issues of conflicting identity that first Brexit, and then the Protocol, have brought to the fore seems for the moment an insoluble problem. That was also true of the political situation in Northern Ireland during the Troubles. But through a slow and painstaking process led by political leaders in Northern Ireland and successive governments in London and Dublin, the peace process took root and flourished, leading to the Belfast/Good Friday Agreement and the subsequent steps towards a power-sharing arrangement. This process took time, patience, dialogue, and most of all trust. The same is true in addressing the problems that Brexit and the Protocol present for Northern Ireland. There is therefore an urgent imperative for all sides to make concerted efforts to build trust by recommitting themselves to that process of dialogue, repairing the damage caused to relations across these islands during the past five years, in the interests, as the Protocol rightly acknowledges, of communities in both Ireland and Northern Ireland.” (Paragraph 299)
42.It is a matter of deep regret that, in the intervening twelve months, so little progress has been made towards achieving these aims. If anything, the situation has deteriorated still further. We therefore urge the UK and the EU, together with the political parties in Northern Ireland, Northern Ireland stakeholders and the Irish Government, to make a renewed commitment to work together to prioritise Northern Ireland’s interests, participate together in constructive engagement, rebuild trust, and engage in effective relationship-building. (Paragraph 300)
43.In the words of one of our witnesses, those who negotiated the Belfast/Good Friday Agreement “were able to do so because of their ability to appreciate the perspectives of others and willingness to work together and take risks to achieve a common goal despite historic differences. Such a courageous approach is needed now.” (Paragraph 301)