Brexit could hit cross-Border trade harder than previously thought

ESRI study highlights interconnectedness of trade and depth of supply chain links

A ‘hard’ Brexit could mean a customs nightmare for companies whose cross-border trade goes in both directions.  Photograph: Dara Mac Dónaill

A ‘hard’ Brexit could mean a customs nightmare for companies whose cross-border trade goes in both directions. Photograph: Dara Mac Dónaill

 

Brexit could hit cross-Border trade in Ireland harder than previously thought, according to a study by the Economic and Social Research Institute (ESRI).

The research, commissioned by the cross-border enterprise body InterTradeIreland, shows that “a very significant share” of cross-Border trade is accounted for by firms that trade simultaneously in both directions. While these two-way traders comprised just 18 per cent of firms involved in trade across the Border, they accounted for over 60 per cent of exports and over 70 per cent of imports in 2015.

This level of interconnectedness had the potential to heighten the exposure to a “hard” Brexit, the report concluded.

The study examined the patterns of cross-Border trade, focusing on the role of supply chain links, measured by the extent of trade in intermediate products and the contribution to overall trade of two-way trading firms.

Northern Ireland accounts for 10-12 per cent of total exports from Ireland to the UK and accounted for 7-8 per cent of imports.

“Given that the population of Northern Ireland makes up less than 3 per cent of the UK total, this shows the closeness of the economic ties between the two jurisdictions,” the report noted.

Disproportionate share

However, it homes in on the disproportionate share of cross-Border trade that is accounted for by two-way trading firms and the depth of supply chain links.

It noted that the share of intermediates in imports from Northern Ireland to the Republic is higher in almost all sectors than trade in the same sectors from the rest of the UK.

“While direct trade links may be exposed to potential costs from tariffs or increased administration costs, two-way trade also risks disruption from delays, particularly where supply chain links are concentrated in goods where timeliness is an important factor, as is the case with perishable food products,” it said.

“From a policy perspective, minimising the extent to which new barriers get put in place and avoiding disruption to these supply chains should be the preferred option,” the report said.

“In the event that the introduction of some new requirements is unavoidable, firms will need to examine how exposed they are and if adaptations can be made to their products to minimise the effects,” it said.