Why are the Tories so concerned about rise in North-South trade post-Brexit?

The UK's Brexit minister David Frost shared a new motive for his concerns about Northern Ireland's Brexit arrangements in a fringe discussion at this week's Conservative party conference.

Fresh from warning in his conference speech that the UK might have to pull the Article 16 emergency brake on the Northern Ireland protocol unless there is significant change from the EU, Frost told the panel that change was urgently needed because of the growth in all-island trade.

Volumes of post-Brexit red tape now required on goods entering Northern Ireland from the rest of the UK – and the Republic from Britain – have forced some businesses on the island of Ireland to look elsewhere for trading partners, leading to an increase in North-South trade.

Geography and the convenience of frictionless trade have made this inevitable since Brexit kicked in last January.

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Tory fears that an all-island economy might be growing out of the complexities of Brexit are supported by trade figures showing a boom in North-South trade since the UK's exit came into effect

But, as Frost disclosed on Monday, the UK is unhappy at “incentives” driving increased trade on the island of Ireland and this is another reason why he wants the protocol changed quickly.

Frost told the fringe event hosted by the Policy Exchange think tank that he was “definitely seeing supply chains being reordered quickly” and that “trade between Northern Ireland and Ireland has gone up a lot in both directions”, as reflected in Irish and British official statistics.

He also noted that trade movements from Ireland across Britain, the so-called land bridge, into the rest of the European Union has "kind of collapsed" in the first nine months of the year.

“People have responded very quickly to that incentive so that is one reason why we can’t wait very long to solve this problem. Things are happening and it isn’t just theoretical,” said Frost.

At the same panel discussion, Martin McTague, policy and advocacy chairman of the Federation of Small Businesses, expressed concern about a “two-speed UK” with different things happening in Northern Ireland and that an increase in trade North-South will “put pressure on the union inevitably” and weaken the links with Britain.

The remarks raised eyebrows in Northern Ireland.

“To hear David Frost rail against the EU is nothing new. But to hear him state clearly and coldly that he wants to damage North-South trade and stop Northern Ireland’s growing exports to the EU single market is sickening and chilling,” said SDLP Brexit spokesman Matthew O’Toole.

O’Toole and others in Northern Ireland expressed concern that Frost was not trying to smooth the flow of goods into Northern Ireland from Britain but was attempting to undermine the unique economic advantage given to Northern Ireland under the Brexit agreement to trade with the EU.

What about the trade figures?

Tory fears that an all-island economy might be growing out of the complexities of Brexit are supported by trade figures showing a boom in North-South trade since the UK’s exit came into effect. The value of goods imported from Northern Ireland to the Republic rose by 77 per cent in the first six months of the year, while exports from the Republic into the North rose 43 per cent.

"Trade is like water – it will find the path of least resistance. For us, this is the natural consequence not just of Brexit but the Brexit that they chose," said Stephen Kelly, chief executive of business representative group Manufacturing NI.

While North-South trade has increased, imports into the Republic from Britain fell 16 per cent. Companies, North and South, have complained about torturous volumes of paperwork that must accompany goods travelling west across the Irish Sea that make some trade, particularly for small companies, just not worth the business. British companies are among those to have lost out.

Frost’s reference to the land bridge show he is concerned also about the loss of this business to Britain from the Republic and that the UK might be struggling to understand the consequences of Brexit and becoming a “third country” with all of the cross-Border checks this brings. And this is all happening before the UK switches on its own import controls on goods from the EU.

While Frost’s remarks should be seen as a Brexiteer talking to his party base, they provide an unfiltered view that, for the UK government, the practical realities of Brexit are beginning to bite.