North set to blow economic opportunity created by Brexit

The political chaos at Stormont means that any hope of taking advantage of the unique economic position of Northern Ireland created by Brexit is probably gone. More than that, it threatens one of the key things investors look for when they are deciding where to commit their money: political stability. Tax, a skilled workforce and a nice advance factory can all play a part in winning investment, but only if the investor can first tick the stability box.

This is a pity. Invest NI, the North’s equivalent of the IDA, had reported an encouraging level of inquiries from foreign investors after the Brexit deal was done. Most of these will now be keeping their money in their pockets for now and seeing how things pan out.

The Northern Ireland protocol was a device drawn up at the last minute to get the Brexit deal over the line. It is a bit messy – from the point of view of trade between Britain and Northern Ireland – and the full consequences were not worked out, or at least not spelled out, in those frantic weeks at the end of 2020.

The DUP got squeezed out in the last-minute dealing and we are now seeing the consequences. They now say they cannot live with the checks on trade on goods entering the North from Britain required under the protocol to avoid checks on the Irish Border.

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The checks are creating problems on the ground, for sure, and work is needed to make them operate more smoothly. But the situation is fundamentally a result of Brexit – which the DUP supported. And it would have been largely solved by Theresa May’s plan for the entire UK to remain aligned with some EU rules – which the DUP opposed. A key political question now is whether unionism would live with the protocol if the EU and UK reached a deal to make it operate smoothly.

Missed opportunity

Out of the chaotic last period of Brexit, and the hastily conceived protocol, came an opportunity. The protocol gives Northern Ireland businesses the ability to export goods freely to both Britain and the EU single market. Here was a unique calling card that could be used with foreign investors. Just as importantly, it was also something many Northern Irish businesses could benefit from.

We have already seen from the fall in the trade between the UK and the EU – including Ireland – that doing business under a trade deal is simply not the same as being in the EU single market. Here was the opening for Northern Ireland: the ability to sell freely in both directions.

But the North’s politics seems to be too fractured to take advantage of this. Instead a fight about the Irish language and the weaponisation of the protocol are dominating – as the economic future hangs in the balance. SDLP MLA Matthew O’Toole tweeted as the latest political chaos broke that “ all political systems provide occasional moments of drama, but with actual delivery and lawmaking in between. Ours is simply a cycle of spectacle. We have to end it.”

The signs in recent weeks were that, despite DUP opposition to the protocol, state agencies and businesses were just getting on with it. The Department of the Economy has been looking at the options, drawing on international expertise. Invest NI has developed the pitch that the North can offer “a unique proposition for manufacturers based in Northern Ireland as well as those seeking a pivotal location from which to service GB and EU markets” and was reporting a very strong pipeline of potential projects.

Reports suggest up to 30 new inward investment projects were looking at coming in, a development hailed by Manufacturing NI, a business lobby group, as potentially “ transformative”. And there have been some other positive signs, for example PWC, with supporting state funding, has just announced a new advanced research and engineering centre with links to local universities. It is precisely the kind of project that can help to attract new investment and itself spin off new businesses.

Unionist narrative

You could argue that building on all this and working for a better economic future could help to develop a counter-narrative for unionism to the talk of Irish unification, which has been given a new lease of life by Brexit. Pressure could have been maintained on London and Brussels to ease the problems of trade coming from Britain to the North. And remember that there is – to borrow a phrase – a backstop here, with Stormont due to vote on the protocol trading arrangements at the end of 2024.

But now we look to be heading the other direction. Minister for Foreign Affairs Simon Coveney has warned that a snap election in the North could effectively be a referendum on the protocol. So the North is facing uncertainty not just about who will be in power and the future of Stormont – but also on the vexed issue of the protocol itself. The DUP may see this is an essential political move, but economically it carries a heavy price. If you are an investor wanting to take advantage of dual access to the UK and EU markets,, you won’t be making your move in these circumstances.

Perhaps it will settle and something will be sorted on the protocol. But right now the dangers are obvious. And this creates uncertainties for the Republic, too, because if the protocol does not stay in place, where do goods get checked as they enter the EU single market from the UK – at the Irish Border or when leaving Irish ports for the Continent? The UK signed a legal agreement on the protocol and perhaps, in the end, all the pressure – including from the US – will lead to some solution. If not, the price of the resulting political stability could be very high – for all of the island.