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Businesses recognise North’s unique trading status despite fears

Its position boosts appeal for foreign direct investment looking to establish a strategic base

There are still questions  about the full impact of EU rules of origin  and the full ramifications for goods swapped back and forth across the Border.

There are still questions about the full impact of EU rules of origin and the full ramifications for goods swapped back and forth across the Border.

 

Northern Ireland is complicated, so it’s no surprise its experience of Brexit is too.

It took years of negotiation to arrive at the Northern Ireland protocol, which gives it a unique trading status in both the UK and the European Union.

The protocol facilitates unfettered access for Northern Ireland goods to the British market, and the inclusion of Northern Ireland goods in free trade agreements between the UK and third countries.

As a result of it Northern Ireland remains in the EU’s single market for goods, allowing them to flow to and from the North to the Republic, and the rest of the EU as they did before Brexit, without the need for customs checks, tariffs or new paperwork,

However, the EU’s rules on customs and regulation of agri-food products continues to apply to goods arriving in Northern Ireland.

As traders get to grips with this new status quo, anxieties have opened up, from fears of British food producers leaving the North’s supermarket shelves empty, to EU Commission threats to rip up the playbook in the row over vaccines.

The main reasons for the disruptions seen in the early weeks of the year were more simple.

'Lack of time’

“If you stand back and look at it, the main problem was lack of time,” says Johnny Hanna, who heads up KPMG’s Northern Ireland office in Belfast.

It was not until December that the EU and UK set out exactly how it was going to work “so businesses had no time to prepare for rules that really are very complex”, he says.

The EU-UK Trade and Co-operation Agreement was agreed on Christmas Eve, by which stage most businesses were closed.

“On top of that businesses in Northern Ireland were very dependent on the readiness of their GB suppliers,” he says. Not all of them were ready.

While North-South trade carried on unhindered, difficulties rapidly emerged in relation to the flow of goods from Britain to Northern Ireland.

Anecdotally fears have been expressed about suppliers from Britain ceasing to trade with Northern Ireland altogether, as the paperwork involved – relative to the size and value of the market – makes it uncompetitive to pursue.

A new UK Trader Scheme helped but in some instances parties have yet to resolve who – buyer or seller – is going to undertake the paperwork involved.

“It does have to be acknowledged that, because of the protocol, for Northern Ireland businesses trading across both Ireland and the EU there has been no change, and that is very positive. But the bit they are struggling with is the GB-NI piece, which is why we are hearing calls for workable solutions and for grace periods,” says Hanna, who believes “tweaks” will be required.

The focus on the current crisis leaves other areas of concern unexplored, such as the implications for Northern Ireland companies selling into both the EU and Britain once standards diverge, or the status of Northern Ireland companies if the EU completes further free trade agreements.

There are still questions too about the full impact of EU rules of origin, and the full ramifications for goods swapped back and forth across the Border, such as dairy products.

“A lot of questions remain,” says Hanna.

Even without tweaks the protocol will be revisited again in four years by the Northern Ireland Assembly.

Opportunity

In the meantime there is a sense of opportunity bubbling up. Northern Ireland’s new and unique status, straddling both the EU and post-Brexit UK, boosts its appeal for foreign direct investment looking to establish a strategic base. “It is attractive for EU businesses looking for a gateway into GB and vice versa,” says Hanna.

“As long as there is the political stability to make that work, many businesses can see a unique opportunity, a recognition of the potential we have.”

Northern Ireland has traditionally been a valuable first port of call for first-time Irish exporters looking to take a stepping-stone into Britain. That will not change, he says, suggesting that more will go on to open an office in Northern Ireland.

“We are already fielding lots of inquiries from businesses south of the Border that see the attractiveness of establishing a presence here to sell into the GB market,” says Hanna.

Though the political noise can drown it out, there are positive noises being made too. “The majority of businesses want it to work, recognise that there are opportunities, and have already re-engineered their supply chains,” says Hanna.

Their optimism is shared by KPMG, which has announced the recruitment of 200 staff for a new £14 million (€16m) digital centre of excellence in Belfast.

There is a clear sense of a pause button having been released.

“Living with so much uncertainty for such a prolonged period of time has been tough for all businesses, but in general businesses have shown great resilience and flexibility,” says Margaret Hearty of InterTradeIreland.

The cross-Border trade and business development body is funded by the Republic’s Department of Enterprise, Trade and Employment and Northern Ireland’s Department for the Economy.

“Some SMEs did hold back on investment decisions until they had more clarity. Covid also had an impact on that. However, it is worth pointing out that according to our Business Monitor results, SMEs that operate in both jurisdictions have fared better than their non-exporting counterparts.”

Its Brexit advisory service has been fielding calls from cross-Border traders affected by disruption of Britain’s supply chains in recent weeks.

“The Northern Ireland protocol is well placed to keep trade in goods moving freely across the island, which is a real positive for many businesses. However, there are other inherent risks that companies should be aware of. There are many outstanding things that need to be agreed for services, which is a large and growing part of cross-Border trade,” says Hearty.

All told, however, the advantages to businesses trading on the island of Ireland are potentially significant.

“Firms in both jurisdictions will benefit not only from continued market access, but also have the opportunity to develop new sales as supply chains adjust to the new trading conditions,” she says.

“It is clear that where additional costs and administrative burdens arise on imports from GB, business will seek more cost-effective solutions for their supply chains. This will naturally lead to import substitution opportunities across the island.”