The U.K. government’s recently announced bill to override certain aspects of the Northern Ireland protocol is casting a long shadow over the state of trading.
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DUBLIN — Amid acute political uncertainty and the upheaval of Brexit, the movement of goods on the island of Ireland has been transforming and seeing a significant boost.
Since the U.K. formally exited the EU in January 2020, firms have shifted their posture, rethinking the roads they take and the ports they use.
This has been driven by the Northern Ireland Protocol, an arrangement that allows the U.K. province to remain in the EU’s single market but requires checks on goods arriving from the rest of the country (England, Scotland and Wales). The EU’s single market seeks to guarantee the free movement of goods, capital, services, and labor within the bloc.
The recent shift can be seen in the state of trade between the Republic of Ireland, which is part of the EU, and Northern Ireland.
According to figures from Ireland’s Central Statistics Office, in the first quarter of 2022 imports from Northern Ireland grew 34% year-on-year to 294 million euros ($310 million) and exports to the north grew 49% to 368 million euros.
“What was clearly happening was that Irish buyers were moving away from GB [English, Scottish and Welsh] suppliers and continuing their trade with the U.K. by buying from Belfast rather than Birmingham,” Stephen Kelly, chief executive of Manufacturing NI, which represents industry in the region, told CNBC.
This has played out in the movement of goods like food, pharmaceuticals and manufacturing supplies over the two jurisdictions’ land border, crossing road networks as well as on to ports for further travel.
Ian Talbot, the chief executive of business group Chambers Ireland, told CNBC that the moves in trade are the result of much adapting by Irish and Northern Irish businesses after the tumult of Brexit.
“There’s no catastrophic failures anywhere. There’s no port lying idle, there’s no road idle. Trade is happening and in large numbers,” he added, referring to the current arrangement facilitated by the protocol.
However, he said that there is still a caveat to the variations in trading and movement of goods on the island of Ireland as much of this change happened amid the disruption of Covid-19 in 2020 and 2021.
“With the impact of Covid and the lockdowns, it’s very hard to unravel all that when you’re comparing. What year do you compare it to?”
Since early 2021, there has been a rapid increase in the number of cargo ships leaving Irish ports, such as Dublin and Rosslare in the southeast of the country, for ports in France and Spain to avoid the red tape of crossing through Britain.
This marks another shift in the profile of freight movement in the island of Ireland with companies eschewing the traditional “land bridge” of the U.K., where trucks would cross the Irish Sea to the U.K. and travel across the country to the port of Dover and onward to France for continental deliveries.
“Northern Irish companies are readily able to access those routes as well without having to drive to the east coast of Great Britain,” Talbot said.
But Belfast’s port has felt reverberations too. Belfast Harbour saw its operating profits for 2021 rise 13% to £34 million, with over 25 million metric tons of cargo moving through the port.
In its annual report, the harbor cited the grace period of implementing the Northern Ireland Protocol as a factor in the increased level of trading. But it acknowledged that “risks and uncertainties” remain with the ending of the grace period. Britain is yet to impose checks on goods arriving from Northern Ireland.
“The ultimate derived demand effects on overall economic activity from Brexit and the NI Protocol, and their concomitant impact on trade, remain difficult to predict,” the report said.
The U.K. government’s recently announced bill to override certain aspects of the Northern Ireland protocol is casting a long shadow over the state of trading and the movement of freight in and out of the island of Ireland. The EU has launched legal action over the plans to scrap parts of the deal, and the impeding departure of U.K. Prime Minister Boris Johnson has also added more uncertainly — although potential successors Rishi Sunak and Liz Truss are likely to plough ahead with the plans.
The bill, as proposed, would create green lanes and red lanes for goods moving to Northern Ireland or beyond. The green lane would be for goods going only to Northern Ireland and would not be subject to checks while the red lane would apply checks to goods ultimately going to the Republic of Ireland or elsewhere in the EU.
Kelly said some elements of the bill, such as the green lane, are “not offensive” but there still remains doubt over how practical it will be to implement.
That doubt will reintroduce worries for trade in Northern Ireland that are similar to those felt when a no-deal Brexit was a possibility.
“We’re potentially in a worse position than no-deal if the U.K. and the EU don’t find an agreement in the coming weeks and months, it’s not just no deal but it’s no deal plus a trade war,” he said.
“That will be hugely damaging not only to Northern Ireland but to the whole of the U.K. and the EU, which will be a double hit for us.”
This is coupled with the raising rate of inflation and the war in Ukraine, which has stymied supply chains in the broader European context.
Kelly said that there are a lot of moving parts in trade but the unique situation of Northern Ireland will not change.
“Northern Ireland will not physically move from being the border between the U.K. and the EU,” he said. “Our geography won’t change.”
(With Inputs from cnbc)
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