The flow of products on the island of Ireland has changed and experienced a major uptick amid extreme political uncertainty and the turmoil of Brexit.
Businesses have changed their stance and reconsidered the routes they take and the ports they use since the U.K. formally left the EU in January 2020.
The Northern Ireland Protocol, an agreement that permits the U.K. province to remain in the EU single market but mandates checks on products arriving from the rest of the country, has been the driving force behind this (England, Scotland and Wales). The single market of the EU aims to ensure the unrestricted movement of people, capital, services, and labour throughout the region.
Trade between Northern Ireland and the Republic of Ireland, which is a member of the EU, provides evidence of the recent change.
The first quarter of 2022 saw a 34 percent year-over-year increase in imports from Northern Ireland to 294 million euros ($310 million), and a 49 percent year-over-year increase in exports to the region to 368 million euros, according to data from Ireland’s Central Statistics Office.
“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,” CNBC spoke with Stephen Kelly, CEO of Manufacturing NI.
This has been demonstrated in the movement of items such as food, medications, and manufacturing supplies across the land border between the two jurisdictions, across road networks, and then to ports for additional transportation.
The changes in trade are the consequence of extensive adaptation by Irish and Northern Irish businesses following the turmoil of Brexit, according to Ian Talbot, chief executive of business association Chambers Ireland, who spoke with CNBC.
“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.
He added that there is still a warning on the changes in trading and the flow of products on the island of Ireland because a large portion of this change occurred during the chaos 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 the beginning of 2021, there has been a sharp rise in the quantity of cargo ships departing Irish ports, such as Dublin and Rosslare in the southeast of the nation, for ports in France and Spain in order to avoid the bureaucracy of transiting through Britain.
The traditional “land bridge” of the U.K., where trucks would cross the Irish Sea to the U.K., travel across the country to the port of Dover, and then continue on to France for continental deliveries, is now no longer used by businesses on the island of Ireland, signalling another change in the profile of freight movement in the country.
“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.
Consequently, Belfast’s port has also been adversely affected. In 2021, Belfast Harbour’s operating income increased 13% to £34 million as more than 25 million metric tonnes of goods passed through the port.
The Northern Ireland Protocol’s implementation grace period was noted by the harbour in its annual report as a contributing reason in the higher volume of business. However, it noted that “risks and uncertainties” still exist as a result of the grace period’s expiration. Britain has not yet implemented inspections of imported products 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.
Bill establishing protocol
The status of trade and the flow of goods into and out of the island of Ireland are under severe threat as a result of the U.K. government’s recently announced plan to override specific provisions of the Northern Ireland agreement. Although prospective successors Rishi Sunak and Liz Truss are expected to move forward with the plans, the EU has filed legal action against the plans to rescind certain aspects of the agreement. Additionally, the impending departure of U.K. Prime Minister Boris Johnson has injected further uncertainty.
In its current form, the bill would designate green and red lanes for goods travelling to Northern Ireland or elsewhere. The red lane would require checks for products ultimately travelling to the Republic of Ireland or elsewhere in the EU, whereas the green lane would solely apply to goods travelling to Northern Ireland and would not be subject to checks.
Kelly claimed that some parts of the plan, such as the green lane, are “not offensive,” but there is still scepticism about how practical it will be to put it into practise.
This uncertainty will bring back concerns for trade in Northern Ireland akin to those experienced 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 has stalled supply chains in the broader European setting, together with the rising rate of inflation and the conflict in Ukraine.
Kelly stated that although there are many changing components in trade, the special circumstances of Northern Ireland will not alter.
“Northern Ireland will not physically move from being the border between the U.K. and the EU,” he said. “Our geography won’t change.”