Brexit is fueling a boom in cross-border trade. but why? What does that mean for the island?

Brian Reid feels well prepared for the turmoil.

The CEO of Deli Lites, a ready-to-eat food maker based less than two kilometers from the border in Warrenpoint, Co Down, has been preparing for a more or less hard-earned Brexit since the referendum vote in 2016.

«We did a lot of work early on to assess the damage Brexit could do to us,» he said. the magazine last week.

For Reid, like many people in the aftermath of the initial referendum, that meant attending trade fairs, commissioning studies on the potential impact of Brexit-related tariffs, setting up buyer meet events and, eventually, lining up new suppliers.

“We started a transition process at that point to move some of our supply chains away from supplying in Great Britain to supplying on the island of Ireland,”

«We set up a Southern subsidiary…that was one of the first things we did.»

But while Deli Lites has always been an all-island company, he said, that’s more true now than it was this time last year.

«We were probably getting 30% of the ingredients and raw materials from GB. That’s roughly 10% now. We’ve moved a very large amount of our supply base across,» Reid explained.

Reed’s work is one of several captured in a set of trade statistics published by the Central Statistics Office last week. They have shown that in the nine months since the European Union 28 became the 27th European Union, cross-border trade and business relations between companies in the north and south have flourished.

In the year to September, the value of imports into the Republic from Northern Ireland grew by 60% to nearly €2.6 billion. Meanwhile, the value of goods moving in the opposite direction ballooned by almost 50% compared to the same period last year, to €2.8 billion.

What will be the long-term impact of this shift? Does it make a practical case for greater economic integration between the North and the South or even Irish unity?

Easy to guess. But the reality is more complex.

business relations

The €6m question is whether these are permanent shifts or a temporary reaction to the initial wave of uncertainty. And, crucially, what is driving the boom?

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These are the kinds of questions that the Economic and Social Research Institute (ESRI), employer group Ibec and Britain’s National Institute of Economic and Social Research hope to answer with a new project launched this week.

This initiative, called the All-Island Economy Research Project, aims to improve the quality of research, statistics and economic data available on the Northern Ireland economy in particular.

“There is nothing political in this,” CEO Alan Barrett was keen to stress to reporters at the launch.

«The focus started with this idea of ​​the island economy, but quickly turned to the question of knowing Northern Ireland and the potential value it could show if we had a data-driven statistical model for the macroeconomy,» he said.

«All we’re trying to do in a sense is create or create the kind of Northern Ireland macroeconomic model that we’re implementing in the Republic and obviously in places like the UK.»

But it is difficult to separate the project from the context created by Brexit. Economic and trade relations between the two powers as a direct result of Britain’s withdrawal from the European Union and the Northern Ireland Protocol, which largely protects the North’s position within the single market.

Because of that, the protocol has created certain opportunities for Northern Ireland companies in particular, said ESRI Research Professor Martina Lawless. the magazine.

«From a very narrow economic point of view, the Northern Ireland Protocol and this kind of joint membership of two different customs territories could be really good news for the Northern Ireland economy,» she said.

One of the reasons why we start looking more at the links between all the islands etc. from an ESRI perspective is that [Brexit] Perhaps it connects Northern Ireland a little more to supply chains and a little more to the business and economic environment.

drive a wedge

For Reid, at least, his company’s shift toward an all-island focus is certainly a permanent one—not least, because it’s a direction his company wanted to travel in anyway.

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By making more of their ingredients available on the island, Deli Lites can «reduce our food miles and support local and indigenous producers,» Reed said.

We have a branch in the south, like I said. We’ll keep this southern operation going. All of this work that we’ve done to learn more about customs and export certifications and all of that, we’re going to use in the export business that we’ve developed, so what we’ve learned through the Brexit journey, we’re going to. . We will grow as an organization and benefit from it.

But the key to understanding the boom in cross-border trade in 2021 is that on both sides of the border, changes are born out of necessity rather than politics or questions of identity, explained Stephen Kelly, CEO of NI Manufacturing.

“It’s like turning on the tap on January 1 Irish buyers have struggled with the new post-Brexit world,» Kelly said.

So instead of trying to set sail and go through all the intricacies of bringing goods into Ireland from Britain, companies in the Republic looked north to another part of the United Kingdom where they enjoyed this free circulation of goods.

Because of these new complexities and additional red tape, companies in the North also suffered from supply lines from Britain.

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According to a survey, one in five NI manufacturers say GB suppliers are no longer willing to send goods to Northern Ireland.

«There’s a whole bunch of great British companies going, ‘You know what?’ Kelly said.

From a manufacturing perspective, the reality of what companies have seen since January 1 is that one in five of our manufacturers have stated that GB suppliers are no longer willing to send goods to Northern Ireland because they don’t want to deal with complexity.

“Northern Ireland may be a smaller part of their business overall so they are saying, ‘Why do I need to do this when I don’t need to do it for clients in Leeds or Leicester. «

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This was certainly good for the economy of all the islands, but it would be a mistake to think of Brexit in terms of only the positives, Kelly believes. Nor does he think that would put the island on a downward path toward Irish unity.

In many ways, he said, Britain’s exit from the European Union created a gap between the two economies.

The Northern Ireland protocol, for example, is really only designed to prevent a hardening of the border by increasing inspections of the movement of goods between the two jurisdictions. “The reality of the protocol is that we are not in the single market,” Kelly said. The protocol doesn’t cover all the other things that make the single market work.»

This includes the issue of recognition of professional qualifications. Within the single market, British professional qualifications – such as dentistry, midwifery or accounting – were automatically recognized in other member states.

That effectively ended with Brexit and was not covered by the terms of the protocol, a major barrier for those in the service sector who want to work across the border in Ireland.

“So instead of the two economies being closely aligned, we are actually moving away from each other. We are far apart,” Kelly said.

While the two economies are undoubtedly converging, Lawless agrees that a boom in cross-border trade will not lead to a union on its own.

«Political developments towards a united Ireland are far from better economic relations,» she said. The European Union has so far experienced 50 years of increased economic relations and political development without anyone ever saying that individual states are not national sovereign states.

«Apart from the UK.»

This work is co-funded by Journal Media and a grant program from the European Parliament. Any opinions or conclusions expressed in this work are those of the author. The European Parliament does not participate in and assumes no responsibility for the editorial content published by the project. For more information, see Here.

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