Whenever Boris Johnson’s government wades into battle over the Northern Ireland protocol, it wields one assertion like a broadsword: that the protocol is ruining the region’s economy. Checks on goods entering Northern Ireland are disrupting trade, increasing prices and bankrupting businesses, and the damage will worsen unless the protocol is changed, goes the argument.
The Institute of Economic Affairs (IEA), a rightwing thinktank, joined the fray last week with a report that estimated the annual cost of the agreement at £850m.
“It underlines the many costs of the current situation – economic, fiscal, and in trade diversion,” said David Frost, the government’s former Brexit negotiator. “If the EU will not negotiate, then the government will be right to intervene unilaterally to restore stability.”
The problem with this justification for slashing the protocol – and risking a trade war with the EU – is that it is bogus. A growing body of evidence suggests Northern Ireland has adapted and started to profit from its new situation, with the benefits of full access to the EU single market and the rest of the UK outweighing the costs of administering checks on some goods entering the region from Great Britain.
“Every piece of evidence presented so far shows a positive impact,” said Stephen Kelly, head of Manufacturing Northern Ireland (MNI). The protocol initially disrupted supply lines but is now cushioning the region from the costs of Brexit, he said. “Our members have largely gotten to grips with it. Three-quarters of them say there are opportunities and [they] are grasping those opportunities.”
Kelly called the IEA report “bunkum” – an extrapolation from a handful of businesses that overlooks wider evidence. MNI estimates the annual cost of administering protocol-related checks at £200m. This is dwarfed by Northern Ireland’s extra £1bn in trade with the Republic, plus its extra trade, yet to be calculated, with other EU countries, said Kelly.
Stuart Anderson, a spokesperson for Northern Ireland’s Chamber of Commerce, said the protocol affected different sectors in different ways, good and bad, and that overall business sentiment was positive. “We’re seeing an improving picture. About 65% of members say despite initial headaches they have adapted well,” he said. Just 8% of members reported serious problems.
Anderson said it was difficult to say if the protocol was a net plus or minus since its costs blurred into global supply chain costs.
Data gives reason for optimism. Manufacturing jobs are growing four times faster in Northern Ireland than the UK average. Since the middle of 2021 the region has recorded inflation below the UK average, with groceries 8% cheaper, according to analyst Kantar.
A report by the National Institute of Economic and Social Research last week said Northern Ireland’s economic output had slightly outperformed the UK average. “This is partly an outcome of the Northern Irish protocol and its special status in the Brexit arrangements, including better trade and investment conditions as part of the EU’s single market and customs union,” it said. “Closer links with the EU, through trade and also potentially labour mobility, have benefited Northern Ireland post-Brexit.”
There are two caveats. One is that the protocol has not been fully implemented: more extensive and rigorous checks on British goods entering Northern Ireland would increase costs and disruption.
The other is that the political battles over the protocol playing out in London, Brussels and Northern Ireland, where devolved government has collapsed, are hurting the region. “While this continues, the reputational damage to Northern Ireland as a place to invest and work grows daily,” said Paul Murnaghan, head of the Chamber of Commerce.