Brexit is fuelling a boom in cross-border trade. But why? And what does it mean for the island?

“There’s a whole cohort of Great British businesses going, ‘Do you know what? We can’t be arsed sending goods to Northern Ireland.’”

BRIAN REID FEELS he was well prepared for the disruption.  

The chief executive of Deli Lites, a food-to-go manufacturing business based less than two kilometres from the border in Warrenpoint, Co Down, had been preparing for Brexit in some form or another ever since the referendum vote in 2016.

“We did a lot of work early on to weigh up the damage that Brexit could do to us,” he told The Journal last week.  

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

“We started a transition at that stage to move some of our supply chains away from sourcing in Great Britain to sourcing 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 business, he said, that’s even more true now than it was this time last year.

“We were probably sourcing maybe 30% of our ingredients and raw materials from GB. That’s nearly down to 10% now. We’ve moved quite a lot of our supply base across,” Reid explained.

Reid’s business is one of the many captured in an arresting set of trade statistics published by the Central Statistics Office last week. They show that in the nine months since the EU28 became the EU27, cross-border trade has boomed and business relationships between companies north and south have flourished.

In the year to September, the value of imports to the Republic from Northern Ireland has grown by a hefty 60% to almost €2.6 billion. Meanwhile, the value of goods moving in the opposite direction has ballooned by almost 50% over the same period last year to €2.8 billion.

What will the long-term impact of this shift be? Is it making a practical case for greater north-south economic integration or even Irish unity? 

It’s easy to speculate. But the reality is a lot more complex. 

Trade ties

The six million euro question is whether these are permanent shifts or a temporary reaction to the initial wave of uncertainty. And crucially, what’s driving the boom?

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

Dubbed the All-Island Economy research project, the three-year initiative is aimed at improving the quality of research, statistics and economic data available around the Northern Ireland economy, in particular.

“There’s nothing political about this,” ESRI chief executive Alan Barrett was keen to stress to reporters at the launch. 

“The focus began with this idea of the all-island economy, but it quickly turned to the question about knowledge of Northern Ireland and the potential value that could emerge if we had a databased statistical model of the macroeconomy,” he said.

“All we’re trying to do in a sense is create or generate for Northern Ireland the type of macroeconomic model that we have in place in the Republic and obviously places like the United Kingdom.” 

But it’s difficult to separate the project from the context that Brexit has created. Economic and trade ties between the two jurisdictions as a direct result of Britain’s withdrawal from the European Union and the Northern Ireland Protocol, which largely safeguards the north’s position within the Single Market.

Because of that, the Protocol has created certain opportunities for Northern Ireland businesses in particular, ESRI Research Professor Martina Lawless told The Journal.

“From a very narrow economic standpoint, the Northern Ireland Protocol and this sort of joint membership of two different customs areas could be really good news for the Northern Ireland economy,” she said. 

One of the reasons we’re starting to look more into all-island linkages and so on from the ESRI perspective is that [Brexit] probably does link Northern Ireland a bit more into supply chains and a bit more into the business and economic environment.

Driving a wedge

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

By sourcing more of its ingredients on the island, Deli Lites “can reduce our food miles and support local and indigenous producers”, Reid said.

We have a southern subsidiary, as I said. We’ll keep that southern operation up and running. All that work that we did to learn about customs and export certificates and all that, we will use that for our export business that we’ve been developing.So what we’ve learned through the Brexit journey, we’re going to bank that. We’re going to grow as an organisation and benefit from it. 

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

“It’s like a tap was turned on 1 January as Irish buyers struggled with the new post-Brexit world,” said Kelly.

So instead of trying to navigate and wade through all the complexities of bringing goods into Ireland from GB, businesses in the Republic have looked north to another part of the UK where they have that free circulation of goods.

Because of those fresh complexities and the additional red tape, businesses in the north have also struggled with supply lines from Britain.

One in five NI manufacturers, according to a survey, say their GB suppliers are no longer prepared to send goods to Northern Ireland.

“There’s a whole cohort of Great British businesses going, ‘Do you know what? We can’t be arsed,’” Kelly said.

From a manufacturing perspective, the reality of what has been experienced by businesses since 1 January is that one in five of our manufacturers state that their GB suppliers are no longer prepared to send goods to Northern Ireland because they don’t want to engage with the complexity.

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

That’s certainly been good for the all-island economy but it would be wrong to think of Brexit just in terms of the positives, Kelly believes. Nor does he think it puts the island on a glide path to Irish unity.

In many ways, Brexit has driven a wedge between the two economies, he said.

The Northern Ireland Protocol, for example, is really only designed to prevent the hardening of the border through increased checks on the movement of goods between the two jurisdictions. “The reality of the Protocol is that we’re not in the Single Market,” Kelly said. All the other things that make the single market work isn’t covered by the Protocol.”  

That includes the issue of professional qualification recognition. ​​Within the Single Market, British professional qualifications — such as dentistry, midwifery or accountancy — were automatically recognised in other member states. 

That effectively ended with Brexit and it isn’t covered by the terms of the Protocol, a significant barrier to those in the services sector who want to work across the border in Ireland.

“So instead of actually a closer alignment of the two economies,” Kelly said, “we’re actually drifting further apart. We’re diverging.” 

While the two economies are undoubtedly growing closer, Lawless agrees that booming cross-border trade isn’t going to lead to a united on its own

“The political developments towards a united Ireland are just so far away from better economic relationships,” she said. “The European Union has had 50 years now of increasing economic relationships and political development without anybody ever saying that the individual countries aren’t sovereign national states.

“Apart from the UK.”

This work is co-funded by Journal Media and a grant programme from the European Parliament. Any opinions or conclusions expressed in this work is the author’s own. The European Parliament has no involvement in nor responsibility for the editorial content published by the project. For more information, see here.

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