Northern Ireland – A cross-border economy at stake

As the UK prepares to leave the EU, Northern Ireland will be severely affected as its economy is highly interlinked with the Republic of Ireland. Disruptions to the supply chain and access to markets are the main concerns for businesses.

The line that separates the Republic of Ireland and Northern Ireland will be the biggest land-border between the EU and the UK after Brexit. The outcome of the Article 50 negotiations will be crucial for the future of the island.

Up to 30,000 workers work and live on different sides of the border and 31% of the exports from the north have their destination in the south, which makes Ireland the largest international market for Northern Ireland exports. 

The Republic, however, would not be affected as much because only 1% of its exports go to the north, although the UK is its main trading partner.

Northern Ireland will be particularly vulnerable though due to the loss of EU funding and the potential impact of tariffs and non-tariffs barriers for trade between both side of the island, 

There, the agri-food sector is particularly at risk as raw and processed products cross the borders several times before being ready for market. That will be much harder after Brexit. In case of no deal, almost impossible. 

Supply chain disruption 

“Everybody is worried about the consequences of Brexit, from farmers through the producers, the processors, and even the hospitality industry,” Michele Shirlow, CEO of the Northern Ireland Food and Drinks Association (Food NI) told EURACTIV.com. 

The main concern is the possible disruption of the supply chain. “There are an awful lot of our food ingredients that come from Europe,” she explained. 

“The food industry in Ireland is very integrated, north and south. Products at the moment can cross the border six, seven times before they end up as a final product. And I just don’t think that has been taken into account,” Shirlow regretted.

But producers are also concerned about potential implications for labelling, the loss of geographical indications and especially the disruption of trade and access to markets. 

“I am not convinced that it has been listened to and I don’t know if politicians are fully aware of the pressure that it has been putting on the entire food and supply chain,” Food NI CEO explained. 

The uncertainty surrounding the negotiations are already having an important impact on investments in the food sector in Northern Ireland.

“Some people have been planning but it is very, very difficult to plan when you don’t really know what all the factors are and what the alternatives are going to be,” Shirlow stressed. 

“My only consolation is that companies are very resilient and they often find the way through before governments do,” she said. 

David Boyd-Armstrong, co-founder of Rademon Estate distillery, that produces Shortcross gin, said the disruption of the supply chain is also a major concern as they import some of their material from the rest of the EU.

“Our supply chain is intensively built across the EU so at the minute we just do not know. And because of that, we can’t really plan for what’s going to come to us,”  Boyd-Armstrong told EURACTIV. 

“Until we get clarity that there is going to be a deal between the UK and the EU, that risk isn’t going to go away,” he said. 

But that is not their only concern. The alcoholic beverage sector is highly regulated, so as the UK leaves the Union, they will not have a say over any possible reform of the rules.  

“We won’t be able to influence that so there might be some changes that could be detrimental to the business,”  the co-founder of the distillery explained. 

Challenges and opportunities?

“Brexit is already having an impact on the economy here,” Seanna Walsh, member of the Belfast City Council for Sinn Fein and chair of the Brexit Committee, told EURACTIV. 

Walsh stressed the important economic links between the south and the north of the island. “The economy here has grown into an all-island economy,” he said.

Farmers who have animals in the north process their meat and dairy products in the south and then, ship them back across the border to some of the export companies, Walsh explained.  

“The Ireland economy does not recognise the border simply because of the fact both the south and the north of Ireland were in the EU. You change that in any way, it creates major problems for agriculture, for the industry, for small and medium-sized businesses…” the Sinn Fein representative warned. 

The Democratic Unionist Party (DUP), however, does not agree and considers Brexit more an opportunity than a threat to the Northern Irish economy. 

Although the majority of the people voted to remain in the EU, member of the Assembly of Northern Ireland (MLA) for the DUP Gordon Lyons defended that those who voted to leave are even more convinced now. 

Their desire to leave the EU has only increased “because people see the opportunities that can come from Brexit”, Lyons told EURACTIV, “the opportunities that we have, to go into the world and not be tied back, as many feel they have been by being part of the European Union.”

Some exporters, however, do not feel the same way. Boyd-Armstrong, whose distillery exports to Canada, with which the EU has a free trade agreement, said that “there is a certain irony” to that argument.

“We are seeing trade deals with South Korea, we are seeing trade deals with Australia and New Zealand come through within the EU and we are going to walk away from the EU and just wait until we strike new deals,” he said.

The uncertainty of future economic relations with third countries remains an important issue for business on the island as well. 

Lyons defended the need to make sure that the UK maintains “a close trading relationship with the rest of Europe”. However, the differences over how to resolve the question on the Irish border is still a concern for the DUP, a party on which UK Prime Minister Theresa May depends. 

If the UK leaves the Union with a withdrawal agreement, the country would remain in the Customs Union and the Single Market during the transition period, intended to allow the parties to negotiate their future relationship. 

To avoid a hard border on the island of Ireland in case the parties fail to conclude an agreement at the end of that period – December 2020 -, the UK and the EU agreed to include the so-called ‘backstop’. 

The backstop is an emergency solution that would see Northern Ireland staying aligned to some rules of the EU single market, while the whole British territory would be part of a customs union. 

Unionists oppose this solution because it would mean separating Northern Ireland from Britain “constitutionally and economically”, said Lyons. 

For the EU and the Republic of Ireland, the backstop is non-negotiable. But in Northern Ireland, some align with this position as well. 

“We think there still can be a deal, and there must be a deal, but it has to be a deal that leaves Northern Ireland in the same trading relationship as the Republic of Ireland,” Colom Eastwood, leader of the Social Democratic and Labour Party (SDLP) told EURACTIV.

Eastwood went beyond defending that Northern Ireland should remain in the Single Market and the Customs Union “which will result in being no need for infrastructure at the border,” Eastwood noted, “that is why the backstop is so important.” 

The leader of the SDLP has his constituency in Derry-Londonderry, an area that has seen important economic development thanks to the political stability over the past twenty years but it would be also one of the places most affected by Brexit. 

“The economic situation could be very very difficult and it could be exacerbated by Brexit, which then leads into all the other social problems,” he warned. 

The area was heavily affected by the Troubles and is only a few kilometres away from the border. In such places, the need to avoid a hard border is felt more strongly.

[Edited by Sam Morgan]