Belfast Telegraph

Republic's loss can be our gain if Northern Ireland has voice in Brexit talks

Analysis by John Simpson

When the UK Government sits down to negotiate with the European Commission on its relationship with the EU, there is an extensive agenda where Northern Ireland businesses have major interests.

As the negotiations evolve, a key dynamic will lie in the role of the Irish Government and its influence through the Commission lead negotiator, Michel Barnier.

Since the EU referendum, there has been a growing realisation that Brexit poses serious questions for the Republic of Ireland as well as the UK.

The UK and Irish economies have been interdependent for years. In the last 50 years, starting with the Anglo-Irish Free Trade Agreement, trading arrangements between the two have been closely integrated.

The Irish Government and businesses must now adapt to circumstances where trading arrangements will adjust to Brexit changes that were not asked for by Ireland.

Brexit means that the well-integrated UK-Ireland economic arrangements will change. The motivation for both countries will be to minimise the costs and adverse consequences.

However, inevitably, as the Irish economy remains within the EU and the UK leaves, the negotiators must accept that there will be changes to the well-ordered system that have the potential to be costly.

The negotiations under have yet to commence. The Irish Government, as one of 27 EU members, will have a major and acknowledged critical role, but will be constrained by the wider range of interests, particularly Germany and France.

There is little dispute that the EU will try to protect the interests of the 27 members and will not wish to make the UK position so comfortable that leaving the EU does not bring with a cost.

In these negotiations, the interests of the Irish Government will be to minimise disruption between the UK and Ireland, but that will be difficult.

Ideally, from our perspective, the UK should be offered permission to trade as from within the customs union and be treated as a member of the single market. This poses difficult choices since, while most businesses would see advantages, political viewpoints differ.

Trading within the single market means that the goods being traded will need to satisfy the standards and specifications set for the single market.

The UK starts with the advantage of operating to those agreed standards, but is the UK prepared to maintain them?

For supporters of Brexit the answer is easier: the UK would be free to choose.

For trading partners in other countries (including Irish buyers), not to be able to assure buyers that UK goods will meet EU standards is a potential new hurdle.

The Irish Government is preparing for some displacement of trade with the UK. Even if the negotiations allow a soft Brexit, the expectation is that a 'no tariffs, no border' solution will be difficult. Trade between the UK and Ireland will necessarily cross an EU border. The EU is being asked to consider special efforts for Ireland to invest in improved transport facilities to mainland Europe. That is a gesture acknowledging that business relationships will change.

Until the negotiations commence, there is more speculation than factual evidence, but two speculative strands point to areas of concern.

The economy of the Irish Republic may lose important markets in the UK for farm and food products. In contrast, that points to a potential opportunity for Northern Ireland.

The other expectation is that the Irish Republic will attract new investment from English-language banks wishing to stay in the EU but displaced from London.

Northern Ireland groups should now be gathering their evidence and gaining access to the UK negotiators in London, as well as, less formally, building relationships with the Irish officials advising Michel Barnier.

Influencing the negotiations is an emerging challenge.

 

Company report: Heatons (NI)

Heatons (NI) is a wholly-owned subsidiary of an Irish-registered parent company of the same name.

Since November 2015 the group has been a subsidiary of English-registered Sports Direct International plc.

The trading relationship with Sports Direct precedes the formal change in ownership.

Registered accounts for 2014 and 2015 show that business purchases from Sports Direct were over 43% of the final value of Heatons (NI) turnover.

In recent years Heatons (NI) has expanded the number of retail stores in Northern Ireland and the aggregate turnover of these stores has been increasing, although in the year to April 2016 there was a small reduction. The trading results have shown a continuing profitable result in each year.

Operating profit in the most recent year, to April 2016, was just over 9% of turnover.

This was similar to the result in 2015

and an improvement on the outcome in 2014.

After the deduction of interest charges on borrowed funds, including funding through the larger group, pre-tax profits were just over £100,000 lower than the operating result.

Average employment in Northern Ireland in 2015 reached 498 people.

More recently, numbers employed has fallen to an average of 446 in 2016.

The balance sheet value of shareholders’ funds at £17.8m in April 2016 has continued to rise through the retention of most of the post-tax profits in this business.

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