Part two of a three-part series in which our Business Editor examines the impact of the controversial trade deal
The NI Protocol is leading to business investment in Northern Ireland of a kind unseen for decades, an economist has said.
Andrew Webb, chief economist at Grant Thornton, said the trading arrangement to keep Northern Ireland a single market for goods had provided the sort of fillip to the economy long promised from a cut in corporation tax.
Data is also showing soaring trade from Northern Ireland to the Republic although the long-term reliability of the data has been questioned.
But the protocol has dented the appetite of firms in Great Britain to send goods to Northern Ireland, because it has introduced new checks and documentation.
While no public government record is available on investment attributable to the NI Protocol, Mr Webb said: “I would say there’s a building body of evidence to suggest that the protocol is working for the NI economy.
“That’s from looking at the trade flows from a Northern Ireland perspective and those recent inward investments.”
Figures from the Republic’s Central Statistics Office have shown that north-south exports reached €3.3bn between January and October, an increase of €1.3bn or 63% on the same period in 2020.
But Paul MacFlynn, an economist at think-tank the Nevin Economic Research Institute (Neri), said trade figures from earlier this year which had also shown a big jump in trade had been revised down.
He added: “I think that there is a lot of supply chain adjustment going on in the figures at the moment, so I think they’re still too volatile to pick out a long term trend or shift.
“There has been a significant increase in all-island trade whatever way you look at it, but exactly how big it is and where it is ultimately going over the longer term is still very much up in the air.”
And it was too soon in his view to decide if the protocol had been a good thing for NI.
“I think the problem with the protocol has always been that the downsides are short-term and the potential upsides are long term. It’s almost as if neither side has reconciled themselves to that. I think NI can make a go of the protocol in the long term, but any attempt to evaluate the protocol in the short term will always be majority negative.”
Mr Webb summed up new business projects in Northern Ireland as “the type of inward investment I don’t think I’ve seen, certainly not at that pace, in my career so far”.
He cited 1,000 new jobs being created by Craigavon pharmaceutical firm Almac, a new £8m distribution hub to be set up by chilled food delivery firm PRM Group in Lisburn and a new $200m canning factory by AMP in Newtownabbey.
“Those projects and big chunky numbers are in sectors that we’re just not used to seeing, except in Belfast-centric sectors like ICT and cyber security. But we’re now seeing a different type of inward investment which is more regionally dispersed because it’s typically looking for big footprints.
“It’s a real shift, and the sort of shift that we hoped for through corporation tax but we’re seeing it through the protocol. Some of those inward investments we just wouldn’t have been anywhere near two or three years ago, and now we’re starting to see those in a fairly steady flow so from a business and economy point of view, there’s an increasing body of evidence to suggest that the protocol is working for the economy.”
He said that while he did not think data on north-south trade could yet be fully trusted, it showed “that NI is doing reasonably well out of this”.
But he said there was a “dance” between the economic benefits and how politically palatable the protocol could be to unionism.
“Just because it’s doing well for the economy, there’s no political unanimity — and if it’s not working politically, then can we say it’s working at all? Or is it just going to grind us down and cause ripples in the political situation again?”
He said other factors were also potentiall distorting economic figures, including Covid-19 but that the scale of investment announcements had been encouraging.
“It’s in the type of sector that’s high-value added, bringing decent-paying and regionally dispersed jobs as not everything has to be in Belfast. Now it’s about grasping that opportunity with both hands.”
And he said he did not think the constitutional argument over whether the future of NI lay in a united Ireland or continuing as a part of GB would be answered on economic grounds. “I just think people are just so entrenched in their position that I see it exceptionally difficult to convince enough people that ‘yeah, actually maybe we would be better off, let’s do that’. I just can’t see it. There’s probably a wavering middle ground, but is it big enough to sway a vote one way or another?”
Meanwhile, economist Dr Esmond Birnie of Ulster University, who is opposed to the protocol, said he is sticking by a previous estimate of an annual cost to the economy of around £850m a year. That figure is made up of roughly £250m pa for extra public spending, and costs of 6% on about £10bn of goods imported from GB every year.
And he said there was a middle ground between the protocol and a hard border.
“Some combination of trusted trader arrangements, very flexible definition (by the EU) of goods at risk of moving on from NI into the single market or mutual enforcement by the UK and Republic of Ireland governments would greatly reduce need for physical infrastructure plus hard checks at the border.”
He added: “To the extent that the growth in value of trade is genuine then some of it is undoubtedly trade diversion... So the net gain to either the Northern Ireland or Great Britain economies, or, indeed, the Republic of Ireland economy, may not be as large as it seems.”
But Irwin Armstrong, the founder and head of CIGA Healthcare, who was one of the few businesspeople here to publicly support Brexit, said: “I think we are really on the right track for Northern Ireland. The ability to trade in the UK and the EU is a very powerful tool for local companies and incoming foreign direct investment.”
And he said the protocol affirmed why NI should always wish to remain in the UK. “The opportunity to make NI an economically successful country has been handed to us on a platter due to the ability to trade across Europe.
“We also have the ability to match the south’s new corporation tax rate and when combined with the other advantages then we would have a ‘game changing’ situation, to the detriment of the south. If the people here can be offered good well paid employment openings, a good education system, good healthcare and a system of Government that actually works then why would a majority ever vote for a united Ireland.”
Consultant Michael Haverty said political leanings were influencing how data on north-south trade was interpreted.
But he added: “From an agri-food perspective, there are some significant jumps in the CSO data, and you can certainly see why it’s easier to trade with someone down the road as opposed to someone across the sea where there is a frontier, particularly from a Republic of Ireland perspective.”
As for whether there has been a permanent shift in trade, he said: “My view would be the dial has changed and I think an element of some of that will be permanent. Whether or not it’s as high as some of the percentages we’ve been seeing recently, I do think there has been a shift that’s taken place.” He added: “From a pure trade perspective, there’s a gain there to be had for Northern Ireland.”
Final part on Monday
Michael Cairnduff says that the business he runs with his wife, Lesley, importing Oscar Pet Foods into Co Down, was “alarmingly close to being not viable” because of the Protocol.
“This should be a profitable business, but the costs have increased to such an extent that profitability has disappeared. It cannot continue this way,” he says.
“My fear is that, if the UK does not continue to manufacture within the provenances allowed by European standards, my business could disappear overnight.
“We’re not in profit and we’re not able to pay ourselves for the extra work that we’re doing. Somewhere higher up, they do have to get a grip on this and make it work.”
But he says there were potential benefits to Northern Ireland’s barrier-free trade with Europe under the Protocol.
“Northern Ireland could be a better place if this were implemented properly.”
Because they are derived from animal products, pet food and treats are subject to rigorous paperwork requirements even before they set sail to Northern Ireland and checks from officials at the Department of Agricultural, Environment and Rural Affairs (DAERA) when they arrive here.
But Michael says the checks and paperwork were making life increasingly difficult. Pallets of dog food could now take two weeks to arrive, when before they took a mere four days.
“The checks are becoming ever more onerous. This is what was signed up to and it’s not as if the powers-that-be didn’t know about them,” he says.
While the demands were difficult for him to meet, it was even harder for suppliers in England.
“I can absolutely see why some suppliers decide we’re not going to do it anymore.
“Our administrative costs have gone up by a factor of 10, about 1,000%, Oscar Pet Foods’ administrative costs are up by a factor closer to 3,000%.
“It’s absolutely a crisis.”
“Apply whatever adjectives you want, but I know of several that would be unprintable that I would apply to them.
“Either way, they couldn’t organise a party in a brewery.”