If you live in the Republic – like it or not – you’re subject to a veritable blizzard of economic news. We pick over every minute gyration of the economy; from slips in gross domestic product to upticks in house prices. The Government’s finances are subject to a near-scientific level of scrutiny.
There’s not a week that goes by without a report warning of some potential banana skin up the road. It’s not obvious why this is so. Maybe it’s because the Irish economy has been so successful over the past three decades and plays host to some of the biggest corporate names on the planet.
Maybe it stems from our long and arduous process of becoming economically independent from Britain. Or maybe it’s because the Irish economy is such an inherently volatile place.
The crash and burn of 2008 was one of the biggest of any industrialised country. It was followed by a gruelling austerity project and then one of the strongest periods of growth and job creation on record, brought to a head by the pandemic and a series of unprecedented economic shutdowns.
But contrast the level of news about the South's economy with the paucity of information and data that flows out about the North's. Outside of the odd jobs announcement, there's relatively little about the wider economic trends and virtually nothing about the public finances. And, right now at a seminal moment in the North's economic history – when its trading relations with surrounding jurisdictions have been so uprooted by Brexit – there's a complete blackout.
The UK's Office for National Statistics (ONS) doesn't break out the UK trade numbers by region – at least not on a monthly basis – so we've no read on the fall-off in trade between Britain and Northern Ireland, which has quickly emerged as the chief faultline in the process.
Major headache
We know anecdotally that the introduction of controls on goods flowing from Britain into the North has proved a major headache for companies on both sides. Goods moving in this direction now require a full customs declaration similar to goods moving from Britain to the Republic.
The increased paperwork combined with the strict application of EU “rules of origin” has greatly hampered trade – in some instances alienating firms on the British side from exporting to the North altogether. And there are potentially more barriers to be erected related to EU food safety requirements.
The new – more cumbersome – arrangements appear to have diverted a significant portion of the trade between the North and Britain internally on to the island of Ireland.
Central Statistics Office figures for the first six months of 2021 detail a large pick-up in North-South trade. Sales of goods from the North to the Republic have risen by 77 per cent to €1.77 billion while exports from Republic to the North have grown by 43 per cent to €1.57 billion.
But no one knows, with any certainty at least, what’s happened to the North’s trade with Britain or more precisely the hit being inflicted on the North’s economy from Brexit and to what degree the pick-up in trade with the South is compensating.
One economist has, however, made a stab at it. Esmond Birnie of Ulster University reckons the Northern Ireland protocol has cost the North about £850 million (€991 million).
He arrives at this calculation through analysing the increased cost to Northern Ireland businesses of bringing in goods from Britain. From a survey of existing businesses and some sectoral level data, he puts this at 6 per cent.
Additional checks
“Given that the total flow of goods and materials coming into NI from GB is about £10 billion, the rise in costs is equivalent to a bill of about £600 million annually,” he says.
Birnie also notes that the implementation of the protocol has required an increase in UK public expenditure of the order of £560 million over 2021 and 2022 to fund various schemes to assist traders and additional checks at ports, which works out at about £250 million each year. Taken together, this adds up to £850 million.
“At the end of July, the UK government published a command paper about its policy approach regarding the protocol,” Birnie says.
"In that paper, the Brexit minister Lord Frost and the NI secretary of state conceded that, whatever the original intent of the initial agreement with the EU in late 2019, the actual operation of the protocol had been extremely damaging to NI in terms of higher business costs, disrupted supply chains and less choice to consumer," he says.
Birnie says his research is an attempt to quantify the scale of those costs to the Northern Ireland economy.
We don’t of course know how firms will respond to these higher costs: will they put up their prices? Will they accept lower profits? Will they withdraw from the Northern Ireland market completely?
UK retailer Sainsbury's, for example, is now sourcing products from Spar wholesaler Henderson Group in a bid to fill the gaps in its Northern Irish supply chain caused by Brexit bureaucracy.
The Belfast-based wholesaler is supplying about 300 products to Sainsbury’s, which operates 13 stores in the North. Some of the produce is coming from farms in the South.This would appear to be an example of trade diversion in favour of Northern Ireland and the Republic at the expense of British suppliers.
But this is just one example: what’s happening en masse across the North’s economy is impossible to tell at this stage.
