The Northern Ireland Protocol has created a “feast or famine” economy in the region with some businesses struggling while others thrive, a parliamentary report has found.
A House of Lords committee examining the post-Brexit Irish Sea trading arrangements found that companies involved in trade with the rest of the UK were being hampered by added red tape whereas those more reliant on doing business with Ireland and the wider EU were benefiting.
The committee stressed an urgent need to resolve the issues created by the protocol and called on the EU and UK to reengage in negotiations.
The committee’s report comes amid a breakdown in relations between London and Brussels over the UK Government’s controversial plan to pass legislation at Westminster that would empower ministers to unilaterally rip up the bulk of the protocol.
Peers said the two sides needed to rebuild trust and repair damaged relationships and recommit to finding an agreed resolution. They said a “mutually agreed solution” was the best outcome as they urged compromise.
The protocol was agreed by the EU and UK in 2019 as a way to avoid a hard land border on the island of Ireland.
It did do so by moving regulatory and customs processes to the Irish Sea, creating new checks on goods being shipped from Great Britain to Northern Ireland.
While businesses involved in moving GB goods into the region have been hit by added bureaucracy, those Northern Ireland businesses involved in selling into the EU can do so without restriction, giving them a potential advantage over competitors in the rest of the UK.
Lord Jay of Ewelme, who chairs the Protocol on Ireland/Northern Ireland Committee, said: “The committee’s engagement with businesses trading in and with Northern Ireland has demonstrated that, while much uncertainty remains, the economic impact of the protocol is gradually becoming clearer.
“The situation was described to us as ‘feast or famine’, whereby businesses able to take advantage of the protocol benefit, while those dependent on trade with Great Britain lose out.”
In preparing its report, the committee took evidence from the five largest parties in the Northern Ireland Assembly, the UK and Irish governments, business representatives, academics and civic society representatives.
Peers said the sea border had created increased bureaucracy, resulting in added pressures on companies’ staff resources, increased costs and longer delivery times.
They said the arrangements had a “disproportionately negative impact” on small to medium sized enterprises (SMEs).
The committee said there remained a concern that businesses in GB will ultimately decided to withdraw from the Northern Ireland market.
Examining those businesses that are benefiting from the protocol, the committee highlighted the dairy and meat processing industries, which are dependent on complex cross-border supply chains on the island of Ireland.
They said those sectors would be damaged if access to the EU single market was lost.
The committee identified several solutions that have been advocated by the business community in Northern Ireland.
Those include a call for “proportionality” in the application of the rules and controls on Irish Sea trade and differential treatment for GB goods whose end destination is Northern Ireland, in comparison to those destined for onward transportation into the EU.
One of the UK’s preferred resolutions is the creation of a dual regulatory system whereby businesses could choose to either comply with EU product standards or UK rules.
The committee said there was “widespread concern” among business about the practical feasibility and implications for cross-border supply chains of this proposal.
The report is a follow-up to an introductory report published by the committee 12 months ago.
Lord Jay added: “Business representatives have put forward a number of mitigations and solutions to ease the practical impact of the protocol, and many of these proposals remain unchanged since the Committee’s July 2021 introductory report.
“At that time, we stressed the need for dialogue to resolve the issues arising under the protocol in the interests of the people of Northern Ireland. It is a matter of deep regret that, in the intervening twelve months, the state of political dialogue in relation to the protocol has deteriorated further.
“There is an urgent need for a reset of dialogue. We therefore call on the UK and the EU, together with the political parties, and stakeholders in Northern Ireland, and the Irish Government, to make a renewed commitment to work together to put Northern Ireland’s interests first, participate together in constructive engagement, rebuild trust and engage in effective relationship-building.
“As one of our witnesses told us, those who negotiated the Belfast/Good Friday Agreement were able to do so because of their ability to appreciate the perspectives of others and willingness to work together and take risks to achieve a common goal despite historic differences. Such a courageous approach is needed now.”
