UK Premier Rishi Sunak appears close to a deal with the EU to end the wrangling over the region’s unique trading arrangements.
(Bloomberg) — The UK government has never been happy with Northern Ireland’s post-Brexit status.
Boris Johnson’s divorce deal with the European Union handed Northern Ireland an advantage — keeping one foot in the bloc’s single market and the other in Britain’s — that has paid economic dividends, if not political ones. It is the only part of the UK outside of London that has fully recovered output lost to the coronavirus pandemic.
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But the arrangement proved unpalatable to Northern Ireland’s unionists and Brexiteers in the UK’s ruling Conservative Party, who object to the region’s continued place in the EU’s economic orbit.
More than six years after the vote to leave the EU — and under the scrutiny of world leaders including US President Joe Biden ahead of the sensitive 25th anniversary of the peace agreement in Northern Ireland in April — Prime Minister Rishi Sunak appears close to a deal he hopes will finally be the Brexit endgame. The question is, will Northern Ireland hold onto what it already has.
Dark Times
Before the partition of Ireland in 1921, the northern part of the island was by far the most prosperous. But bolstered by independence, the Republic of Ireland has flourished and its economy is now 10 times larger than the part that stayed under British rule.
As in much of the UK, Northern Ireland suffered from the hollowing out of industry especially after World War II, with companies including Titanic-builder Harland & Wolff unable to compete with the rise of lower-cost manufacturing bases including in Asia.
Economic decline formed a backdrop to The Troubles — the sectarian violence that began in the 1960s between nationalists pushing for a united Ireland, and unionists loyal to London. Bombings and shootings informed the world’s impression of Northern Ireland, starving it of investment.
“You’d see the pigeons first,” recalls John Martin, a civil engineer during The Troubles who is now head of the Northern Ireland Road Haulage Association. “You’d see them suddenly taking flight. And then within about a second you’d hear this massive explosion.”
Fresh Start
Since the 1998 Good Friday Agreement effectively ended the violence, Northern Ireland has projected a different image, from the filming of HBO’s “ Game of Thrones” to the emergence of a professional and financial services sector driving the regeneration of Belfast city center.
The 2016 Brexit vote might have been a major setback. Though a majority in Northern Ireland opted to stay in the EU, the split raised the prospect of a return to border posts and checkpoints, disrupting the flow of people and goods that underpinned the region’s peace accord.
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Instead, the EU and UK thrashed out a hybrid settlement, the Northern Ireland Protocol, effectively keeping the region in both. The effect on trade was visible almost immediately.
“A blind man on a galloping horse can see the opportunity the protocol presents,” said Stephen Kelly, chief executive of industry body Manufacturing NI.
Northern Ireland’s exports rose in both directions in 2021, the most recent data for which the region’s statistics body has data and the first year after the protocol took effect. The value of goods sent to the Republic of Ireland rose to £5.2 billion from £4.5 billion in 2019, while exports to Great Britain increased to £12.8 billion from £10.8 billion.
More recent data from Ireland’s Central Statistics Office showed the country’s imports from Northern Ireland rose 32% in 2022 from a year earlier.
“It’s not rocket science,” said Gareth Hagan, chief executive of Belfast-based trade and investment consultants OCO Global. “It’s become more difficult to get goods from Great Britain into the Republic of Ireland, so Northern Ireland picks up a bit of the slack.”
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The new rules mean companies like Ardagh Metal Packaging, a New York-listed manufacturing of drinks cans, can take advantage of cheaper labor and real estate in Northern Ireland while exporting to both the UK and the EU, Manufacturing NI’s Kelly said.
Ardagh’s new $200-million plant outside Belfast is due to begin operations this year, while one of its customers, the world’s third-largest Coke bottling company Coca-Cola HBC, has also announced a £17 million investment in the local economy.
Changing Skyline
Belfast’s skyline illustrates how things have changed since The Troubles. In Titanic Quarter, glass offices spring out of the old docklands. One of Europe’s largest urban waterfront regeneration projects, it is occupied by more than 100 companies including Microsoft and IBM.
Citi’s arrival eight years after the peace accord is seen as a “snowball moment” in the bank, according to Leigh Meyer, its Belfast site head and one of the original movers. Now one of the region’s largest private employers with 3,700 staff, it plans to add more. He also expects Belfast’s 15,000-strong financial sector to triple in the coming years.
In Belfast’s old linen quarter, Deloitte is relocating two of its offices into a converted warehouse as part of plans to near-double its local headcount to 2,000 from 1,200 by 2025. There is “no doubt” clients are waiting for the protocol wrangling to end before making investment decisions, said Jackie Henry, a Belfast native and managing partner at the firm.
The confidence is showing up in soaring house prices, albeit from a low base — Northern Ireland is still the cheapest region in the UK to buy. Rents have also gone up 27% since the Brexit vote, compared to the UK average 13%.
Even the two giant cranes — Samson and Goliath — at the Harland & Wolff shipyard now represent business rather than economic decline: the company rescued from administration in 2019 has a new Royal Navy contract. It came just in time to transfer skills from the shipbuilding “gray-beards” to a new generation, said CEO John Wood.
Divisive Protocol
But ideological opposition to the protocol has left Northern Ireland without its devolved government after the Democratic Unionist Party quit in protest a year ago. DUP leader Jeffrey Donaldson said after meeting Sunak on Friday the UK government had made progress in EU talks but that “more work is required” to meet its demands.
Brexiteers Face Grim New Reality as Sunak Nears Northern Ireland Deal
“There are still challenges to work through,” Sunak said Saturday at a security conference in Munich. “There is an understanding of what needs to be done.”
Sunak’s Conservative Party is also still tearing itself apart over the protocol, which both Johnson and his short-lived successor, Liz Truss, planned to rip up. Some Tories argue it disrupts trade between Northern Ireland and the rest of Britain, and that to grant the European Court of Justice authority over disputes in Northern Ireland governed by EU law is a betrayal of Brexit. Johnson called Sunak’s new deal a “great mistake,” a person close to the prime minister told the Telegraph newspaper Saturday. Johnson’s intervention could signal a growing Tory rebellion against the new plan, the newspaper said. “Well, Boris is being Boris but I wouldn’t say this is a completely unhelpful intervention and I think, as I say, the prime minister will acknowledge that having the Northern Ireland Protocol Bill there, having the work that the former prime minister did, has helped us get where we are but it’s always been our preference to try and have a negotiated settlement and that is what everyone is working to,” Penny Mordaunt, the leader of the House of Commons, said in an interview with Sky News Sunday.
According to Martin at the Road Haulage Association, objections to the protocol in Northern Ireland do not only come from unionists.
While it has been a boon to trade and investment, the protocol has put up barriers for some businesses, from garden centers to chip shops and supermarkets. That’s even with grace periods that mean the rules haven’t yet been fully implemented.
“We’re seeing trade diversions, we’re seeing lack of choice, we’re seeing shortened shelf lives,” said Roger Pollen, head of the Federation of Small Businesses Northern Ireland.
According to Esmond Birnie, senior economist at Ulster University and a former Ulster Unionist Party politician, the region’s post-pandemic rebound is misleading. Northern Ireland took a smaller hit due to its relatively large public sector, which carried on through the lockdowns, he said.
The latest economic data also clouds the picture. Just as in the rest of the UK, Northern Ireland has faced soaring inflation since the pandemic and Russia’s invasion of Ukraine, and output contracted in the second and third quarters.
Among those focused on business, though, optimism isn’t hard to find.
Pollen said the advances of the last few years will be only the start of the region’s revival, so long as politics doesn’t get in the way. “We’re on the cusp of something great here,” he said.
(Removes portion of Citigroup interview which didn’t adhere to our editorial standards.)
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