Business

A New Year's resolution we can all agree on - UK avoiding ‘no deal' Brexit

Leaving the EU without a deal on March 29 would be damaging for Northern Ireland, according to Angela McGowan

I SUPPOSE it was inevitable.

During Christmas I was asked the dreaded question: “What happens next with Brexit?”

After toying with the same less than diplomatic answer offered by the former Chancellor of the Exchequer on Rob Rinder’s Good Year, Bad Year, I replied: ‘avoid no deal’.

This is not yet guaranteed. That’s why, shortly before Christmas, the CBI united with other major UK business groups to call for UK politicians to prevent a disorderly ‘no deal’ Brexit.

Unfortunately, it is necessary to remind ourselves precisely why leaving without a deal on March 29 would be so damaging, particularly for Northern Ireland.

Broadly speaking, the region will be hit with the same UK-wide implications of no deal, such as interruptions to data and hindered access to vital EU supply chains.

Having the UK’s only land border with the EU creates a set of serious specific issues that threatens both peace and prosperity. Any breach of the spirit of the Good Friday Agreement risks walking back two decades’ worth of social, economic and political progress. In short, for the island of Ireland, leaving the EU without a deal would be an affront to reason.

Businesses trading with the Republic of Ireland and the rest of the UK would face significant disruption. Under no deal, the EU would be legally obliged to carry out checks on lorries and ships coming from the UK, impacting Northern Ireland’s trade with the region’s main export partner, Ireland.

Some 177,000 HGVs and 208,000 light vans cross the border each month. If the EU applies third country controls on HGV traffic crossing the border at Newry alone, two-minute checks could result in a lorry queue up to 14 miles long.

The Freight Transport Association has estimated that a Heavy Goods Vehicle costs £1 per minute to operate. So every minute lost in customs checks is an additional cost on business.

Now consider that more than half Northern Ireland businesses exporting goods and services to Ireland employ fewer than 10 people. Under a no deal, small firms with no experience of trading outside the EU Single Market would have to implement new trading processes, which will come with significant costs - hurting competitiveness and discouraging them from continuing to export, a key driver of productivity growth, the only sustainable route to higher wages and living standards.

So instead of investing in R&D, increasing competitiveness and creating jobs, firms will be compelled to spend vast sums on compliance and bureaucracy.

What’s needed is a comprehensive agreement on customs and rules to ensure the border works smoothly and legitimate businesses are protected.

Worryingly, existing differences in VAT and excise duties have already led to smuggling at the Irish border, with fuel smuggling and laundering in Northern Ireland alone estimated by Her Majesty’s Revenue and Customs in 2013 to cost the UK £70m in lost revenue per annum. A hard border would result in greater incentives for organised criminals – often with links to paramilitary groups – to turn to smuggling.

Let’s remember it’s not just businesses that would be hit by no deal in Northern Ireland. The region’s educational institutions will become less attractive if they cannot access international skills for academic teaching and research. They will also lose out financially of they cannot participate in cross-border research projects. As international students are estimated to contribute £170m to Northern Ireland’s economy, any decline will have a wider economic impact on retailers and the housing market.

Then there’s energy. Northern Ireland and the Republic of Ireland have shared a wholesale electricity market since 2007. This all-island approach has delivered proven benefits for consumers across the island including increased competition, efficient use of renewables, lower costs and improved security of supply. Yet consumer costs could rise in Northern Ireland as a result of a no deal scenario, hurting people least able to afford it, from lower income families to pensioners.

The current arrangement is underpinned by European Union law, so a ‘no deal’ Brexit risks the necessary continued policy alignment and legal certainty underpinning the Single Electricity Market. Failure to find agreement will lead to concerns about security of supply as Northern Ireland currently relies on accessing excess electricity generated in Ireland.

All told, ‘No deal’ Brexit would mean a lost decade, stifling Northern Ireland’s potential, and leaving the region less competitive, productive and prosperous for years to come. It’s also worth remembering that the impact of a no deal Brexit cannot be treated in isolation.

Firms are already frustrated by the inability of policymakers to articulate an economic vision for the region in the absence of an Executive. There’s been no progress on tackling growing skills shortages, poor infrastructure, unreformed business rates, a lower rate of Corporation Tax, an improperly applied apprenticeship levy, or education reforms.

Failure to address Northern Ireland’s rising economic competitiveness deficit, combined with the challenges arising from a no deal Brexit, will make it harder for businesses to consider investing in Northern Ireland. Businesses will, in the end, vote with their feet.

For all these reasons, let us agree that for the sake of continued peace and prosperity across the island of Ireland, now Christmas is over, the best New Year’s resolution MPs can make is to avoid no deal.

:: Angela McGowan is director of CBI Northern Ireland. Follow her at @angela_mcgowan

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