A MAJOR think thank is urging Northern Ireland politicians to abandon calls for the north to remain in the single market post-Brexit.
The Nevin Economic Research Institute (Neri) said elected representatives should instead throw their lot behind pushing for the region to stay in the Customs Union following the UK's exit from European Union.
But it admitted the proposal could pose "significant political problems" in that it could mean a border between Northern Ireland and the rest of the UK, rather than between the two Irish jurisdictions.
However, following the publication of the institute's latest economic observer, it said the entire UK remaining in the customs union was among the best-case scenarios resulting from a hard Brexit.
Unlike the single market, membership of the customs union does not require total freedom of movement of people but would allow goods to pass with minimal restriction.
Neri argued the customs union is "possibly more important for Northern Ireland as it will become a more immediate and visible barrier to trade on the island of Ireland in the event of a hard Brexit".
And it said designs on a soft border - or digital customs frontier - between the north and the Republic post-Brexit were "somewhat detached from reality".
"While Norway is in the single market, it is not in the customs union and therefore the border between Norway and Sweden requires customs posts," the report said.
"If Norway and Sweden, both members of the single market, could not find a borderless solution, why would it suddenly be possible for the island of Ireland?"
It said that scenario made a "stronger" case for the north remaining in the customs union rather than the single market "even without Great Britain".
"In this scenario, the part of the UK that leaves the customs union (presumably GB) would have to agree a free trade deal with the EU to enable tariff free trade between the GB and NI," it said.
"The only catch would be that NI would have to impose rules of origin on goods imported from GB and vice versa.
"The benefit though is that customs checks at sea or air ports are less cumbersome or trade inhibiting than those on land borders."
But Neri said the option would likely cause problems among politicians in the north - who are not yet unified on how to approach Brexit.
"While it is theoretically possible, there are significant political problems with this option," it said.
"Many politicians in NI may take issue with a deal that erects a small barrier to trade with GB to ensure the absence of one with ROI."
No matter how it is set up, Neri said a hard Brexit was "likely to be more economically disruptive for Northern Ireland (than Britain)".
"Remaining within the single market and most importantly the customs union would be the optimal situation for NI," the report said.
"The Northern Ireland executive must recognise the impact that Brexit has had on the NI economy already and prepare for the implications of what is to come."
