The Brexit impact on Ireland’s trade: there hasn’t been one

Ireland was always presented as the fall guy in the Brexit equation, collateral damage in the UK’s messy divorce from the EU. Because of the political risk posed to Northern Ireland and because of the country’s long-standing trading ties with the UK, we had the most to lose of any EU member state. Europe’s negotiating position reflected as much.

The news cycle here was a veritable blizzard of reports and warnings about the threat to the economy, particularly to the food sector. Enterprise Ireland and others warned businesses to Brexit-proof themselves by diversifying away from the UK.

There were even predictions that Ireland might suffer a greater economic hit than the UK itself.

But guess what? There hasn’t been a hit. Central Statistics Office (CSO) figures show trade in goods with the UK (exports and imports), after an initial wobble, has risen steadily since Brexit.

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As of September this year, goods exports to Britain – on an annual basis – were up by €2.4 billion to nearly €13 billion while imports were up by €7 billion to €17.5 billion. Even food exports, the chief risk, were up by €400 million to €2.86 billion for the nine-month period. Britain as a share of total exports remains at 8-9 per cent, the same as it was in 2021 and 2020.

“This reliance on the British market remains steadfast, notwithstanding the current economic uncertainty in the UK at present,” Janette Maxwell, director in tax at Grant Thornton Ireland, said recently.

The wobble seen in the early part of 2021 – it lasted about two months – was explained by firms stockpiling goods in the run-up to the UK’s formal exit.

If you hadn’t heard of Brexit, there isn’t much in Ireland’s trade numbers to tell you something big has happened. In fact, you would be hard pushed to see any major trend other than Ireland’s ever-increasing pharma exports.

In contrast, the UK’s trade with the EU has been damaged. Research shows it is down by 15-20 per cent. Former British prime minister Boris Johnson had said there would be “no non-tariff barriers to trade” as a result of the EU – UK’s free trade deal but this has proved, like many of Johnson’s pre-Brexit promises, entirely off base.

UK firms have faced higher import costs because of the weaker pound, longer lead times to source inputs, difficulties administering EU rules on VAT, and the inconsistent application of customs rules on the EU side.

A recent British Chambers of Commerce survey indicated that SMEs in the UK are now facing “structural” rather than temporary problems as a result of Brexit, with more than half (56 per cent) saying they were struggling to adapt to the new rules for trading goods.

On the EU side, the increased red tape seems to have deterred many businesses from trading with the UK altogether.

Perhaps because businesses here are further away from mainland Europe or because they are more tied into the UK economy, simply ceasing to trade with our nearest neighbour wasn’t an option or at least not an easy option. Northern Ireland’s unique in-out position has also provided a workaround.

As a result, some trade between the Republic and Britain has been displaced by trade between the two jurisdictions on this island.

Under the Northern Ireland protocol, trade in goods with Britain is subject to customs checks. However, while Northern Ireland remains within the customs territory of the UK, it is simultaneously within the EU single market for the movement of goods. This means goods moving between Northern Ireland and the Republic are not subject to customs checks.

[ The Irish Times view on Britain after Brexit ]

Some British-based traders have apparently established bases in the North to facilitate trade with the Republic, while some companies in the Republic have replaced imports from Britain with imports from the North.

Either way, Ireland’s has had a relatively untrammeled path through Brexit, for now at least (there are potentially more trade barriers to be erected in the form of import checks on the UK side). Equally, the notion that Ireland might fare worse than the UK seems ludicrous.

Not only has trade been damaged but the UK’s new trade deals with other countries including Australia, New Zealand and Japan are proving less advantageous.

The Japanese deal was criticised earlier this year after UK government figures showed exports to that country in goods and services had fallen in the past year.

[ EU to beef up Brexit deal enforcement powers with trade tariffs ]

Research by the London-based think tank Centre for European Reform (CER), published last week, suggested Britain’s economy was 5.5 per cent smaller than it would have been if the country had remained inside the EU or £33 billion (€37 billion) worse off in terms of lost trade and investment.

“There is a gap between the things politicians want to say about Brexit and what the data tells us. I think it’s become impossible to argue that Brexit has not hurt the UK economy,” John Springford, deputy director of the CER, said.

Boris Johnson is gone but the negative impact of Brexit for the UK will remain for a long time to come.