Ten years after the United Kingdom voted to leave the European Union, Northern Ireland’s economy presents a complex picture, marked by a unique trading arrangement that grants it dual access to both EU and Great Britain (GB) markets. While some sectors have benefited significantly, others grapple with new trade frictions, leading to a performance that, on balance, has outperformed the UK average on certain key metrics, though the narrative is far from straightforward.
A Tale of Two Port Towns
The divergent economic impacts of Brexit are starkly illustrated in two Northern Ireland port towns. In Larne, garden centre owner John Shannon faces an unwelcome reality: a £387 ‘export charge’ levied by his supplier simply to bring roses in from Great Britain. This charge is a direct consequence of the new customs procedures required for goods entering Northern Ireland from GB. Conversely, in Warrenpoint, food manufacturer Brian Reid of Deli Lites has witnessed a different outcome. ‘Off the back of the Brexit vote, we picked up a lot of customers who wanted to source on the island of Ireland,’ Reid stated, highlighting how the altered trade landscape created opportunities for local businesses.
Northern Ireland’s Special Brexit Deal
Northern Ireland’s unique position stems from a specific Brexit arrangement designed to avoid a hard border on the island of Ireland. This deal effectively keeps Northern Ireland within the EU’s single market for goods. Consequently, goods originating from Northern Ireland face no new checks or controls when entering the Republic of Ireland or the wider EU. Furthermore, the UK government guaranteed continued unfettered access for Northern Ireland goods into the rest of the UK. This ‘dual market access’ has been lauded by some, including then-Prime Minister Rishi Sunak, who described Northern Ireland as ‘the world’s most exciting economic zone’.
However, this arrangement has simultaneously created a de facto trade border for goods moving from GB into Northern Ireland. Customs paperwork and inspections are now mandatory, particularly for food products, impacting businesses that rely on GB supply chains. These measures, implemented in January 2021 and subsequently modified by the Windsor Framework in 2023, have introduced significant friction.
The Practical Impact on Businesses
Small and medium-sized enterprises (SMEs) heavily reliant on GB supply chains have borne the brunt of these new trade barriers. Businesses like John Shannon’s garden centre have experienced increased paperwork, unexpected handling charges, and, in some cases, the withdrawal of GB suppliers altogether. Shannon’s personal efforts to mitigate these issues include driving his van to England to collect goods that hauliers are reluctant to deliver due to the administrative burden. He has also shifted some of his purchasing to the Republic of Ireland, noting an improvement in the offerings from local plant nurseries.
For companies like Brian Reid’s Deli Lites, the dual market access has been a significant boon. The increased complexity and risk of sourcing short-life food products from GB for retailers across the island of Ireland led many to seek local suppliers. ‘We picked up a number of contracts with retailers on the back of that which has been brilliant for the company,’ Reid commented. He added, ‘We have the best of both worlds, we’ve managed to take advantage but it hasn’t come easy and there are lots of challenges we’ve had to work through.’
Economic Performance: Data and Analysis
Official data on Gross Value Added (GVA) from the Office for National Statistics (ONS) reveals a nuanced picture. From the 2016 referendum up to 2023, Northern Ireland’s economy grew by 11.5% in real terms, outperforming the UK national average of 8.7%. However, in the immediate post-Brexit implementation period (2021-2023), NI’s growth of 4.4% was marginally slower than the UK average of 4.7%. Looking at 2023 alone, NI showed stronger performance with 1.5% growth, significantly ahead of the UK’s sluggish 0.3%.
Company payroll data from HMRC further supports a positive trend for Northern Ireland since 2021, with payrolls growing by nearly 10% compared to a UK average of around 7%. While the dual market access for goods is a key feature, analysis of the Index of Manufacturing shows a more recent strengthening. After a slight outperformance in the initial transition period (2021), NI manufacturing experienced a contraction in 2023, but has since recovered strongly with a 9% output surge, contrasting with flat industrial production across the UK.
Economy Minister Caoimhe Archibald pointed to export data as evidence of the dual market access’s impact. Since the Windsor Framework’s implementation in March 2023, Northern Ireland’s exports have increased significantly, while British exports have fallen. Exports to the EU specifically from NI rose by over 10%, while they fell by over 16% from Britain, which Archibald described as a ‘real, strong indicator’.
Beyond Brexit: Other Economic Drivers
It is crucial to note that Northern Ireland’s economic growth over the past decade has also been significantly driven by the business services sector, which is not directly covered by the special Brexit deal. This sector, encompassing areas like law, consulting, and accountancy, has expanded by 24% in real terms over the decade, well above the UK average of 15%. This growth in services, which constitute the majority of the economy, reflects broader structural shifts and the establishment of ‘near-shore’ operations by global firms, such as Herbert Smith Freehills Kramer since 2011 and Citi since 2004.
Economists also attribute part of Northern Ireland’s stronger performance to a delayed recovery from a deeper and longer recession following the 2008 financial crisis and property crash. This meant that Northern Ireland was likely to experience ‘catch-up growth’ independently of Brexit’s specific impacts.
The decade since the Brexit referendum has thus presented Northern Ireland with a unique economic experiment. While the dual market access has undeniably created opportunities, particularly for manufacturers and food producers seeking to serve the island of Ireland, it has also imposed new costs and complexities on businesses trading with Great Britain. The overall economic performance, outperforming the UK average on several measures, appears to be a confluence of this special trading arrangement, a robust services sector, and a post-recessionary recovery, rather than a singular Brexit dividend.
