Agreement between the UK and the EU at the end of Phase 1 of the UK’s withdrawal negotiations is welcome and has already offered some comfort to many manufacturers across Northern Ireland. If the agreement holds, we move to Phase 2 where the UK are seeking a critically important ‘transition’ agreement before exiting the EU and then seeking an agreement on new free trade and customs relationship.
Friday’s agreement provides assurance about what the fall-back position will be if no agreement is found in Phase 2 or Phase 3. It commits both the UK and the EU to not place a border across the Irish Sea or across the island of Ireland. This deals with most of the areas which would place barriers to trade east west and north south. Agreement is still needed to ensure that there are no tariffs or how VAT at the border between the EU and the UK can be collected and distributed.
The Phase 1 agreement can hopefully mean we can move on to a more positive conversation not only between the UK and EU, but between business and the politics also. Relationships had become strained and engagements increasingly spirited as it was felt that business was being ignored. Whatever the final withdrawal deal, it will be business which inherits the aftermath so it is critical that business is heard.
The increasing alarm in business was reflected in the results of a survey which Manufacturing NI conducted last week.
As some context, the vast majority of local firms make and sell for the Northern Ireland market only but are impacted by an increase in raw material import costs and the availability of skills. For those who sell to external markets, GB is the most likely destination with firms who export more likely to be our largest employers and those SME’s closer to the Border. The EU remains our most important export market, with sales to the Republic of Ireland dominating.
In our survey, 90% of firms responding were local, family owned SME’s employing less than 250 people.
Frustrations and concerns were clear with almost three quarters of manufacturers saying that Brexit will be negative to their business regardless of the deal. Only 16% said they thought it would be positive and one in ten believing it will have no impact. It is clear that efforts to convince business that the UK outside of the EU will prosper have, so far, failed.
Just 21% of businesses wanted the UK out of the EU’s Single Market and Customs , with 38% hoping the UK as a whole would remain but 41% preferring to have some sort of special arrangement for Northern Ireland either in retaining full membership or being a bridge between the UK and the EU.
Almost half of businesses were most concerned about the cost of tariffs on imports and exports with 39% worried about non-tariff barriers such as customs costs and delays or being blocked out of markets due to regulatory restrictions or differing products standards when the UK leaves the EU.
Half of firms have made no plans or minimal changes to avoid any additional tariff costs from importing or exporting. Only 16% of firms were making plans or investments to benefit from Brexit either by expanding production or investing in sales development in the UK and outside of the EU.
More worrying was more than a third, 38%, are planning on shifting production outside of the UK or by developing their own facilities, making a purchase of creating new partnerships inside the EU.
A quarter of jobs in Northern Ireland are directly or indirectly provided by our manufacturing firms. These are dispersed in cities, towns and townlands close to places where people want to set up home and make a contribution to their local community. Their success is critical if we want a regionally balanced economy and strong local communities, so their voice needs heard in designing what Brexit finally means.
Friday’s agreement offers some reassurance, for now. But, it also presents a chance to be that bridge between the UK and the EU which would make us one of the most attractive investment locations in the world.
A chance to not only have our cake and eat it, but make it too!