The Freight Transport Association (FTA) has responded with concern to conclusions by Northern Ireland’s civil service (NICS) in a data paper on the province’s likely trade and investment prospects following a no-deal Brexit, calling such an outcome “unacceptable” for logistics businesses.
Prime ministerial candidates Boris Johnson and Jeremy Hunt have both stated their willingness to push ahead with a no deal Brexit in the event that no further agreement with the EU can be reached, the current deadline for which is 31 October.
They have also both apparently ruled out the inclusion in any fresh agreement of controversial Irish border ‘backstop’ arrangements, which would tie the UK in to EU economic regulations indefinitely in the event that future UK/EU trade arrangements failed to maintain an open border – and which formed a key tenet of outgoing prime minister Theresa May’s deal with the EU, rejected repeatedly by MPs.
But in its paper, NICS warned that a no-deal Brexit would have a “profound and long-lasting impact on the economy and society”, due to “material business failure” as well as changes to everyday life and border frictions, including for road transport operators.
“22 per cent of vehicle crossings and 35 per cent of people crossings are for an economic purpose, for example commuting to work or the delivery of goods,” said NICS.
“The challenge and in the context of no deal will be to distinguish between the purpose of trips for that sheer volume of cross border movements, identifying those which involve an economic or regulated purpose from those that do not…
“For instance, recent data shows that LGVs alone make up 11 per cent of total traffic movements back and forth across the border at 15 of the main border crossings between NI and Ireland. For that category of vehicles it will be difficult to know if their purpose of journey is for leisure or for trade/work purposes without any physical checks.
“The data indicates that there is widespread use of groupage, with agents and HGVs being the predominant means of moving high frequency low value exports to Ireland.
“The prevalence of groupage will add a further complication to the transport of goods in a ‘no deal’ scenario, as if there is an issue with the customs documentation or regulatory checks for any of the products, delivery of the entire load would be delayed.
“As well as delays that may arise from customs or regulatory procedures, there are potential barriers to providing transport and logistics services in the EU in a no deal scenario. In a no deal exit, NI hauliers would need an ECMT permit to transport goods into Ireland or other EU countries.
“Hauliers can continue to use EU Community Licenses until 31 December 2019; current guidance is that in the event of ‘no deal’ after that date, ECMT permits will be required. There are a limited number of these permits available for the UK, and NI hauliers received 15 per cent of the initial permit allocations.”
The paper continued: “There have been early commitments that the Common Travel Area would continue even in a ‘no deal’ scenario.
“However, the potential for checks on commercial traffic, from either jurisdiction, clearly has implications for how to practically separate and identify economic related cross border movements from non-economic related journeys when the overall level of movements are so huge, and when the type of vehicle will not always a reliable indicator of purpose.”
The report also estimates that increased trade restrictions resulting from no deal could result in a £120 million annual economic contraction.
FTA Northern Ireland policy manager Seamus Leheny said the report reiterated what the association had been warning for months: namely, that “a no-deal Brexit could be a disaster” for logistics in Northern Ireland, and for the wider business community.
“Northern Ireland’s businesses rely on free access to customers in both the UK and EU, which would be severely curtailed by a no deal Brexit, and the resulting delays, costs and disruption would render the nation’s businesses less competitive to customers,” he said.
Leheny added that the report demonstrated how the imposition of EU tariffs and non-tariff barriers would severely restrict NI’s continued export market to Ireland for a wide range of goods and services, with NICS estimating that the reduction in trade in a no deal scenario could reduce NI’s exports to the republic by up to £180 million per year.
“With more than 4.8 million freight vehicle movements across the Irish border alone every year, a no deal outcome to Brexit could have a devastating impact on the trading environment and, in turn, the logistics sector in Northern Ireland, and further afield,” he warned.
“Our supply chains are complex and interdependent and support every level of the country’s economy, from food production and industrial manufacturing to the supply of medicines. The checks which could be implemented on goods arriving or departing in NI would be hugely disruptive to both businesses awaiting deliveries and to the end users, who will face delays, disruption and rising costs.
“Agri-food products such as livestock and raw food ingredients could be subject to checks at the border, yet there is still no agreement on what form these checks would take, how and most importantly where they would be made.
“And the loss of EU workers, forced to return to their country of origin by new residency laws in the face of a no deal Brexit, could be devastating for a sector like logistics, which relies on their skilled labour to keep vehicles moving and stocks of goods and raw materials in the right place at the right time.”
He continued: “Northern Ireland has always relied on trade to keep its economy buoyant, yet the NICS report makes it clear that a no deal Brexit would cause economic contraction and a loss of confidence both domestically and from overseas customers.
“With less than six months until the revised deadline for the UK’s departure from the EU, FTA is urging politicians to abandon the rhetoric around a no deal exit and start urgent work towards securing a deal which will work for the industries in Northern Ireland that rely on trade for their continued success.”
FTA has also criticised proposals by the Alternative Arrangements Commission (AAC), chaired by MPs Greg Hands and Nicky Morgan, which is consulting with business on the future of cross-border trade and potential backstop avoidance measures.
“The AAC interim report discusses the potential for a single Sanitary and Phytosanitary (SPS) Zone for the UK and Ireland after Brexit, but this is simply unrealistic and raises the prospect of more problems in the future should the UK diverge from EU SPS regulations,” said Seamus Leheny.
“And without the resources or infrastructure to accommodate additional checks and tariff payments at the border, the onus for implementing the changes will fall on businesses already hindered by uncertainty and indecision over the future trading arrangements under which they will be expected to operate.
“Finding a solution to the challenge is not a simple one, as recognised by Mr Hands himself, but the Commission owes it to Northern Irish businesses to work to find one.
“The AAC report highlights the potential for Special Economic Zones (SEZ) within Northern Ireland and centred along the border regions. However, these would only serve to create new borders, barriers to trade and new formalities while also requiring the agreement and consent of the EU; these are not the solution to the predicament of Brexit and the border in Ireland.
“FTA’s response to the AAC is clear: keep Ireland’s border frictionless after Brexit to protect the regional economy and the thousands of jobs which currently rely on the freedom of movement for goods and services on an all-island basis.”