The impact of the NI Protocol (together with the TCA) was always going to be sub-optimal to full membership of the EU single market and customs union and it will present both challenges and opportunities, writes Johnny Hanna, Partner in Charge of KPMG's Belfast office.
Businesses will need to assess the impact based on their individual circumstances and tailor their Brexit response appropriately.
With the notable exception of additional complexity for goods imported from GB, businesses established in Northern Ireland will benefit from a very favourable trading regime in relation to goods relative to similar businesses established in either the EU or GB. For example, unlike the position for GB, NI businesses will, in many cases, be able to trade as before with the EU, with continuing tariff free access, no customs procedures and no paperwork. Similarly, unlike the position for EU businesses (including Ireland), NI businesses will in most cases, continue to sell into the GB market without any customs procedures or paperwork. This will be a significant benefit to the many thousands of businesses in Northern Ireland who trade primarily across the island of Ireland, with the EU and those who sell into the GB market.
For NI businesses importing goods from GB (and for the relevant GB suppliers themselves), there is unfortunately a lot of complexity to digest in relation to the new customs rules and procedures, in particular the “at risk” test and the rules of origin criteria. These will need to be considered in detail to determine whether a zero customs duty outcome applies or whether there may be eligibility to claim a waiver for tariffs which might otherwise have been payable. The position will be dependent on a range of factors (see our detailed commentary on the Protocol).
Given that many operational aspects of the Protocol and the TCA itself were not agreed until the eleventh hour it was an impossible task and unrealistic to expect businesses to be adequately prepared. Even with various grace periods and a light touch approach taken on some matters, this has led to disruption for many businesses over recent weeks as they get to grips with this new regime in real time.
If NI businesses can get access to EU FTAs with third countries (which is not provided for currently in either the Protocol or the TCA) it will greatly assist the growth of the all-island economy, with its closely linked supply chains, and also help promote further export opportunities for businesses across the island. For that reason we expect Businesses and industry representatives to continue to lobby for this access with the Government in Ireland, the UK and at EU Commission level.
While there will be challenges ahead for existing businesses in relation to imports from GB (including when the initial grace periods and phased introductions expire) and it is too early to be definite on the potential medium to long opportunities for Northern Ireland, we expect there will be opportunities to attract new foreign direct investment as investors considering setting up in either the UK or EU weigh up the benefits of establishing new businesses in Northern Ireland in order to avail of its unique position as a frictionless gateway to both the UK and EU, while also offering export growth opportunities for existing NI businesses.
If you have any queries on how Brexit will affect your business, please get in touch with our dedicated Brexit Response Team.