Brexit transition period
Londonderry Chamber briefing paper
Despite the emergence of coronavirus as a huge threat to businesses in the North West, Brexit still looms.
Given the immense challenge that COVID-19 is presenting, local businesses have little to no capacity to deal with a Brexit crisis and the uncertainty it brings.
With six months remaining until the Brexit transition period ends, and no willingness from the UK to extend the transition period, urgent clarity and technical certainty is needed over how the UK Government intends to implement the Northern Ireland Protocol and what Brexit will mean in practice for North West businesses.
The Chamber has several outstanding concerns across a range of issues, including cross-border workers, skills, supply chains, and ability to trade seamlessly.
Lack of capacity
Since March, the North West business community has, naturally, prioritised responding to the sudden and severe shock of coronavirus over other issues. This leaves little to no capacity, resources, finances, or energy to commit to dealing with the impending impact of withdrawal from the EU.
Without targeted UK Government and NI Executive support, local businesses – of all sizes – will be unable to cope with the upheaval. This support needs to come in the form of an education campaign to train business owners and communicate to them exactly what Brexit means in practice.
The UK Government confirmed on 20 May that there will be new checks on some goods entering NI from the rest of the UK. This means increased costs, increased paperwork, and increased barriers to doing business. These costs need to be mitigated through government grants and compensatory measures.
Government support must also be provided in real financial terms.
Cross-border workers have been seriously disadvantaged since the Brexit vote. As a border community, companies in the North West hire Republic of Ireland residents given the seamless freedom of movement of workers, goods, and services. Since June 2016 however, Republic of Ireland residents have experienced real term decreases in their wages. With
mortgages paid in euros and wages paid in sterling, some workers have been seriously affected by the pound’s currency drop.
As such, companies have reported being unable to attract, develop, and retain ROI cross-border workers, leading to a mini brain drain in the North West. For a region which already suffers from being unable to retain young people who study and enter employment elsewhere, this exacerbates an existing skills and workforce shortage.
From a wider social and everyday point of view, any impediment to cross-border travel or livelihoods would be simply unacceptable and unthinkable for a community which exists on both sides of the border. For many in the North West, the border does not exist as a traditional border and their daily lives are dependent on it remaining seamless, frictionless, and effectively invisible.
Manufacturing supply chains
Many Chamber members who manufacture goods and products rely on cross-border supply chains. Before it is finished, a product may cross back and forth across the border several times. More clarity is needed on rules of origin if parts of the supply chain are in the EU/Republic of Ireland.
The Chamber has always been clear that we need access to markets both north – south and also east – west. Any impediment to trade, whether between Northern Ireland and the Republic of Ireland or between Northern Ireland and Great Britain, would be totally detrimental to the regional business community. While the UK Government’s commitments to unfettered trade are welcome, businesses need urgent clarity and technical detail about how this unfettered trade will be guaranteed.
A substandard Brexit will hit Derry and Strabane hard economically and harder than non-border cities and towns. Levels of deprivation in Derry and Strabane have been high for many years due to a legacy of underfunding and a lack of investment. Years of underfunding in regions like the North West are proven to lead to health inequalities, higher level of social deprivation and lower standard of living, thereby making it harder to attract families and people to set up home in the region. This creates a downward cycle and further migration of talent away from the region.
Recent, long-awaited investment and policy announcements regarding the North West including the establishment of the Graduate Entry Medical School and the financing of the Derry and Strabane City Deal are welcome and will boost our regional economy. They will also be crucial as we recover from the impact of COVID-19 and help us create and retain a more skilled and talented workforce.
These are also announcements which will encourage and attract future inward investment into our region. The Protocol on Ireland and Northern Ireland should make the North West an attractive place for indigenous businesses to grow and for foreign direct investment. However, attracting FDI and encouraging companies to set up in the North West, and in Northern Ireland
more generally, will be much more difficult in an uncertain post-Brexit environment. Businesses need certainty above all else when making these decisions and need to understand what their trading conditions will be on 1 January 2021.
The UK Government, through the Secretary of State for Northern Ireland, has recently established a Business Engagement Forum “to ensure it gives business full support to make any necessary preparations, meeting for the first time on June 10. While this engagement has begun very late in the day and may be too late to clarify all our concerns, it is nonetheless welcome that the Government is finally listening to the views of business here.
The Northern Ireland Office has confirmed that the BEF is designed to be a “flexible and responsive channel for engagement with businesses and business representatives” with membership not being designated as a core group.
Given the unique challenges for border businesses in the North West, Chamber engagement with the work of the BEF should be a priority and the Secretary of State should be engaging with and listening to the concerns of the North West business community as a matter of urgency.
In January 2020, the challenge of preparing for the end of the transition period was already mammoth. COVID-19 has exacerbated this task beyond comprehension. As we stand, businesses in the North West are unprepared for and uninformed about Brexit.
Urgent clarity, guidance, and support is required if local businesses are expected to navigate Brexit as seamlessly as possible.
Clarity and detail on new financial, administrative and legal obligations is required. Increased paperwork and checks will bring added costs and added strains on the operational capacity of businesses. Businesses cannot be put in a position where these increased pressures are sprung on them at the last minute.
An extension to the transition period should not be viewed as kicking the can down the road but a purely pragmatic decision which would allow companies to recover from the impact of the pandemic and prepare themselves for the realities of Brexit.
Businesses need to be ready for January 1st 2020. But, from a long-term point of view, businesses also need to be confident and secure in the environment they are operating in. While the next six months will be crucial in guiding businesses through the immediate challenge of exiting the EU, more work needs to be done and more clarity needs to be provided to create an environment which is secure and hospitable to business