The businesses which sit at the fulcrum of the United Kingdom’s’s new post-Brexit trade settlement – Northern Ireland’s retailers – are making the best of a situation that they never wanted to be in. But they are insistent that they need more time to establish a workable business model.
According to Aodhan Connolly, Director of the Northern Ireland Retail Consortium, retailers and logistics firms in Northern Ireland have “done a brilliant job” in adapting to the new paperwork imposed by the region’s special status – part of the United Kingdom, but continuing to follow EU single market rules.
“We did not want the Northern Ireland Protocol,” Connolly said in an exclusive interview with Borderlex.
“But it’s there, it’s the law, and we are trying our best to make it work.”
Disruptions to movements of goods from Great Britain to Northern Ireland hit the headlines in January, with shortages of some goods reported on NI supermarket shelves – despite UK government assurances that impediments to GB-NI trade were minimal.
For his part, Connolly stressed that the shortages only ever affected a small proportion of the thousands of product lines stocked by supermarkets.
“The situation has never been as bad as some people have said, but it’s not as good as the UK government has claimed either.”
Facilitations needed on Export Health Certificates
But he added: “There are certainly some big challenges coming down the line on 1 April.”
This is a reference to the date when the current grace period exempting supermarkets in Great Britain from the requirement to deliver Export Health Certificates, or EHCs, with any consignments of livestock-based products moving to stores in Northern Ireland is due to expire.
Recent discussions between Commission vice-president Maroŝ Šefčovič, who heads up the Commission’s delegation dealing with issues relating to the Northern Ireland protocol, and his UK counterpart Michael Gove, have prompted some optimism that the 1 April cliff-edge might be avoided – if the currently-fraught relations between London and Brussels do not deteriorate in the meantime.
“Šefčovič said there could be no permanent grace periods nor any permanent derogations – but he said there can be facilitations,” said Connolly, who was recently in meetings both with the Commissioner and with Gove.
“They are both very much aware that the grace periods are in place until there is a functioning alternative available [in the form of a longer-term settlement on Northern Ireland goods movements]. Right now there is no functioning alternative – so the principle remains for the need for a grace period.”
For how long should the a grace period be extended?
“It depends who you talk to. Some in the agriculture sector say 24 months – others in the retail sector they could perhaps manage nine months [i.e. an extension to the end of 2021], but ideally they’d need 15 months.
“But I think at least there is a pragmatism in the negotiations now, which means that the parties have at least realised that further support is needed.”
Grace period extension ‘is a must-have’
Connolly was in no doubt that if EHCs were to be introduced, they would cause “hardship” to retailers, who would need to battle with the bureaucratic requirements of the scheme.
“Quite simply we haven’t had time to get ready for this. We haven’t time to work all out of those efficiencies of scale or of practice that we usually use. So there is a realisation that those further derogations are needed. It’s not a nice-to-have, it’s a must-have.”
Connolly pointed out that another meeting of the EU-UK Joint Committee on Northern Ireland had been scheduled for mid-March – something which he took to be a positive development.
The European Commission has made clear that any further derogations in favour of Northern Ireland must be a transitional stepping-stone towards a permanent solution which would give businesses moving goods in and out of the region a sustainable basis on which to proceed.
‘Auditable and certifiable supply chain’ concept
On this point, the Northern Ireland Retail Consortium, of which Connolly has been part since 2012, is attempting to get ahead of the argument with its call for an “auditable and certifiable supply chain” concept. This is designed to remove the need for any bureaucratic intervention on regular movements of goods from Great Britain to Northern Ireland.
“Seventy percent of everything that crosses the Irish Sea is destined for Northern Ireland retailers’ shelves,” he explained. “So if it’s finished product for retail, the ‘dead-end host principle’ should apply. That means we can show as retailers that these goods are not at risk of moving into the European market.”
The Commission has said it is open to agreeing such provisions, but wants certain safeguards to apply, such as goods being labelled to state that they are for consumption in Northern Ireland only. This is something which the UK government has yet to sign up to – and it would entail additional costs for producers.
The Approved Economic Operator scheme is an established ‘trusted trader’ programme which has been talked about in the context of facilitating movements into Northern Ireland – but Connolly insisted that it was not appropriate for the region’s requirements
“It’s fine for the big guys, maybe. But it doesn’t go far enough, and it doesn’t cover SPS regulations,” he pointed out. “Also, it takes 18 months, and about £20,000, before you can be up and running.
“What we need in Northern Ireland is something that is proportionate to the risk, something that covers the majority of retail business, and which carries an easy evidentiary burden that allows medium-sized enterprises and the supply chain to get involved,” Connolly insisted.
‘We need a NI-style veterinary agreement’
The SPS issues relating to GB-NI goods movements would be eased if some kind of veterinary agreement were to be put in place between the UK and the EU. Commissioner Šefčovič has gone on record [link to https://borderlex.net/2021/02/25/eu-hints-at-northern-ireland-grace-period-extensions/] as saying that, as far as the EU was concerned, such an agreement could be considered.
But Connolly pointed out that a veterinary agreement such as that between the EU and New Zealand would not necessarily suit the Northern Irish situation.
“Under a New Zealand-style agreement, only 1% checks of consignments are checked – for us, that would be about seven lorries a day. But the NZ deal is based on mutual recognition of standards. Moreover, consignments arriving from NZ typically consist of large loads of perhaps three or four items, rather than smaller loads carrying perhaps 1,500 items, as in our case.
“What we’re asking for is a ‘Northern Ireland-style agreement’ – an agreement that works for Northern Ireland business, based on the proportionate risks involved.”
NI Protocol ‘is here to stay’
Meanwhile, the pressures of the Northern Irish trading environment have triggered a fierce political debate, with the region’s First Minister, Arlene Foster, leading demands for the Northern Ireland Protocol – an integral part of the EU-UK Withdrawal Agreement – to be ditched altogether.
But Connolly said this was an impossible demand.
“It’s clear that the Protocol is here to stay. For us in business, this is a simply a trade issue. For other people, however, this is a constitutional issue. And the two become conflated. You can win a trade argument on facts, but you win a constitutional argument on emotion. But the fact is, there is no alternative to the Protocol – and we have to make it work.”
How long would it take before the situation in Northern Ireland settled down to a ‘new normal’?
“That is very dependent on political will. If there is the political will to allow the derogations that are needed to allow facilitations to be put in place, and to give NI business enough time to adapt, then perhaps two or three years?
“But if they don’t do that, then it could take up to ten years before business is able to adjust.”