That was the deal that wasn’t.






What might have been the economic impact on Northern Ireland if the Prime Minister had in fact accepted the deal which was proposed by Brussels on the morning of Monday 4 December? Here are some key points:

  1. In order to ensure regulations continued to be aligned between Northern Ireland and the EU notwithstanding any changes in the rest of the UK, this deal implied a substantial increase in the extent of devolution to Northern Ireland.

That begs several questions. Even if we assume devolution can be restored, would it be sensible to give Stormont extra powers when we’ve seen just how erratic the progress of devolved government has been in its almost 20 years 1999-2017?

  1. If regulatory harmony between Northern Ireland and the Republic of Ireland (plus the other 26 EU members) is obtained at the price of opening up a regulatory gap between Northern Ireland and Great Britain that will imply a very large economic cost.

Northern Ireland’s total sales to the rest of the UK in 2015 were four times higher than the Northern Ireland sales to the Republic of Ireland. For the Northern Ireland sales figures, see Northern Ireland Statistics and Research Agency, February 2017, Broad Economy Sales and Export Statistics, also HM Government August 2017, The UK’s Exit from the European Union: Northern Ireland and Ireland Additional Data Paper.

The likelihood is that we would lose more from continued alignment with the EU than we would gain.

More puzzlingly, the Republic of Ireland is in the same boat- its east-west trade flows to the UK are at least seven times greater than the north-south flows with Northern Ireland. Why the focus by the Irish on the land border when the Republic of Ireland government policy imperative should therefore be securing the best possible free trade arrangement between the UK and EU?

In 2014 according to data presented by the Economic and Social Research Institute in Dublin 13.3% of all the merchandise exports of the Republic of Ireland went to GB and 1.8% to Northern Ireland, and 30.5% of Republic of Ireland imports came from GB and 1.8% from Northern Ireland; see ESRI.

  1. If Northern Ireland were to follow EU regulations as opposed to UK ones that could mean Northern Ireland was shut out of whatever trade deals the UK makes with the rest of the world beyond the EU post-Brexit.
  1. There can be no doubt that in the recriminations following Monday’s events we will hear the wish that the constructive ambiguity inherent in the proposed agreement should have been allowed to work its magic.

Given how much use has already been made of constructive ambiguity in the so-called peace process and given the consequent instability and the consequence of that on the economy, how does anyone think that would work on a far grander scale?

The bigger question of course is, if a form of words would work for Northern Ireland to remain somehow ‘aligned’ to the EU, why not Scotland, or London?

Unionists of all hues are at least saying something similar on the integrity of the UK in the negotiations. Ruth Davidson, this morning:

“The question on the Brexit ballot paper asked voters whether the UK should stay or leave the European Union – it did not ask if the country should be divided by different deals for different home nations.”

“While I recognise the complexity of the current negotiations, no government of the Conservative and Unionist Party should countenance any deal that compromises the political, economic or constitutional integrity of the United Kingdom.”

“All sides agree that there should be no return to the borders of the past between Northern Ireland and the Republic of Ireland.”

“Similarly, jeopardizing the UK’s own internal market is in no-one’s interest.”

“If regulatory alignment in a number of specific areas is the requirement of a frictionless border, then the Prime Minister should conclude this must be on a UK-wide basis.”

It took four minutes for RTE to update wording leaked from the Irish Government yesterday morning.

Tony Connelly has since made clear that his sources were ‘non-Irish’ which would suggest Brendan O’Neill’s take in The Spectator may not be too far off the mark.

And they say a week is a long time in politics.


Dr Esmond Birnie, Economist