Northern Ireland is now eight months into its halfway house of the Ireland/Northern Ireland Protocol, a period which has been underscored by two switches to the DUP leadership, loyalist protests fomenting more widespread unionist disquiet, the progressive pulling of popular products from supermarket shelves, and recent warnings of an invocation of Article 16 by the UK Government, which would effectively take Northern Ireland out of the EU Customs Union.

This disruption betrays the optimism with which the Protocol was presented following Boris Johnson’s ascent to Number 10, a calculation which was successful thanks as much to Brexit fatigue as it was to the apathy with which many in Great Britain – and England in particular – regards Northern Ireland. The internal recriminations have been swift, and many DUP MLAs will continue to sweat on their job security through to elections next May.

Inevitably, economic patterns are beginning to follow political ones. 

Are emerging trade patterns prophetic?           

The ramifications for trade, for example, have been swift. NI exports to the Republic of Ireland increased by 77% in the first half of 2021 against the year prior, imports by 43%. This is partly compensatory: imports from NI saw their biggest bounce in history as imports from GB fell by 67% between December 2020 and January 2021. Meanwhile, there is a perception that NI’s trading partnership with GB has accordingly been diminished; supermarket shortages are representative of increased barriers to trade following the Irish Sea’s christening as a customs border.

Nevertheless, the figures highlight a positive development in NI’s export trade balance, and one that appears likely to sustain in the long run: the Irish Times reports that GB businesses are setting up operations in NI to circumvent some customs regulations, while Irish consumer and business buying habits are increasingly skewing north. NI’s exports to the Republic of Ireland have nearly quadrupled in value between January 2015 and June 2021, while imports from the UK are 82% of their January 2015 rate. Even ignoring the sharp divergence since the beginning of 2021, the data suggest a trend toward NI products and away from GB ones.    

Index of NI & GB Merchandise Exports to the Republic of Ireland, January 2015 – June 2021; January 2015=100. Source: CSO

In reality, Northern Ireland’s path has rarely been afforded the luxury of measuring progress in economic terms; a £10 billion annual deficit underscores the region’s status as a fragile state not yet ready to fight on its own terms. On this occasion, the positive development to the region’s trade balance will no doubt send a chill down the spine of unionist Northern Ireland, one of many halting reminders over the past year that transitions out of Brexit have failed to pass their smell test. Alerts like those from M&S enhance the anxiety over identity in a way it wouldn’t in most other territories.

That anxiety may fuel its own economic dangers. A recent paper highlighted the ways in which the legacy of the Troubles persists to limit Northern Ireland’s economic potential. One of them, the boycotting of businesses and activities along sectarian lines, is once more a foreseeable reality as anxiety and uncertainty continue to fester around NI’s status. It has been practised before, though now it is reasonable to suggest supply chains are more fluid than they were before the Good Friday Agreement, as intimidation subsides and unionist and nationalist businesses interact. A significant level of boycotting and divestment of economic activity is more likely to batter both sides of the Protocol divide, while doing little for either side’s position on the subject.

Redrawing old battle lines

But while unionists sweat on Northern Ireland’s status within the UK, it is easy to forget that their position enjoys majority support; the Northern Ireland Life & Times Survey’s (NILT) most recent results reported that 53% of people would vote to remain in the UK, versus 37% who say they would vote for reunification with Ireland, if a referendum were held tomorrow. Maintaining that position now depends on a burgeoning demographic of Northern Ireland residents that draw immense value from the region’s unique position within both the UK and the island of Ireland, and halting an endemic brain drain of that demographic only seems possible by enhancing the idiosyncrasies a sustainable Protocol may bring. 

It looks unlikely that economics will drive Northern Ireland’s decisions around its external markets for the foreseeable future. If it did, opportunities abound in manufacturing, agri-food and – further down the line – tech and finance. The former two are areas where Northern Ireland has overperformed in the past and may keep it buoyant through disruption, particularly if GB firms continue to divert some operations and Ireland grows weary of the UK’s long-term stability. The latter two have ballooned in recent years, and are much less likely to be encumbered by meaningful customs delays while being more prepared for relocation by British companies seeking greater links with the EU. 

A bigger role in a strange new Union

Tension comes as the Union faces uncomfortable questions about its future. Indyref2 is making sustained legislative progress following the SNP’s power-sharing agreement with the Greens. Were Scotland to vote to leave the UK, it would likely invoke a footrace to capitalise on the desire of England and Wales to maintain close economic ties with the EU. Meaningful progress now could see Northern Ireland beat Scotland to the punch as the primary GB-EU interlocuter, while keeping unionists’ wish of staying within the UK. 

The Protocol on its own is unlikely to be the determinant of a United Ireland, though sustained denial of the Protocol’s benefits in the short- and long-term – reducing prosperity as the South grows richer – might do the trick. Unionists, and an increasingly protectionist UK Government, continue to draw old battle lines, even as the field changes around them. The impacts of the Protocol on the Northern Ireland economy are too early to measure, and difficult to strip out of its classic deficiencies: economic inactivity, poor rates of productivity, and stagnant wages. While its future remains uncertain, exploiting the Protocol’s benefits now will surely make it less frightening.