Economist whose says Northern Ireland Protocol costs £900m a year defends figures after being cited by DUP leader Sir Jeffrey Donaldson

The economist whose estimate of the annual cost of the NI Protocol is being cited by the DUP has issued a detailed defence of his work.

By Philip Bradfield
Friday, 4th February 2022, 6:43 pm
Updated Friday, 4th February 2022, 7:13 pm

Ulster University Economist Dr Esmond Birnie says the NI Protocol costs the economy £850-950m per year. His estimate has come under close scrutiny after being cited by DUP leader Sir Jeffrey Donaldson as a key reason to oppose the protocol.

BBC NI Economics & Business Editor John Campbell told Good Morning Ulster today that Dr Birnie’s analysis was based on “a very limited data set” which is based on the experience of four companies, one of them Marks & Spencers.

Mr Campbell said Dr Birnine then extrapolated from this what costs have been incurred as a result of the NI Protocol.

Esmond Birnie Chief Economist PricewaterhouseCooper. Picture by Brian Little

The broadcaster said the total inflow of goods and materials coming into NI annually is about £10bn and Dr Birnie calculated that the Protocol has caused a 6% rise in costs, totalling £600m per year of extra cost per year for business.

Dr Birnie then added a further £250m in costs due to extra spending by government to assist businesses with the extra red tape imposed by the EU through the Protocol.

However Mr Campbell said it was “debatable” whether the £250m should be added in as it was a cost covered by central government and not incurred by Stormont.

He also said Dr Birnie failed to add in the value of extra trade NI has engaged in with the Republic of Ireland/EU. He noted that Dr Birnie was “very sceptical” of Dublin’s official data, which suggested there has been a big increase in cross border trade with the Republic.

Mr Campbell also noted that SDLP MLA Matthew O’Toole said the Birnie analysis was comparing the costs in a no-Brexit scenario, not a Brexit situation with a Protocol.

But Dr Birnie issued a stout defence of his figures to the News Letter.

“Those who challenge my estimate - which is based on figures from real businesses - that firms face a 6% increase in costs for bringing in goods or materials from GB should bear in mind that other sources have quoted even higher cost increases,” he said.

“Back in 2018 the Treasury, when trying to predict the impact of Brexit on the UK in general, said that international experience was that borders added 5-11% (average 8%) to non-tariff barriers due to things like time delays, bureaucracy and checks.”

He added that last year economists at the Fraser of Allander Institute in Glasgow estimating the impact of the Protocol on NI used a cost increase figure on GB to NI trade of 8% - compared to his 6% estimate.

“So, if anything, it is possible I under-estimated the Protocol’s cost increase!” Dr Birnie added.

Responding to suggestions that the £250m extra government cost is not relevant because it is paid by central government and not Stormont, he added: “Well, it is a cost to the UK taxpayer and I would have thought we should have learned from RHI, there is no free money even if it comes from the London government.

“At some point in the not too distant future the UK government may decide to spend less on mitigating the Protocol. At that point part of the £250m per annum moves over to become a direct cost to the NI private sector.”

He added that anyone who complains that large estimates of the cost of the Protocol have no basis in evidence should also read the recent article, ‘The Northern Ireland Protocol: Is Northern Ireland stuck in the middle?’ by G. Duparc-Portier and G.Figus.

“They are quite clear, using an economic forecasting model, that over the long run even allowing for the beneficial effects of the Protocol on NI-RoI and NI-EU trading, there will be an overall cost amounting to about 2.6% of NI’s GDP of which 2.1% is the result of the higher costs on moving goods from GB to NI.

“In today’s money 2.1% of NI’s GDP is equivalent to about £900m to £1000m, so we are back to that sort of number again.”

However the economist also added a further warning.

 “If we have faced all these economic problems from the Protocol when it is still only partly implemented- imagine what full implementation, particularly in terms of food products could look like?”

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