Esmond Birnie: Data on reduced GB-NI business might point to a diversion of trade under protocol/Windsor Framework

Previous attempts to demonstrate the likely existence of such trade diversion have relied on the data produced by the NI statistics agency (NISRA).

Their latest figures for the purchases of goods into NI relate to 2023 (published in December 2024) showed that the value of such purchases coming from GB had increased by 24% comparing 2023 with 2020, but by 51% in terms of purchases coming from RoI. In other words, the trade flow coming from RoI was growing at twice the rate of that coming from GB. This outcome would be consistent with trade diversion.

NI’s continued common membership together with the RoI of the EU’s Customs Union plus single market favours the in-flow of goods across the Irish border. The extent to which an Irish Sea economic border was operating has acted as a cost friction against goods coming in from GB. Trade, like water, takes the easier path.

Of course, there are some limitations on such data. We only have three years of figures, for 2021, 2022 and 2023, relating to the post-Brexit arrangements which came into force in January 2021. Some commentators have claimed that differential inflation rates could be distorting the comparison of North-South and East-West trade growth rates.

If anything, however, it might be argued that it would be plausible that the Irish Sea border would lead to the inflation rate on NI imports from GB being higher than that for NI imports from the RoI. Hence, any price distortion would be in the “wrong” direction to explain the more rapid growth of cross-border trade.

Recently (February 6) the UK statistics body, Office for National Statistics (ONS), published the latest results of the periodic ‘Business Impact of Coronavirus Survey’. This is right up to date as it measures business activity throughout last year, 2024.

In the 12 months to end January 2025, 13.1% of manufacturing firms in GB sold goods to NI. By comparison, in the 12 months to end January 2021 (i.e. the year just before the Protocol came into operation) 20.1% sold goods to NI.

The drop by seven percentage points from 20% to 13% is substantial and looks significant. If this is not explained by the post-Brexit trading arrangements that would beg the question what other explanation is plausible. Given that, this may be the ‘smoking gun’ regarding trade diversion under the Windsor Framework etc.

If such trading changes had been a result of a ‘free business choice’, a sort of free trade adjustment, there might be no need for further comment. Unfortunately, it does not look like that was what is happening. Businesses are adjusting because the higher costs imposed by the protocol/Windsor Framework force them to adjust.

Any business frictions or costs associated with the Irish Sea border are acting as equivalent to a tariff on goods coming into NI from GB. The results from the point of view of businesses and consumers are likely to be, in part, sub-optimal: less choice, higher price etc.

Other statistics in the ONS survey which bear on the impact of the Windsor Framework, even as now being modified by the Safeguarding the Union agreement, include the result that ‘only’ 15.1% of GB retail firms sold goods to NI during 2024. 4% of GB-based retailers stopped selling to NI during 2024. Nearly a third of NI businesses (32.7%) reported challenges arising from the Windsor Framework.

One further consideration is very relevant: the situation is fluid. Over time various exemptions (‘grace periods’) relating to restrictions on GB to NI trade are being removed.

Notably, on March 31, 2025 movement of business parcels from GB to NI (‘B2B’) will be liable to certain information recording and customs requirements. On this occasion we cannot be confident that things will necessarily get better.

Dr Esmond Birnie is senior economist at Ulster University Business School