Dr. Martina Lawless:

Following on from the comments of my colleagues on the overall structure of the economies of Ireland and Northern Ireland, my research in this area relates to cross-Border trade and the activities of firms and supply chain integration across the island.

Goods trade between Ireland and Northern Ireland has grown substantially since the exit of Great Britain from the EU Single Market and the customs union. The unique status of Northern Ireland, with its access to both the EU and UK markets, has driven this recent substantial increase in cross-Border trade and had the potential to continue to feed into broader economic linkages across the island. There remain outstanding issues around the operation of this special status under the Northern Ireland protocol and uncertainty from this source could limit the extent to which Northern Ireland can benefit from its unique status.

Business investment benefits from clarity on regulation and market access so clear guidance on the operation of the protocol would likely see increased investment in Northern Ireland. Micro and small firms play a much more significant role in cross-Border trade than is usual in exporting and importing patterns. This suggests many firms regard the island as their local market and functional economy. For example, almost all exporting firms in Northern Ireland include Ireland as one of their destination markets, and more than 80% of small firms that export from Northern Ireland have all of their export sales in Ireland.

We also find a high degree of cross-Border integration through supply chains. As exporting firms have systematically better outcomes across a range of key indicators, including employment and productivity, expanding participation in exporting can make an important contribution to the broader performance of the economy. Cross-Border trade can be a stepping stone in this regard to broader export participation by firms both in Ireland and Northern Ireland.

While the Northern Ireland protocol did much to keep trade flowing freely across the Border, an important limitation is that this agreement relates only to goods trade. Our research has shown that cross-Border services trade is considerably lower than cross-border trade in goods. Services make up one quarter of the total trade going from Northern Ireland to Ireland and just 16% of the trade going from Ireland to Northern Ireland. This low share of services in trade flows from Ireland to Northern Ireland is in strong contrast with the high overall services content of Ireland's exports to other markets.

As services are not covered by the Northern Ireland protocol there remains potential for services trade to be negatively affected by any divergence between the UK and the EU on services regulation in the longer term. I thank the committee and would be happy to take members' questions.