Ms Margaret Hearty:

I thank the Chairman and members of the joint committee for their invitation to present on the impact of Brexit on trade in Ireland from the perspective of InterTradeIreland.

As the joint committee is aware, InterTradeIreland is one of the six North-South implementation bodies and is mandated by both Governments to promote cross-Border trade and business development initiatives. In doing so, InterTradeIreland provides a comprehensive range of supports for businesses focused on growing trade, innovation and strategic partnerships across the island.

Following the UK's referendum vote to leave the European Union in 2016, InterTradeIreland moved to support existing and new cross-Border traders to protect and grow new trade opportunities in the face of uncertainty. InterTradeIreland was very quick to respond with the development of a Brexit advisory service, which has supported thousands of firms on the island to prepare for Brexit in advance of the end of the transition period. We have significant ongoing demand for our vouchers and advice on areas of customs, rules of origin and understanding VAT regulation and people.

Our extensive efforts in preparing firms trading across the Border resulted in 45% of firms trading in the opposite jurisdiction having plans in place to address the changes in advance of the transition period. That was more than double the level of preparedness of the general business population, of approximately 20%.

However, the UK’s formal departure from the EU at the beginning of 2021 has resulted in businesses across the island operating in a much-changed market environment.

In 2020, cross-Border trade in goods and services was valued at €7.3 billion, which represents a decrease of 8% on 2019. However, this is set against the backdrop of the Covid-19 pandemic and is 7% higher than 2018. The year 2019 showed an exceptional rate of growth before the pandemic. For 2021, the latest official trade data from the CSO show how trading patterns between Ireland and Northern Ireland, and Ireland and Great Britain, have changed during the year. The figures for cross-Border trade in goods for the full year of 2021 between Ireland and Northern Ireland show an increase of €2.8 billion. Imports to Ireland from Northern Ireland were up 65% to €3.9 billion, a rise of €1.5 billion compared with 2020. The value of Irish exports to Northern Ireland increased by 54% in 2021 to €3.7 billion, an increase of €1.3 billion compared with 2020. Meanwhile, exports from Ireland to Great Britain also increased by 17% during 2021 to €14.4 billion. Imports to Ireland from Great Britain fell by 13% during 2021 to €15.4 billion. The impact on cross-Border trade in services is less clear as those data for the year are less accessible. We will have to wait and see there.

At a broad sectoral level, Irish imports and exports to and from Northern Ireland are up across all categories. Substantial growth can be seen in Irish exports of minerals, fuels and lubricants, which are up 118% on 2020, and in machinery and transport equipment, which are up 106% on 2020. By value, the food and live animals sector has had the largest growth with a €435 million, or 47%, increase in exports to Northern Ireland in 2021. Within this category, dairy products made the largest contribution towards growth. These large rates of growth are unprecedented in some sectors. However, it must be noted that the changes taking place in cross-Border trade value in 2021 are the result of a complex mix of factors. Contributory factors to rising value include, but are not limited to: the de-risking of supply chains in response to Brexit and the Covid-19 pandemic; logistical moves and changes in warehousing practices post Brexit; the rising cost of energy and its inflationary impact; and a shortage of supply due to global demand and supply pressures, such as on timber. There are also demand-side pressures. For example, plastic exports from Ireland to Northern Ireland are up 68%.

On a positive note, the latest InterTradeIreland all-island business monitor survey, released just last week, found that 85% of firms on both sides of the Border are currently either stable or in growth mode, which is welcome. This is an indication that the resilience of firms has been maintained in both economies within the new trading environment as they emerge from the Covid-19 pandemic. However, the pandemic and the rising costs of energy and overheads continue to present significant issues for most firms on the island. The impact of Brexit is still being felt by a number of businesses on either side of the Border, with 46% of businesses in Ireland reporting it as an issue.

Our top priority as an organisation is to continue to help businesses adjust to the new trading environment and potential impacts on supply chains. Work in this area cuts across a number of supports aimed at increasing the growth of exporting firms. We know from our research that 73% of indigenous SMEs that trade off-island began their exporting experience with trading cross-Border. InterTradeIreland’s Brexit advisory service will transition to a new cross-Border trade information service in 2022, with work under way to ensure the service continues to meet the needs of businesses in both jurisdictions as the new rules and regulations evolve.

Considering all of this, and in the context of the impact of Brexit on trade in Ireland, it is important to recognise that the rise in trade value across the Border does not all result from new sales or supply chain activity. Many firms trading across the Border on the island, particularly those with complex and integrated offshore supply chains, are finding adjusting to the new market rules challenging. Continued uncertainty with regard to the final agreement on the protocol on Ireland and Northern Ireland is having a dampening effect on investment. The removal of Northern Ireland from the EU's Single Market for services is also having an impact on firms with an all-island outlook or aspirations. Many firms are continuing to work through the impacts on service delivery and it is likely that further challenges will arise in a number of areas for services firms in the coming months and years. These challenges will likely be centred on areas such as market access, data sharing and skills. Looking to the future, our research shows that while there are challenges, there are also significant opportunities to grow cross-Border trade and innovation opportunities for the benefit of both economies. Our efforts during the coming months and years will be focused on realising these opportunities for firms throughout the island.

I thank the committee and our sponsor Department in Ireland, the Department of Enterprise, Trade and Employment, for the opportunity to present on InterTradeIreland's work, as well as our perspective on supporting trade and business development on the island throughout this Brexit process.