Brexit Update: Money Pledged for Northern Ireland

An insight into what is to come?

14 August 2020

Author: Richard Gray
Practice Area: Corporate - M&A
Sector: Brexit

Brexit_(jigsaw)

Whilst much of 2020 has been overtaken by the coronavirus pandemic, looming in the background is the ongoing matter of Brexit. In the last week there have been various announcements from the UK Government in relation to the effects of Brexit, specifically relating to Northern Ireland. The deadline for a possible extension to the transition period under the Withdrawal Agreement passed in June. Negotiations between the UK and EU began in March with several rounds of negotiations taking place over the course of the year. Whilst both parties have stated their hopes of striking a deal, no such deal was reached and future rounds of negotiation have been scheduled between the UK and EU from August until the end of September.

An announcement was made recently by the UK Government that it is providing £650 million in funding for Northern Ireland. The Government has proclaimed that this “major” investment is a statement of “absolute commitment to the people and businesses of Northern Ireland”. The statement issued by the Government said that the funding would be broken down into the following:

  • A new free-to-use Trader Support Service backed by funding of up to £200 million will complete digital processes on behalf of businesses importing goods into Northern Ireland.
  • £155m to fund the development of new technology to ensure the new processes required for the movement of goods to and from Britain can be fully digital and streamlined.
  • £300 million confirmed funding for the PEACE Plus programme to support peace, prosperity and reconciliation projects on the island of Ireland.

However, it is important to note that these figures may not quite be what they seem. For example, of that £650 million, £300 million for the PEACE Plus programme had already been confirmed in January 2019. Furthermore, £355 million relates to technology and digital processes for importing goods into Northern Ireland, processes that are only required as a result of Brexit. It is still unclear whether businesses in Northern Ireland will in addition be left with an onerous tariff schedule under World Trade Organisation rules. This will depend on the outcome of negotiations between the UK and EU.

Whilst any additional funding for Northern Ireland will be welcome, it does evidence the sheer scale of disruption that the people and businesses of Northern Ireland may face, even if the extent of that disruption is still uncertain. Moreover, it is unclear what will happen after the money pledged runs out as Brexit is not a temporary fixture. One thing is certain, customs checks will apply on goods entering Northern Ireland from Britain as of January 2021, whether there is a deal or not. The existence of these custom checks are difficult to square with the continued insistence by the Government that Northern Ireland will have unfettered access to markets in Britain.

One industry that could be badly affected is the food and drink industry. Many supermarkets have distribution centres located in Britain, this could pose problems as many goods come from complex supply chains that cross the land border with Ireland as well as the Irish Sea during production. Retailers such as Tesco and Lidl that are also located in the Republic of Ireland will be able to supply Northern Ireland stores without issue however, retailers such as Sainsbury’s and Asda do not have the infrastructure needed to avoid tariffs and border checks. The UK may look for an exemption for retailers in Northern Ireland from the need to comply with border checks however, the EU will have to agree. The EU is clear that they must protect the integrity of the single market which raises concerns as to whether they would agree to such an exemption. Many business in Northern Ireland are still unclear as to whether or not they will be subject to tariffs for goods imported into Britain. Whilst the Government has stated that further guidance will be provided for Northern Ireland traders placing certain highly regulated goods on the British market, no date has been set for the release of any guidance and time is running out.

The UK and EU have both stipulated their intentions to establish a deal and a deal is necessary for Northern Ireland. The Financial Times stated that at the end of July both the UK and EU indicated that disagreements between both parties were lessening however, negotiations remain stagnant with state aid and fishing rights as the main bones of contention. Time will tell if a deal can be struck or not. If so, there are only a few months left to agree one.

If you have any queries on the impact of Brexit, please contact Richard Gray from our Brexit team.

*This information is for guidance purposes only and does not constitute, nor should be regarded, as a substitute for taking legal advice that is tailored to your circumstances.

Back