Windsor Framework: A Brighter Future for Northern Ireland?
Rishi Sunak has claimed that the Windsor Framework will make Northern Ireland the “world’s most exciting economic zone”, resulting in access to both the UK and the EU single market. The deal essentially attempts to return to the trading terms Northern Ireland had in place before the UK voted to leave the Single Market. At that time, tariffs and customs checks in the Irish Sea and along the border were not a factor. Since Brexit however, Northern Ireland has continued in an awkward middle-ground. In an attempt to prevent a hard border, Northern Ireland has essentially remained in the EU single market, resulting in checks on imports from the UK.
The Windsor Framework will bring into force Red and Green channels. The Red Lane will constitute goods from the UK destined for the Republic of Ireland or the EU Single Market travelling through Northern Ireland. These will face increased customs checks and standards in order to protect the Single Market. Green Lane goods are those from the UK which are to stay in Northern Ireland.
To enter the Green Lane companies will need to register as ‘Trusted Traders’, with the British government promising support for smaller businesses. There is hope that improving technological advancements will enable the EU and the UK to monitor goods more seamlessly, with IT systems and databases shared. It is hoped this should reduce checks to 5% of the current levels by 2025. For retail, now only a single general certificate will be required for mixed loads, cutting down on bureaucracy and administration for retail operators and hauliers.
Medicines will now be “automatically” and permanently available at the same time in Northern Ireland as they were in the rest of the UK. Previously, the EU needed to make exemptions for the supply of medicines. Areas surrounding state aid have also been clarified, as the EU feared UK state aid might be used to undercut EU firms.
The UK government will now be able to set VAT rates below the EU minimum rates for immoveable goods that are not at risk of entering the Single Market. This will include items such as heat pumps and some other goods for retrofitting houses, such as solar panels.
As with everything Brexit-related, the political unease is likely to outshine economic concerns. Along with the usual joint bodies and governance councils between the UK and EU, an emergency mechanism known as the “Stormont brake” will come into force. This mechanism can be triggered at the request of 30 MLAs in the Stormont Assembly from at least two parties. It will allow the UK government, as an act of last resort and in extreme circumstances, to amend or replace aspects of EU provisions if they feel it will have a “significant and lasting impact specific to the everyday lives of communities” in the North.
The House of Commons voted overwhelmingly to adopt the Windsor Framework on the 22nd of March. Five hundred and fifteen MPs voted in favour of the agreement, with only twenty-nine descents, consisting mostly of the DUP and a few rebel Conservatives, including notable Tories such as Sir Iain Duncan Smith, Boris Johnson, Jacob Rees-Mogg, Priti Patel and Liz Truss.
Those voting against the deal were concerned that Northern Ireland remains divided from Britain economically, and that EU courts will still have some, if diminished, jurisdiction. However, even among supporters of the deal, there was anger about the preferential treatment Northern Ireland is to receive in contrast to other regions of Britain, and the overall economic illogicality of Brexit.
Labour MP and chair of the Labour Movement for Europe, Stella Creasy, criticised Sunak for championing the new arrangement for Northern Ireland, while “denying those same benefits to businesses struggling in the rest of the UK.” The Liberal Democrats foreign affairs spokesperson, Layla Moran, accused the Conservatives of “patting themselves on the back for reversing some of the damage done by their disastrous deal.”
Will it make Northern Ireland the ‘Most Exciting’ Economic Zone in the World?
Northern Ireland has tended to lag behind the UK economically. Traditional industries such as manufacturing and shipbuilding have seen significant decline due to increased competition from cheaper Asian rivals. Harland and Wolff, whose Goliath and Samson cranes define Belfast’s Titanic quarter, hasn’t built a ship since the Anvil Point, a Ministry of Defence ferry built in 2003. Having moved towards building infrastructure such as offshore wind turbines, it is only now seeing the return of shipbuilding with a contract to fabricate replenishment-at-sea support ships for the Royal Navy’s Royal Fleet Auxiliary.
The CSO estimates that in 2022, Irish GDP will grow by about 12.2%. This contrasts to the modest increase of 2.6% to 3.1% predicted by PwC for Northern Ireland, half a percentage point behind the rest of the UK.
Northern Ireland has typically had a disproportionately large public sector, funded by subsidies from Westminster. Three of the top ten largest Northern Irish firms are statutory corporations, such as Translink (Northern Irish equivalent the Republic’s CIÉ) and NI Water. This compares to the Republic, where the ESB is the only statutory corporation in the top ten by revenue.
Northern Ireland does though enjoy cheaper costs than the rest of the UK and then the Republic. Average house prices for the final quarter of 2022 were about €200,000, compared to average house prices of around €310,000 in the Republic of Ireland, €217,000 in Scotland, €250,000 in Wales and €360,000 in England. By home-ownership prospects being better and wages remaining comparatively lower, Northern Ireland is attractive for multinationals looking for European bases.
The Windsor Framework however, focuses on streamlining the trade of physical goods, and does not really change the playing field for Northern Ireland in terms of services. Talk of a ‘Singapore of Europe’ might be premature. Yet there is hope that international firms looking for access to both EU and UK markets with access to an English-speaking workforce and low costs could result in increased FDI into the region, especially with firms mindful of tight housing and office supplies in the Republic.
Given the DUP’s opposition thus far to the agreement and the subsequent decision of the Orange Order to reject it, the future of the agreement is anything but certain. Firms looking to invest want certainty.