Trade Diversion and Windsor Framework

Motion made, and Question proposed, That this House do now adjourn.—(Taiwo Owatemi.)

The issue of diversion of trade is becoming an increasing problem of manifold proportions for Northern Ireland. Before the protocol, goods could be moved from Birmingham to Belfast as easily as they could be moved from Gloucester to Glasgow, but no more. The resulting Irish sea border, and all that comes with it, has caused a huge and increasing diversion of trade.

We can get an insight into how things naturally should be and how business wishes them to be by looking at the Northern Ireland Statistics and Research Agency figures of recent years. If we look at the pre-protocol days, we see that in 2018, for example, the volume of goods purchased from the Irish Republic was £2.8 billion, but the amount purchased from GB was five times that—£13.4 billion. There we have a snapshot of the natural inclination of trade in Northern Ireland, particularly for our raw materials.

Before Brexit, there was a similar situation. Indeed, we could say—and some may say—that that is a better reflection of whether there has been trade diversion. Before Brexit, we could as readily buy our goods from the Republic as we could from GB, because we were all in the EU single market. Even then, the predominant trading of choice was from GB. That is no surprise because for decades Northern Ireland has been a particularly integrated part of the UK economy.

However, along came the protocol, which requires Northern Ireland to be subject to a foreign customs code—that of the EU—which of course treats GB as if it is a foreign country. Therefore, when goods come from outside the EU into the EU, and we in Northern Ireland are regarded as being in the EU for these purposes, those goods have to be checked, with customs declarations, documentary checks and physical checks on, for example, all our raw materials. So it is no surprise that that is inevitably bound to cause diversion of trade.

We were told, as part of the spin of selling the protocol, “Oh, there are protections against the diversion of trade, and it wouldn’t be allowed to happen”. Article 16 of the protocol, we were told, was our safety net:

“If the application of this Protocol leads to…diversion of trade…the United Kingdom may unilaterally take appropriate safeguard measures.”

It has led to the diversion of trade, but the United Kingdom Government have not taken unilateral action in that regard.

The fact of the diversion of trade is a challenge to the protocol’s proponents. It is a challenge to those who put this upon us, and it is one that they have to meet, but which I fear they will not meet. Where is the proof, some may ask, of the diversion of trade? Again, it is in the NISRA statistics. Dr Esmond Birnie, a renowned economist in Northern Ireland, has done a succession of studies of the NISRA statistics. He wrote back on 11 December 2024 that the data

“provides further evidence that the NI economy is becoming more trade integrated with the Republic”,

and of

“North-South trade growing at very rapid rates at the expense of what previously was an inflow of goods from GB.”

Will the hon. Member give way?

Perhaps in a moment.

We also see that in the purchase of goods figures that NISRA reports. It has given us figures from 2020, contrasting them in a table with those for 2023. The year 2023 was only the beginning of things getting difficult, as the Irish sea border did not in effect come into place until October 2023 because of the grace periods. However, those NISRA figures show that Northern Ireland’s purchases of goods increased from 2020 to 2023—of course, it was a period of inflation—by 24% from GB, but by 50% from the Republic of Ireland, meaning twice the growth rate in the buying of goods into Northern Ireland that would previously have come from our integrated United Kingdom economy.

The Office for National Statistics business insights and conditions survey states that 13.1% of currently trading manufacturers based in GB had sent goods to Northern Ireland in the past 12 months. That was at the end of 2024. But in January 2021, 20% of manufacturers in GB were sending goods to Northern Ireland. So, in just those four years there has been a dramatic fall in the number of manufacturers supplying goods to Northern Ireland. It has nearly halved in four years. The ONS data for 2024 tells us more: 11.7% of companies tell us they have stopped trading with Northern Ireland. Why? Because of the bureaucracy, because they have to make customs declarations, because they have to have them checked, and because they have to employ extra staff to do all that. Many companies, particularly in smaller sectors, have simply said that they are not going to do it.

Will the hon. and learned Gentleman give way?

In a moment, perhaps. I need to make sure I get through what I need to say.

It is beyond doubt, I would respectfully say, that there has been trade diversion. Back in September, the Road Haulage Association gave evidence to a parliamentary Committee of this House. It told the Committee that 30% of haulage lorries that take goods to GB are returning empty. Why? Because GB companies have stopped supplying. Now, that is an incredible thing to contemplate. Trade works on the basis that you take goods out, and then you fill your lorry and bring goods back. That is how you make it viable and how the economy works. That 30% of lorries now returning to Northern Ireland are returning empty is an incredible indictment of the operation of the protocol.

And things are getting worse. The EU regulation on general product safety now puts more burdens on companies selling into Northern Ireland, because they have to meet enhanced EU product safety regulations. I have mentioned the craft sector in this House before. Recently, 11 suppliers in that niche market stopped supplying Northern Ireland. It will get worse, because the partial border is coming and they will have to do more paperwork and make more declarations about sending simple parcels from GB to Northern Ireland. Tesco has slides that it shows to its own suppliers stating that they should now buy from the Republic of Ireland because it is easier to supply from there than from GB. The same is happening in veterinary medicines and in every sector.

Why does that matter? It matters for a very pertinent political reason. The whole idea of trade diversion and the whole purpose of the protocol was and is to build an all-Ireland economy: to dismantle the economic links between Great Britain and Northern Ireland and enhance links with the Irish Republic, thereby creating stepping stones out of the United Kingdom into an all-Ireland for Northern Ireland. That was the determination that lay behind the protocol.

Before the hon. and learned Gentleman takes the intervention, I know that he was anxious about getting through his speech, but, because the Adjournment debate started early, he does have until 7.30 pm. [Laughter.] I believe he was about to take an intervention—does he want to continue with that?

I will give way.

You shouldn’t encourage him, Madam Deputy Speaker—he will take to 7.30 pm and beyond, because this is such an important subject.

Does the hon. and learned Gentleman agree that the diversion of trade has not only political but economic implications for Northern Ireland? There are increased transport costs, because lorries do not come both ways with goods in them; there is the fact that many people chose suppliers in England because they are cheaper, better-quality and so on, and now manufacturers in Northern Ireland are having to go to the second-best suppliers; and there is also the additional paperwork that is involved. That all adds to costs and makes the Northern Ireland economy less competitive, which therefore makes it more difficult for it to be viable.

The right hon. Gentleman is absolutely right. Business is like water: it follows the easiest course. When we were an integrated part of the UK economy, the easiest and cheapest course was to do the greater bulk of our trade with GB. That, historically, has been our basic supply market for our raw materials and everything else. However, when a fettering of trade is imposed, naturally, business will follow the easiest route. The easiest route now, sadly, is to cease trading from GB and accentuate trading with the EU, and most particularly the Republic of Ireland.

The United Kingdom was built on two pillars, according to the Acts of Union. The first was a political union, with article 3 establishing this House as one sovereign Parliament for the whole United Kingdom; the second was an economic union, through article 6, which established unfettered trade between and within all parts of the United Kingdom. That was what article 6 said—that there should be unfettered trade. But along came the protocol, which fettered trade, leaving the Supreme Court with no choice but to accept that the protocol had therefore subjugated article 6. The very foundation of our economic union, article 6, which says that there shall be unfettered trade, is in suspension. It is no wonder that the consequence of that fettering of trade is a diversion of trade.

I thank the hon. and learned Member for giving way. It is on that diversion of trade that I wish to speak. He and most Northern Ireland MPs will know of the fantastic Colemans Garden Centre in my constituency of South Antrim. It supplies quite a number of people across Northern Ireland who have had difficulty in getting plants and fruit brought across from their main supplier, McIntyre Fruit, in Scotland. Just before this debate, the manager of Colemans Garden Centre told me that he had been in contact with Stuart McIntyre who said that he had just picked up a contract to supply a firm in Japan. He said that, bureaucracy-wise and administration-wise, it is easier for a supplier in Scotland to supply into Japan than it is to supply across the 14-mile stretch of water into Northern Ireland.

That is the absurdity of where we have got to, and it has been accentuated by our subjection to the EU’s general product safety regulations. Those regulations provide that if a company is supplying into Northern Ireland from outside the EU—in other words, from GB—it must have an agent resident within the EU. The company must complete the paperwork on the origin of its goods and on the customs declarations, and it cannot do so without employing an agent within the EU. Anyone who knows anything about business will know that that is added cost that will cause many businesses to say, “Northern Ireland is not a huge market to start with, so I shall just not bother with it.” That is what all our businesses in Northern Ireland are suffering from.

I congratulate the hon. and learned Member on securing this debate. Small businesses in my constituency have told me that they are now having to pay His Majesty’s Revenue and Customs a duty for buying goods from English suppliers and then selling the same goods in Northern Ireland to the Northern Ireland consumer, remaining within the internal market. Last Friday, one trader told me that he is now having to pay more in duties to HMRC than the invoice was for the goods. That is because HMRC does not trust that the goods will remain, but assumes that they will be sold into the EU. Does the hon. and learned Member not agree that the same HMRC displays greater trust and acceptance of VAT declarations, on the premise that they will be checked at random, than it does for internal trade within the United Kingdom? What a backward step that is.

I agree. Let us just think about the Irish sea border. Given the infinitesimal amount of goods and trade that cross that border—infinitesimal when compared with the proportion of EU trade—it is incredible that it has 20% of all the checks across the whole of the EU. That infinitesimal amount when set against the totality of EU trade warrants 20% of all the checks in the EU. It would be easier to bring in goods from Belarus into the EU than it is to bring goods from GB into Northern Ireland.

The hon. and learned Member talks about that trade being infinitesimal—0.4% of EU trade crosses that border, yet it accounts for 20% of checks. Does he agree that that will not be the story of the future? In my constituency, we are already building a £140 million EU control post on a 10-acre site. Once that is open, there will be much more scope to check goods to an even greater degree. If that is not the point of having such a large EU border post in the middle of the United Kingdom, what is?

That is the point, because it is an EU border. EU trade laws govern the Irish sea border. EU officials, under the protocol, have the right to supervise checking. When we have the full panoply of facilities that are being built at Larne and at other ports, I fear that we will see the muscle of EU inspections. The protocol gives the EU, which boasted that the price of Brexit would be Northern Ireland, the upper hand in that regard.

I return to the point that the protocol is imbued with a political motivation, and that motivation is not to get Northern Ireland the best of both worlds. My goodness, what a con that idea is. The protocol was supposed to make Northern Ireland a Mecca, a Singapore of the west, but we now know that there has been no uplift whatsoever in foreign direct investment. Why? Because a manufacturer coming to Northern Ireland is interested not just in selling goods out of Northern Ireland, but in where it is getting its raw materials. When a manufacturer is told that its basic supply line has to pass through an international customs border controlled by the EU, the shine soon goes off the prospect of investing in Northern Ireland.

We are in a pretty dire situation, which is getting worse, and which has massive constitutional and economic implications, but I fear that the Government are deaf and blind to the issues, because they do not want to face the consequences. They are hand in glove with the EU, dismantling Northern Ireland’s place in the United Kingdom, and setting us on a course for the economics marrying with the politics, and Northern Ireland ceasing to be.