Brexit impact on the Northern Ireland border
Background
Brexit, “British Exit “is the withdrawal of the UK from the European Union (EU) following a referendum in 2016 in which 52% voted to leave while 48% voted to stay. In the case of Northern Ireland, it is the only part of the UK that has a continuous border with another EU member state. Transaction costs play a significant role in Northern Ireland, which would increase cross-border trade if Brexit occurred. Furthermore, the prices of developing cross-border infrastructure i.e., roads, would soar high. The economic impact that Northern will face is hard to unravel. However, the critical factor is how smaller economies benefit from being part of more significant multilateral movements.
Economic consequences of Northern Ireland
Northern Ireland is different from the rest of the UK and faces very distinct challenges. For starters, the trend rate growth of its economy is about a third lower compared to the UK. Moreover, it has the highest unemployment rate of 1% above the whole UK figure, which stands at 5.8%. A trend of total employment will likely increase by a considerable amount. This will be caused by a decrease in cross-border trade and economic cooperation. Northern Ireland is in a vulnerable position due to its high dependency on the Republic of Ireland. Two-thirds of the EU exports and half of the imports to the EU are traded with the Republic of Ireland. The Northern Ireland trade balance has improved due to the increase in border trade courtesy of the Good Friday Agreement.
However, due to the high reliance on the Irish market, Northern Ireland is more vulnerable to any trade barriers that might result from Brexit.
Impact on the UK economy
The EU holds a 7% share of the world’s population and a total GDP of 25%. In respect of the UK, it accounts for 12% of its people and 15% of its GDP. However, Brexit would result in a 1-3% reduction in the UK GDP. Cross-border trade is a crucial consideration of Northern Ireland, and its location is advantageous, particularly concerning Foreign Direct Investment (FDI). Being located at a site of increased FDI within the EU remains a beneficial factor in their economy. Therefore, withdrawal would affect nations and regions that are sites of FDI.
Border issues and cross border commuters
The Centre from Cross-Border Studies estimates between 23,000 to 33, 000 people living and working on different sides of the Irish border. The Common Travel Area (CTA) between the UK and the Republic of Ireland facilitates the integration of labor markets. Brexit will reformulate the CTA as an agreement between an EU Member State and an external country. Whether it remains unchanged or not, the CTA only guarantees the free movement for Irish and UK citizens and not foreign cross-border workers. Moreover, there is a possibility of withdrawal of benefits such as EU Social Security Coordination, another deterrent for cross-border commuting. The Good Friday Agreement entitles Northern Ireland citizens to become EU-citizens. However, the uncertainty of these arrangements raises questions regarding trade and labor relationships.
Exchange rates will also play a part in cross-border interactions. A sterling devaluation will translate into a higher price for imported goods. This may encourage the migration of EU-workers from Northern Ireland to the Republic of Ireland.
Foreign direct investment
Northern Ireland has had a substantial amount of foreign funding because the nation was a late starter compared to the rest of the UK. The growing economic activities, such as sports and tourism, held together by creative industries, play a crucial role in cross-border economic cooperation. Connecting these subsidiaries is infrastructure within Northern Ireland with the rest of the UK and EU regarding roads and air transport, which plays an essential role in economic development.
EU funding
Since Northern Ireland receives EU structural funds (the second-largest amount in terms of percentage of regional GDP), Brexit would lead to a loss of Development funding, which currently plays a massive role in Northern Ireland. Access to Common Agricultural Policy funding, which is very important for the Agri-food sector representing 5.5% of total employment, might be in jeopardy. The performance of the Northern Ireland economy is supported by funding from the EU. Therefore, it is in a more vulnerable position and stands to lose from a poor or bad agreement with the EU.
Politics
Politics, more often than not, determines economics and economics to define politics. The UK government may be open to several alternatives due to Brexit; A revival of the European Free Trade Area (EFTA), European Economic Area (EEA) access to EU markets and a Customs Union with EU to a range of EU tariff-free markets. Moreover, Northern Ireland may benefit from a new constitution after the UK election giving it more discretion over its economic policies.