Statistical distortions and measurement problems mean that the emerging data on trade flows need to be treated with great caution. In particular, claims that cross-border trade in Ireland is soaring and that GB exports to the Republic have collapsed are questionable. Meanwhile, we can only guess at developments in trade between GB and Northern Ireland due to a complete lack of useful data.
The UK and Ireland have a strong historical trading relationship, so that the UK’s leaving the EU trading and regulatory system was always likely to have disruptive effects. Moreover, the situation has been further complicated by the Northern Ireland Protocol (NIP) which has left Northern Ireland (NI) in the EU single market and, partially, in the EU customs union as well.
Since the start of the year, official data from both the UK and Irish side has shown some big shifts in trade flows. In addition, there has been intense media coverage of the impact of the NIP on trade between Great Britain (GB) and NI – concentrating mostly on a range of apparently outlandish restrictions on some food products, plants, and pet movements. The key developments this data and media coverage would appear to show are the following –
- A big rise in cross-border trade between NI and the Republic of Ireland (ROI)
- A slump in UK-ROI trade
- A sharp drop in sales from GB to NI
Looking at each of these points in turn, we find that the reality is more complex, with the true underlying trends hard to discern from statistical noise and, in some cases, a statistical void.
Cross-border trade in Ireland
Irish cross-border trade has been historically small in scale, and measurements of it have been inconsistent. According to UK data (from NISRA), NI sold about £3bn of goods to ROI and purchased about £2.5bn in 2018. Irish data for the same year has much smaller numbers – imports from NI of £1.4bn and exports to NI of £1.8bn. This large discrepancy should immediately signal we need to be careful interpreting this data.
The Irish data are our only source for examining developments in cross-border trade since January. They suggest a big rise in trade volumes, with recorded Irish imports from NI up around 80% on pre-pandemic levels and Irish exports to NI up by around a third (Chart 1).
Some Irish commentators have excitedly interpreted these figures as showing a surge in the ‘all-Ireland’ economy. But if we dig into the details, we can quickly observe some serious oddities in the data that call into question how meaningful such an interpretation might be.
First, a large part of the recorded rise in NI exports to ROI looks erratic. Over 40% of the rise in recent months has been in medicines, an area where previously cross-border sales were minimal. This may be related to the coronavirus pandemic and so could be fleeting. Similarly, April saw a massive rise in sales of gas and electricity from NI to ROI, to a level eight times higher than last December (Chart 2).
If we remove these two sectors, the rise in NI sales to ROI roughly halves, to about 45%. This is still substantial, but the story doesn’t end there. It is likely that some of these cross-border flows don’t reflect genuinely increased trade between NI and ROI but trade between GB and ROI that is being re-routed via NI to evade new trade barriers. Historically, the share of NI sales to ROI in total UK sales to ROI was 6-8% – recently it has risen to around 24% (for agri-food, where border issues will be greatest, the share has gone from around 20% to around 50%).
One item that points in this direction is the large rise in iron and steel sales between the two (where there are issues with EU tariffs). Another oddity is the large rise in ROI sales of road vehicles to NI (ROI not being a significant producer of these). Some of the considerable rise in bilateral food sales may also reflect re-routing of perishable goods to dodge border disruptions.
Reports from ports and freight firms confirm that such re-routing has been taking place. NI businesses that previously imported from GB via Dublin port have instead chosen to do so via NI ports (taking advantage of possibly lighter checks including ‘grace periods’ applying to some products). Similarly, some ROI importers may now use ports in NI rather than Dublin for bringing in some goods from GB.
A final – and startling – oddity is that recorded cross-border freight movements do not appear to corroborate the Irish trade data. NISRA data on traffic movements at fifteen border locations across three categories of freight vehicles (LGV, HGV-RIG and HGV-ART) do show a strong recent rise – but only to a level back in line with the pre-pandemic trend. As noted above, recorded trade flows are well above the pre-pandemic trend but there is no sign of a similar rise in cross-border freight (see Chart 3). Either the trade data is inaccurate, freight loads per vehicle have risen hugely or the trade is being carried in another (unclear) way.
What of UK-Irish trade? Here, there are also startling statistical anomalies – most notably on the flow of exports from the UK to Ireland. According to Irish data, UK exports to Ireland in April were almost 50% down on their October 2020 levels. But the UK data shows a totally different picture, with exports to Ireland down only 1%, having recovered strongly from a sharp fall in January
This divergence is enormous and unprecedented. Moreover, it is not visible if we look at the flow in the reverse direction, i.e. Irish exports to the UK – where Irish and UK data are largely in line (Chart 4). Making sense of it is hard. It may reflect measurement errors or lags. It may also partly reflect the re-routing issues mentioned above (Irish and UK authorities may label the same flows differently). What is clear is that we should be extremely wary of extrapolating too much from this data.
GB trade with Northern Ireland
Trade between GB and NI has attracted perhaps the most attention since the start of the year. Frustratingly, this is also the area where accurate and timely data is entirely lacking. Figures on NI sales and purchases from GB are produced only annually, and with a considerable time lag. This leaves us largely with indirect, even anecdotal, evidence on what is happening. There is little doubt that GB to NI trade flows have been subject to considerable interruption, largely focusing on (but not limited to) agri-food products. But the extent of this can only be hinted at by looking at other data.
One approach is to look at GB to ROI trade flows, which may be structurally the most similar to those between GB and NI. Irish data on this flow shows a steep decline, with GB sales of non-food goods to ROI down about 34% and food goods down around 40%. Applied to the GB to NI flow this would imply GB non-food sales to NI might be down around £3.4bn and food sales by £1.2bn.
This is, however, almost certainly a big overestimate of the decline. We know from earlier that the Irish data is showing a massive fall in imports from the UK that UK data doesn’t show. We also know that grace periods covering some food and other NI imports from GB mean that full trade barriers aren’t in place for those goods (whereas they are between GB and ROI). We also know that freight volumes between GB ports like Liverpool and Cairnryan and NI have recovered to pre-pandemic levels after a slump at the start of the year. Indeed, Stena line is adding services from Wales to NI.
However, we do not know how much of the GB to NI freight is now moving across the border to the ROI, so even the patchy freight data we have do not tell us directly about what is happening to GB trade with NI consumers and businesses. Overall, on this most important trade flow, we are largely in the dark.
There is little doubt that the UK’s exit from the EU customs union and single market, together with the NI protocol, has shaken up trade between GB, NI and ROI to a considerable extent. But the nature of those changes, and their likely durability, remains unclear due to a combination of contradictory data and massive problems of data interpretation related to erratic trade movements and large-scale re-routing of trade through NI.
Some observers are keen to jump on the data we have to make grand pronouncements about the rise of the ‘all-Ireland economy’ or Ireland ‘weaning itself off’ imports from the UK. But the available information doesn’t support such conclusions. Most problematically, we know very little about the trade flows which are currently causing the most political heat at present – flows from GB to NI. The UK authorities need to rectify the statistical void in this area to enable any kind of rational discussion on the impact of the NI protocol on trade.