Nations and Regions
Since the EU Referendum in June 2016, much has been discussed about what a ‘no- deal’ departure will mean for the nations and regions of the UK. The return of powers, responsibilities, and money from Brussels to London has allowed the Devolved Administrations to demand further devolution way from Whitehall to Cardiff, Edinburgh & Belfast. In England, directly-elected mayors and some local authority leaders also want more decentralisation and devolution. But it is the UK’s only land border with the EU that has captured the headlines.
The Northern Ireland Protocol to the Withdrawal Agreement is a legally-binding treaty that seeks to avoid a hard border with the Republic, as guaranteed in the Belfast Agreement of April 1998 - also known as the Good Friday Agreement. Northern Irish voters have the chance to decide what happens to the provisions of the Protocol every four years, with the first vote due in 2024.
The Protocol took effect from 1 January 2021 and - for as long as it is in force - Northern Ireland will align with all relevant EU rules on placing goods on the NI market. This ought to mean no extra processes, procedures or restrictions on the flow of goods - so called “unfettered access” - to the whole of the UK market. Goods between Northern Ireland and the Republic - and between Northern Ireland and other EU countries - should also move freely.
But this has proved to be wholly incorrect - and businesses are encountering considerable problems in shipping goods to Northern Ireland. For instance: goods imported from the EU that are unpacked & repacked in Great Britain - exported back to the EU - notably the Irish Republic but also Northern Ireland (due to the Protocol and the Trade & Cooperation Agreement) - without any significant processing or adding value having been done - means companies have to deal with customs declarations & duties, rules of origin, VAT, etc.
Under the Protocol, goods from Great Britain not deemed to be ‘at risk’ of leaving the UK customs territory will not attract tariffs - but any ‘at risk’ of entering the EU Single Market will pay EU tariffs. You have to make customs declarations and may need to pay tariffs when bringing goods into Northern Ireland from Great Britain - or from outside the EU, namely the rest of the world.
For goods coming into NI from GB, you will not pay customs duty if you are:
- able to claim a preferential rate of duty under the new UK-EU Trade & Cooperation Agreement.
- authorised under the UK Trader Scheme and declare that your goods are not ‘at risk’ from onwards movement into the EU.
- eligible to claim a waiver on the customs’ duty up to specified limits.
If your business is affected by these changes, the UK Government is offering help in the shape of a new Trader Support Service. This service free to use and aimed at protecting trade with Northern Ireland from England, Wales or Scotland. You can use the TSS to have customs’ declarations completed on your behalf by going here: www.gov.uk/guidance/trader-support-service
Before you move goods, some of the matters you must consider are:
- you need an XI-EORI number to move goods between NI and non-EU countries - namely Great Britain and the rest of the world.
- you can use the free Trader Support Service or get someone to deal with customs for you.
- if you want to declare goods are not ‘at risk’, you have to apply for authorisation for the UK Trader Scheme.
- if you import goods regularly, you can apply for a Duty Deferment Account to delay paying most customs charges.
- you have to find the commodity code to make customs declarations when shipping goods.
- you have to check the rules of origins requirements for your goods.
This is not an exhaustive list and you should read the guidance on goods in and out of Northern Ireland at: https://www.gov.uk/guidance/trading-and-moving-goods-in-and-out-of-northern-ireland-from-1-january-2021
REGIONAL AND STRUCTURAL FUNDS
Leaving the EU means an end to receiving EU Structural Funds that support economic development and reduce inequality between regions around Europe. The most well-know is the European Regional Development Fund (ERDF) aimed at reducing economic disparity and helping under-developed regions to catch up. The UK has two ‘less developed’ regions: West Wales and Cornwall & the Isles of Scilly. Projects to benefit from ERDF include civil engineering like flood & coastal defences; roads, bridges & tunnels; and port & harbour facilities. Wales has received over 5 times more per head than England. One of the conditions of ERDF was to display on outdoor signs that EU funds had gone towards completed works.
UK Shared Prosperity Fund
During the period of Brexit uncertainty in 2017-2019, ministerial promises were given about a new UK Shared Prosperity Fund to replace EU Structural Funds that the nations & regions will be able to bid for. This pledge was included in the Conservative Party’s 2019 General Election Manifesto that promised £500 million for the UKSPF aimed at its “levelling up” agenda.
Scant details exist about the Shared Prosperity Fund other than vague promises made at the last two Budget Statements. This vacuum has allowed the Devolved Administrations to demand more funding under the Barnett Consequentials.
The Welsh and Scottish Governments are concerned they will not be given similar funding by London, post-Brexit. They are suspicious that Whitehall will bypass them - to spend money directly in the nations - and are seeking guarantees this will not happen and funding will not be cut. If ministers are going to replace EU programmes, we urge them to announce UKSPF details soon and publish the consultation so that BMF and NFB members can plan accordingly.
Leaving the EU means that the UK will no longer be covered by EU State Aid rules. The UK Government has recently switched to using the phrase “subsidy control” instead. While subsidy is usually best avoided, there are genuine cases where is necessary or desirable for a defined purpose or period of time - notably market transformation; behavioural change; or in emergencies, to rescue collapsing companies.
The UK Government has a poor track record in regional or industrial policy and ministers should not attempt to pick winners. But leaving the EU does allow the UK Government to act to save ailing industries or companies if ministers choose. This could be by holding a ‘golden share’ in a company or mounting a financial rescue. The steel industry is an obvious example and the repercussions in several towns of plant closures in the past are well-documented.
Caution is required if state aids are replaced by new subsidies. It risks violating WTO rules and the terms of whatever free trade agreements are successfully negotiated in future. Jettisoning the current EU State Aid rules will make negotiating various UK-EU agreements, including a free trade deal, much harder to achieve. This is what newspapers like to call the “Singapore on Sea” position.
UK Internal Market
In August 2020, the UK Government held a consultation on a future internal market. Views were sought on proposals to ensure all 4 home nations will operate as a single market after Exit Day. The BMF gave a full response in which we told the Department that the building materials’ supply chain already operates as an internal market.
The BMF, Construction Products Association and others monitor the level of imports. Several years ago, the CPA calculated that approx. 78% of all construction materials & products used here originate from within the UK. The percentage occasionally fluctuates between 77% and 81% but it is a fairly stable and reliable industry yardstick.
The other 20-22% are imported from Europe and elsewhere - notably:
- timber & panel products: the overwhelming majority of imports are European softwoods from Scandinavian countries like Sweden, Finland & Latvia. The cold climate means timber grows slowly with the tree rings close together that give it greater strength - making it more suitable for structural building purposes. The minority of timber imports are tropical hardwoods from West African countries like Ghana and plywood from the Far East like China & Indonesia.
- bricks: to supplement UK production - especially occasional surges in demand - some brickmakers and agents & brokers will import bricks from Belgium and the Netherlands.
- chemicals, paints & varnishes: from Germany and elsewhere in Europe.
- stone and landscaping: various countries like Spanish slate, Italian marble and decorative aggregates from places like Morocco and India.